Article: Opening in China: The do’s and don’ts For foreign law firms, setting up a law firm office in China is de rigeur at the moment. Kai Xue of DeHeng advises on how this is best done.

Sure most of you know this and don’t need a newspaper article to tell you.

I would  have thought the first don’t is to put the apostrophe in the correct place in the word don’t !

Opening in China: The do’s and don’ts
For foreign law firms, setting up a law firm office in China is de rigeur at the moment. Kai Xue of DeHeng advises on how this is best done.

Many foreign law firms are opening in China
With the continuing stable growth of China’s economy, the market of China is becoming the centre of more and more international conglomerates and enterprises. Consequently, the demand of these entities for legal services in China is getting stronger than ever, which results in increasing station of foreign law firms in China in recent years. In keeping with this trend among Anglo-American law firms, about one in three  of the National Law Journal 250, a compilation of the largest American law firms, had established representative offices (“RO”) in China or Hong Kong office by 2013.  Among large UK-based law firms, 18 of the 20 largest had a presence in China.
It is necessary for a law firm wanting to follow this trend and expand its presence into China to know what will be required in connection with the establishment and what procedures will be involved, so that it can plan things ahead. This article aims to offer an overview and highlights in respect thereof.
Scope of business
For the purposes of this article, an RO refers to a representative office in the jurisdiction of mainland China.  Strictly,the Regulations on the Administration of Foreign Law Firms’ Representative Offices in Chinaspecify that a RO of a foreign law firm can only engage in the following activities:
(a) providing consultation to clients regarding the laws of the jurisdiction(s) where the lawyers of it are allowed to practice law and international treaties and practice;
(b) transacting legal matters in the jurisdiction(s) where the lawyers of it are allowed to practice law under the instruction of clients or Chinese law firms;
(c) entrusting Chinese law firms to handle China-related legal matters on behalf of its clients;
(e) entering into long-term cooperation with Chinese law firms to entrust them to handle legal matters through contractual arrangements;
(f) providinginformation regarding the legal regime of China;
As stated above, such ROs are prohibited from directly engaging in legal matters involving Chinese law.
We, however, want to point out that in reality dozens of these offices are practicing Chinese law including providing full service in transactional matters and issuing advice on regulatory matters. This is due to the relaxation of implementation of the rules above by regulators. This kind of regulatory breathing space has given international law firms the ground to build impressive practices in major cities like Beijing and Shanghai that concentrate on cross border transactions but also do work for domestic clients on domestic matters in some cases. There is only one area in which the rules stated above arerigidly implemented – litigation: representative offices of foreign law firms are still prohibited from appearing before a PRC court on behalf of clients.
1) Minimum personnel
The RO must include one chief representative and at least one other representative.  The chief representative and representative must remain in China for at least 6 months in the year during their tenure.  The minimum residence durationis actively enforced by annual audit and non-compliance puts renewal of the RO license at risk.
2) A partner or partner equivalent title
The individual taking the role of the chief representative must be either a partner or a practicing lawyer of the firm holding a position equivalent to a partner.
3) Office space
The required office space should to be obtained before final approval.  Please see the section below for advice on the timing for signing of the office lease.
4) Insurance
The law firm will need to have insurance coverage for malpractice liability in China.  More so, the insurance policy must specifically name China as a jurisdiction under the coverageas well as the individuals to be appointed as representatives.
Application procedures and timeline
Opening a RO is a lengthy process, requiring at least 9 months from submission of application to final approval.When taking into account the documentation preparation, you will need to plan time more than 9 months for a real application process.  In particular, some of the documents need to be notarizedwith a notary public and legalized at a consulate or embassy of China, which adds uncertainty in terms of actual time involved.
1. Filing of an application to the provincial level branch of the Ministry of Justice (“MoJ”)including certification of certain facts about the representatives of the offices and law firm with accompanying documentation.The authority has 3 months to review the application. During this period, the authority may require the applicant to submit supplemental application documents if it finds necessary.
2. When satisfied with the application documents, the provincial authority will submit the applicationto the central MoJ for its final review. This review process can last as long as 6 months.
3. Within 30 days of receiving the final approval from the central MoJ, the applicant needs to complete filing and registration with the local public security bureau (produceseveral chops), technology supervision bureau, labor bureau and tax bureau, and open its bank account with one of the major banks.
4. Within 30 days after the completion of Step 3, the applicant needs to fileand completean opening registration with the relevant provincial MoJ to which it submitted the application.A signed and notarized office lease should accompany this application.
5. This 30 day period between preliminary approval by the central MoJ and completion of the opening registration with a provincial MoJ may be too brief to locate office space and then sign an office lease agreement.  Therefore we recommend scouting and negotiating while the application is in preliminary processing before the central MoJ.  After the applicant is informed about preliminary approval, it is the ideal time to sign the lease.
Kai Xue is a lawyer in the cross border transactions practice of DeHeng Law Offices, Beijing