Shanghai Municipality, Implementing Measures for the Mutual Secondment of Lawyers by Chinese and Foreign Law Firms in the China (Shanghai) Pilot Free Trade Zone to Serve as Legal Counsel

Chinese and foreign law firms that apply to participate in the pilot project shall satisfy the condition of at least one party having set up an establishment in the PFTZ, i.e. the foreign law firm having established a representative office in the PFTZ, or the Chinese law firm (or a branch thereof) being established in the PFTZ, in addition to satisfying the conditions set forth in Articles 3 and 4 hereof.

Article 3: A Chinese law firm applying to participate in the pilot project shall satisfy the following conditions:

(1) having been established for at least three years;

(2) being in the form of a partnership;

(3) having at least 20 full-time practising lawyers;

(4) having relatively strong legal service capabilities and compliant internal management;

(5) not having been subjected to administrative penalties or industry sanctions during the most recent three years; and

(6) its head office being in Shanghai (including the PFTZ), or its head office being in another province, autonomous region or municipality directly under the central government but already having a branch in Shanghai (including the PFTZ).

Article 4: A foreign law firm applying to participate in the pilot project shall satisfy the following conditions:

(1) having had a representative office in Shanghai for at least three years, or having had a representative office in another city in China for at least three years and already having a representative office in Shanghai (including the PFTZ); and

(2) its existing representative offices not having been subjected to administrative penalties by a Chinese regulator during the most recent three years.

Article 5: A Chinese lawyer seconded to a foreign law firm's representative office resident in Shanghai (including the PFTZ) to serve as Chinese legal counsel shall satisfy the following conditions:

(1) having at least five years of full-time practice experience in China;

(2) having relatively strong capabilities to handle mainland and foreign-related legal matters; and

(3) not having been subjected to administrative penalties or industry sanctions during the most recent three years.

The person in charge of a Chinese law firm or its branch may not be seconded to the foreign law firm's representative office resident in Shanghai (including the PFTZ) to serve as Chinese legal counsel.

Article 6: A foreign lawyer seconded to a Chinese law firm or a branch thereof established in Shanghai (including the PFTZ) to serve as foreign legal counsel shall satisfy the following conditions:

(1) having at least five years of full-time practice experience in a foreign country;

(2) having relatively strong capabilities to handle legal matters of his/her home country and international legal matters; and

(3) not having been subjected to administrative penalties or industry sanctions by the legal profession regulator in his/her country of practice or China during the most recent three years.

The person in charge of a foreign law firm or the chief representative of its China resident representative office may not be seconded to a Chinese law firm (or a branch thereof) to serve as foreign legal counsel.

Article 7: A Chinese or foreign law firm may establish a legal relationship of Mutual Secondment of Legal Counsel with only one foreign law firm or Chinese law firm, and such Mutual Secondment of Legal Counsel shall be reported to the municipal judicial bureau for the record.

The number of Mutually Seconded Legal Counsel of a Chinese law firm and foreign law firm may not exceed three persons.

Chinese and foreign law firms participating in the pilot project may not establish a cooperation relationship in the form of an association with a third party law firm and its branches (or representative offices).

Article 8: To participate in the pilot project, the Chinese law firm and the foreign law firm that have reached a consensus shall execute an agreement on Mutual Secondment of Legal Counsel.

A Chinese law firm of another province, autonomous region or municipality directly under the central government that intends to second lawyers from its branch established in Shanghai (including the PFTZ) or a foreign law firm that intends to second lawyers from its representative office resident in Shanghai (including the PFTZ), may also have the branch or representative office that has secured written authorisation from the head office execute the agreement on Mutual Secondment of Legal Counsel with the cooperating law firm.

