The legal profession of China in a globalized world: innovations and new challenges

Abstract

The legal profession is undergoing fundamental changes; and this is the case not just in established legal markets. Based on a state-of-the-art sketch, this paper identifies and analyzes the latest innovation initiatives and alternative business models in China’s legal profession. It finds that, propelled by market demands and benefiting from technological advancements, the provision of legal services has become highly versatile today, giving rise to various alternative service providers, especially the rapidly rising online legal service portals. Because they are technically not law firms, the exclusivity requirements on lawyer ownership and legal service provision are not applicable to them. In the meantime, the competition for large corporate clients and lucrative business transactions is fierce and will continue to be so, not only within the club of big Chinese corporate law firms, but also between Chinese law firms and international law firms globally. In this course, some leading big corporate law firms in China are observed to have creatively incorporated key corporate features in running their business and compensating their partners, effectively deviating from the partnership + pure legal services regulation. Such market realities question the necessity and effect of the regulatory restrictions on law firm legal form and ownership structure, and call for an agenda for related research in the future.

Full text

Electronic copy available at: https://ssrn.com/abstract=3070340
1
LEGAL PROFESSION OF CHINA IN A GLOBALIZED WORLD:
INNOVATIONS AND NEW CHALLENGES
Jing Li*
There are three types of baseball players: Those who make it happen,
those who watch it happen and those who wonder what happens.
Tommy Lasorda
Abstract
Legal profession is undergoing fundamental changes; and this is the case not just in
established legal markets. Based on a state-of-the-art sketch, this paper identifies and analyzes
the latest innovation initiatives and alternative business models in China’s legal profession. It
finds that, propelled by the market demands and benefiting from technological advancements,
the provision of legal services has become highly versatile today, giving rise to various
alternative service providers, especially the rapidly rising online legal service portals. Because
they are technically not law firms, the exclusivity requirements on lawyer ownership and legal
service provision are not applicable to them. In the meantime, the competition for large
corporate clients and lucrative business transactions is fierce and will continue to be so, not only
within the club of big Chinese corporate law firms, but also between Chinese law firms and
international law firms globally. In this course, some leading big corporate law firms in China
are observed to have creatively incorporated key corporate features in running their business
and compensating their partners, effectively deviating from the partnership + pure legal services
regulation. Such market realities question the necessity and effect of the regulatory restrictions
on law firm legal form and ownership structure, and calls for an agenda for related research in
the future.
I
NTRODUCTION
Given the persistent need from the clients for increased efficiency, predictability, and cost
effectiveness in the services they purchase from law firms, the dynamics of supply and demand
have undergone profound long-term changes, indicating that the legal profession now lives in a
buyer’s market.
1
While this has certainly to do with the “fragile” business model of the large
* Jing Li is an assistant professor of the Business Law Department at Tilburg University, the Netherlands. Earlier
versions of this paper have been presented at the International Legal Incubator seminar, Dec. 1, 2016, Tilburg, the

