China's Revised Lawyer's Law: Practical Benefits for a Strengthened Legal Profession

Second, from the time an investigative case is commenced against a client, the lawyer will have the right to inspect and make copies of documentation of the proceedings and the case files supporting the allegations against the client. From the time a court accepts the case, the lawyer will have the right to inspect and make copies of all materials that are in support of the allegations. This will have the effect of re-affirming a lawyer's right to obtain basic information about a case against his client.

Third, the revised Lawyer's Law stipulates that a lawyer representing a client in a proceeding will be permitted to apply to the prosecutor or the court to gather evidence or notify witnesses to appear in court to provide testimony. Of particular importance, the revised law provides that lawyers may conduct legally relevant fact-finding vis-¨¤-vis agencies and individuals. This provision has drawn attention from the legal community because of the difficulties lawyers in China have faced when attempting to gather information from state agencies, which may have their own rules that block lawyers from gaining access to information. For this reason, some PRC practitioners are calling for the NPCSC to go beyond the proposed revisions as currently worded and to make the revised Lawyer's Law explicitly clear with respect to what types of information agencies must provide (for example, such materials as industrial and commercial registration files, real estate and vehicle registrations, and bank account, insurance and financial information where needed in adversarial proceedings).

Fourth, lawyers will not be subject to legal action for advocacy viewpoints expressed in court. This exemption will not apply to speech that threatens national security, defames others, or disrupts the order of the court. The revised Lawyer's Law provides that if a lawyer, while participating in legal proceedings, is subject to arrest, his family, firm and the lawyer association to which he belongs must be notified within twenty-four hours.

Legal Ethics and Law Firm Governance

The revised Lawyer's Law will strengthen currently existing legal ethics and law firm governance requirements. Judges and prosecutors will be prohibited from serving in the capacity of advocate or agent in legal proceedings for two years from the time they leave office. Law firms will be required to put in place comprehensive procedures for such basic internal governance as managing conflict checks, fee collection and finances, and annual assessments to ensure that firm attorneys are adhering to professional ethics and discipline - the revised law will require that firms terminate non-complying lawyers.

One especially significant provision of the revised law will be a prohibition against law firms pursuing any business activity other than that of providing legal services. International practitioners may recognize this prohibition as an analogue - albeit more strongly worded - to rules in other jurisdictions designed to maintain the professional independence of lawyers. For example, in the United States, the American Bar Association (ABA) Model Rules of Professional Conduct indirectly limit lawyers' ability to engage in non-legal business by barring lawyers from forming partnerships with non-lawyers if any of the activities of the partnership would involve the practice of law. The ABA Model Rules restrict lawyers from practicing in professional corporations or associations in which a non-lawyer owns an interest (with limited exception), is a corporate director or officer, or has the right to direct or control the professional judgment of the lawyer. Furthermore, the Model Rules place limitations on the ability of lawyers to share their legal fees with non-lawyers.

With respect to legal ethics issues, language is under consideration that will re-state and clarify the prohibition against state functionaries from concurrently engaging in law practice. If enacted, this will mark the completion of an important transition from China's earliest lawyer rules - i.e., the interim regulations adopted in 1980 that were supplanted when the current Lawyer's Law took effect - which had deemed all lawyers functionaries of the state. This point may be particularly relevant to US companies and subsidiaries that are evaluating their obligations under the US Foreign Corrupt Practices Act when engaging PRC lawyers. In this connection, US companies and subsidiaries may nonetheless wish to bear in mind that 1,400 of China's roughly 10,000 law firms are state-invested entities. State-invested law firms will continue to be recognized under the revised Lawyer's Law.

Lawyer Liability

The revised Lawyer's Law will address in comprehensive fashion the liabilities that lawyers and law firms face for not fulfilling their professional responsibilities or for otherwise violating their duties. Taken as a whole, these will give consumers of legal services in China added protection when engaging PRC lawyers.

Lawyers may face fines of up to Rmb5,000 (US$650) and in serious cases suspension for up to three months for such offenses as simultaneously practicing in more than one law firm, using inappropriate methods to attract business (e.g., by paying introduction fees or defaming other law firms), representing both sides of a case, not fulfilling pro bono obligations, and, in the case of judges and prosecutors, serving as an advocate or legal agent within two years of leaving office.

Fines of up to Rmb10,000 (US$1,310) and, in serious cases, suspension for three to six months may be meted out to lawyers who undertake private representations (i.e., in secret from their firms), refuse without legitimate reason to carry out their duties with respect to a representation that they have agreed to undertake, fail to make timely appearance in court or arbitration proceedings, exploit their position as providers of legal services to usurp the opportunities of parties to a dispute, or divulge business secrets or individual confidences. (The revised Lawyer's Law indicates that legitimate reasons to refuse to carry out a representation once accepted include client demands to engage in illegal activity or to conceal material information in the course of a case.)

Lawyers may face suspension for six months to a year, fines of up to Rmb50,000 (US$6,600), and criminal prosecution for offenses related to improperly influencing judges, prosecutors or arbitrators (for instance, meeting with judges, prosecutors or arbitrators for the purpose of improperly influencing them, engaging in bribery, or inducing a party to engage in bribery). These penalties may also extend to such conduct as colluding with the opposite side against the interests of a client, inciting a party to disrupt public order or otherwise threatening public security as a means of settling a dispute, deliberately providing false evidence or inducing others to do the same, obstructing a party's legal efforts to obtain evidence, disrupting the order of the court or of arbitration proceedings, interfering in the normal operation of legal or arbitration proceedings, publishing speech that is harmful to national security, and divulging state secrets.

