Barriers to foreign law firms decried

Foreign lawyers cannot appear in a mainland court. They cannot practise Chinese law. Their firms cannot directly employ Chinese lawyers.

What foreign lawyers can do is offer information on the mainland's legal environment, provide advice and handle legal matters relating to the laws of other countries, and engage domestic firms to deal with cases on behalf of their clients.

Under Beijing's commitments to the World Trade Organisation, the main concession in legal services was a pledge to lift geographic and quantitative limits on opening representative offices. Rules issued later, however, require a three-year waiting period between opening new offices.

'Regulations create barriers for foreign law firms establishing offices in China, unreasonably limit their range of activity and restrict them from hiring suitable staff,' the American Chamber of Commerce in China said in a policy paper last year.

'The net result is not only that foreign firms' ability to effectively serve their international clients is impeded, but also that their contribution to the development of China's legal system and its legal services industry is significantly limited,' it said.

Still, the flood of foreign investment into China has given overseas law firms all the work they can handle. The mainland has about 200 registered overseas law firms, according to state media.

As a result of the restrictions and difficulty in finding lawyers that meet the requirements for working in China, foreign law firms are far smaller than domestic firms and their own offices in other countries. A big foreign law firm in China might have roughly 50 professionals, compared with 400 to 500 in a major US city. But some have been pushing the boundaries.

In April, the Shanghai Bar Association released a critical report about foreign law firms, widely seen as a reassertion of the government's power over lawyers and concern about the threat of competition.

'The business activities of overseas law firms have far exceeded the limits placed on them under Chinese law and their illegal practice has tended to become increasingly grave,' the bar association said. 'This not only impairs fair competition and healthy development of Chinese law firms. It is also growing into a threat to the judicial independence and economic security of this country.'

Foreign firms argue that further opening the market will give Chinese law firms more exposure to international practice.

'If they would allow hybrid firms that had foreign lawyers and Chinese domestic lawyers, they would basically lift open the market. There would be a lot more Chinese lawyers who are trained in international law,' said Walker Wallace, a partner at O'Melveny & Meyers in Shanghai.

China bars foreigners from hearings in open court without permission. In a recent policy paper, the European Chamber of Commerce called for an end to this practice, which has prevented foreigners attending hearings for cases involving their own firms.

'Transparency is fundamental to the effective operation of a legal system and to ensure that justice is done,' the chamber said, adding the open court ban went against this principle.