Electronic copy available at: https://ssrn.com/abstract=3070340
2
corporate law firms intrinsically,
2
external market forces and new technological developments
have also been playing an increasing role in making it even shakier. On the one hand, legal
services have never been so commoditized as today; while on the other, legal services have also
become increasingly multi-disciplinary and transnational, calling for cross-border collaboration
of practitioners across vastly different jurisdictions, and also key input from experts in areas such
as accounting, finance, taxation, management and organizational studies. From the perspective of
the public, there has never been a point in history where the access to justice and legal protection
is so simple, versatile and creative. This said, law firms nowadays must face fierce competition
from the rapidly emerging alternative legal service providers, whose ground-breaking business
models pose unprecedented challenges to law firms’ conventional dominance in the realm of
legal practice. And for good or for bad, the competition is by no means only on the level of
pricing and costs.
Compared to other lines of business, lawyers maintain a highly confident relationship with
their clients, bearing fiduciary duty to act in the latter’s interests. Because the knowledge of law
and the provision of legal services are a highly specialized expertise, there is natural information
asymmetry between lawyers and clients. As such, lawyers are subject to strict ethical codes and
heavy regulation, designed for the purposes of securing the clients’ independent access to justice.
Among other things, such regulation plays a significant role in shaping the entity choice of law
firms, which are typically organized as partnerships. Furthermore, there has also been a prevalent
prohibition of non-lawyer ownership in law firms, so that legal practitioners are free from the
kind of pressure that the management of a corporation faces from their shareholders, and are thus
able to maintain their independent professional decision-making power. The US, as the largest
and most developed legal market in the world,
3
and continental Europe, most typically
Germany,
4
still defend this school of thought. This prohibition on paper, however, has not been
Netherlands; and at the 6
th
Annual Conference of the Younger Comparativists Committee of the American Society
of Comparative Law, Apr. 28, 2017, Koç University, Istanbul, Turkey. I am grateful to Panos Delimatsis, Yincheng
Hsu, Zehra G. Kavame, Norbert de Munnik, Nikolas M. Rajkovic, Stavros Zouridis, and all other participants at the
two conferences.
1
Georgetown Law Center for Study of the Legal Profession & Peer Monitor, 2015 Report on the State of the Legal
Market, available at https://www.law.georgetown.edu/news/press-releases/georgetown-law-and-peer-monitor-
release-2015-report-on-the-state-of-the-legal-market.cfm, at 15.
2
Larry E. Ribstein, The Death of Big Law, 2010(3) W
ISCONSIN
L
AW
R
EVIEW
749, 759 (2010).
3
M
ODEL
R
ULES OF
P
ROF
'
L
C
ONDUCT
R. 5.4 (2013).
4
German Federal Bar’s European Affairs Committee, Position of the Bundesrechtsanwaltskammer (The German
Federal Bar) on the Issues Papers of the ABA Commission of Ethics 20/20 concerning Multijurisdictional Practice

3
able to totally preclude innovative attempts from emerging. Although with highly controversial
business models, new generation of legal outsourcing and legal talents consultancy firms like
Axiom and Outside GC, and online legal service providers such as the LegalZoom, have as a
matter of fact gained considerable market share from traditional partnership law firms. This is
achieved without crossing the delicate non-lawyer ownership + pure legal services redline, as
they are neither partnerships nor “law firms” per se. In contrast, Australia has opened and the
UK has reinforced a new and more entrepreneurial approach by confronting the real needs of
clients and liberalizing their legal services regulation. From 2007, non-lawyers in the UK are
able own up to 100% of a legal service provider under the regime of alternative business
structures (“ABS”).
5
Following the new wind, a number of common law countries soon jumped
on the same boat and more are considering the same. Under the ABS regime, law firms are
observed to have issued shares to the public on stock exchanges, and embraced the concept of
multi-disciplinary practice on a both broader and deeper level.
As the world’s second largest economy, China’s exponential growth has given rise to a
great demand for corporate and business related legal services. The recent birth of the world’s
largest law firm (by the number of lawyers), namely, Dacheng-Dentons,
6
exemplifies how the
ambitious Chinese legal practitioners have avidly responded to the demand. But there is
definitely much more than that going on in this vast emerging legal market. For a country whose
private legal profession was spun out of the state apparatus only less than 40 years ago,
7
it is
surprising to see how fast China’s corporate law practice has been catching up with the
innovative trend globally. Along this line, this paper aims to provide a state-of-the-art sketch of
the innovations in China’s legal profession, primarily focusing on the corporate, business and
civil law areas. Using a case study approach, it depicts and investigates a number of thought-
provoking alternative practices and business models that are observed during recent years in two
of Law and Alternative Business Structures, July 2011, at 3, available at http://www.brak.de/zur-
rechtspolitik/stellungnahmen-pdf/stellungnahmen-europa/2011/juli/position-of-the-brak-2011-47.pdf (submitting
that under German law, it is prohibited for non-lawyers to own law firms, subject to very limited exceptions for
certain multidisciplinary partnerships. The ABS firms under the English regime are believed to be “a serious threat
to the independent professional judgement of the lawyer employed by such a firm”).
5
Legal Service Act (2007), Part 5.
6
Patti Waldmeir, Dentons-Dacheng merger to create world’s largest law firm, F
INANCIAL
T
IMES
, Jan. 22, 2015,
available at https://www.ft.com/content/a70f0cb2-a225-11e4-aba2-00144feab7de.
7
Sida Liu, Lawyers, State Officials and Significant Others: Symbiotic Exchange in the Chinese Legal Services
Market, 206 T
HE
C
HINA
Q
UARTERLY
276, 281-85 (2011) (briefly reviewing the history of China’s legal reform and
the birth and growth of lawyers and other alternative legal service providers).

