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FM AMCONSUL GUANGZHOU
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INFO RUEHOO/CHINA POSTS COLLECTIVE
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RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 02 GUANGZHOU 000060 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
PACOM FOR FPA 
 
E.O. 12958: N/A 
TAGS: PGOV SOCI ECON EINV CM
SUBJECT: South China's Foreign Lawyers - Strangers in a Strange 
Land 
 
 
¶1. (SBU) Foreign attorneys in south China are subject to tight 
restrictions, including prohibitions on advising on Chinese law, 
with regard to the nature and scope of their professional 
activities.  Traditional Western legal touchstones such as 
confidentiality, conflict of interest, and legal precedent are not 
 
SIPDIS 
consistently respected within the Chinese system.  A 
poorly-developed, corruption-ridden court system and the uneven 
quality of regional local talent adds to frustration felt by 
attorneys, as well as their clients.  End Summary 
 
Tight Restrictions 
------------------ 
 
¶2. (SBU) Foreign law firms (FLFs) in Guangzhou and elsewhere in 
China are subject to strict limitations on the kind of legal 
services they can offer.  They are permitted to provide counsel to 
clients on international law, as well as their own national law, but 
are expressly prohibited from advising on Chinese law.  A French 
attorney who practices in a firm with offices in several Chinese 
cities, including Guangzhou, commented that they operate within the 
regulations by routinely advising foreign clients "on the impact of 
foreign law on Chinese law."  One attorney stated that the 
activities of FLFs have come under increasing scrutiny, but there 
have been no reported instances in Guangzhou of the government 
taking steps to close a FLF for illegal practice of law. 
 
¶3. (SBU) In addition, FLFs cannot appear in Chinese courts, and are 
obliged to work with a Chinese law firm which appears in court in an 
official capacity for their clients.  FLFs do employ local Chinese 
attorneys, but these professionals are required to resign from the 
Chinese bar once they start working for the FLF.  Foreign attorneys 
in Guangzhou have commented that some local Chinese law firms are 
becoming more sophisticated and are beginning to compete directly 
with FLFs.  However, they believe that this is less true in 
Guangzhou and Shenzhen than in other "first-tier" Chinese cities 
such as Beijing and Shanghai.  In general, finding high quality 
local law firms to act as partners for FLFs is difficult. 
 
¶4. (U) The good news: the current situation actually has represents 
a relaxation of previous restrictions.  Until the mid-1990s, FLFs 
existed only as consultants; at that time, the State Council and the 
Ministry of Justice provided a legal basis for foreign law firms to 
formally practice in China.  Prior to China's accession to the World 
Trade Organization, though, foreign firms were limited to one 
"unique" office.  The government committed to removing this 
restriction post-WTO, but timing requirements remain in place: upon 
receiving a new license, a firm must still wait three years before 
applying for an additional office or branch location. 
 
Lack of a Western Legal Tradition 
--------------------------------- 
 
¶5. (SBU) Prohibited from forming joint ventures with local firms, 
FLFs must establish commercial or "privileged" partnerships.  A 
senior lawyer from a European firm lamented the challenges of 
working with local law firms: apart from not being able to share 
common letterheads, he indicated, most Guangzhou law firms do not 
abide by Western-style rules regarding ethics, professionalism, and 
confidentiality.  FLFs must advise their clients that, among other 
 
SIPDIS 
concerns, Chinese law firms are not bound by conflict of interest 
rules, resulting in the potential of the local partner firm 
representing other parties with adverse interests to the FLF's 
client.  Fred Hong, an American attorney with fourteen years 
experience practicing in Guangdong province (following a sixteen 
year legal career in southern California), expressed fewer concerns 
regarding his work with Chinese counterparts, but stressed that his 
partnerships with local firms are "long-standing relationships" in 
which trust and reputations for reliability have been earned over 
many years. 
 
¶6. (SBU) The uneven quality of Chinese attorneys can lead to 
frustrations both in and out of the courtroom.  Chinese courts 
permit a citizen or corporation to engage any person to appear as a 
legal representative through the filing of a power of attorney (Dai 
li ren, or "authorized representative").  American lawyer David 
Buxbaum, who has advised clients in Guangzhou since the early 1980s 
and was one of the pioneers in explaining trade law to U.S. and 
Chinese parties, uses the POA to appear regularly in Chinese courts 
as a legal representative, not as a licensed attorney.  Although the 
pass rate for the Chinese bar exam is low - between 5 and 9 percent 
- foreign attorneys here argue that this has not yet created a class 
of sophisticated legal professionals.  Local attorneys are often not 
aware of basic principles of Chinese law and procedure.  One foreign 
attorney stated that "you need to lead a lot" when working with 
Guangdong province lawyers; a French attorney maintained that local 
attorneys will often stick to positions having no legal basis, 
 
GUANGZHOU 00000060  002 OF 002 
 
 
obstructing efforts to resolve cases appropriately. 
 
Frustrating Appellate Practice 
------------------------------ 
 
¶7. (SBU) Foreign attorneys who practice in Guangzhou confirm reports 
of poor judicial quality and outright corruption.  Limited discovery 
rights make the obtaining of necessary records and documentation 
extremely problematic.  Chinese courts do not abide by the 
centuries-old Western concept of precedent, making prior caselaw - 
such as it exists - effectively irrelevant.  The appeals process 
also does not follow the standard Western model: cases are typically 
reviewed de novo, with appellate courts routinely re-examining the 
circumstances of a cases and ruling on questions of fact, in 
addition to those of law.  As a result, there is a low incentive for 
parties to make much effort or create any type of record at the 
trial court level, as most cases are appealed as a matter of course. 
 One attorney said he is often quite frank with his foreign clients 
who wish to pursue money judgments against parties in the local 
courts: "I almost always tell them that they should kiss it 
goodbye". 
 
Slow development 
---------------- 
 
¶8. (SBU) However, foreign attorneys here also report signs of 
progress.  Although improvement in overall attorney quality remains 
slow, transparency within the legal system is gradually improving. 
"E-government" initiatives have made access to documents somewhat 
easier and the practice of law more straightforward.  One attorney 
also commented favorably on the accessibility of some local 
officials, as compared to Western counterparts, to directly discuss 
administrative and property law issues.  An American attorney 
observed that the Chinese legal system has only had a few decades to 
mature - it takes a long time for individuals, as well as the 
system, to develop a "pure legal sense, but it's being picked up 
gradually." 
 
Goldberg