14 May 2012
Legal Services Industry in Hong Kong
Overview
- Hong Kong's legal services sector plays a pivotal role in satisfying the professional services needs associated with mainland-related investment. Many top legal advisors in Asia's M&A deals have a significant presence in Hong Kong.
- The listing of mainland enterprises in Hong Kong, along with the simplified procedures for mainland enterprises to set up offices in Hong Kong, also helps boost the demand for a wide range of professional services provided by Hong Kong law firms.
- The liberalisation measures adopted under CEPA have also enhanced the access of Hong Kong’s legal sector to the mainland market.
- Hong Kong's exports of legal services amounted to US$199 million (HK$1.55 billion) in 2010, up 2.8% from the year-earlier period. Asia was the most important region of destination, accounting for 48.7% of the total legal services exports in that year. In particular, the Chinese mainland was the largest market in Asia, contributing 28.6% of the legal services exports.
The Legal System in Hong Kong
Hong Kong has become a Special Administrative Region of the People's Republic of China (the PRC) since 1 July 1997. Under the principle of "One Country, Two Systems", Hong Kong's previous legal system has continued in place.
The Basic Law of the Hong Kong Special Administrative Region (the HKSAR) was enacted by the National People's Congress in accordance with the Constitution of the PRC. It is akin to a mini-constitution for the HKSAR, and took effect on the establishment of the HKSAR.
Under the Basic Law, all the laws previously in force in Hong Kong shall be maintained, except for any that contravenes the Basic Law and is subject to amendment by the HKSAR legislature. National laws of the PRC shall not be applied in the HKSAR except for laws relating to defence and foreign affairs as listed in the Annex III to the Basic Law.
The Legal Profession in Hong Kong
The legal profession in Hong Kong is divided into two distinct branches, namely solicitors and barristers. Solicitors have limited rights of audience before the courts, whereas barristers have unlimited rights of audience in all courts. Lawyers practising within one branch of the profession are not, at the same time, allowed to practise within the other. Organizations governing the professional standard of solicitors and barristers are, respectively, The Law Society of Hong Kong and Hong Kong Bar Association.
While the majority of members of the legal profession are engaged in private practice, a significant number work in one of the Hong Kong government’s legal department, or are employed as legal advisers to public or private companies, or engaged in teaching and research at one of Hong Kong's tertiary institutions.
Foreign law firms also play an important role in Hong Kong’s legal market. According to the latest available data, 23 foreign registered law firms had formed associations with local firms as of the end of April 2012. Meanwhile, local firms employed more than half of the registered foreign lawyers.
Hong Kong is the international law capital of Asia, with more than 9,000 practising solicitors and barristers. As of end-April 2012, 788 local solicitor firms and 70 foreign law firms had set up presence in Hong Kong, including more than half of the Global 50 law firms with a presence in Hong Kong. As Hong Kong is a leading international financial centre, the growing demand for services related to finance, such as IPO, will help stimulate continual demand for legal services.
Number of Barristers
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As of 14 May 2012 |
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Total Practising Barristers |
1,155 |
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- senior counsels |
86 |
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- juniors |
1,069 |
Source: Hong Kong Bar Association
Number of Solicitors and Firms
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As of end-April 2012 |
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Solicitors with a practising certificate |
7,152 |
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Hong Kong solicitors' firms |
788 |
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Registered foreign lawyers |
1,471 |
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Registered foreign law firms |
70 |
Source: The Law Society of Hong Kong
Exports of Services
According to the latest available figures, Hong Kong's exports of legal services amounted to US$199 million (HK$1.55 billion) in 2010, up 2.8% from the year-earlier period. In 2010, Asia remained the most important service destination, accounting for 46.3% of Hong Kong’s total legal services exports. This was followed by North America (28%) and Western Europe (16%). In Asia, the Chinese mainland was the most important market, contributing 28.6% of the total services exports in that year.
Performance of Hong Kong's Exports of Legal Services
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2009 |
2010 |
||||
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HK$ mn |
Share |
Growth |
HK$ mn |
Share |
Growth |
|
|
Total Exports |
1,510 |
100% |
+0.5% |
1,552 |
100% |
+2.8% |
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to Asia |
699 462 |
46.3% 30.6% |
+5.9% +12.4% |
756 444 |
48.7% 28.6% |
+8.2% -3.9% |
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to Western Europe |
307 |
20.4% |
-2.8% |
248 |
16.0% |
-19.2% |
|
to North America |
437 |
28.9% |
-0.7% |
438 |
28.2% |
+0.2% |
Source: Report on Hong Kong Trade in Services Statistics, Census and Statistics Department
Hong Kong's legal services sector plays a pivotal role in satisfying the professional services needs associated with mainland-related investment. As the Chinese mainland is one of the largest mergers and acquisitions (M&A) markets in Asia, many top legal advisors in the world have made a significant presence in Hong Kong to serve the region. Meanwhile, Hong Kong law firms have established a strong international-mainland business network and clientele.
The listing of mainland enterprises in Hong Kong, along with the simplified procedures for mainland enterprises to set up offices in Hong Kong, further boosts the demand for a wide range of professional services provided by Hong Kong law firms.
