Chinese Foreign Lawyer Ethics Rules Unclear?

The June Issue of the ABA [American Bar Association] Journal just came out featuring a story on foreign law firms in China. The article is entitled, "Chinese Puzzle: Foreign firms jumping into the market find ethics rules unclear." It is written by Terry Carter and it gives me some pretty good "air time" and I get the only photograph.

The article is on foreign law firms in China and it starts noting foreign lawyers "are not permitted to practice law in China." Thus, "when a deal is completed and a formal legal docu'ment is necessary, they can't create it or litigate it." Despite this, the Chinese legal market has been heating up and foreign firms are fighting to get in. But according to Lisa Smith, a Hildebrandt International law firm consultant, competition for lawyers with the right skill set is intense.

The article then discusses recent buzz surrounding McDermott Will & Emery's "splash into the [Chinese] market:"

Blogs and the foreign legal community in China were abuzz recently concerning McDermott Will & Emery's splash into the market. In January, 20 Chinese lawyers left the Chinese firm AllBright to form MWE China Law Offices.

The MWE stands for McDermott Will & Emery. The two arranged a strategic alliance, meaning that McDermott Will in effect has a stable of Chinese lawyers who can practice law in China'though not as law firm employees, which would violate government regulations. (Most big foreign law firms eschew formal arrangements with just one Chinese firm.)

The departing group was led by AllBright co-founder John Z.L. Huang, who was trained in the law in the U.S. as well as China. Yet months later, Huang was not only listed on the MWE China Web site as a founding partner, but also remained on the AllBright Web site as a current and founding partner. The same goes for many in the group who joined Huang's move to MWE.

Commenters on China Law Blog say contractual relations among partners in Chinese firms, and possible need for approval by authorities, might have gummed up the deal. But Maryanne Adams, a spokeswoman for McDer'mott Will in Chicago, says different: 'They are now part of MWE law offices and strategically aligned with McDermott Will.'

Attempts to clarify this muddle via e-mail with both Huang and a spokesperson for the AllBright firm were unavailing.

The article then quotes me saying "big foreign firms are luring away Chinese lawyers with offers of more money. And for the experienced Chinese lawyers, it's a seller's market." It then says "Harris & Moure is plugged into the Chinese legal grapevine" and uses as an "example" of this that "when Chinese lawyers wanted word to get out that the Shanghai Lawyers Association was calling for a crackdown on foreigners practicing in China, a copy of the association's memo to regulatory agencies soon found its way to Harris."

The article then talks about how the Shanghai Bar sought 'powerful measures to regulate and restrict the illegal activities practiced by the foreign law firms in Shanghai' and then breaks out some of the rules for foreign lawyers operating in China. It correctly notes that though "the Shanghai Lawyers Association memo got everyone's attention, there has been no crackdown." Matthew Adler of the DLA Piper law firm attributes China's failure to act to China's being "very conscientious of what is good for economic growth and development.

Though I agree with Mr. Adler on this, the article says I offer "a different take and then quotes me saying, 'The law and regu'lations [regarding foreign lawyers in China] are not that gray'enforcement is gray. If some firms are crossing the line and practicing in China, they're banking on nothing happening, and they're probably right." Mr. Adler is absolutely right about China being very practical and I concur with his view that the reason the expected crackdown on foreign lawyers in China has not occurred is because the government does not think doing so would be good for business; it is not because it deems the law and regulations unclear.

The article concludes with my saying the following:

'The thing that drives me nuts about China is that they seem to want people to violate the law,' Harris says. 'So they make it real easy to bring in money and do a deal. But if it's not legal, it could someday be hard to get the money back out.'

I was actually referring to business overall in China, not to just the legal business. Rich Kuslan of the Asia Business Intelligence Blog is also quoted in the article.

If you want more on the blog posts that "broke" the Shanghai Bar memorandum story, check out the following: