Measures for the Administration of Associations Between Law Firms of the Hong Kong and Macao Special Administrative Regions and Mainland Law Firms

(Promulgated by Ministry of Justice on November 30 2003 and effective as of January 1 2004.)

PART ONE: GENERAL PROVISIONS

Article 1:These Procedures are formulated in order to implement the Mainland and Hong Kong Closer Economic Partnership Arrangement and the Mainland and Macao Closer Economic Partnership Arrangement as approved by the State Council, and to regulate association activities carried out in the Mainland between law firms of the Hong Kong and Macao Special Administrative Regions and Mainland law firms and the administration thereof.

Article 2:Association as referred to in these Procedures shall be the forming of associations in the Mainland to provide separate Hong Kong, Macao or Mainland legal services to clients by Hong Kong or Macao law firms that have already established representative offices in the Mainland together with a Mainland law firm at the place where the representative office is located in accordance with agreed rights and obligations.

Article 3:Association by Hong Kong or Macao law firms with Mainland law firms shall not take the form of association as a partnership or association as a legal person.

During the period of association by Hong Kong or Macao law firms with Mainland law firms the legal status, names and finances of both parties shall remain independent and each shall be independently liable for their civil liability.

Article 4:Association by Hong Kong or Macao law firms with Mainland law firms shall abide by state laws, regulations and rules and scrupulously observe lawyers¡¯ professional ethics and practice discipline, and shall not prejudice state security or the public interest.

PART TWO: APPLICATION FOR ASSOCIATION

Article 5:Hong Kong or Macao law firms that fufil the following criteria may apply for association:

(1) they shall have been registered and established in accordance with the relevant Hong Kong or Macao laws;

(2) they shall have owned or rented a place of business in Hong Kong or Macao from which they have conducted substantive commercial business for at least three years;

(3) the sole proprietor or partners must be registered practising lawyers in Hong Kong or Macao;

(4) their main scope of business shall be the provision of local legal services in Hong Kong or Macao;

(5) law firms and the sole proprietor or all the partners of the firm must pay Hong Kong profits tax, Macao profits tax or personal income tax;

(6) they must have obtained approval to establish representative offices in the Mainland; and

(7) they shall not have been penalized by the lawyers¡¯ regulatory authority in Hong Kong or Macao in the two years prior to their application for association.

Article 6:Mainland law firms that fufil the following criteria may apply for association:

(1) they shall have been established for three years;

(2) they shall employ not less than 20 full-time lawyers; and

(3) they shall not have received administrative penalties or administrative disciplinary measures in the two years prior to application.

Branches of Mainland law firms may not apply to be a party in an association.

Article 7:Hong Kong or Macao law firms and Mainland law firms applying for association shall jointly submit the following material to the local provincial-level judicial administrative authority at the place where the Mainland law firm is located:

(1) application for association signed by both parties;

(2) the draft association agreement prepared by both parties;

(3) a copy of the valid registration document granting the establishment in Hong Kong or Macao of the Hong Kong or Macao law firm; the name(s) of the sole proprietor or responsible person, or all the partners; and a copy of the practising permit of the Mainland representative office and a list of the representatives;

(4) documents issued by the relevant Hong Kong or Macao Special Administrative Region authorities proving the Hong Kong or Macao law firms fulfil the standards for legal service providers;

(5) a copy of the Mainland law firm¡¯s practising permit, the name(s) of the responsible person, all the partners or joint owners, and documents issued by the relevant district (or municipal) judicial administrative authority proving that the company fulfils the criteria stipulated in Article 6 hereof; and

(6) other material as requested by the provincial-level judicial administrative authority.

The copy of the valid registration document as stipulated in Item (3) above must be certified by a recognized Mainland notary.

The application material must be submitted in triplicate and in Chinese. If it contains a foreign language, then a Chinese translation must be appended.

Article 8:The provincial-level judicial administrative authority shall decide whether or not to approve the application for association within 20 days of its receipt of the application material. If a decision cannot been reached within 20 days, then the time limit may be extended by 10 days with the approval of the personnel in charge of the authority and the applicants shall be informed of the reason for this extension.

If an application is in accord with the provisions hereof, then approval shall be granted and an association permit issued. If an application is not in accord with the provisions of these Procedures, then the association shall be approved and the applicants shall be informed in writing.

When an association is approved, the provincial-level judicial administrative authority shall file the association approval document and the related material with the Ministry of Justice for the record within 30 days of issuing the association permit.

PART THREE: RULES FOR ASSOCIATION

Article 9:Hong Kong or Macao law firms and Mainland law firms engaged in association shall sign a written association agreement. This agreement shall contain the following:

(1) the names and domiciles of both parties, and the names of the sole proprietor,  partners or joint owners;

(2) the name and logo of the association;

(3) the term of the association;

(4) the business scope of the association;

(5) arrangements for joint offices and equipment;

(6) arrangements for joint personnel such as administrative personnel, secretaries, etc;

(7) arrangements for division of fees earned from and apportioning operating costs spent on the association;

(8) arrangements for legal practice insurance for and method of bearing liability of the lawyers of both parties;

(9) termination and liquidation of the association;

(10) liability for breach of the agreement;

(11) resolution of disputes; and

(12) other matters.

The association agreement shall be formulated in accordance with the relevant provisions of Mainland law.

The association agreement shall become effective once the association has been verified and approved by the relevant judicial administrative authority.

Article 10:   The term of association as agreed in the association agreement between Hong Kong or Macao law firms and Mainland law firms shall not be less than one year. When the term of association as agreed in the agreement has expired, it may be extended after consultation between the two parties. Applications for extensions shall be dealt with in accordance with the procedures stipulated in Articles 7 and 8 hereof.

Article 11:   Association between Hong Kong or Macao law firms and Mainland law firms may use an association name and logo that have been agreed between the two parties and that have been approved.

The association name shall be comprised of the name of the Hong Kong or Macao firm and the name of the Mainland firm plus the word ¡°association¡±.

Article 12:   Associations between Hong Kong or Macao law firms and Mainland law firms may, in the name of the association, jointly accept appointments by a party concerned or another law firm to handle, in a cooperative fashion, the respective legal matters of Hong Kong, Macao, the Mainland and countries other than China where the relevant law firms are allowed to engage in legal practice

Hong Kong or Macao lawyers involved in association shall not handle Mainland legal affairs.

Article 13:   When appointed to handle legal work, the parties of an association shall avoid conflicts of interests between their respective clients.

Article 14:   Hong Kong or Macao law firms and Mainland law firms cooperating to handle legal work in the name of an association may charge joint fees from the client that shall then be divided in accordance with the association agreement; they may also charge the client separately in accordance with the legal work each has done under the association, but must notify the client of this beforehand.

Article 15:   Hong Kong or Macao lawyers and Mainland lawyers engaged in association may conduct promotional activities together, but when doing so shall disclose the following:

(1) their association shall not take the form of a partnership or legal person;

(2) the Hong Kong or Macao firm and their lawyers participating in the association cannot handle Mainland legal matters; and

(3) lawyers conducting promotion must specify the name of their firm.

Article 16:   Both parties engaged in an association, and their lawyers involved, shall join legal practice insurance plans in their own names in accordance with relevant provisions of Hong Kong, Macao and the Mainland.

Article 17:   The parties engaged in an association shall, in accordance with the association agreement, have the party at fault independently bear or both parties jointly bear the liability for compensation for practice in violation of the law or faults that cause losses to a client in the course of conducting association business.

Article 18:   Hong Kong or Macao law firms and Mainland law firms engaged in association may use common offices and equipment. The relevant costs shall be shared in accordance with the association agreement.

Article 19:   Hong Kong or Macao law firms and Mainland law firms engaged in association may jointly employ assistants such as administrative personnel or secretaries. The relevant costs shall be shared in accordance with the association agreement.

Article 20:   Hong Kong or Macao law firms and Mainland law firms engaged in association shall each maintain their own financial systems and accounts books.

Article 21:   Hong Kong or Macao law firms and Mainland law firms engaged in association may terminate such business in any one of the following circumstances:

(1) when both parties fail to apply for an extension once the period of association has expired;

(2) when both parties terminate the association in accordance with the association agreement;

(3) when either party no longer exists or becomes bankrupt; or

(4) in other circumstances when the association should be terminated in accordance with the law.

When an association is terminated, the cancellation procedure shall be undertaken by the relevant provincial-level judicial administrative authority.

PART FOUR: SUPERVISION AND ADMINISTRATION

Article 22:   Hong Kong or Macao law firms and Mainland law firms engaged in association shall submit the previous year¡¯s association report to the local provincial-level judicial administrative authority at the place where the Mainland law firm is located every year before March 31, and shall agree to inspection. Firms that fail to submit their report on time without good reason shall be regarded as having voluntarily terminated their association.

Article 23:  Hong Kong or Macao law firms and Mainland law firms engaged in association that violate Mainland laws, regulations or rules, or the provisions hereof, shall be given a warning by the relevant provincial-level judicial administrative authority and shall be ordered to rectify matters within a time limit. Those that fail to do so shall be fined up to Rmb10,000. Those that have made illegal income shall be fined within one and three times that sum, but not exceeding Rmb30,000.

Article 24:   Personnel employed in judicial administrative authorities who in the course of their administrative duties violate laws, regulations or rules shall receive administrative penalties. Where the act constitutes a crime, criminal liability shall be pursued in accordance with the law.

PART FIVE: SUPPLEMENTARY PROVISIONS

Article 25:   These Procedures shall be interpreted by the Ministry of Justice.

Article 26:   These Procedures shall be effective as of January 1 2004.