Opening-up of the Legal Services

Industry in China
Professor Ding Xiangshun, Renmin University of China Law School
 Introduction

Legal services generally refer to the commercial services related to legal affairs provided by legal
professionals. Though the definition, qualification requirements and practicing scope of legal professionals
vary from country to country, it is commonly believed that professionals capable of providing legal services
refer to lawyers with a practicing license, and legal services refer to services provided by lawyers.
According to the "Provisional Classification Table of Main Products" issued by the United Nations, legal
services, including various legal consulting services and defense provided by trial lawyers, mainly cover the
following five aspects: (1) consultation on criminal laws and defense in court; (2) consultation on civil laws
and litigation agency; (3) drafting and making legal documents; (4) handling of non-litigation businesses,
including agency, negotiation, inquiry, consulting, etc.; (5) acting as legal adviser.1 By and large, as
professional lawyers, the providers of legal services, should pass the qualification test and get the
practicing license. The legal profession and legal services in different countries are with strong national
attributes and should be bound and protected by their own laws. However, with the deeper international
cooperation, increasing international exchanges and contacts, continuous developing of trade
liberalization and frequent communication of personnel, capital and goods between different countries,
the demands on cross-border laws and legal services have also increased, forming a new pattern of
integration. In this case, it is necessary for a country to allow, to some extent, foreign legal professionals to
enter its local legal services market, thus opening up the legal services market which is originally
monopolized by local lawyers. At the international level, legal services, a particular type of commercial
services, belongs to professional services in service trade and its market opening-up should be adjusted by
the General Agreement on Trade in Services. The legal services market should be gradually opened up
through negotiation between contracting parties, so as to enable foreign lawyers to provide legal services
to local companies, enterprises or individuals.

Though there is no clear definition of "opening-up of legal services market" in the academia of China, it
is commonly understood as permitting legal professionals or law firms with legal occupational
qualifications (mainly refer to lawyer qualification) granted by foreign countries or separate customs
territories to set up corresponding institutions in the People's Republic of China to provide legal business
to specific or non-specific clients. Therefore, the opening-up of legal services market mentioned in this
report includes both the opening-up of Chinese legal services to foreign legal professionals (mainly refer to
lawyers) and that to the legal sectors in Hong Kong, Macau and Taiwan. Furthermore, with China’s
large-scale investment in foreign countries, many Chinese enterprises and citizens are bound by foreign
laws and international laws. Chinese law offices have more opportunities to deal with foreign legal affairs,
and a new business form of Chinese lawyers practicing in foreign countries or practicing in cooperation
with foreign lawyers has been established. Therefore, the opening-up of legal services market mentioned
in this report also includes the joint practicing of Chinese lawyers with foreign lawyers.

In this report, I reviewed the background and development process of the Chinese legal services
industry, expounded the legal framework and status quo of the opening-up of Chinese legal services
industry, analyzed its latest trend, and forecasted its development tendency under this new situation.

I. Development and Opening-up of Chinese Legal Services Industry

Since China's reform and opening up, a large amount of foreign capital and capital from Hong Kong,

1
Sun Nanshen. "Problems in Opening-up of Chinese Legal Services Market and Countermeasures", Journal of Nanjing
University (Philosophy, Humanities, Social Science): No. 4, 1998

2
Macau and Taiwan has flowed into mainland China. This has greatly promoted the development of
technology and economy in China, and enhanced the economic and trade cooperation between China and
foreign countries. As a result, demands on legal services in foreign-related economic relations, civil
relation and even international communication have been increased a lot. Accordingly, foreign law firms
with many business relations in China have entered China in various forms to provide legal services. Law
application, involving the sovereignty of a country, is the most sensitive and complex topic. There have
been no explicit provisions in Chinese laws on foreign law firms conducting law business in China.
Moreover, in the early days of reform and opening up, since the Chinese lawyering industry had just
started, Chinese lawyers were not very familiar with foreign legal systems and were unable to provide
direct, adequate and all-round legal services to foreign clients in foreign languages.

As lawyers have to be with their clients, which is a characteristic of this industry, foreign lawyers
started to participate in providing legal services in a certain way in China with the continuous inflow of
foreign capital into China, though there are no direct provisions in Chinese laws. Some foreign law firms
have set up consulting companies in China, so as to strengthen contacts with their clients here and open
up the Chinese market. Some foreign law firms have even cooperated with Chinese lawyers, set up law
firms in the name of Chinese lawyers, whilst employing foreign lawyers to provide legal services to foreign
clients. As there were no explicit legal provisions, China's judicial administrative authority did not prohibit
foreign lawyers from providing services for foreign clients in China, but they were prohibited from
engaging in Chinese legal affairs and litigation business in China. In this case, foreign trade-related
institutions including the American International Chamber of Commerce and The Association for the
Promotion of International Trade in Japan made continuous lobbies for China to open up the legal services
market and allow foreign law firms to enter China. Meanwhile, in order to promote the reform and
opening up, eliminate western countries' doubts about China's continuous promotion of reform and
opening up and implement of market economic policy after the "June 4th" political crisis, promote the
reform of Chinese economic system, establish the market order and form an equal competition order in
both domestic and international market, provide better services for the foreign investment promotion and
foreign businessmen, China began to allow foreign law firms to enter China restrictively, providing legal
business to foreign clients and foreign-related legal services to Chinese clients. TOO LONG A SENTENCE.

In July 1992, under the approval of the State Councils, the Ministry of Justice launched pilot projects in
some cities such as Beijing, Shanghai and Guangzhou. This allowed foreign law firms and law firms with
certain strength from Hong Kong and Macau to set up their offices in mainland China and engage in legal
businesses within the legally permitted scope. To this end, the Interim Provisions of the Ministry of Justice,
the State Administration for Industry and Commerce on the Establishment of Offices within the Territory
of China by Foreign Law Firms (hereinafter referred to as "Interim Provisions") was put forward. According
to this provision, the Chinese government adopted a principle of restricted opening-up to foreign lawyers,
or set some restrictions for them: restriction on opening-up cities, fourteen more cities have been taken as
pilot cities after Beijing, Shanghai, Guangzhou, Shenzhen and Haikou; restriction on the number of offices
established in China, a foreign law firm could only set up one representative office in China; restriction on
the scope of business in China, foreign law firms could not participate businesses involving Chinese laws;
restriction on employing local legal professionals, the representative bodies set up in China by foreign law
firms should not employ Chinese law legal professionals.