4
major groups, namely, the law firms, which are the mainstream incumbents; and the significant
others,
8
most representatively the Internet-based legal service providers. Based on such
examination, the paper goes on to comparatively analyze the Chinese experience within the
current debate on regulation of legal service provision, and discuss the potential implications and
challenges of liberalizing the mandatory partnership requirement and prohibition of non-lawyer
ownership in law firms. It finds that, the latest developments in China’s legal profession in
general converge into the similar trends that have swept the other major legal markets, tilting the
market towards the buyers’ side. The current wave of leading Chinese corporate law firms avidly
expanding themselves overseas, even creating massive global law firms on the one hand, and the
various creative collaboration modes between Chinese law firms and their foreign counterparts
on the other, are vivid examples of this finding. This being said, many legal needs are not met in
the less developed geographic regions and in financially less rewarding practice areas. There, the
market generates innovation not through the game of “survival of the fittest”, but through a more
general demand for access to justice and legal protection, which needs to be attended through
creative ways as conventional channels are either inefficient or insufficient. As such, it is argued
that the new generation of Internet-based legal service portals serve to provide an effective
alternative to improve the access. Instead of being organized as traditional partnership law firms,
these sites are founded and financed by non-lawyers, and have rather adopted various innovative
business models, which pose new challenges to China’s restrictive law firm regulations. These
challenges are reinforced by the fact that even some of the top tier corporate law firms in China
have effectually deviated from the partnership legal form by incorporating key corporate features
in running their business and compensating their partners. In this vein, China makes a unique
contribution into the broader discussion on alternative business structure in general.
This paper is structured as follows. Section I reviews the relevant literature over the
rationale for partnership as the traditional organizational choice for law firms and the challenges
posed by the new realities. Section II sketches the regulatory framework and evolution of the
legal profession in China, where the legal market is rather fragmented and lawyers maintain a
symbiotic relationship with the regulator and other legal service providers. Section III makes a
brief comparison of China’s regulations with those of other five jurisdictions with respect to the
8
Id., at 286.

5
issues of legal form, ownership, and multidisciplinary services of law firms. Section IV names
and describes the key innovations in China’s legal profession, whose implications are
collectively discussed in Section V. Section VI concludes.
I. L
AW
F
IRMS AS
P
ARTNERSHIPS
:
T
HE
R
ATIONALE AND THE
C
HALLENGES
When it comes to the choice of business form, law firms, as well as other professional
service firms such as those doing accounting and consultancy services, have been historically
inclined to partnership.
9
Based on the existing sociology and economics research, the benefits of
this business form derive from the ability of balancing the competing claims of the three key
stakeholders of professional service firms, i.e., the professionals, the owners, and the clients.
10
Relative to the corporate business form, partnerships are more suitable to realities of law firms,
which are stratified apprenticeships organized by various practices, and are owned and controlled
by partners simultaneously.
11
The classic argument in support of partnerships is that the key asset
of a law firm, which is the knowledge about the needs and interests of clients, rests in lawyers’
heads.
12
Because such asset is hardly specific to a particular firm, it is impracticable to lock it in,
thus rendering the capital lock-in function of the corporations unattractive to professional service
firms.
13
From the perspective of economic efficiency, partnerships are also found to able to lower
the agency costs in professional firms. In particular, given that legal services are highly
knowledge intensive and customized, it is hard for outsiders, who lack the expertise about the
business and proximity to the managers, to monitor the activities in a law firm as partners
themselves, thus making it inefficient to allocate law firm ownership to outsiders.
14
The natural
solution is then the partnership form, where professionals share ownership and control, and
monitor each other to achieve economies of scale.
9
Laura Empson, Surviving and thriving in a changing world: the special nature of partnership, in M
ANAGING THE
M
ODERN
L
AW
F
IRM
:
N
EW
C
HALLENGES
,
N
EW
P
ERSPECTIVES
, 10 (Laura Empson eds., 2007).
10
Id., at 13.
11
John J. Gabarro, Prologue, in M
ANAGING THE
M
ODERN
L
AW
F
IRM
:
N
EW
C
HALLENGES
,
N
EW
P
ERSPECTIVES
, xix-
xxi (Laura Empson eds., 2007).
12
James B. Rebitzer & Lowell J. Taylor, When Knowledge Is an Asset: Explaining the Organizational Structure of
Large Law Firms, 25 J.
L
AB
.
E
CON
. 201, 203 (2007).
13
Lynn A. Stout, On the Nature of Corporations, 2005 U.
I
LL
.
L.
R
EV
. 253, 264 (2005).
14
Royston Greenwood & Laura Empson, The Professional Partnership: Relic or Exemplary Form of Governance?,
24 O
RGANIZATION
S
TUDIES
909, 916 (2003).

