China's Foreign Law Firms Under Seige?
In a post, entitled, "China Poised to Crack Down on Foreign Law Firms," China Confidential just blogged on a recently issued memorandum that is the talk of the town among Chinese lawyers in Shanghai, and to a lesser extent, Beijing. The memorandum from the Shanghai Lawyers Association, written in tandem with a number of Chinese government agencies, attacks foreign law firms in China for engaging in illegal activities and promises harsh action against those firms. It also sets out a telephone hot-line number for lawyers and the public to call and report any foreign law firm illegal activities. The memorandum goes on to set forth various illegal activities in which foreign law firms are allegedly engaging, ranging from practicing law without a license to tax evasion.
China Law Blog was given this memorandum and we, in turn, turned it over to China Confidential to blog on. We did this because we believe such an important issue (and one so close to us) should be handled by a professional and disinterested journalist (not lawyers) and because we wanted to see a journalistic investigation conducted.
China Confidential sees the crackdown on foreign law firms in China as part of a larger crackdown on foreign influences. I don't. I see it as arising from the anger of the Shanghai law firms (and to a lesser extent Chinese law firms outside Shanghai) at their not having received sufficient credit for the work they do completely behind the scenes for foreign law firms. For years, Chinese lawyers have been complaining to us about foreign law firms in China implying they have Chinese licensed lawyers on staff, when they do not, and using outside Chinese lawyers completely on the sly.
It is important to note that China's legal practice laws relating to foreign lawyers are not draconian. They are not too disimilar from the laws in most other countries. Foreign lawyers are not allowed to practice in any of the 50 U.S. states. Korea does not allow foreign law firms at all (I do not understand how this is not a WTO violation). I have been told China's laws on this are actually quite similar to those in Japan.
You can see the memorandum in Chinese here and in English here.
http://www.chinalawblog.com/cgi-bin/mt/mt-t.cgi/1211
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Comments
From what I have seen and heard, the government's "crack down" and Chinese lawyers' dissatifaction with the foreign law firms' practices in China has all to do with competition and who is getting the money, the big fees.
The Chinese government has had a law or regulation for about 8 years or so, prohibiting foreign law firms from practicing Chinese law. That prohibition was honored by foreign law firms more by breaching or ignoring it than by abiding it. Naturally the Chinese government with pushing from Chinese licensed lawyers would want the rule complied with and the Chinese lawyers would want playing field tipped in their direction.
Some years ago while teaching American law at Qinghua University, I heard stories about the use by foreign law firms of contracted Chinese lawyers for their knowledge of Chinese law and local conditions which turned out to be means to get around the prohibition on foreign firms practicing Chinese law. The hitch to the scheme was that the contracted Chinese lawyers were paid by Chinese fee standards while the foreign law firms billed out the services by international fee rates, of course taking the profit from this type arrangement. Once the Chinese lawyers understood how this fee situation worked they were annoyed and pissed. Maybe it is right and proper for the pendulum to swing the other way.
Posted by: jaax | May 12, 2006 1:48 AM
Jaax -- I think you have nailed it.
Posted by: China Law Blog | May 12, 2006 6:40 AM
Korea's WTO issue and Tokyo's situation aside, I would only add that the spirit of the News Brief was particularly focused.
Clearly, protectionism of the domestic legal profession is as prevelant in Shanghai and Beijing as it is in London, Paris, New York or Sydney. Historical discourses have always privileged one group over another, and there is therefore one more global truth (beside taxes and death).
All in all, it's good to see the legal profession, the rule of law, maintained in such a manner, don't you think?
rgds,
magold
Posted by: magold | May 15, 2006 7:26 PM
Magold --
Thanks for checking in.
When you refer to the "News Brief," are you referring to the Shanghai Bar's memorandum?
I am not sure this is really a rule of law issue, because until recently, China really did make almost no effort to enforce the rules applicable to foreign lawyers.
The Associated Press picked up on our story (without attributing it to us!) and added the following:
"However, local lawyers said they were aware of the document [the Shanghai Bar memorandum] and supported stronger enforcement of the restrictions, meant to protect the fledgling local legal services industry.
'They are doing business which they are not authorized to do in China so of course that affects the business of local law firms,' said Wei Zengming, a member of the Shanghai Bar Association.
'The Ministry of Justice and our bar association should do something to clean up the legal services market,' he said. 'If foreign firms are violating the rules, of course they should be punished.'"
Seems you and the Shanghai lawyers are in complete agreement.
Posted by: China Law Blog | May 15, 2006 8:55 PM