The "Interim Provisions" adopted a principle of reciprocity — "According to the reciprocity principle, if
the country of a foreign law firm allows Chinese law firms to set up offices within its territory, the law

3
firms of such country may set their offices within Chinese territory pursuant to this regulation." In Article
15, it provided that: the offices set up by foreign law firms may engage in three businesses: (I) providing
the clients with consultations on the laws of the countries where the lawyers of such law firms have been
approved for lawyer businesses, international treaties, international commercial laws and international
conventions; (II) accepting the entrustment of clients or Chinese law firms to handle the legal affairs of the
countries where the lawyers of such law firms have been approved for lawyer businesses; (III) acting as
agents of foreign clients to entrust Chinese law firms to handle the legal affairs within Chinese territory.
Under this legal framework, the Ministry of Justice formally approved 12 law firms of foreign countries and
Hong Kong to set up offices in Beijing, Shanghai and Guangzhou in October 1992. By the end of 2001, the
Ministry of Justice had approved altogether 104 foreign law firms and 28 law firms of Hong Kong to set up
offices in China,2 including law firms of America, England, Japan and other developed countries with high
international rankings and strength. These representative offices were mainly located in Beijing and
Shanghai. According to Miao Xiaobao, then the director of Shanghai Municipal Bureau of Justice, "21 of
the world’s top 100 law firms announced by The American Lawyer in November 2002 have set up
representative offices in Shanghai, including seven of the top ten firms, and most of them are well-known
law firms in Wall Street and London."3 The representative offices of foreign and Hong Kong law firms
employed more than 100 foreign and Hong Kong lawyers and 350 local employees. The representative
offices of foreign and Hong Kong law firms set in Shanghai has made 320 million RMB and paid taxes of 52
million RMB. In Beijing, "By the end of March 2003, there had been representative offices of 62 foreign
and Hong Kong law firms in Beijing, with more than 100 foreign lawyers obtaining the license for practicing
in Beijing, including 29 law firms of American and England, accounting for 47% of the total number; 12
Hong Kong law firms, accounting for 19%; 21 law firms from nine other countries, namely, France,
Germany, Italy, Switzerland, Australia, Canada, Japan, Singapore and Jordan. 14 out of the 62 law firms
have representative offices in both Beijing and Shanghai."4

In the 1990s, with the great achievements made in reform and opening-up, the Chinese government
actively sought to recover their position as a GATT (General Agreement on Tariffs and Trade) founding
country and therefore, as an organic component of service trade, legal services industry also became the
content of negotiation. After the replacement of GATT with WTO (World Trade Organization), China made
corresponding preparations in domestic legislation for further expanding the opening-up of legal services
market while carrying out the negotiation for WTO entry. In May 1996, the Lawyer Law of the People's
Republic of China, the first law to standardize the professional qualification and practicing conduct of
lawyers, was adopted by the Standing Committee of the National People's Congress and implemented on
Jan. 1, 1997. According to this Law, "The measures for administration of the legal service activities carried
out by the representative bodies set up by foreign law firms within Chinese territory shall be formulated
by the State Council" (Article 51).

On Dec. 11, 2001, China formally entered the WTO and made the following commitment about the
opening-up of the legal services industry: (1) within one year upon China's entry into the WTO, cancel the
restriction on the number of representative offices set up by foreign law firms in China, cancel the

2
Ding Feng, Jiang Xiuyuan. "China's First Administrative Regulation for Regulating the Opening-up of Legal Services
Market——Analysis of the Regulations on Administration of the Reprehensive Bodies of Foreign Law Firms in China".
Chinese Law, No. 4, 2002
3 "Shanghai Lawyer Industry Has Accelerated the Pace of Opening up", World Market, No. 11, 2003
4 Xiao Lizhu. "Increasing One's Own Competitiveness by Complementary Advantages—Speech of Beijing Municipal

Bureau of Justice at Work Conference on Representative Offices of Foreign (Hong Kong and Macau) Law Firms held by the
Ministry of Justice", Chinese Lawyer, No. 8, 2003

4
restriction on the pilot cities for foreign law firms to set up representative offices in China and cancel the
restriction that each foreign law firm can set up only one representative office in China; (2) admit that the
legal service activities of the representative offices set up by foreign law firms in China belong to
profit-making activities; (3) allow the representative offices set up by foreign law firms in China to establish
a long term entrustment relationship for legal practices with Chinese law firms in the form of contract; (4)
relax the restriction on the years of employment of representatives of foreign law firms in China. As a WTO
member, the State Council formulated and issued the "Regulation on the Administration of Foreign Law
Firms’ Representative Offices in China" (hereinafter referred to as "Regulation"), so as to make legal
preparations for opening up the legal services market, standardize the behaviors of legal services of the
representative offices and representatives of foreign law firms in China, and make sure that there will be a
regulation for foreign law firms to abide by in setting up offices and carrying out legal service activities in
China and for the judicial administrative departments at all levels to abide by in regulating the legal
services market and performing responsibilities. This is an administrative regulation for comprehensively
regulating foreign lawyers' practicing in China formulated by the State Council with the authorization of
the "Lawyers Law", and also the domestic legal preparedness for opening up Chinese legal services market
made by Chinese government in performing its commitment for the WTO entry. The Regulation consists of
35 articles in six chapters, including General Provisions, Establishment, Modification and Cancellation of
the Representative Offices, Business Scope and Rules, Supervision and Administration, Legal Liabilities and
Supplementary Provisions. According to China's commitment for the WTO entry, the new "Regulation"
adopted the principle of most-favoured nation treatment and the principle of reciprocity provided in the
"Interim Provisions" was no longer effective. Different from the "Interim Provisions" which regulated the
representative offices of both foreign law firms and those of Hong Kong and Macau, this Regulation only
regulates the representative offices of foreign law firms. The administrative measures for the
representative offices of the law firms of separate customs territories of Taiwan, Hong Kong and Macau
will be separately formulated. This is mainly because that Hong Kong and Macau, as special administrative
regions of the People's Republic of China, have different political status from that of sovereign states.
Therefore, in March 2002, the Ministry of Justice issued the "Administrative Measures for the
Representative Offices of the Law Firms of Hong Kong Special Administrative Region and Macau Special
Administrative Region Stationed in the Mainland". However, at the early period of establishment, this
Measures generally followed the contents of the "Regulation". Later on, with the further strengthened
contacts between the central people's government and Hong Kong and Macau and the speeding-up
exchanges with Taiwan, more in-depth and comprehensive opening-up measures were taken for the legal
circle of Hong Kong and Macau. Accordingly, the "Administrative Measures for the Representative Offices
of the Law Firms of Hong Kong Special Administrative Region and Macau Special Administrative Region
Stationed in the Mainland" were revised in November, 2003, December, 2006 and April, 2015,
respectively.