6
A competing school of thought, however, questions the viability of such economic
advantages. For example, Martin-Rhodes et al. (2014) offered rather pragmatic explanations to
the results of their survey about the entity choices of American law firms, arguing that most
business form choices had more to do with historical and short-term considerations than anything
else.
15
In particular, it is submitted that the historical dominance of partnership archetype is be
better attributable to normative constraints, rather than managerial choice.
16
One of such
normative constraints is the vicarious liability feature embedded in the partnership form. Because
substantial liability might arise from the personal legal services provided by a partner directly to
a client, the limited liability protection embedded in corporate business forms was long viewed
as “incompatible” with professional relationships.
17
In the US, it was not until the development
of professional corporation in the 1960s that the concept of limited liability was first extended to
law firms.
18
In the UK, law firms have been permitted to incorporate since 1992, and many have
converted to the UK limited liability partnership (“LLP”) after it become available in 2001.
19
Germany followed the suit in 1999 to allow law firms to limit partners’ vicarious liability by
incorporation,
20
which is realized in practice mostly through the well-known GmbH form.
21
More recently, however, partnership has lost its upper hand in the competition with newer hybrid
organizational forms. Based on a 2002 empirical study, general partnerships accounted for 29%
of the US law firms,
22
and this number reduced to only 16% in 2011, while professional
corporations, LLPs, limited liability companies, all of which offer the limited liability feature,
altogether accounted for the remaining 84%.
23
Similar to the US, incorporated companies and
LLPs are much more popular among UK solicitor firms nowadays. Combined, they outnumber
15
Allison Martin Rhodes et al., Law Firm’s Entity Choices Reflect Appeal of Newer Business Forms, 16 B
USINESS
E
NTITIES
16, 19 (2014).
16
Andrew von Nordenflycht, Does the emergence of publicly traded professional service firms undermine the
theory of the professional partnership? A cross-industry historical analysis, 1 J
OURNAL OF
P
ROFESSIONS AND
O
RGANIZATIONS
137, 155 (2014).
17
Allison Martin Rhodes & Robyn Axberg, The law firm as an industry model for entity choice and management, in
R
ESEARCH
H
ANDBOOK ON
P
ARTNERSHIPS
,
LLC
S
,
AND
A
LTERNATIVE
F
ORMS OF
B
USINESS
O
RGANIZATIONS
, 281
(Robert W. Hillman & Mark J. Loewenstein eds., 2015), at 289.
18
Id., at 289.
19
Empson, supra note 9, at 12.
20
See Gesetz zur Änderung der Bundesrechtsanwaltsordnung, der Patentanwalt-sordnung und anderer Gesetze, v.
31.8.1998 (BGBl. I S.2600).
21
Laurel S. Terry, German MDPs: Lessons to Learn, 84 M
INNESOTA
L
AW
R
EVIEW
1547, 1561 (2000).
22
Robert W. Hillman, Organizational Choices of Professional Services Firms: An Empirical Study, 58 B
USINESS
L
AWYER
1387 (2003).
23
Martin Rhodes et al., supra note 15, at 18. It is worth noting that sole proprietorship is excluded in the survey.

