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George Washington University Law School

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Monday, May 15, 2006

Complaints about foreign law firms in Shanghai

The Shanghai Lawyers Association recently issued a memorandum decrying what it called the unauthorized practice of law by foreign law firms in China and calling for a crackdown by the authorities. For details of the memorandum, see the reports by China Confidential and the China Law Blog (not to be confused with this blog). The China Law Blog has posted Chinese and English texts.

A few comments (slightly modified from original posting):

  • This is about protecting Shanghai lawyers from competition, not about protecting the public or the clients of the foreign lawyers. The memorandum does not even bother to pretend otherwise, and explicitly highlights the harm done to Shanghai lawyers. Remarkably, the memo does not ever claim that the foreign lawyers have actually given bad advice.
  • It is not quite accurate to suggest, as does the China Law Blog, that everyone does the same thing. The China Law Blog says, "Foreign lawyers are not allowed to practice in any of the 50 U.S. states." The states typically (I think) do not distinguish between citizens and non-citizens. They distinguish between those who have passed the state bar and those who have not. LL.M. programs in the U.S. are heavily populated by foreign lawyers who, upon graduation, typically take the New York or California bar exams and then qualify to practice. By contrast, foreigners are not allowed to qualify as PRC lawyers. Even Hong Kong and Macao lawyers may not represent clients in court. These restrictions stem from the still-powerful conception of the legal system, and particularly courts, as part of the state security apparatus; the participation of persons over whom the government has incomplete authority must therefore be limited.
  • This is not a WTO issue. The China Law Blog posting wonders why South Korea's complete prohibition of foreign lawyers is not a WTO violation. The answer is that the WTO agreements (the relevant one would be the GATS) do not require you to allow foreign lawyers to practice. China, unlike South Korea, has made some specific promises about legal services (as part of its accession agreement), and those are set forth in its Services Schedule. I doubt that a crackdown would violate any of the those promises, so there are no grounds for a WTO complaint.
  • While lawyers in Shanghai and no doubt elsewhere are pushing for a crackdown, there are forces pushing in the other direction, and not just the foreign lawyers. Local bureaux of justice, for example, derive benefits from regulating foreign law firms that they would lose if the foreign firms were to be driven out or reduced in size. Thus, the struggle is not completely one-sided.

Thanks to China Law Blog for bringing this to everyone's attention.

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Comments

This responds to each of your comments.

"This is about protecting Shanghai lawyers from competition, not about protecting the public or the clients of the foreign lawyers." I agree with this, but is this necessarily wrong when all that they are requesting is that the foreign law firms abide by the law?


"It is not quite accurate to suggest, as does the China Law Blog, that everyone does the same thing." I merely pointed out that China's legal practice laws are not draconian when compared to those in other countries.

"The China Law Blog says, 'Foreign lawyers are not allowed to practice in any of the 50 U.S. states.' This is not accurate." This is accurate. I agree with you that foreign lawyers are allowed to take the bars in some states and then practice, but they are not allowed to do so without first taking the bar. My firm recently had to petition the Washington Supreme Court to allow one of our foreign lawyers to sit for the Washington bar, even though she had graduated from law schools in Germany and in France and had passed the German and Spanish bar exams and had practiced in both countries for years before moving to the United States. But, yes, you are correct that IF someone is allowed to sit for the bar in the U.S. and passes, they can practice law and that opportunity does not exist in China for foreigners.

"This is not a WTO issue. The China Law Blog posting wonders why South Korea's complete prohibition of foreign lawyers is not a WTO violation." I thought this was a WTO issue with respect to Korea because so many Korean lawyers have told me that it is. I apparently stand corrected.

"While lawyers in Shanghai and no doubt elsewhere are pushing for a crackdown, there are forces pushing in the other direction, and not just the foreign lawyers. Local bureaux of justice, for example, derive benefits from regulating foreign law firms that they would lose if the foreign firms were to be driven out or reduced in size. Thus, the struggle is not completely one-sided." I completely agree. There are, no doubt, Chinese governmental entities that will favor the foreign law firms, but our reports from Shanghai are that the Ministry of Justice is solidly behind the Shanghai lawyers.

Posted by: China Law Blog | May 15, 2006 10:08:00 AM

Just a brief response to the response above:

1. Indeed, all they are requesting is that foreign firms abide by the law. My point is that the law in question, like professional regulations in many countries, is more about protection of lawyers than about protection of the public. Others do it, too; it's still not a good idea from a public policy standpoint.

2. We agree that foreigners *can* practice in the US if they meet certain conditions. They cannot practice in China, period. Actually, if the Chinese government didn't view the legal system as a state secret, it could shut the pesky foreigners up easily without any significant competitive effect on Chinese lawyers by welcoming them to practice if they could pass the Chinese bar exam. Few would manage.

3. It will be very interesting to see how this turns out. Not only the Chinese economy as a whole, but the Chinese legal profession as well (in ways it may not fully appreciate) benefit from the presence of foreign lawyers and their involvement in the legal system. This is a classic example of interest-group legislation that hurts the public interest.

Posted by: Don Clarke | May 16, 2006 2:34:29 PM

I am curious as to whether China has any laws about Chinese law firms employing foreign lawyers. (For example, Lehman Lee & Xu's website describes itself as a Chinese law firm but their list of attorneys appears to include many foreign names). If the Chinese government's real goal is to protect the public from unlicensed attorneys practicing Chinese law, it would seem to make sense to have some rules in place?

Posted by: Gary Chodorow | Jun 8, 2006 3:18:28 AM

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