Gu Zhiming is one of the partners of a US law firm. At the end of 2000, China’s Ministry of Justice ratified his firm to establish an office in China’s mainland and carry out legal service.
“We have been waiting for the go-ahead since 1994,” said Gu. “All the 200 partners of my firm are pleased to know Shanghai has opened the door to lawyers from outside China. We believe foreign lawyers will be able to obtain more business in China, and the nation’s present economic situation will be favored by more foreign companies and financial institutions and attract increasing foreign investment.”
In 2000, 13 law firms from the United States, Singapore and Hong Kong got approval for the establishment of offices in China’s mainland.
In recent years, the rapid development of China’s export-oriented economy has given strong impetus to the opening of China’s legal service sector. So far, the Ministry of Justice has approved 120 foreign law firms to establish offices in China’s mainland. Their businesses have also expanded from acting as agents in small investment projects to a variety of fields, including securities, mergers and large infrastructural construction projects. In light of such circumstances, the Ministry of Justice is planning to promulgate new professional regulations on the expansion of businesses by foreign law firms in China.
According to Duan Zhengkun, vice minister of justice, China began to ratify the establishment of offices of foreign law firms in China’s mainland in 1992. Duan said in the wake of the nation’s accelerated opening, transnational legal businesses had increased sharply at that time, leading to an urgent need to open the legal service sector. The competent departments hence began to introduce this measure on a trial basis. Its following development can be divided into two stages:
The first stage (1992-97): The system of establishing offices of foreign law firms was gradually recognized and completed, while judicial administrative departments also set up related internal regulations so as to strictly perform standardized administration. During this period, the offices of foreign law firms were mainly engaged in traditional and daily businesses and served the real estate and manufacturing industries.
The second stage (after 1997): As a result of the quickened opening of the nation and changed core tasks of domestic reform and economic development, foreign investments began to target new projects, shifting from traditional industries to high-tech industries such as the information industry. The expansion of businesses by the offices of foreign law firms also centered on high-tech industries.
While constantly increasing investment, foreign law firms have also strengthened exchanges with Chinese lawyer circle over the past eight years, said Duan, adding they have developed a commissioned relationship when dealing with cases.
At present, foreign law firms intending to establish offices in China’s mainland should first submit a written application to the Ministry of Justice for examination and approval.
Vice Minister Duan explained that approval of an application depends mainly on the following points:
• The attitude of the country where the applicant is based is friendly toward China, and the country has corresponding favorable policies concerning admission of legal service for China that ensures China’s law firms are also able to establish offices in that country;
• A time period for the applicant’s existence in its homeland, for example above 10 years, and the applicant should have China-related businesses, which ensures it is able to develop businesses after entering China;
• The applicant’s offices in China will be able to promote friendly exchange and cooperation between Chinese and foreign law firms.
In addition, reputation, influence and professional capacity of the applicant will also be considered, said Duan.
Prof. Jiang Ping with the University of Political and Legal Sciences of China says the introduction of foreign law firms has played an important role in China’s efforts to standardize the market and conform to international practices. Though they are mainly devoted to out-of-court cases, said Jiang, the offices of foreign law firms in China can directly lend a hand in some major international economic activities, such as domestic enterprises’ listing and setting up branches abroad. All these issues must take advantage of foreign laws. In this field, however, native lawyers find it hard to meet international standards, according to Jiang.
Viewing the whole issue from this angle, Jiang stressed that permitting foreign law firms to establish offices in China’s mainland is of vital importance to the reform and regulation of the country’s legal system and the improvement of the entire industry’s quality. China’s legal profession has achieved remarkable progress in terms of both quality and quantity in the 20-odd years of reform and opening up, he said. Comparing to developed countries and regions such as the United States, Britain and Hong Kong, however, China’s law firms are still small and follow a workshop-like operational mode. In developed countries and regions, law firms are generally large in size. For example, large US law firms usually have more than 100 partners and about 1,000 staff workers, and their business has a global reach and is classified precisely, noted Jiang.
Jiang believes the constant introduction of foreign law firms is certain to advance China’s entire legal profession to a higher level.
Considering China’s pending WTO entry, the Ministry of Justice will take a series of much stronger measures in the near future, which will guarantee foreign lawyers and lawyers from outside China’s territory to develop business in the country and cut the time taken to examine and ratify foreign law firm’s application for the establishment of offices in China’s mainland.
Vice Minister Duan said, “I believe the prospects are bright for the development of foreign law firms in China’s mainland. This is because on one hand China has an increasingly expanding legal services market that is unmatchable by any other countries, and on the other hand the consistently completed reform and opening-up policies will provide foreign lawyers with a favorable external legal environment and protect their rights and interests from infringement.”
(Beijing Review 01/25/2001)