7
partnerships for more than three times.
24
It is worth noting that, although these newly added
organizational forms offer some level of protection against vicarious liability for the professional
negligence of other lawyers in the law firm, they do not completely shield a lawyer from the
personal liability for his/her own professional negligence or that of lawyers that he/she
immediately supervises.
25
Another example of regulatory constraint related to the choice of partnership is the
prohibition of ownership by and division of legal fees with non-lawyers in law firms, which used
to exist around the world,
26
but is nowadays most eloquently represented by the US.
27
This
directly rules out public ownership, which will open law firms’ ownership to non-lawyers,
28
as
well as the possibility of importing private equity investors. In comparison, other countries have
adopted more liberal approaches in regulating the legal profession. More recently, the most
thought-provoking regulatory development has been the alternative business structures, which
were made available by the Legal Services Act in 2007.
29
An ABS is a regulated organization
which provides legal services and has some form of non-lawyer involvement, which can either
be at the management level (e.g., partner, director or member), or at the owner level.
30
Essentially, ABS is made possible through entity regulation, which serves as an important
supplement to the traditional regulatory focus on individual solicitor, barrister, or other legal
professional.
31
This trend of liberalizing law firm regulation has swept across smaller legal
markets as well. To name a few: Australia legislated to remove the non-lawyer ownership
prohibition and low law firms to raise public funds in 2007, and the firm Slater & Gordon floated
on Australian Stock Exchange immediately after the reform to become the world’s first public
traded law firm.
32
Comparatively, a number of continental European countries have allowed
24
Based on the numbers as of December 2017. See Data for breakdown of solicitor firms, S
OLICITORS
R
EGULATION
A
UTHORITY
, http://sra.org.uk/sra/how-we-work/reports/data/solicitor_firms.page (updated monthly).
25
Martin Rhodes et al., supra note 15, at 18. In particular, it is submitted that the override on complete liability
limitation typically takes the form of security requirements that impose vicarious liability when the entity fails to
take out sufficient malpractice coverage.
26
Von Nordenflycht, supra note 16, at 144.
27
Supra note 3.
28
Von Nordenflycht, supra note 16, at 145.
29
Legal Services Act of 2007, c. 29 (Eng.), http://www.legislation.gov.uk/ukpga/2007/29/contents.
30
Setting up and ABS, T
HE
L
AW
S
OC
’
Y
http://www.lawsociety.org.uk/advice/articles/settingup-an-abs/.
31
Judith A. McMorrow, UK Alternative Business Structures for Legal Practice: Emerging Models and Lessons for
the US, 47 G
EORGETOWN
J
OURNAL OF
I
NTERNATIONAL
L
AW
665, 669 (2016).
32
Peter Latteman, Slater & Gordon, the World’s First Publicly Traded Law Firm, May 22, 2007,
http://blogs.wsj.com/law/2007/05/22/slater-gordon-the-worlds-first-publicly-traded-law-firm/ (last visited Dec. 7,
2016).

8
ABS on a limited scale, often by putting a cap on the equity stake to be held by non-lawyers in
these firms.
33
In Singapore, new amendments to the Legal Profession Act came into action in
2015 to allow a form of ABS which provides only legal services, but allows non-lawyer
employees to become partners, directors or shareholders, or to share in the profits of the law
practice subject to prescribed limits.
34
Canada is also on the road to allow ABS, but rather
chooses to focus on ABS with only minority ownership by non-licensees.
35
Beyond the new regulatory trends challenging traditional normative constraints in the legal
profession, the declining prevalence of partnerships among law firms is also attributable to the
different realities of modern law firms today.
36
Traditionally, legal profession was characterized
by fluid partnerships and casual apprenticeships.
37
Things began to change at the beginning of
the 20
th
century when big corporations rose as the engine of economic growth, demanding for
complex legal services that would require simultaneous efforts of many attorneys. This gave rise
to big corporate law firms.
38
Given the sheer size and geographical dispersion of many of these
firms today, it is logical that they are less unified by loyalty and shared values, but more by the
“corporate” type of control through a bureaucratic hierarchy over most of the employee
lawyers.
39
In addition, the risk of litigation rises along with the globalization of legal services,
and in this regard limited liability provides legal practitioners with the much needed security.
Empirically, this corresponds with the finding that although generally LLP is the least popular
business form among law firms in the US, it is comparatively most prevalent with large law
firms.
40
Moreover, the growth of partnership in size also gives rise to greater demand for
(outside) capital, and in the meantime erodes the non-financial benefits of partnerships, as a
result of the increased free-riding problems and the decreased effectiveness of collegial control
33
S.J.F.J,
C
LASSENS ET AL
.,
E
VALUATION OF THE
L
EGAL
F
RAMEWORK FOR THE
F
REE
M
OVEMENT OF
L
AWYERS
,
F
INAL
R
EPORT
205-06 (2012), available at http://ec.europa.eu/internal_market/qualifications/docs/studies/2013-
lawyers/report_en.pdf.
34
Circular on the Establishment of the Legal Service Regulatory Authority, M
INISTRY OF
L
AW
S
INGAPORE
,
https://www.mlaw.gov.sg/content/dam/minlaw/corp/News/Circular%20on%20the%20Establishment%20of%20the
%20LSRA.pdf (last visited Oct. 26, 2016).
35
Alternative Business Structures, T
HE
L
AW
S
OCIETY OF
U
PPER
C
ANADA
, http://www.lsuc.on.ca/ABS/ (last visited
Oct. 26, 2016).
36
Empson, supra note 9, at 11.
37
Rebitzer & Taylor, supra note 12, 215 (2007).
38
Mark Galanter, Skybox Lawyering, in L
AW AND
C
LASS IN
A
MERICA
:
T
RENDS SINCE THE
C
OLD
W
AR
, 87 (Paul D.
Carrington & Trina Jones eds., 2006).
39
Marc Galanter & William Henderson, The Elastic Tournament: A Second Transformation of the Big Law Firm, 60
S
TAN
.
L.
R
EV
. 1867, 1928 (2008).
40
Martin Rhodes et al., supra note 15, at 18.

