What's the current state of China's legal profession?
There are approximately 110 000 lawyers and 9 000 law firms in Mainland China. In recent years, many law firms in big cities, such as Beijing, Shanghai and Guangzhou, have adopted the partnership system. Due to growth in the legal sector, some firms have undergone mergers and restructuring to become large-scale firms with over one hundred employees. However, in the lesser-developed western areas of China, the majority of law firms remain small in size and limit their services to criminal defense and civil representation. Few lawyers in China specialize in dealing with foreign-related businesses and even fewer provide legal services in a foreign language. Yet it should be noted that in the 20 years since the restoration of the legal profession in Mainland China, both the number of lawyers and quality of legal service have risen significantly.
How will China's accession to the WTO impact the legal profession?
China's accession to the WTO will affect the legal profession in the following aspects:
- More large foreign law firms armed with financial and human capital will enter and exert influence on China's legal service market;
- Current regulations restricting foreign firms, including conducting business only concerning their native country and Chinese lawyers losing their license if hired by a foreign firm, will be relaxed;
- Foreign firms may initially dominate the legal service industry in Mainland China, thereby improving the management and level of service of domestic firms;
- Current cooperative law firms and state-invested law firms will be transformed into partnership law firms.
Is there a difference between partnership law firms and cooperative law firms?
Articles 16 to 18 of the Law of the People's Republic of China on Lawyers allows three types of law firms in China: state-invested law firms, cooperative law firms and partnership law firms. The law states that a law firm established with the assistance of government capital shall be independent in its practice and shall undertake liability for its debts with its entire assets. Lawyers can also establish cooperative law firms, which are also liable for their debts with their entire assets. The third type of law firm lawyers may establish is a partnership law firm. The partners shall undertake unlimited and joint liability for all debts.
The only difference between a cooperative law firm and a partnership law firm in China is that cooperative law firms are liable for their debts with the entire assets of the law firms, while the debts of partnership law firms shall be undertaken jointly and severally by the partners. This means that cooperative law firms are limited in their liability to the entire assets of the law firm while the liability of partnership law firms extends to the personal assets of the partners.
Since China entered the WTO, reforms have been made in order to transform all state-invested law firms and cooperative law firms into partnership law firms. It is almost definite that all Chinese law firms will be partnership law firms in the future.
Is there liability insurance in China protecting lawyers against the risks associated with unlimited liability?
After the malpractice suit filed against the Shanghai-based Jianwei Law firm in 2001 and the subsequent increase of malpractice suits thereafter, the concept of liability insurance has drawn a considerable amount of attention from both the legal and insurance industries. The Bar Association of Shanghai and some Chinese insurance companies tried to deal with this issue in 2001. However, due to a lack of a definition of who should be responsible for defining the liability of law firms, and the concern of how to prevent lawyers and their clients from conspiring to cheat the insurance companies, the negotiations were not successful. Although presently, there is no form of liability insurance available for lawyers, this issue will surely be dealt with in the future.
What are the characteristics of the legal system in China?
The main legislative organ is the National People's Congress in Beijing. The provincial, municipal and other levels of government have some autonomy in creating regulations but they must not contravene the national laws, however in many cases this adaptation of central laws to local conditions may lead to misinterpretations. Since the "open door policy", the central Government has made various changes to put the law in line with international practice and expectations. The transformation has been a very slow and gradual process, very much by trial and error. Laws and regulations are often termed "provisional or interim" and changed as soon as they are found unsatisfactory. Notwithstanding all the efforts to change and bring the system in line with international practices, China's legal system is still greatly influenced by the Chinese Communist Party. This gives rise to the possibility of a legal dispute being resolved on political rather than legal grounds. Another remaining problem is the lack of transparency, which often translates into that many rules and regulations are not published and instead circulated as internal documents, often catching foreign business people unprepared.
How is China's Judicial System structured?
There are three divisions in the Chinese judicial system: the Public Securities, the People's Prosecutors, and the Courts.
At the top of the judicial system is the Supreme People's Court followed by the high Courts, the Intermediate courts and the Basic Courts. These courts are divided into tribunals handling criminal, civil, commercial, and other administrative cases. A single judge handles simple civil disputes and minor criminal cases. For others, a panel comprising of an odd number of judges similar to the jury system will preside. The jurors do not pass judgments. They merely make recommendations on the hearing. A judicial committee passes judgment. The judicial committee consists of a Chairman, a President of the Court and various other members. The local People's Congress elects the President of the Court at each respective level and approves the selection of its members. However, it is the Communist Party Committee, which appoints its Chairman who nominates the members.
China's Legal Structure?
Scholars have described the legislative structure in China as "a monistic system with several levels". The National People's Congress ("NPC") is the highest state organ in the country and has the unitary legislative powers over the entire nation and it delegates certain legislative powers to local people's congresses and the central and local governments.
What are the sources of legal rules in China?
The sources of legal rules are as follows:
a) Constitution: The Constitution was promulgated in 1982 and was amended in 1988 and 1993. In a broad sense, it includes the statute of the Constitution, law of election, organic laws of the people's congresses, of the State Council, of the local governments, of the people's courts and of the people's procuratorates.