In recent years, arbitration and mediation have gained in popularity as alternative dispute resolution means to legal litigation, and Hong Kong is seen as a preferred venue for dispute resolution in the region. The Hong Kong Arbitration Ordinance is widely recognised as one of the most advanced arbitration statutes in the world. Arbitration awards made in Hong Kong are enforceable through the courts of most of the world's trading economies through its being a party to the New York Convention. These awards are also enforceable on the Chinese mainland since the establishment in 2000 of the arrangement on mutual recognition and enforcement of arbitral awards between Hong Kong and the mainland.
Under the Hong Kong Arbitration Bill came into effect in June 2011, both domestic and international arbitrations follow a single set of rules. This can reduce confusion and bring the laws of Hong Kong in line with international standard. The new ordinance also adopts the United Nations Commission on International Trade Law (UNCITRAL) standards.
Closer Economic Partnership Arrangement between Hong Kong and the Mainland (CEPA)
As a member of the WTO, China has improved market access conditions for foreign firms to the mainland's legal sector. In addition, the liberalisation measures adopted under CEPA have also enhanced the access of Hong Kong’s legal sector to the mainland market.
Since the implementation of CEPA in 2004, the Chinese mainland has further opened up its market to Hong Kong’s legal service sector. Among the provisions, the residence requirement for representatives of representative offices of the Hong Kong law firm on the mainland has been relaxed; Hong Kong permanent residents are allowed to sit the National Judicial Examinations; Hong Kong lawyers are allowed to be employed as legal consultants by mainland law firms; and restrictions on association between Hong Kong and mainland law firms have been relaxed.
As of 1 May 2012, Hong Kong law firms (including many Hong Kong-based foreign law firms) had set up 111 representative offices on the Chinese mainland. Beijing, Shanghai and Guangzhou are the most popular cities to establish mainland presence. Besides, six Hong Kong law firms have entered into association arrangements with their mainland counterparts under CEPA, such as Woo Kwan Lee & Lo.
CEPA allows mainland law firms to employ Hong Kong legal practitioners, but those who are employed by mainland law firms are not allowed to handle matters of mainland law. Hong Kong lawyers providing professional assistance at the request of mainland law firms on the basis of individual cases are not required to apply for a Hong Kong legal consultant permit.
Yet, CEPA allows Hong Kong residents with Chinese citizenship to sit the mainland’s National Judicial Examinations. Hong Kong legal practitioners, who have passed the examinations and obtained the required internship, intensive training and assessment, are allowed to engage in non-litigation legal work in mainland law firms. In 2011, 91 Hong Kong residents had sat National Judicial Examinations and 6 of them passed.
Under Supplement VIII to CEPA signed in December 2011, the mainland will consider widening the business scope for Hong Kong residents who have acquired mainland legal professional qualifications and hold a mainland lawyer’s practice certificate, with a view to allowing them to act as agents in civil litigation cases on the mainland relating to Hong Kong residents and juridical persons.
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Current Scope of Access |
Access for HKSS under CEPA |
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- Foreign law firms: cannot operate in association with mainland law firms
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- In order to operate in association with mainland law firms, Hong Kong law firms must meet the following four conditions:
- For mainland law firms to operate in association with Hong Kong law firms, CEPA requires that they be set up for 3 years. There is no required number of full-time lawyers employed by mainland law firms to operate in association with Hong Kong law firms. - A Hong Kong law firm that has set up a representative office on the Chinese mainland is allowed to operate in association with 1 mainland law firm, without being subject to geographic restriction. - A Hong Kong law firm that has set up a mainland representative office can operate in association with one mainland law firm in Guangdong established for 1 year or more, and at least 1 of the persons who established the firm must have been in legal practice for 5 years or more.1 |
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- Foreign law firm’s representative office: residency period of 6 months each year |
- Hong Kong law firm’s representatives in their mainland representative offices are exempt from residency requirements. |
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- Foreign lawyers cannot practise Chinese law
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- Hong Kong residents with Chinese citizenship can sit the mainland’s National Judicial Examination. - Hong Kong residents who have acquired mainland legal professional qualifications to undergo 1-year internship in a mainland law firm may apply to practice as lawyers. # - Internship can be carried out in the branch office of a mainland law firm set up in Hong Kong. # In accordance with the “Outline for Practical Training and the Guidelines on Practical Training” - Hong Kong lawyers who have no less than 5 years of legal practice experience and have passed the National Judicial Examination can undergo intensive training of no less than 1 month offered by mainland lawyers associations; upon completion of the training and passing the assessment, they can apply to practise as lawyers on the mainland. ## ## In accordance with the “Law of the People’s Republic of China on Lawyers” and the provisions of the “Rules on Management of Internship for Application for Legal Practice (Provisional)” by the All-China Lawyers Association. |
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- Hong Kong barristers can act as agents in civil litigation cases on the mainland in the capacity of citizens (mainland authorities are working on the necessary implementation rules and regulations). |
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1 Hong Kong legal practitioners include both solicitors and barristers. Their years of practice are calculated in accordance with the actual number of years for which the solicitor or barrister has practised in Hong Kong, as shown on the relevant certificate respectively issued by the Law Society of Hong Kong or the Hong Kong Bar Association.
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