9
mechanisms.
41
In this sense, the adoption of certain techniques and systems that usually
characterize the more formal, less personal corporate business form does impose challenge to the
managers of global law firms.
II. L
EGAL
P
ROFESSION IN
C
HINA
–
R
EGULATORY
F
RAMEWORK
,
K
EY
P
ARTICIPANTS
,
AND
E
VOLUTION
This Section aims to pinpoint the key applicable regulations on legal form choice and
market entry qualification issues of the various participants of legal profession in China, as well
as the essential business models that are not directly regulated by statutes but rather formed
themselves in practice. It is further divided into four subsections. Section 2.1 deals with
practicing lawyers and law firms, both domestic and international, which are the major players in
the market. Section 2.2 covers the other legal professionals, who are much more under the radar
relative to lawyers yet still significant, given the ability and position of some of these
occupations to maintain a closer symbiotic exchange with the state power.
42
The discussion in
Section 2.3 is specifically devoted to the bar association in China and its regulatory power vis-a-
vis the state. The final Section 2.4 briefly discusses how the Chinese legal profession, especially
the corporate law sector, has evolved to its current status, which is resulted from the combined
forces of both its local institutional context and globalization.
2.1 The Mainstream: Lawyers and Law Firms
2.1.1 Domestic Law firms and Lawyers
In China, one can only provide legal services in the name and capacity of a “lawyer” once
he/she holds a valid license.
43
A lawyer must only practice in a law firm,
44
which acts as the
entity to contract with and accept fees from clients.
45
In this sense, although the concept of solo
41
Von Nordenflycht, supra note 16, at 141.
42
Liu, supra note 7, at 286.
43
中华人民共和国律师法 [Lawyer’s Law of the People’s Republic of China] (amended and adopted at the 30
th
Session of the Standing Committee of the Tenth National People’s Congress, Oct. 28, 2007),
L
AW
I
NFO
C
HINA
,
available at http://www.lawinfochina.com, art. 13.
44
Id., art. 14.
45
Id., art. 25.

10
lawyers has been made available after 2007 when the Lawyer’s Law was amended,
46
a
practitioner wising to avail this possibility still needs to set up a sole proprietor law firm.
47
In
addition, three other types of law firms, namely, partnership law firms, limited liability
partnership law firms, and state-funded law firms, are also allowed under the current regulatory
framework.
48
The following Table 1 summarizes the key regulations pertaining to each of the
four types of law firms.
T
ABLE
1:
D
IFFERENT
T
YPES OF
L
AW
F
IRMS IN
C
HINA
*
Sole Proprietor
Law Firm
Partnership
Law Firm LLP Law Firm State-Funded
Law Firm
Articles of
Association
Yes Yes Yes Yes
Partnership
Agreement Not applicable Yes Yes Not applicable
Number of
Founder(s) 1 At least 3 At least 20 Not applicable
Nature of
Founder(s)
Full-time lawyer
with at least 3
years of
practicing
experience
Full-time
lawyers with at
least 3 years of
practicing
experience
Full-time lawyers with
at least 3 years of
practicing experience
Local judicial
administrative
authority
The firm should have
at least 2 full time
practicing lawyers
Nature of
New
Partners
Same as above Same as above Same as above Not applicable
Liability Unlimited liability
Unlimited joint
and several
liability
Unlimited joint and
several liability in
general
Limited liability offered
as “partial shield”
Limited liability to the
extent of all the firm’s
assets
Firm
Assets RMB100,000 RMB300,000 RMB10 million Not specified
46
Fried Frank Harris Shriver & Jacobson LLP, China’s revised lawyer’s law: toward a strengthened legal
profession, L
EXOLOGY
, Sep. 4, 2007, http://www.lexology.com/library/detail.aspx?g=c89e3126-f8c3-4412-ace8-
b57b07044997.
47
律师事务所管理办法 [Administrative Measures for Law Firms] (promulgated by the MOJ, May 28, 2008),
L
AW
I
NFO
C
HINA
, available at http://www.lawinfochina.com, art. 9.
48
Id., art. 5.