Driven by globalization, especially the WTO entry, China has quickly become the world’s largest
trading country and its GDP has ranked the world’s second. China has not only attracted large amounts of
foreign investments but also invested a lot to foreign countries. The new pattern has set new requirements
on Chinese legal services industry and it is necessary to adopt more flexible modes to strengthen
foreign-related legal services and enhance cooperation with the legal circles of other countries. Meanwhile,
the implementation of reform and opening up policy in more than thirty years and the state policy of
ruling by law and four comprehensives have contributed to substantial progress in China's politic, social
and legal systems. During this process, China's legal education for cultivating legal professional talents has

5
also achieved significant progress. The number of universities launching systematic legal education has
increased from two in 1977 to more than 600 at present and a complete legal education system of higher
learning including bachelor, master (including Master of Science in law and master of laws) and doctorate
has been set up. In 2002, the Commission for Legislative Affairs of the NPC Standing Committee revised
the Lawyers Law, Judges Law and Public Procurators Law and established a unified examination system of
legal professional qualification, thus guaranteed the quality of legal practitioners. Through more than
thirty years of development, China's legal service contingents and law firms have achieved great progress:
lawyer's identity has been transferred from state cadre to liberal legal practitioner; the organizational form
of law firms has been changed from mainly state ownership to partnership; the practicing ability of
Chinese lawyers has been improved a lot, which enabled them to handle Chinese business and gain
foreign legal practitioner qualification; law firms have become larger and stronger and there appeared
some large law firms with wide business scope and international influence. Therefore, China has begun to
explore new measures for further opening up to foreign legal services circles on the basis of experiences
drawn from opening up legal services industry in Hong Kong, Macau and Taiwan, as well as the
comparative study of the legal service opening-up modes of foreign countries, so as to meet the demand
on reform and opening-up and respond to the request of international lawyer affairs circle for further
reform and opening-up. In addition, as an organic component of the promotion of free trade areas, some
useful attempts were conducted and some new measures adopted for opening up the legal services
industry in free trade areas. In November 2014, in accordance with the spirit of "Overall Plan of China
(Shanghai) Free Trade Pilot Zone" and the "Approval Reply of the Ministry of Justice on the Work Plan of
China (Shanghai) Free Trade Pilot Zone for Exploring the Modes and Institutional Pilot Test for
Strengthening the Business Cooperation between Chinese and Foreign Law Firms", Shanghai Municipal
Bureau of Justice formulated the "Measures of China (Shanghai) Free Trade Pilot Zone for the
Implementation of Mutual Assignment of Lawyers as Legal Advisors of Chinese and Foreign Law Firms",
and "Measures of China (Shanghai) Free Trade Pilot Zone for the Implementation of Joint Operation
between Chinese and Foreign Law Firms" to carry out the pilot tests of mutual assignment of lawyers as
legal advisors of Chinese and foreign law firms and of joint operation between Chinese and foreign law
firms in Shanghai Free Trade Zone. In May 2015, American Baker & McKenzie International Law Firm
(hereinafter referred to as "Baker & McKenzie") and Beijing FenXun Partners Law Firm set up the first joint
operation office in China (Shanghai) Free Trade Pilot Zone, symbolizing the formal landing of the new trial
of opening up of Chinese legal services industry.

II. Legal Framework and Development of the Opening-up of Chinese Legal Services Industry

Due to historical and realistic reasons, legal affairs are considered as belonging to sovereign scope in
China and therefore, strong vigilance has been kept on its opening-up. Though, in more than thirty years'
reform and opening-up, China has adopted measures for gradual opening-up in the legal business fields
that only involve economic development, foreign trade investments and dispute resolution, Chinese legal
services industry has implemented a limited opening-up policy on the whole: though foreign law firms are
allowed to set up representative offices in China, they are prohibited from engaging in Chinese legal
business in China or employing Chinese legal professionals; differential administration is implemented for
the representative offices set up by foreign law firms; different opening-up measures are adopted for
foreign lawyers and lawyers from separate customs zones of Hong Kong, Macau and Taiwan; and so on.

