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185 Representative Offices in China: Are Foreign Law Firms Leaving?

Sun, 25 Apr 2021
Categories: Insights

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A total of 185 representative offices of foreign law firms in China had passed the 2019 annual examination, according to statistics disclosed by the Ministry of Justice (MOJ) in November 2020.

Pursuant to the Regulations for the Administration of Foreign Law Firms’ Representative Offices in China (外国律师事务所驻华代表机构管理条例), foreign law firms are not allowed to directly provide legal services within the territory of China, but must establish representative offices and engage in the businesses excluding the Chinese legal affairs. In addition, such representative offices are subject to annual examination.

In other words, based on the MOJ statistics, there are currently only 185 representative offices of foreign law firms that have passed the annual examination and are duly licensed in China.

These representative offices of foreign law firms spread in 5 provinces across the country, including Beijing (74), Shanghai (103), Guangdong Province (6), Liaoning Province (1), Zhejiang Province (1). We can see that there are 177 representative offices of foreign law firms located in Shanghai and Beijing, accounting for 95.7%.

In terms of the country of origin, the 185 representative offices are from 18 countries. Among them, there are 116 representative offices from the United Kingdom and the United States, accounting for 62.7%, and the rest from other countries including Japan(15), Germany(9), Australia(7), France(7), South Korea(7), and Singapore(7).

With regard to the statistics, the number of representative offices of foreign law firms has reduced again, reaching the bottom in recent years. The number of licensed representative offices was respectively 211 in 2018, 215 in 2017, whereas the number was all over 220 in 2014-2016.

This indicates that foreign law firms are gradually exiting the Chinese market.

Initially, along with the investment and trade of foreign clients, foreign law firms entered the Chinese market, and the first batch of international business lawyers was trained and developed in such representative offices in China.

Now, local law firms in China have gradually developed and are beginning to replace foreign law firms in providing services for foreign companies, which also accordingly compresses the market of foreign law firms in China.

In fact, Chinese law firms have also begun to expand into the international market and set up branches overseas.

Pursuant to the information disclosed by the Beijing Lawyers Association on 29 Oct. 2020, Beijing law firms mainly adopt direct investment and direct operation, alliances or joint ventures with foreign law firms, establishment of legal service companies, joining international law firm alliances, and signing memoranda of cooperation with foreign law firms and other models for international development.

In accordance with incomplete statistics disclosed by the Beijing Lawyers Association, 36 Chinese law firms have established 231 overseas branches through direct investment, joint venture, cooperation, alliances, etc., of which 25 law firms have 74 overseas branches, which has been reviewed and filed by the Beijing Municipal Bureau of Justice.

The above picture is the distribution map for overseas branches of Beijing law firms produced by the Beijing Lawyers Association.

The largest law firms in China, which are also the law firms most likely to expand into the international market, are generally headquartered in Beijing. Therefore, the statistics about the overseas branches of the Beijing law firms can primarily reflect the statistics about the overseas branches of Chinese local law firms.

It is worth noting that in Jul. 2019, the Ministry of Justice promulgated the Provisions on the Administration of Recording-filing of Overseas Branches of Law Firms (律师事务所境外分支机构备案管理规定), requiring Chinese law firms to file with the Chinese government if they set up branches overseas which they have actual control for and actually provide legal services.

Contributors: CJO Staff Contributors Team

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