11
To be provided and
guaranteed by the
local government
* Summarized on the basis of the Administrative Measures for Law Firms.
In China, law firms can only be owned by lawyers. Limited liability protection is only
partially available if a law firm is organized as an LLP, where partners are shielded from the
other people’s intentional misconduct or gross negligence, but will still be held liable for the
contractual obligations of the LLP as a whole.
49
As shown in Table 1 above, the non-lawyer
ownership prohibition is sustained both as of the time of law firm inception, and when the law
firm expands and admits new partners. In addition, law firms should also refrain from engaging
in business activities other than providing legal services, and failing to comply with such
restriction may lead to temporary suspension or even revocation of the law firm’s license for
practice.
50
For that matter, the allowed business scope of lawyers is defined to include only the
following: (a) acting as legal consultant for client; (b) representing client and participate in civil,
administrative and criminal litigations; (c) representing client in filing petition in all types of
litigations; (d) participating in mediation or arbitration; (e) providing non-litigation legal
services; and (f) answering law-related inquiries, writing legal documents for client.
51
In this
sense, hybrid services where technology, business process and project management are deployed
tactically to meet the clients’ actual need for streamlined one-stop solutions, such as what Allen
& Overy has been exploring recently,
52
may face practical difficulties to develop in big Chinese
law firms due to such exhaustive definition.
While the “Cravath system”, which is marked by deferred compensation and the up-or-out
tournament, is generally maintained as the industry standard for American law firms
53
as well as
49
Martin Rhodes & Axberg, supra note 17, at 281. See also 中华人民共和国合伙企业法 [Partnership Enterprise
Law of the People’s Republic of China] (Adopted at the 24
th
session of the Standing Committee of the 8
th
National
People’s Congress on Feb. 23, 1997 and amended at the 23
rd
session of the Standing Committee of the 10
th
National
People’s Congress of the People’s Republic of China on Aug. 27, 2006),
L
AW
I
NFO
C
HINA
, available at
http://www.lawinfochina.com, arts. 57 & 58.
50
Lawyer’s Law, supra note 43, art. 50.
51
Id., art. 28.
52
Unbundling a market: The appetite for new legal services models, A
LLEN
&
O
VERY
, May 2014,
www.allenovery.com/SiteCollectionDocuments/Unbundling_a_market.PDF, at 15.
53
See Huseyin Leblebici, Determining the value of legal knowledge: billing and compensation practices in law
firms, in M
ANAGING THE
M
ODERN
L
AW
F
IRM
:
N
EW
C
HALLENGES
,
N
EW
P
ERSPECTIVES
, 131 (Laura Empson eds.,
2007). See also Galanter & Henderson, supra note 39, at 1873.