6
 Theoretically, the opening-up of the legal services industry is carried out at two levels: one is the
opening-up of the legal professional qualification, especially lawyer qualification. This includes allowing
foreigners to participate in the local examination for legal professional qualification, get a practicing
license and work as local practitioners under the prerequisite of passing the examination and completing
other training requirements. The second is the opening-up of legal service businesses, but with the legal
professional qualifications monopolized by local citizens. This allows foreign lawyers or law firms to enter
China and carry out legal businesses in a certain scope under certain conditions, and such legal businesses
are generally limited to those involving foreign laws, extra-territory laws or international laws. Different
countries adopt different opening-up routes in accordance with their legal traditions, legal occupations
and legal structures. In some countries traditionally influenced by common law system such as America,
England and Australia, the acquisition of legal qualification is not based on nationality, and by completing
necessary training and passing examination in these countries, foreigners may obtain their lawyer
professional qualifications and work as legal practitioners there. It is worth noting that some countries
traditionally influenced by a continental law system, such as Japan, actually have set no nationality
restriction on the eligibility for judicial examination. However, as its examination passing rate is extremely
low, foreigners that have not received relevant training in legal professional knowledge and test skills are
in fact very hard to pass such examination. Due to historical tradition and some realistic factors, China had
not opened up its legal services industry, neither its legal professional qualification nor legal services
market, to foreigners for an extensive period. Since 1990s, the Chinese government has restrictively
opened up its legal businesses to foreign law firms and Hong Kong law firms. Though the opening-up
scope of its legal services industry was somewhat expanded after China's WTO entry, the principle of
restrictive opening-up of legal businesses was not changed. Conversely, after entering the 21st century, the
Central People's Government recovered its sovereignty of Hong Kong and Macau Administrative Regions
and achieved historic breakthrough in the cooperation between mainland China and Taiwan. China
adopted different opening-up policies toward separate customs regions of Hong Kong, Macau and Taiwan,
allowed successively the residents of Hong Kong, Macau and Taiwan to participate in the judicial
examinations held by Chinese mainland and obtain the lawyer's practice license after passing the
examination and meeting the necessary internship requirements. In June 2003, the Chinese Central
Government signed the Closer Economic Partnership Arrangement (CEPA) with Hong Kong Special
Administrative Region Government; in Oct. 2003, Chinese Central Government signed with Macau Special
Administrative Zone Government the Closer Economic Partnership Arrangement (CEPA) and after that, five
"Supplementary Agreements" were signed. The above economic trade arrangements mainly cover goods
trade, service trade and trade facilitation. As an important link of service trade, China began to open up
the legal professional qualification examination to the residents of Hong Kong, Macau and Taiwan. After
acquiring the national legal professional qualification and one year's internship practice in mainland law
firms, Hong Kong and Macau residents may become practicing lawyers in non-litigation legal affairs. In
2003, the residents of Hong Kong and Macau were allowed to participate in the judicial examinations held
by Chinese mainland; in 2008, the residents of Taiwan were also allowed to participate in the judicial
examinations and practice in mainland China after passing the examinations. For this purpose, the
Ministry of Justice specially issued relevant standardized documents, e.g. "Some Provisions on Hong Kong
and Macau Residents' Taking the National Uniform Judicial Examination", "Some Provisions on Taiwan
Residents' Taking the National Uniform Judicial Examination".

The framework and basic conditions of the opening-up of Chinese legal services industry to foreign
countries, Hong Kong SAR, Macau SAR as well as Taiwan region are introduced and analyzed as follows.

7
 (I) Representative Offices of Foreign Law Firms in China

There is no doubt that the opening-up of legal business to foreign lawyers is an important content of
the opening-up of Chinese legal services industry and is also the key in this aspect. After the WTO entry,
according to Chinese government's commitment, the legal services industry was further opened up to
foreign law firms, and the main measures adopted included: (1) within one year upon China's entry into
the WTO, cancel the restriction on the number of representative offices in China set up by foreign law
firms, cancel the restriction on the cities where foreign law firms may set up their representative offices in
China and cancel the restriction on setting up only one representative office in China by each foreign law
firm; (2) allow the representative offices of foreign law firms in China to provide the " information on the
impact of the Chinese legal environment"; (3) allow the representative offices in China set up by foreign
law firms to establish a long term entrustment relationship for legal practices with Chinese mainland
lawyer law firms in the form of contract.5 These new measures were welcomed by some international law
firms having a close business relationship with China, and in 2003, 11 foreign law firms set up their second
representative offices in China. At the same period, five Hong Kong law firms also set up their second
offices on the mainland.

The new "Regulations" specifies the necessary conditions for the representative offices and their
representatives of foreign law firms in China: (I) the foreign law firm has practised law in its own country
and has not been disciplined for any violation of professional ethics or practice disciplines; (II) the
representatives of the Representative Office must be lawyers and members of the bar associations where
they are qualified as lawyers, and have practised law outside China for not less than two years and must
not have been penalized for criminal offences or for violations of professional ethics or practice disciplines.
The chief representative must further have practised law outside China for not less than three years and
shall also be a partner of the foreign law firm or hold an equivalent position; and (III) there shall be an
actual need for setting up a Representative Office to provide legal services in China. (Article 7). Meanwhile,
the "Regulations" also specifies the approval procedure for setting up representative bodies in China: the
setting up of representative offices in China by foreign law firms should be approved by and registered
with the judicial administration department (Ministry of Justice) of the State. According to China's
commitment for WTO entry, in the new "Regulations", the provision specifying that "the term of operation
of representative offices of foreign law firms shall be five years and when approved, may be extended
upon expiry" in the "Interim Provisions" was cancelled and there is no restrictive provision on such term of
operation. With respect to the work scope of representative offices of foreign law firms in China, two
provisions were added in the new Regulations: keeping a long term entrustment relationship for handling
legal affairs with Chinese law firms in the form of contract; providing information about Chinese legal
environmental impacts, what’s more, according to the agreement with Chinese law firms, such
representative offices may directly raise requirements to the lawyers of the entrusted Chinese law firms.
However, the new Regulations still upholds the principle of restrictive opening-up of legal services market
and the representative offices of foreign law firms in China may only engage in business activities involving
no Chinese legal affairs. The main relevant contents are as follows:

First, the business activity scope of such representative offices is restricted to cover only the following
business activities: (1) to provide clients with consultancy on the legislation of the country/region where
the lawyers of the law firm are permitted to engage in lawyer's professional work, and on international

5
Duan Zhengkun. "Supervising and Promoting the Opening-up of Chinese Law Services Industry by Law", Chinese Lawyer,
No. 8, 2003

