Washington International Law Journal


Jane J. Heller


Following China's accession to the World Trade Organization ("WTO"), the Chinese government issued new regulations governing foreign law firms in China. A number of commentators have analyzed these regulations to evaluate whether China is "'on track" to fulfilling the commitments it undertook to gain entry to the WTO. However, a more basic question that should be addressed is whether the new regulations meet China's goals in joining the WTO: to foster trade and economic development and to accelerate the growth of China's legal profession. Although China appeared willing to engage in significant liberalization of the legal services sector when it joined the WTO, the new regulations reflect a much more cautious approach in recognition of the vulnerability of Chinese law firms to foreign competition. On one hand, the regulations shield an infant domestic industry from competition in spheres of activity where Chinese law firms already dominate, while, on the other hand, they favor the expansion into China of some of the largest foreign firms in the world by erecting costly barriers to entry that deter entry by smaller foreign firms. As China's market forle gal services expands, and the demand for legal expertise in complex commercial transactions grows, Chinese firms, which lack a deep pool of attorneys experienced in commercial transactions, are likely to be squeezed out of the transactional segment of the market by larger, more efficient foreign firms. China's approach in adopting the new regulations fails to recognize the benefits of competition and the regulations should therefore be revised. By lowering barriers to entry and permitting free interaction between Chinese and foreign lawyers, China can accelerate the development of its legal services sector and continue to sustain high levels of economic growth.

First Page