chinaWhat happens when there is a legal gray area? Well, people step into it—especially when the gray area happens to be a law that defines what a lawyer can and cannot do in China. The law states that a foreign lawyer cannot “conduct any legal services concerning Chinese law” nor can they “hire Chinese-licensed lawyers; any legal assistant hired may not provide legal services” (a legal assistant being a lawyer who has not worked abroad for at least 2 years) (Shanghai Lawyers).
That’s a bummer for a foreign lawyer that wants to do any work at all in China. However the Chinese government made some slight exceptions. Foreign lawyers in China can consult and practice international and overseas law for Chinese and foreigners, represent foreign clients in entrusting work to Chinese firms, and provide information about China’s legal environment without providing interpretation of Chinese laws. That’s a pretty narrow framework to maneuver in. And for the past years, foreign lawyers have found many ways around these restrictions by either bending or breaking the guidelines. Give them an inch and they will take a mile. Some of the worst of what’s going involves foreign firms hiding the fact that they are outsourcing work to Chinese firms so clients think they are China experts. But mostly, what’s happening isn’t all that unreasonable. Foreign lawyers, though perhaps not experts, know enough about China to advise their foreign clients on how to do business in China, so they do as much as they can without breaking the rules. As you can imagine, most lawyers aren’t too excited about outsourcing when they have the know-how to do the work themselves.
By law, they shouldn’t. But the status quo has allowed them to stretch the gray area of what a foreign lawyer can do until it’s become a very large gray football field. The government has allowed this gray playing field to exist because the Chinese legal environment has been very inexperienced and if foreign lawyers could not work for the clients, much less work would be done to international standards in China. That, of course, equals less investment and income for China. So you see why the Chinese have allowed foreign lawyers a lot of breathing room.
Unsurprisingly, as Chinese lawyers are becoming more experienced and capable, they are starting to get more upset. The memorandum that brought this debate to the forefront was published by the Shanghai Lawyers association. It calls for a serious crackdown on foreign lawyers practicing outside of their limits. In other words, they want the foreign firms that are operating outside of the very strict regulations to be punished or even shut down as examples.
As others, like Dan Harris, have pointed out, this isn’t such an unreasonable demand when compared to other jurisdictions. Mr. Harris points out that California will not allow a lawyer accredited in another state, much less another country, to practice at all without first passing the California bar. Of course, at this point, foreign lawyers cannot sit for the Chinese bar, making the situation a tad less fair, but the demand to have the Chinese legal practice protected by the afore-mentioned laws is not so strange.
Most people do not seem to think that foreign firms will be shut down—but there is the possibility of some serious wrist slapping. To me, this seems like something of a natural process. As Chinese lawyers continue to grow in experience and competency, they will want their market back from foreigners. But Chinese law is in a tight spot. You can’t just kick out foreign lawyers—their expertise and client base are too valuable. So I imagine that the Chinese government will start by slowly tightening the gray area that foreign lawyers have created for themselves. They will do this as much as they trust their own Chinese lawyers to pick up the slack. So the question is: how much faith do Chinese officials have in Chinese lawyers?