8
conventions and practices; (2) to handle, when entrusted by clients or Chinese law firms, legal affairs of
the country/region where the lawyers of the law firm are permitted to engage in lawyer's professional
work; (3) to entrust, on behalf of foreign clients, Chinese law firms to deal with Chinese legal affairs; (4) to
enter into contracts to maintain long-term entrustment relations with Chinese law firms for legal affairs;
and (5) to provide information on the impact of the Chinese legal environment. According to the
provisions in Article 37 of the "Provisions of the Ministry of Justice on the Execution of the Regulations for
the Administration of Foreign Law Firm’s Representative Offices in China", the representative offices
should observe the following rules in publicity: (I) when stating to its clients the business that it may
engage in China, it shall also specify that it does not have the qualification, licence or ability to provide
Chinese legal services; (II) when stating to its clients that certain personnel have Chinese lawyer
qualifications or have been PRC admitted lawyers, it shall also specify that the personnel cannot practise
Chinese law at present; and (III) when publicity mentioned above is made through letters or business cards,
the statements set out in Items (I) and (II) above shall also be included. Article 38 specifies that none of
the representative or support personnel of a representative office may provide services in relation to
Chinese law as a “Chinese legal consultant”. Article 39 explicitly specifies that no representative office or
law firm that establishes representative offices may: (I) invest in any Chinese law firm, whether directly or
indirectly; (II) operate on an associated basis with any Chinese law firm or Chinese lawyer with which they
share profits or risks; (III) establish joint office with any Chinese law firm or dispatch personnel to be
engaged in legal services in any Chinese law firm; or (IV) manage, operate, control or enjoy equity interests
in any Chinese law firm.

Second, the representative offices shall not employ Chinese legal professions or engage Chinese
practicing lawyers and the employed auxiliary personnel shall not provide legal services to clients 6.
Therefore, if any lawyers with Chinese lawyer qualification are engaged by the representative offices, their
lawyer practicing qualification shall not be registered by the lawyer association nor shall they provide legal
services to the clients in the name of lawyer. Where representative offices employ auxiliary personnel of
Chinese nationality, they shall go through the formalities for employment relationship at the local foreign
enterprise service organs and acquire the employee certificates from the judicial department (bureau) of
local province, autonomous region or municipality directly under the central government. According to
Article 40 of the "Provisions of the Ministry of Justice on the Execution of the Regulations for the
Administration of Foreign Law Firm’s Representative Offices in China", Any of the following activities shall
be deemed as employing PRC admitted lawyers: (I) to reach employment or labour agreement(s) with PRC
admitted lawyers; (II) to establish de facto employment or labour relationships with PRC admitted lawyers;
(III) to reach an agreement with a PRC admitted lawyer on sharing profits or risks or participating in
management; (IV) to pay any remuneration, fees or business dividends to PRC admitted lawyers; or (V) to
employ PRC admitted lawyers to engage in external business activities on behalf of the representative
office or the law firm to which the representative office is affiliated.

In practice, the Ministry of Justice made interpretation with regard to the regulation applicability in
Shanghai Municipal Bureau of Justices' handling of the cases of illegal participation of foreign lawyers of
Shanghai representative offices in Chinese legal affairs. In these two cases, French SMS Francis Lefebvre
Law Firm's representative office in Shanghai accepted client’s entrustments to designate its employed
auxiliary personnel to participate in litigation and arbitration activities, providing legal opinions on
applicability of Chinese laws in such activities and collecting charges therefor in the name of

6 Article 16 of the "Regulation"

9
 representative office, which violated the provision that representative bodies "can only engage in
business activities involving no Chinese legal affairs" set forth in Article 15 of the Regulation; in its related
case, though Signore KhattarWong Law Firm's representative office in Shanghai did not explicitly accept
the client entrustment to provide legal services on client's labor contract, its employed auxiliary person
provided the interpretation involving Chinese laws to the client by email and after that, Signore
KhattarWong Law Firm's representative office in Shanghai collected charges therefor from the client,
which was the confirmation of its auxiliary personnel's provision of legal service and should be
recognized as violating the provision that representative offices "can only engage in business activities
involving no Chinese legal affairs" set forth in Article 15 of the Regulation. Meanwhile, as the above two
representative offices provided legal services to clients through their employed auxiliary personnel, they
also violated the provision that such representation offices' "employed auxiliary personnel shall not
provide legal services to clients" set forth in Article 16 of the Regulation.7

Third, with respect to the administration of representative offices, a system of localization

administration and centralized examination and approval by the judicial administrative department of the
State Council was established. The judicial administrative organs of provincial level shall be responsible for
the daily administration of the representative offices in China. The main administrative matters include:
accepting and making initial examination of the applications of foreign law firms for setting up branch
organs and merging, splitting or representative increase of such representative offices; making initial
examination of the applications of foreign law firms for name-changing and decrease of representatives
thereof; being responsible for the registration and registration cancellation of such representative offices
and their representatives; being responsible for the annual inspection of such representative offices. But,
the administrative licensing for foreign law firms to set up representative offices shall be examined and
approved by the judicial administrative department of the State Council.

In the progress of China's opening-up, foreign investment promotion and international trading, the
representative offices of foreign law firms in China have played an important role and become an
important force in Chinese legal services market. Meanwhile, the relevant foreign law firms have also
achieved much in the past thirty years. Setting up representative offices in China has become a main form
for foreign law firms to provide legal services to their clients. In the past decades, the number of foreign
representative offices has grown rapidly as shown in the table below, from several dozens at the beginning
to more than one hundred in 2002 and 229 in 2016. Law firms of more and more countries have set up
representative offices in China, from initially only the USA and UK to 16 countries in 2016.

Change of the Number of Approved Operating Representative Offices of Foreign Law Firms in China

7
"Reply of the Ministry of Justice Regarding the Applicability Issues of "Regulations on the Administration of Foreign Law
Firms’ Representative Offices of in China", 13March, 2009 Ministry of Justice Reply No. 2 [2009]

10
 Number of approved operating representative offices of foreign law firms in China

Distribution of Representative Offices of Foreign Law Firms in China in 2016

Belgium, 1 Brazil
Holland Portugal Mauritius
Italy
Australia, 8

Norway Germany

France
Spain
USA

Japan

Singapore

South Korea

UK

USA UK South Korea Singapore Japan Spain

France Norway Germany Australia Italy Belgium

Holland Brazil Portugal Mauritius

In the development process, foreign law firms have set up their representative offices not only in
China's politic, economic and trade centers but also in more provinces. In 2006, the representative offices
were mostly distributed in Beijing, Shanghai and Guangzhou. But, a decade later, though the regional
distribution proportions of foreign representative law offices in China have not changed greatly, new
representative offices have appeared in Tianjin, Fujian and Zhejiang.