Law firms may face fines of up to Rmb100,000 (US$13,200) and suspension for one to six months for such offenses as accepting representations or fees in a manner not in accord with regulations, changing business names, operating charters, partnership agreements and business locations in violation of regulations, engaging in business activities other than that of providing legal services, accepting conflicting representations, not fulfilling pro bono obligations, paying introduction fees or defaming other law firms to solicit business, providing false information to or hiding material information from the MOJ, or engaging in other deceptive behavior vis-¨¤-vis the MOJ.

The revised Lawyer's Law will specify that any illicit income gained in connection with the violations discussed above will be subject to confiscation.

Lawyer Qualifications

The revised Lawyer's Law will require that applicants for law licenses must meet several qualifications - specifically, they must support the PRC Constitution, pass the national bar examination, have one year of law firm training, and be persons of good character. Advocates of the national bar examination believe that it is a necessary requirement to ensure that the process of entry into the legal profession will be both fair and capable of setting high standards.

Notably, the Lawyer's Law as currently in effect allows, as an alternative to passage of the national bar examination, persons of advanced educational attainment and having experience in legal research and teaching, or an equivalent professional background, to apply for law licenses pursuant to separate MOJ criteria. Though language is under consideration that will leave this alternative route open under the revised Lawyer's Law, questions have been raised as to whether permitting exceptions to the national bar examination process is relevant any longer to China's needs.

Solo Practice

In tandem with international practice, the revised Lawyer's Law will permit for the first time in the PRC legal services market the establishment of solo practitioner firms. (Solo practitioners will be required to have five years of experience in legal practice before they can open shop.) This will afford consumers of legal services in China greater diversity with respect to the services available to them, and permit foreign law firms operating in China more flexibility in drawing upon assistance of PRC counsel. Currently, there are about 130,000 lawyers in China working in about (as mentioned above) 10,000 firms, suggesting there is room for entrepreneurial solo practitioners to take advantage of the opportunities that the revised Lawyer's Law will open to them.

Professional Self-Governance

The revised Lawyer's Law will have significant implications in the area of lawyers' professional self-governance. Under the Lawyer's Law as currently in effect, all lawyers, law firms and lawyer associations - the national and regional professional associations to which PRC attorneys and law firms must belong, and which supervise foreign law firms maintaining offices in China - are under the direction of the MOJ, which is part of the executive arm of China's government. This will stay the same in the revised Lawyer's Law, but with the added stipulation that the lawyer associations shall exercise professional self-regulation with respect to lawyers and law firms in accordance with the Lawyer's Law and their charters. This will have the effect of recognizing in official terms the increased autonomy that China's lawyer associations have been exercising in practice for some time. For example, pursuant to its current charter (in effect since 1999), the All China Lawyers Association (ACLA) - China's nation-wide bar association - already regulates lawyer and law firm conduct, and also handles complaints against and disputes among lawyers. Further, it should be noted that regulatory functions have already been taken on by the provincial and local-level lawyer associations as well. In international practice, these are key indicators of professional autonomy.

General Observations

The proposed revisions to the Lawyer's Law are well-drafted and, if enacted, will mark a significant step forward in the development of China's legal profession. The revised statute will offer greater protection for the attorney-client relationship and set clearer guidelines for lawyer conduct. This in turn will enable lawyers to represent the business interests of their clients in China in a more effective fashion.

As consideration of the revised Lawyer's Law moves forward, practitioners may wish to bear in mind several issues that remain to be resolved. First, it is notable that some of the misconduct addressed by the draft revisions is not punished more severely than currently contemplated. For example, improperly influencing judges, prosecutors or arbitrators perverts the course of justice and for that reason it is quite common in international practice for offenses of that nature to be punished by disbarment, which of course goes well beyond the six-to-twelve month suspension being considered for inclusion in the revised Lawyer's Law. On the other hand, clarifying the scope of certain other offenses that will be addressed by the statute is an issue of concern. As already mentioned for example, the revised Lawyer's Law prohibits lawyers from divulging state secrets, which under the PRC State Secrets Law is defined in broad terms (matters that implicate national policy, national defense, the conduct of foreign policy, economic development, activities related to protecting national security, and certain scientific and technological issues could all be state secrets). Because lawyers have been prosecuted for offenses in this area, clarification with respect to how to identify and handle matters potentially involving state secrets would be useful.

Second, the wording of some of the revised statute's safeguards against inappropriate conduct, though well-intentioned, may create hardships for PRC lawyers. For example, prohibiting lawyers from concurrently working in more than one law firm helps guard against conflicts of interest, but the relevant language includes a requirement that lawyers who change firms must apply to have their licenses re-issued - this is potentially burdensome. Similarly, the prohibition against lawyers representing both sides of a case reflects a basic tenet of legal ethics, but in line with international practice it would make sense to include some allowance for permitting lawyers in non-adversarial and non-criminal matters to act for both parties if the parties provide their informed consent. Lastly, the prohibition against lawyers undertaking private representations (in secret from their firms) is another important safeguard against conflicts of interest, but including a clear exception for solo practitioners should help to advance the drafters' objectives.

About the authors

Huen Wong is a partner at Fried, Frank, Harris, Shriver & Jacobson LLP. He joined the firm in 2006 and is the firm¡¯s managing partner in Asia, based in Hong Kong. Wong has extensive knowledge of PRC law and practice and his experience covers a broad range of fields, including joint ventures, securities, licensing, building and construction projects, and arbitration in the region.

Adam H. Arkel is a corporate associate in Fried, Frank, Harris, Shriver & Jacobson LLP¡¯s Washington, DC office. Arkel¡¯s practice focuses on advising public companies, regulated entities and individuals on securities regulatory, compliance and enforcement issues. He is fluent in Chinese and previously lived in East Asia for three years.