Article 9: An agreement on Mutual Secondment of Legal Counsel shall include the following details:

(1) the practice permit (licence) numbers of the two law firms, the names of the foreign law firm's representative office resident in Shanghai (including the PFTZ) and the Chinese law firm (or branch thereof), the names of the chief representative and the persons in charge of the law firms and their practice permit (licence) numbers, and their domiciles;

(2) the number of lawyers to be seconded by each party, a list of their names and the numbers of their practice permits (licences);

(3) the places of work, scope of practice, method of cooperation, and the rights and obligations of the parties' mutually seconded lawyers while serving as legal counsel;

(4) the expense arrangement for the secondment of lawyers, arrangement for the distribution of the cooperation earnings and method of bearing debts;

(5) the procedure for the resolution of disputes between the parties, and the conditions and procedures for replacing and seconding additional lawyers;

(6) the term of cooperation between the parties, liability for breach of contract, and the procedures for terminating and renewing the cooperation; and

(7) other matters that need to be specified.

In general, the specified cooperation term in an agreement on Mutual Secondment of Legal Counsel may not be less than two years.

Article 10: Once a Chinese law firm and foreign law firm have executed an agreement on Mutual Secondment of Legal Counsel, they shall jointly submit such agreement, documentation evidencing that both law firms and the seconded lawyers satisfy the conditions specified herein and other relevant materials to the municipal judicial bureau for the record.

If, following its review, the municipal judicial bureau finds that the Chinese and foreign law firms and their seconded lawyers satisfy the specified conditions, it shall grant record filing and issue to the parties' seconded lawyers Chinese legal counsel certificates and foreign legal counsel certificates respectively. If they are found not to satisfy the conditions, the municipal judicial bureau shall deny record filing and provide its reasons in writing.

If, upon the expiration of the term of cooperation specified in their agreement on Mutual Secondment of Legal Counsel, the parties resolve to renew the cooperation, they shall report the same to the municipal judicial bureau for the record within 15 days before the expiration of the cooperation term. If the parties resolve to terminate their cooperation during the term thereof, they shall apply to the municipal judicial bureau in both of their names for the cancellation of record filing within 15 days from the date of the resolution.

Article 11: In addition to providing consultancy services, such as on information and legal environment of Chinese law, to the foreign law firm and the representative office thereof hosting him/her, a Chinese lawyer may, in his/her capacity as a Chinese lawyer, while serving as Chinese legal counsel in the foreign law firm's representative office resident in Shanghai (including the PFTZ) to which he/she has been seconded, provide clients with Chinese law advisory services as well as agency services involving civil and commercial contentious and non-contentious legal matters governed by Chinese law, may, by way of a division of responsibilities and coordination, cooperate with the foreign law firm's representative office resident in Shanghai (including the PFTZ) in handling cross-border and international legal matters, and may, in respect of material and complex legal matters, ask for the cooperation of the Chinese law firm and foreign law firm with which he/she is serving in handling the same.

In addition to providing consultancy services, such as on information and legal environment of foreign law, to the Chinese law firm or the branch thereof hosting him/her, a foreign lawyer may, in his/her capacity as a foreign lawyer, while serving as foreign legal counsel in the Chinese law firm or branch thereof to which he/she has been seconded, provide clients with advisory and agency services involving the application of foreign law, and may, by way of a division of responsibilities and coordination, cooperate with the Chinese law firm or the branch thereof in handling cross-border and international legal matters.

When a Chinese and foreign law firm participating in the pilot project and the lawyers that they have mutually seconded to each other handle legal matters either separately or cooperatively, they shall jointly comply with the rules on the avoidance of conflicts of interest.

Article 12: When engaging in the business activities specified herein, a Chinese legal counsel seconded to the representative office of a foreign law firm shall comply with the PRC Lawyers Law and relevant provisions on the administration of lawyers' practice, adhere to professional ethics and practice discipline and submit to the monitoring and guidance of Chinese judicial administrative departments and lawyers' associations.

When engaging in the business activities specified herein, a foreign legal counsel seconded to a Chinese law firm or a branch thereof shall comply with the Regulations for the Administration of the Resident Representative Offices of Foreign Law Firms in China and the Ministry of Justice, Provisions for the Implementation of the «Regulations for the Administration of the Resident Representative Offices of Foreign Law Firms in China», may not, during his/her term of secondment, engage in or claim to be able to engage in the provision of Chinese legal services, may not nominally or de facto become a partner in the Chinese law firm and may not participate in the internal management of the Chinese law firm or a branch thereof.