11
 Regional Distribution of Foreign Law Firms' Representative Offices in China in 2006

Shandong Liaoning
Guangdong

Beijing

Shanghai

Beijing Shanghai Guangdong Shandong Liaoning

Regional Distribution of Foreign Law Firms' Representative Offices in China in 2016

Fujian Liaoning
Tianjin
Guangdong Zhejiang

Beijing

Shanghai

Beijing Shanghai Guangdong Tianjin Fujian Liaoning Zhejiang

Most foreign law firms that have set up representative offices in China are most international top law
firms and have strong influence in the international legal services market. According to the Global Top 100
summarized by American Lawyer, British-invested and America-invested law firms occupied the 48 out of
the top 50 in global total earnings in 2015, including 10 British-invested law firms and 38 America-invested
law firms. Among the ten law firms from UK, except for SMS and Slaughter & May who have one
representative office only in Beijing, respectively, each of the remaining eight ones have representative
offices in both Beijing and Shanghai.

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Fifteen of US top law firms have set up representative offices in both Beijing and Shanghai, including:

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 Some internationally influencing international law firms, including Baker Mckenzie (American),
Clifford Chance (British), Kirkland & Ellis (American), Allen & Overy (British) and Linklaters (British) have
achieved great success in China and all have representative offices in Beijing, Shanghai and Hong Kong.

(II) Opening-up of Legal Services Industry toward Hong Kong and Macau Regions

After the WTO entry, China has gradually adopted measures to the legal circles of Hong Kong, Macau
and Taiwan which are different from those for other countries. Such measures mainly include: opening up
the legal professional qualification examination to residents of Hong Kong, Macau and Taiwan and
allowing them to practice law on Chinese mainland; adopting a more flexible attitude toward law firms
from Hong Kong, Macau and Taiwan and allowing them to establish a close relationship with mainland law
firms, including providing legal services for foreign-related clients by way of joint venture and joint
operation. In March 2002, the Ministry of Justice issued the "Administrative Measures for the
Representative Offices of Law Firms of Hong Kong Special Administrative Region and Macau Special
Administrative Region Stationed in the Mainland", which was revised in Nov. 2003, Dec. 2006 and 2015,
respectively. In 2003, the Ministry of Justice issued the "Measures for Administration of Associations
Formed by Law Firms of Hong Kong Special Administrative Region or Macau Special Administrative Region
and Mainland Law Firms", allowing law firms of Hong Kong Special Administrative Region and Macau
Special Administrative Region to carry out joint operation with Mainland law firms by way of
contract-based and partnership joint ventures to provide one-stop legal services for the clients. This
marked that Chinese government adopted opening-up measures for Hong Kong and Macau legal circles
that were different from those for foreign law firms. The above measures achieved remarkable effects and
there was a significant growth of the number of Hong Kong law firms having representative offices on the
mainland after 2004, the number increased to 61 in 2008 and has been basically kept afterwards.
Moreover, altogether 13 Hong Kong law firms established contract-based joint ventures with mainland law
firms and 10 Hong Kong law firms established partnership joint ventures with mainland law firms.

Change of the Number of Hong Kong Law Firms' Representative Offices on the Mainland

Number of approved operating representative offices of Hong Kong law

firms on the Mainland

(III) Opening-up of Legal Services Industry toward Taiwan

With the continuous development of cross-strait economic trade relationship, the
exchanges between the mainland and Taiwan has increased. In 2008, the Central People's

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Government decided to allow residents of Taiwan to participate in the Chinese mainland
judicial examination. Xiamen approved 232 Taiwan candidates for judicial examination in
2008 and 233 in 2009. In April 2009, altogether 37 Taiwan residents passing the judicial
examination acquired the "Certificate of Legal Professional Qualification" issued by the
Ministry of Justice in Xiamen. In July 2009, Xiamen Lawyer Association issued the "Lawyer
Practitioner Internship Certificate" to Qiu Guankui from Taiwan, who was the first Taiwan
compatriot to get such certificate in Fujian.

In 2009, in light of the further advanced cross-strait relations and the geographical
positions of Fuzhou and Xiamen, the Central People's Government decided to carry out pilot
tests in Fuzhou and Xiamen. This allowed law firms of Taiwan to set up representative offices
in these two places to provide Taiwan-related civil legal consulting service. In July 2009, the
Ministry of Justice issued the "Notice of the Ministry of Justices on Approval of Pilot Tests of
Setting Representative Offices by Law Firms of Taiwan in Fuzhou and Xiamen, Fujian", and
Fujian Provincial Department of Justice also formulated accordingly the "Measures for the
Implementation of Pilot Tests of Setting Representative Offices by Law Firms of Taiwan in
Fuzhou and Xiamen, Fujian". In Dec. 2010, seven Taiwan law firms such as Taiwan Yedahui
Law Firm, Lin & Chang International Law Offices and Over-North Attorney-at-Law acquired
the licenses for setting up representative offices in Fuzhou and Xiamen.

Part IV Exploration and New Tendency of Opening-up of Chinese Legal

Services Industry

It should be noted that, with the development of Chinese lawyers, the Chinese legal
services industry has possessed stronger competitiveness. Some large Chinese law firms
involved in more foreign-related businesses have begun to initiatively open up to the outside
world. As a result, they have set up new branches or carried out joint operation with foreign
law firms in foreign countries in light of the regulations on legal services industry of different
counties. They have conducted new exploration and attempts of proactive opening-up of
Chinese legal services industry on a new level. Meanwhile, with the continuously deep-going
development of free trade strategy and the release of "One Belt, One Road" strategy, the
Chinese government has been energetically developing its foreign-related legal services
industry. This has, in turn, promoted the opening-up of legal services industry to some
extent.
In 2015, the Shanghai Free Trade Zone adopted more opening-up measures for foreign
law firms, allowing them to set up joint operations with Chinese law firms for joint provision
of legal services to clients. In January 2017, the Ministry of Justice, Ministry of Foreign Affairs,
Ministry of Commerce and Legislative Affairs Office of the State Council jointly issued the
"Opinions on Developing Foreign-related Legal Services Industry", making an all-round
deployment for developing foreign-related legal services industry. The document pointed out
that foreign-related legal services industry should be developed so as to provide legal
services for key national development strategies such as "One Belt, One Road"; provide legal