Although the Constitution is regarded as the paramount law in the country, it nevertheless cannot be quoted in judicial verdicts and administrative decisions as a direct legal ground for solving concrete disputes and problems. It is therefore out of direct touch with daily legal practice and operation and is regarded as being of a general and vague nature. Since it has no direct applicable effects, review of other legal rules and governmental practice on the basis of constitutionality have been both politically and technically problematic.
b) Law (Falu): All legal documents promulgated by the NPC and its Standing Committee belongs to the category of law which includes laws, decisions, (often containing state policies) and ratified international treaties. Law could be further divided into two sub-categories, one is basic laws which are enacted by the general meetings of the NPC and have a general impact throughout the nation; the rest are non-basic laws which are enacted by the Standing Committee of the NPC and have a wide impact in certain areas only.
c) Administrative Regulations (xingzheng fagui): This refers to the legal documents made by the State Council (sometimes together with the Communist Party). As the central administration of the country, the State Council has the power to enact rules concerning important issues of the country provided they shall not contravene the Constitution and the law. On most occasions, they are detailed rules for implementing laws, on other occasions, they are experimental rules where there are no governing laws.
d) Administrative Rules (xinzheng guizhang): This category includes regulatory rules issued by the ministries, commissions and departments of the State Council. These governmental organs are administrative branches which have the power to issue rules regarding affairs and matters under their respective administration. From a practical perspective, this set of rules is very important for it provides detailed procedures, standards and requirements for practitioners. For example, rules issued by the Ministry of Foreign Trade and Economic Cooperation are very useful for practical issues regarding foreign investment and foreign trade.
e) Local Regulations (difang fagui): The local people's congress and their respective standing committees enact local regulations. Their effects shall be confined within their respective geographical territories. The local people's congress and their standing committees are found at the provincial, county, large city and city level which are the capitals of provinces and are authorized by the Standing Committee of the NPC.
f) Local Administrative Rules (difang xingzheng guizhang): This category includes regulatory rules issued by provincial, city and county governments and their administrative branches. They are detailed rules for implementing national laws, and regulations and local regulations in their respective areas.
g) Autonomous Regulations and Special Regulations (difang zizhi tiaoli he danxing tiaoli): According to the Constitution, the people's congress and their respective standing committees of autonomous areas of all levels (autonomous regions prefectures and counties), have the power to enact autonomous regulations and special regulations which shall not contravene the Constitution but may adopt flexible and different rules according to their special local conditions and customs.
h) Autonomous Rules (difang zizhi guizhang): Although there are no special provisions defining the legislative powers of the autonomous governments, they in practice, have similar power to the local governments to make rules regulating affairs and matters under their daily administration.
i) Regulations By Special Economic Zones (jingji tequ fagui): Special economic zones are the places circumscribed by the Standing Committee of the NPC for the purpose of promoting foreign investment and attracting foreign technology.
j) Judicial Interpretation (sifa jieshi): Judicial interpretation consists of detailed rules for implementing laws and regulations. Judicial guidance to resolve issues encountered in the process of application of law, answers to specific questions raised by lower courts and procuratorates, etc. by the Supreme People's court and the Supreme People's Procuratorate. According to law, the Supreme People's Court and the Supreme People's Procuratorate have the power to issue judicial interpretations on questions concerning specific application of laws and regulations in judicial proceedings. In theory, these interpretations are only binding over the judicial branches, but in practice they have a wider range of application in all kinds of dispute resolutions throughout the country, such as administrative proceedings and arbitration. Judicial decisions are not legally binding over later cases, but the decisions published or approved by the two supreme judicial organs have de facto influence over the thinking of all judges and prosecutors. In times, when there are no explicit legal rules, judicial verdicts inevitably provide some guidance.
k) Hong Kong Basic Law (xianggang jiben fa): Hong Kong Basic Law is a new category, which has occurred with the invention of the policy of "one country two systems". After the return of sovereignty over Hong Kong to China, the judicial system previously practiced in Hong Kong has been maintained, which is distinct from the system in the mainland, but functions under the PRC Constitution and within the framework of one country. Since it provides the foundation for safeguarding the Common Law System of Hong Kong and serve as a bridge between two entirely different legal systems, its position in the PRC legal system is unique.
l) Common Practice: In every jurisdiction, there are informal parts or elements within the formal legal system. In the Chinese legal system, informal elements also exist as hidden rules or procedures. For example, the law does not explicitly stipulate whether lawyers can meet the judges before open trials. In practice, many lawyers meet the judges to discuss their cases in order to influence the judge's opinions. Without knowing these common practices, parties and legal counsels find it difficult to apply the legal rules efficiently and effectively.
m) International Treaties: Once China becomes a signatory party to an international treaty, the treaty becomes an integral part of the system except for the articles over which China makes reservations.
How to determine the effects of legal rules?
Given the number of legal rules, the principles of determining their effects are as follows:
a) Higher rules prevail over lower rules;
b) Later rules prevail over previous rules; and,
c) Special rules prevail over general rules.
In the process of adjudication, laws and regulations have greater effects than rules. According to administrative litigious law, the courts must follow laws and regulations but may take administrative rules and local rules as references.
