Analysis: Who's Going to Get Bigger Piece of Law Service "Cheese Cake"

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Last updated at: (Beijing Time) Monday, January 21, 2002

Analysis: Who's Going to Get Bigger Piece of Law Service "Cheese Cake"

With China's accession to the WTO, China will, in accordance with its commitments to the WTO, cancel all its restrictions within one year against foreign law firms setting up representative offices in the country.

What's more, it is believed that the further opening up of China's legal service sector is inevitable, which would bring both challenges and opportunities to Chinese law firms.

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With China's accession to the World Trade Organization (WTO), China will, in accordance with its commitments to the WTO, cancel all its restrictions within one year against foreign law firms setting up representative offices in the country.

Although at present foreign attorneys are confined to the business of foreign law services as stipulated by new regulations which took effect on January 1 (In Detail), many people believe that the further opening up of China's legal service sector is inevitable in the long run.

That prospect makes some Chinese lawyers rather nervous. But there are others, including their foreign colleagues, who say that Chinese lawyers will benefit from the process too.

Culture vs expertise

Wang Li, director of the Deheng Law Office, China's most prestigious law firm, noted the small scale of Chinese law firms and their lack of management expertise and generally low proficiency level.

"Chinese lawyers might be marginalized to the less-profitable part of the legal services market if drastic measures are not taken," she said.

Stephen Forbes, co-director of the European Union-China Legal and Judicial Cooperation Program, said that Chinese lawyers will be successful at least in some parts of the market.

He categorized the legal business into three levels: simple services like will authentication, batch services dealing with dispute resolution, and expert services focusing on dispute prevention.

With the development of the Internet, Chinese lawyers will have an advantage in the first category of services across the world, given that they have the needed legal knowledge, he said. The dispute resolution market in China will also be the turf of local lawyers because of cultural factors.

However, expert services, the most challenging part of the business, are for international companies, Forbes said. "Such clients demand high-quality service, which usually encompasses the legal, financial, environmental and cultural fields."

With China's entry into the WTO, Chinese lawyers will be part of the global networks too, the EU attorney said.

Wu Zhipan, head of the Beijing University Law School, agreed to Forbes' categorization, but warned that simple legal services will employ fewer lawyers with the emergence of smart interactive software.

He said that expert services, the most profitable part of the business, will be dominated by foreign law firms because of their history and expertise.

Zhang Guanbin, editor-in-chief of the Legal Service Times, said that the legal services market is called a huge "cheese cake" thanks to the recent popularization of Spencer Johnson's best- seller "Who Moved My Cheese?" in China.

However, he pointed out that only a small part of the "cheese" is now visible, while the huge potential is to be sought by both foreign and local lawyers themselves, "and the Chinese legal sector must take action now."

Prepare actively to meet challenges

In fact, action is being taken. The Deheng Law Office has evolved from being a branch of the Chinese Legal Affairs Center under the Ministry of Justice to now being owned by 14 partners across the world, and employing 200 lawyers, of whom 80 percent are holders of master's or doctorate degrees in law.

It is estimated that now half of China's 9,000 law firms are partnerships or cooperative businesses. Even those that are owned by the government have no business affiliations with their owners.

Sources said that leading lawyers in Beijing and Guangzhou are planning to set up high-powered law offices with government support.

New law schools are being set up, too. According to legal educator Wu Zhipan, 232 universities and colleges nationwide offer 4-year degree education in law. This year alone, more than 80 universities and colleges have applied to the Ministry of Education for permission to teach law.

To raise the proficiency level of the legal profession, would- be lawyers will, from this year on, take national legal examinations together with new recruits for the professions of judge and prosecutor.

A "win-win" deal

Minister of Justice Zhang Fusen said that the opening up of China's legal sector will better serve foreign investors in China and facilitate Chinese companies to enter the international market.

"Moreover, Chinese law firms will be able to learn new management expertise from their foreign competitors," he said. The opening up will create a "win-win" situation for all, he stressed.

As to who will get the bigger piece of the "cheese cake," it is up to the competitors themselves, Zhang said. One thing you can say for sure is that, with the sustained rapid development of the Chinese economy, the "cheese cake" of the legal service market will become bigger and bigger.

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