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Hong Kong-based international firms hit back at Law Society’s plans to close loophole allowing foreign lawyers to practise

  • Partners from 15 global law firms express ‘enormous concern’ about planned rule change in letter to Law Society president
  • Signatories say making the hiring of foreign lawyers more difficult would have ‘negative repercussions for the economy’
PUBLISHED : Tuesday, 23 October, 2018, 7:03am
UPDATED : Tuesday, 23 October, 2018, 7:03am

International law firms in Hong Kong are pushing back against an “arbitrary” proposal by the professional solicitors’ body to raise the bar for hiring foreign and mainland Chinese lawyers.

The Law Society is considering plugging a potential loophole that allows non-local lawyers to practise in the city “through the back door”.

In a joint letter from Hong Kong partners from 15 global firms to Law Society president Melissa Kaye Pang, the companies expressed “enormous concern” that, for every foreign lawyer hired, they would now have to hire two local lawyers, instead of one, as was previously the case.

“In particular, [the international firms] are concerned that the implementation of this proposal will have colossal negative repercussions for the economy of Hong Kong and for Hong Kong’s status as an international financial centre,” wrote the partners.

Among the signatories were local partners from Davis Polk, Kirkland & Ellis, Latham & Watkins, Linklaters, Paul Hastings, and Skadden.

The backlash from international firms has already forced the Law Society to push back the end date of a consultation period for the new measure from November 1 to December 31. The firms have also requested an “urgent meeting” with Pang, which she has agreed to, but no date has been fixed yet.

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The Post exclusively reported last week that the Law Society had proposed restricting lawyers from outside Hong Kong – including those from mainland China – to giving legal advice only on cases involving jurisdictions they were registered in, as opposed to working on any non-Hong Kong cases.

The new rule was intended to prevent foreign lawyers from giving any “back door” advice on cases involving Hong Kong law, which they are not supposed to work on.

Costs for hiring foreign lawyers may rise after a proposed two-year transition period. This could happen due to firms having to raise local-to-foreign hire ratios for the first time since 1994, and because foreign and mainland lawyers may have to pay a licence fee for each jurisdiction they wish to practise under.

The Law Society previously said changing the ratio was to ensure “mainland and local consumers are properly served, and to further groom local talent”.

Martin Rogers, partner at Davis Polk, who co-signed the letter, said the Law Society had not provided any analysis to justify the new measures or help solve problems related to “back door” practice.

“If the Law Society takes the view that better enforcement is required to restrict what [foreign lawyers] are allowed to do, that’s unobjectionable. What really concerns us is the arbitrary idea to deal with the ratio and to restrict lawyers from coming,” Rogers said.

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He added that the proposal also gave the impression of “being discriminatory” against foreign lawyers, and was inconsistent with the government’s policy to make Hong Kong a pre-eminent international legal and financial centre.

“If the cost of [being based in Hong Kong] is you’re forced to employ more Hong Kong solicitors just because the Law Society [requires it], people are going to find a different place to do business,” said one partner from another firm, who preferred not to be named.

Former Law Society president Dieter Yih Lai-tak said that, during his tenure from 2012 to 2013, the Law Society had received complaints from young local lawyers about the growing number of foreign lawyers, but the society had not proposed any rule change until now.

The veteran securities lawyer said fixing the local-to-foreign hire ratio at 1-1 had always been “arbitrary”, but he also believed the debate on restricting foreign lawyers was misguided as there was a manpower shortage in the legal sector, due to an admissions bottleneck in local law schools.

“From my experience working in several international firms, it is more costly to hire a foreign lawyer than a Hong Kong one – the market has been undersupplied, so I don’t see why foreign lawyers are affecting Hong Kong lawyers’ prospects,” said Yih, who founded a local law firm specialising in listing and commercial matters.

Many ‘foreign’ lawyers are actually Hongkongers who have studied law overseas, while some locally qualified lawyers are actually foreigners
Dieter Yih Lai-tak

“Interestingly, many ‘foreign’ lawyers are actually Hongkongers who have studied law overseas, while some locally qualified lawyers are actually foreigners – so nationality is a non-issue. The only issue is cost and the quality of legal work they can provide.”

Another major source of confusion, according to Yih, was that the Legal Practitioners Ordinance did not preclude anyone from giving advice on stock listing rules.

“In an initial public offering project I once worked on, an international law firm employed a legal team that was almost entirely from the Beijing office, and the most senior lawyer from the Hong Kong office had been qualified for only three years, and that’s perfectly legal,” Yih recalled.

“If anyone complaining were to say ‘Hong Kong laws say…’, I would definitely report the case to the Law Society. But if they are only speaking of ‘Hong Kong listing rules say…’, I wouldn’t have a case,” he said.

“While young local lawyers might argue there’s a loophole, there’s just no legal basis to make any complaint.”