The Legal Service Market in China: Implementation of China's GATS Commitments and Foreign Legal Services in China

• Author: Huang Liyue
• Pages: 30-48

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2012] Chinese Legal Service Market 30

THE LEGAL SERVICE MARKET IN CHINA:

IMPLEMENTATION OF CHINA’S GATS COMMITMENTS AND

FOREIGN LEGAL SERVICES IN CHINA

HUANG Liyue

I. INTRODUCTION

This paper examines the legal service market in China, especially

the market share of foreign legal service providers (FLSP), in the

context of China’s membership with the World Trade Organization

(WTO). China joined the WTO on 11 December 2001. As part of

accession commitments, China agreed to open its service market,

gradually and conditionally, to its fellow WTO members under the

General Agreement on Trade in Services (GATS). 1 Legal services

are the very first ones to appear in China’s schedule of

commitments.2

China’s fast growing economy relies largely on foreign

investments and international trading. The involvement of foreign

legal services in this regard is indispensable. Especially at the

moment, language remains the major obstacle for the communication

between business partners in the East and West. From a foreign

investor or trading partner’s perspective, it is simply too risky to

leave matters of legal consequence to lawyers who do not speak the

same language. Furthermore, the Chinese legal system and legal

profession have not reached the level of maturity that could

command the confidence of foreign investors and trading partners.

Foreign legal services are a necessary supplement to the legal

services provided by Chinese legal professionals. However, they

threaten to derail or at least forestall the development of the infantile

Chinese legal industry with their overwhelming financial and

organizational strength. A struggle between Chinese legal profession

and its foreign counterparts is bound to ensue. State intervention will

be vital for the survival of the Chinese legal profession. But how will

the Chinese authority balance this interest with its obligations as a

member of the WTO?

1 General Agreement on Trade in Services, Apr. 15, 1994, 1869 U.N.T.S. 183 (GATS).

2 The People’s Republic of China Schedule of Specific Commitments, GATS/SC/135 (Feb. 14,

2002), available at

http://docsonline.wto.org/GEN_highLightParent.asp?qu=+%28%40meta%5FSymbol+GATS%FCSC%

FC%2A%29+and+%28%28+%40meta%5FTitle+China+%29+or+%28%40meta%5FCountries+China

%29%29&doc=D%3A%2FDDFDOCUMENTS%2FT%2FSCHD%2FGATS%2DSC%2FSC135%2ED

OC%2EHTM&curdoc=9&popTitle=GATS%2FSC%2F135.

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2012] Chinese Legal Service Market 31

Four modes of supply – through which cross-border delivery of

services are realized – were incorporated into GATS.3 Three of the

four – Cross-border Supply, Commercial Presence, and Temporary

Movement of Natural Persons – are relevant to this topic. The

discussion will focus on Commercial Presence, which is the delivery

of legal services through direct foreign investment. Since the

delivery of legal service on aspects other than Chinese law does not

rely on access to the Chinese legal service market, our discussion

will be confined to legal services concerning only Chinese law. We

will take a close look at the effect of the presence of FLSP on the

Chinese legal service market, and the discrepancies between China’s

WTO commitments and their implementations in reality.

This paper is set in the context of the conclusion of China’s

Cultural Revolution and its subsequent adoption of the open door

policy. Part II provides background information, including the

development of China’s legal profession alongside its economic

reform. Part III examines the challenges facing the Chinese

authority: on one hand, they are under the mounting pressure of

globalization and its WTO obligations to liberalize its service

market; and on the other, the state’s interest of protecting an infant

industry and the political interest of keeping the society under the

tight grip of the Communist Party. Part IV examines the scope of

China’s GATS Commitments. Part V examines China’s domestic

legislative measures for the implementation of its GATS

Commitments. Part VI looks at the effect of the implementations,

including the current status of the legal service market, and whether

or not China has delivered on its promises. Part VII looks at the

unique position of legal service providers from China’s Special

Administrative Regions (SAR), and its implication on the future of

FLSP in China. Part VIII expresses the author’s opinion as to the

future of China’s legal reform and its legal profession as the

conclusion of the paper.

II. BACKGROUND

Any legal system must be assessed within its historical and

cultural context.4 In examining the Chinese legal system, one must

take into consideration the effect of China’s Cultural Revolution,

because its impact continues to be seen and felt in every aspect of

3 “The four modes of supply were identified by American advocates for free service trade, now

found in GATS Article I:2(a)-(d). They are: Mode 1. Cross-Border Supply; Mode 2. Consumption

Abroad; Mode 3. Commercial Presence; and Mode 4. Temporary Movement of Natural Persons.” RAJ

BHALA, INTERNATIONAL TRADE LAW: INTERDISCIPLINARY THEORY AND PRACTICE: DOCUMENT

SUPPLEMENT 490 (3d ed. 2008).

4 JIANFU CHEN, CHINESE LAW: CONTEXT AND TRANSFORMATION 6 (2008).