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Are Western Firms Growing Too Fast in China?

Seeking to reestablish the rule of law in the aftermath of the Cultural Revolution, China's government in 1980 set an ambitious goal: increase the number of licensed Chinese lawyers by 50-fold. Twenty-six years later, the aspiration has almost been realized. China's domestic legal industry has about 122,000 lawyers, compared to 3000 in 1980. Now the government may be turning its attention from adding to the ranks of those lawyers to protecting their business ' at the expense of foreign firms looking to strengthen their presence in China.


A scathing memo passed unanimously by the Shanghai Bar Association on April 17 accused foreign firms of 'threatening China's legal system and economic safety' [see, The American Lawyer, Bar Talk, 'Walk the Line,' August 2006]. Among other things, the memo accused foreign lawyers of illegally practicing Chinese law, evading taxes, engaging in false advertising, and establishing or controlling Chinese firms. Foreign lawyers have long been barred from practicing Chinese law, but the specifics are vague. Under a regulation that took effect in 2002, foreign firms can 'provide information about the legal environment in China, but not interpretation of the applicability of Chinese laws.' Appearing in court and writing opinions are clearly off-limits, but advising clients about specific Chinese laws and domestic legal strategies is murkier. Although the bar association does not legislate, the menacing memo hinted at a future crackdown. (Fearing potential sanctions, foreign lawyers declined to comment on the record about the matter for this article.)

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