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services for Chinese enterprises and citizens in their "going out"; provide legal services for
China' s overall diplomatic work; and provide legal services for strengthening international
multilateral and bilateral cooperation in combating corruption, hunting for those who have
fled abroad and recovering ill-gotten gains. It set forth that, in the next three years, China will
support Chinese law firms to set up at least 30 representative offices in the countries along
the "One Belt, One Road" and promote Chinese and foreign law firms to establish joint
cooperation and business alliance relations.8 These measures are a signal that China will
actively carry out legal cooperation with foreign countries and strengthen the construction of
foreign-related legal services industry, thus bringing new opportunities for further
opening-up of Chinese legal services industry.
1. Setting up branches in foreign countries
The modes to open up their legal services industry vary from country to country. Since
the beginning of this century, more Chinese law firms have begun to utilize the opening-up
policies of foreign countries to proactively enter foreign legal services markets to provide
better services to Chinese and foreign clients. Some Chinese lawyers who know Chinese laws,
have Chinese nationality and possess foreign lawyer licenses have played a huge role in this
aspect. By having the knowledge of cross-border laws and possessing cross-border legal
licenses, they are acting like a bridge in bringing Chinese lawyers going out.
In summary, Chinese law firms mainly adopt the following three modes to set up their
overseas branches:
First, engaging Chinese lawyers with foreign legal professional licenses and assigning
them to target countries to set up law firms with full qualification as their local agencies. In
this case, though local lawyers are engaged as well, the overseas law firms are generally led
by Chinese lawyers and their principal lawyers are generally partners of Chinese law firms.
For example, the partner of Zhong Lun Law Firm's branch in the UK possesses both Chinese
lawyer qualification and British solicitor qualification, and he also works in a British law firm.
Second, establishing new legal service platforms with local law firms in accordance with
foreign laws. Some countries implement restrictive opening-up to foreign lawyers within a
certain scope and only allow foreign law firms to establish a certain joint cooperation relation
with local law firms. This is just the mode adopted by Japan's legal services industry, where
foreign law firms are allowed to establish joint operation with local law firms. China King &
Wood Law Firm's branch office in Japan adopts such joint operation with local law firm as
well.
Third, establishing contract-based joint operation or cooperation relationship. At present,
many Chinese law firms with foreign-related businesses have contracted with relevant
foreign law firms to form a cooperation relationship based on business requirement.
2. Setting up cross-border lawyer cooperation organizations by adopting Swiss "Verein"
legal structure

8
Xiong Xuanguo. "Energetically Developing Foreign-related Legal Services Industry, Creating a New Pattern of
Foreign-related Legal Services". The Legal Daily: 1st March, 2017

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 In March 2012, Beijing King & Wood Law Firm and Australia Mallesons Stephen Jaques
Law Firm adopted Swiss "Verein" legal structure to formally set up an international legal
service union (King & Wood Mallesons) and establish a platform involving 1800 lawyers,
which is capable of providing one-stop cross-judicial region legal services involving the
mainland, Hong Kong, Australia and the UK. Later on, in 2015, Beijing Dacheng Law Offices
and Detons International Law Firm adopted a similar legal structure to set up "Dacheng
Dentons", announcing that it is the world’s largest law firm that have offices in 120 cities in
more than 50 countries and over 6600 lawyers.
Both King & Wood Mallesons and Dacheng Dentons have adopted Swiss "Verein
Structure" (the association structure under Swiss laws). "Verein" originally means
"association" and it is specified in Section II, "Association Legal Person" (Article 60-79),
Chapter Two of Swiss Civil Code that a Swiss association does not need to register for its
establishment, and the independent legal person qualification is gained as soon as its articles
of association are compiled for its establishment. According to Swiss Civil Code, the
establishment of association legal person adopts "internationalism" and needs only to sign
the articles of association, for which no compulsory industrial and commercial registration or
registration fee is required. As such organization structure has a great facilitation and
flexibility, many cross-national commercial institutions, professional accounting firms and law
firms often utilize the "Verein" organizational structure to expand their geographical sense of
presence and influence all over the world, and increase their operating revenues.
Within such a legal framework, the members have a flexible relationship with each other,
they are mutually independent, having no legal relationship of mutually entrusted agency
and they do not need to assume joint and several liabilities for other members in the
association. There is no unified top central management with authoritarian force or final
decision making. The members are from different countries all over the world, restricted by
the laws of the countries where they registered themselves and under the supervision and
regulation of their own countries. Therefore, though both King & Wood and Dacheng have
announced the adoption of merger measures in publicity and internal operation, such a
merger is not explicitly recognized according to Chinese laws. Additionally, within the existing
legal framework, King & Wood and Dacheng law firms may not employ foreign lawyers. Even
if foreign lawyers participate in legal businesses in the form of legal advisor, they may not
engage in Chinese legal businesses in the name of lawyer publicly.
However, by adopting this type of legal structure, domestic law firms established
according to domestic laws may set up a new business cooperation relationship, where,
under the prerequisite of independent original operating profit pool, accounting, tax
payment and partner remuneration systems (i.e. independent accounting), they may set up
business networks, publicize and promote common branding and share law firm
development strategy, market promotion and IT technology, and moreover, carry out closer
cross-nation cooperation among members, including client and business referral and quick
growth of respective business revenues. Therefore, it is essentially a kind of "contract-based
joint cooperation" relationship. Although, it also has potential conflicts with laws and
regulations of some member countries and may violate the regulations and professional
morality requirements on the legal sector of some member countries.