Article 13: If, during his/her term of secondment, a Chinese or foreign legal counsel causes a concerned party or the hosting foreign law firm's representative office resident in Shanghai (including the PFTZ) or the hosting Chinese law firm or a branch thereof to incur a loss due to a violation of the law or practice fault by him/her, liability for compensation shall be borne by his/her own Chinese or foreign law firm. The Chinese or foreign law firm may seek recourse against the seconded lawyer at fault in accordance with its respective provisions.

If a Chinese legal counsel and the foreign law firm's representative office resident in Shanghai (including the PFTZ) hosting him/her and a foreign legal counsel and the Chinese law firm hosting him/her, in cooperating in handling a legal matter, cause a concerned party or both law firms to incur a loss due to a joint fault, the two cooperating law firms shall share in bearing the liability for compensation in accordance with their agreement.

Article 14: In accordance with their agreement, cooperating Chinese and foreign law firms shall guide and supervise their Mutually Seconded Legal Counsel's practice activities and cooperation in the pilot project, following a consensus reached through consultations between the parties or at the request of the other party, replace, in a timely manner, a seconded lawyer with whom a conflict or problem has arisen in the course of cooperation, and communicate and consult, in a timely manner, to resolve any issues that arise in the course of their cooperation.

Article 15: During the pilot project, the municipal judicial bureau and the relevant district or county judicial bureau shall, in accordance with relevant laws, regulations, rules and these Measures, monitor and guide the practice activities of, and cooperation in the pilot project by, the lawyers mutually seconded by parties to serve as Chinese and foreign legal counsel.

Article 16: The details of the practice of lawyers seconded to the China resident representative office of a foreign law firm by a Chinese law firm to act as Chinese legal counsel and the details of the cooperation with the foreign legal counsel seconded by the foreign law firm shall be incorporated into the annual inspection and assessment of the law firm and the annual assessment of lawyers' practice.

The details of the cooperation of the Chinese legal counsel seconded by the Chinese law firm with the foreign law firm and the details of the practice of the lawyers seconded to the Chinese law firm or a branch thereof to act as foreign legal counsel shall be incorporated into the annual inspection of the China resident representative office of the foreign law firm.

Article 17: If, during the pilot project, a foreign law firm's representative office resident in Shanghai (including the PFTZ), a Chinese law firm (or the branch thereof) or a Chinese or foreign lawyer mutually seconded to serve as legal counsel commits a violation of laws or regulations, the municipal judicial bureau, in concert with the relevant district or county judicial bureau, shall investigate and deal with the matter.

After investigation and verification, in a case where administrative penalties shall be imposed pursuant to the law, if a foreign law firm's representative office resident in Shanghai (including the PFTZ) or the lawyers it has seconded are involved, the municipal judicial bureau shall handle such case in accordance with relevant provisions of the Regulations for the Administration of the Resident Representative Offices of Foreign Law Firms in China and the Ministry of Justice, Provisions for the Implementation of the «Regulations for the Administration of the Resident Representative Offices of Foreign Law Firms in China»; if a Chinese law firm (or a branch thereof) or the lawyers it has seconded are involved, the municipal judicial bureau or the relevant district or county judicial bureau shall handle such case in accordance with relevant provisions of the PRC Lawyers Law and the Measures on Penalties for Violations of the Law by Lawyers or Law Firms.

Article 18: The municipal judicial bureau shall report information on pilot project-related work and oversight thereof to the Ministry of Justice in a timely manner.

Article 19: Where law firms from the Hong Kong and Macao Special Administrative Regions apply to participate in the pilot project, matters shall, mutatis mutandis, be handled in accordance with these Measures.

Article 20: These Measures shall be effective as of the date of issuance.