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Local lawyers feel the heat
2003-01-21
Business Weekly
The Ministry of Justice's approval last Wednesday for 14 overseas law firms to open new representative offices on the Chinese mainland, though seemingly a normal part of a yearly routine, has stirred the feelings of local lawyers.
"Local lawyers who do foreign-related business are quite sensitive to this piece of news," said Li Jingbing, lawyer with the Beijing-based law firm ZY & Partners. "There is the feeling of pressure."
Among the 14 law firms, three are newcomers from Hong Kong. The other 11 come from the United States, Britain, France and Italy and are opening their second representative offices on the mainland.
"China's economic development in the 20-plus years after its adoption of the opening-up policy has provided a stage for law firms to explore their business and our business in China has shown fine momentum for growth," said Danian Zhang, chief representative of the newly approved Shanghai office of the Chicago-based law firm Baker & McKenzie.
Zhang said he believes that better times are coming with the further integration of China, now a member of the World Trade Organization (WTO), into the world economy.
China's history of opening its legal-services market can be tracked to 1992 when the Ministry of Justice started a pilot scheme allowing each overseas law firm to set up one representative office in one of the 15 cities on a list it provided. Upon its WTO entry at the end of 2001, the nation pledged that it would further open up its legal-services market, gradually lifting the geographic and quantitative restrictions on representative offices of overseas law firms.
To date, 163 representative offices of overseas law firms have been established on the Chinese mainland. Most of them are in Beijing, Shanghai and Guangzhou.
"The foreign law firms in China's legal-services market ... have promoted overseas investment in China and economic and technical co-operation between foreign and Chinese businesses," said Vice-Minister of Justice Duan Zhengkun. "They have also promoted exchanges and co-operation between Chinese and foreign lawyers."
Despite such official rhetoric, when local lawyers like Li from ZY & Partners comment, they talk about the challenges brought by the influx of foreign law firms.
Li, who is also the vice-head of the Committee of Legal Services for the WTO of the All-China Lawyers Association, cautioned that local law firms are faced with brain drain because of competition from foreign law firms which offer higher salaries, and boast foreign clients, advanced management mechanisms and professional service standards.
"Many young legal professionals in China have their eyes on a position in the representative offices of foreign law firms in China," Li said. "We are in a disadvantageous position in the competition for talented personnel."
Overseas law firms have now been given the green light to provide clients with consultation on foreign laws and to entrust Chinese law firms to deal with Chinese legal affairs, according to a regulation issued by the State Council at the end of 2001.
However, the prohibition on the establishment of jointly funded law firms was not lifted after China's WTO accession. And representative offices of foreign law firms in China are still barred from recruiting nationally registered Chinese lawyers, although many get around the law by hiring them as "assistants."
Though ministry officials have said repeatedly that China's legal-services market can only be opened step by step, the restriction obviously protects local lawyers, whose current position in Chinese society was secured only about two decades ago.
"Chinese law firms need to standardize their work and improve their scale to face the challenges brought by an open legal-services market," Li said.
In addition to enhanced professional training for lawyers and stricter requirements for entering the profession, a contract was signed in May last year between the Ping An Insurance Company of China and the Beijing Lawyers Association that may finally institute a liability system within Chinese legal services. The system, which compensates parties whose economic losses are proved to have been caused by the negligence of lawyers, is expected to strengthen the competitiveness of Chinese lawyers against their foreign counterparts.
While admitting the importance of improving the proficiency of local lawyers, Li said that the Ministry of Justice should also enhance the supervision and management of foreign law firms on the mainland.
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