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 3. Allowing mutual lawyer assignments between Chinese and foreign law firms and
setting up Chinese and foreign lawyer joint operation organization in free trade zones.
In April, 2015, according to the "Measures on the Implementation of Mutually Assigning
Lawyers as Legal Advisors between Chinese and Foreign Law Firms in China (Shanghai) Pilot
Free Trade Zone" and "Measures on the Implementation of Joint Operation between Chinese
and Foreign Law Firms in China (Shanghai) Pilot Free Trade Zone", Beck & McKenzie
(American), the first to set up its representative office in China, took the lead to set up a joint
operation relationship with Beijing FenXun Partners, which is the first of this kind in the FTZ.
In March 2016, British Holman Fenwick Willian LLP also set up a joint cooperation office with
Shanghai Wintell & Co in the FTZ. In October 2016, Hogan Lovells International LLP registered
in England and Wales set up a joint cooperation office with Fujian Fidelity Law Firm in the
FTZ.
According to the provision of relevant legal document, the so-called joint operation refers
to joint operation between Chinese and foreign law firms that is approved under certain
conditions, in which, both parties "under the agreement specified rights and obligations,
practice joint operation in the pilot free trade zone, provide legal services involving
application of Chinese and foreign laws to Chinese and foreign clients, respectively by work
division and cooperation, or cooperatively handle cross-border and international legal
affairs."9 The parties of approved joint operation body "may, in the name of joint operation
body, accept entrustment of clients or other law firms, handle Chinese and foreign legal
affairs by work division and cooperation or cooperatively handle cross-border and
international legal affairs within the respective approved lawyer practicing business
scopes."10 Moreover, such joint operation body should, in the FTZ, “share the same office
and office equipment to realize merger work in one office and may share auxiliary personnel
for administrative and secretarial work.” During the joint operation, both parties will keep
independent in legal position, name and finance and independently assume their respective
civil liabilities.
In the FTZ, Chinese and foreign law firms that meet the requirements and are approved
may mutually assign lawyers as legal advisors, i.e. "A Chinese law firm and a foreign law firms
may sign an agreement, based on which, the Chinese law firm may assign a Chinese lawyer
to the representative office of the foreign law firm in China to act as its Chinese legal advisor,
the foreign law firm may assign a foreign lawyer to the Chinese law firm (or branch) to act as
its foreign legal advisor and both parties will, within their respective practicing business
scope and authorities, carry out business cooperation by work division and cooperation."11
When acting as assigned legal advisor, the Chinese lawyer may, in the name of Chinese
lawyer, provide clients with Chinese legal consultation services and agency services of civil
and commercial litigation or non-litigation legal affairs which Chinese laws are suitable for,

9
Article 2 of " Measures on the Implementation of Joint Operation between Chinese and Foreign Law Firms in China
(Shanghai) Pilot Free Trade Zone"
10 Article 9 of " Measures on the Implementation of Joint Operation between Chinese and Foreign Law Firms in China

(Shanghai) Pilot Free Trade Zone"

11 Article 2" Measures on the Implementation of Joint Operation between Chinese and Foreign Law Firms in China

(Shanghai) Pilot Free Trade Zone"

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jointly handle cross-border or international legal affairs with the representative office of the
foreign law firm in Shanghai (inclusive of the FTZ) by work division and cooperation, and in
the case of major and complex legal affairs, request the Chinese law firm where he is
employed to jointly handle such with the foreign law firm. When acting as an assigned legal
advisor, in addition to providing consultation services in foreign legal information, legal
environment and so on to the Chinese law firm or its branch to which he is assigned, the
foreign lawyer may, in the name of foreign lawyer, provide the clients with legal consultation
and agency services which foreign laws are suitable for and jointly handle cross-border or
international legal affairs with the Chinese law firm, or its branch by work division and
cooperation.

Allowing mutual assignment of lawyers between Chinese and foreign law firms and
setting up joint operation offices in the FTZ are all active explorations in the opening up of
legal services industry within the FTZ strategic framework. Mutual assignment of lawyers
facilitates the one-stop legal services and may make up the deficiency that foreign law firms
are not allowed to engage Chinese legal professionals. Joint operation enables the
establishment of a contract-based stable cooperation platform between Chinese and foreign
lawyers in the FTZ, granting certain autonomy in charge collection, education, training, etc.
Within this framework, Chinese and foreign lawyers may jointly carry out legal services,
creating good conditions for providing "one-stop" cross-legal domain legal services. On the
other hand, even within the framework of joint operation, “foreign law firms, their
representative offices, representatives and employees in China shall not handle Chinese legal
businesses.” which is in accordance with the basic legal framework established by the
"Regulations on the Administration of Foreign Law Firms’ Representative Offices in China"
and "Provisions of the Ministry of Justice on the Execution of the Regulations on the
Administration of Foreign Law Firms’ Representative Offices in China".

Conclusion

From the development and overall pattern of the opening-up of the Chinese legal service
industry at present, we can see that, although the opening-up has been limited, the foreign
lawyers have, to some extent, accomplished tasks entrusted to them by clients, and thus
have made active contributions to China's reform and opening up, investment attraction,
foreign trade and outbound investment and cooperation. Throughout this process, foreign
lawyers have enhanced cooperation with the Chinese legal circles, and the quality, size and
level of Chinese law firms have also been improved through such cooperation. Through
becoming the world’s second largest economy, China is moving from being the recipient of
large foreign investments to being the one that makes large outbound investments, which
requires the establishment of a new mode of international exchange and cooperation to suit
this new pattern. In particular, the advocacy and practice of the "One Belt, One Road"
strategy requires China to strengthen the supply of legal knowledge and legal services. China
must also further understand the legal systems and governing modes of the countries along

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the "One Belt, One Road" and enhance legal cooperation with these countries. Therefore, it
is foreseeable that, while continuing to explore and carry out effective Chinese and foreign
lawyer cooperation in jointly providing foreign-related legal business in new forms, China will
expand the scope of the opening-up of the legal services industry and transfer from passive
opening-up of the domestic market to active international cooperation. The Chinese
government will actively support and promote international cooperation and opening-up
methods where Chinese law firms are involved or take the lead. In this sense, international
law firms should re-review and connect with the new strategy for China’s opening-up of the
legal services industry.

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