12
in other major legal service markets such as the UK,
54
this practice are far less institutionalized
in China. Instead, Chinese law firms have been identified to run their business under two major
models, namely, commission-based model and corporate model.
55
Under the commission-based
model, partners pay a percentage of their fees, i.e., the commission, to the firm and keep the rest.
As such, each partner is an individual profit center and is responsible for administrative matters
such as hiring associates. While this type of arrangement is familiar in most domestic firms in
China, including some reputable ones,
56
its popularity is on a decline as a trend, especially
among large firms, primarily due to the difficulty of building a long-lasting brand for the firm as
a whole.
57
In particular, the reduced prevalence of commission-fee system is resulted from a
series of policies of the Ministry of Justice (“MOJ”) in the late 1990s to encourage the
development of large partnership law firms with a corporate structure, in order to meet the
demand of global convergence after China’s accession into the World Trade Organization
(“WTO”).
58
By contrast, law firms operated under the corporate model centralize the key management
functions like paying office rent, employee salaries and other costs, hiring associates and
distributing profits, to partners.
59
Rather than each partner bringing in and keeping his/her own
clients, the firm contracts with potential clients universally, and the cases are distributed to the
appropriate partner afterwards.
60
With respect to the issue of partner compensation, commission-
based type of law firms typically adopt the “eat what you kill” model, where a partner simply
gets what he/she earns from the billings, after paying the commission to the firm.
61
Comparatively, compensation systems in corporate-type law firms tend to be more sophisticated,
54
Mark Galanter & Simon Roberts, From kinship to magic circle: the London commercial law firm in the twentieth
century, 15 I
NTERNATIONAL
J
OURNAL OF THE
L
EGAL
P
ROFESSION
143 (2008).
55
Anna Zhang, How Do Chinese Law Firms Operate? T
HE
A
SIAN
L
AWYER
, June 6, 2016, available at:
http://www.international.law.com/id=1202759347077/How-Do-Chinese-Law-Firms-
Operate?slreturn=20161011101606.
56
Id.
57
杨文龙 [Wenlong Yang],
传统提成制律所的变革之路
[Towards an Improved Commission-Based Law Firm
Operation Model], speech at iCourt 律所主任年会 [iCourt Annual Forum of Managing Partners of Law Firms],
Suzhou, July 15-17, 2016, available at: http://chuansong.me/n/405483039759.
58
Sida Liu & Honqi Wu, The Ecology of Organizational Growth: Chinese Law Firms in the Age of Globalization,
122 A
MERICAN
J
OURNAL OF
S
OCIOLOGY
798, 812 (2016).
59
Zhang, supra note 55.
60
Yang, supra note 57.
61
Anna Zhang, No Simple Formula: How Chinese Law Firms Pay Their Partners,
T
HE
A
SIAN
L
AWYER
, June 13,
2016, available at: http://www.international.law.com/id=1202759881173/No-Simple-Formula-How-Chinese-Law-
Firms-Pay-Their-Partners.

13
and partners are often paid according to their positions in various bands of points, and the
accumulation of which is not only tied to their objective performance of the current year.
62
In
general, there is some fusion and convergence of partner remuneration practices, with traditional
corporate type law firms introducing performance-based elements to modify the hardcore
lockstep, and long-time commission-based firms starting to let partners share the firm’s profits so
as to motivate them to work cooperatively for the firm’s overall growth.
63
The following Figure
1 illustrates the key features of the business models of four leading corporate law firms in China.
From left to right, the weight of performance in deciding partner compensation increases, while
the level of collegiality among partners and integration among local offices decreases. It is worth
noting that some of the practices enumerated in Figure 1 do not necessarily compete with each
other, but can co-exist in a law firm. For example, Tahota, the largest comprehensive law firm in
the western part of China, has two tiers of offices when it comes to expanding its presence in
China. The firm adopts the “corporate model” and centralizes the management of both the
human sources and capital for the offices located in its home cities (such as Chengdu and
Chongqing) and cities of high strategic value (such as Beijing). All the other offices largely
remain independent and assume responsibility for their own profits and losses, which manifests
the application of the “commission model”.
64
F
IGURE
1:
A
S
PECTRUM OF
B
USINESS
M
ODELS OF
F
OUR
L
EADING
C
HINESE
C
ORPORATE
L
AW
F
IRMS
62
Yang, supra note 57.
63
Zhang, supra note 61.
64
毛姗姗
[Shanshan Mao],
【大所之路】泰和泰：一个从中西部崛起的大所
[[Road to Big Law] Tohota: Big
Firm Rising from the Midwest], I
NTELLIGEAST
, Oct. 17, 2016, http://www.zhihedongfang.com/article-23895/.

14
Note: Summarized on the basis of Liu & Wu (2016).
65
2.1.2 Foreign Law firms and Lawyers
Against the background of globalization, international law firms have also rigorously
expanded their presence in China, building a both collaborative and competitive relationship
with the Chinese counterparts. They are a unique group of participants in China’s legal service
market, in that the state has imposed a special set of regulations that are directed particularly at
them.
66
In general, market access offered to international law firms is quite small. The one and
only permitted legal form for foreign law firms to do business in China is representative office.
In particular, it is explicitly prohibited for any foreign individual or entity to render legal services
65
Liu & Wu, supra note 58.
66
Primarily, these regulations are: 外国律师事务所驻华代表机构管理条例 [Regulations on the Administration of
Foreign Law Firms' Representative Offices in China] (promulgated by the State Council, Dec. 19, 2001),
L
AW
I
NFO
C
HINA
, available at http://www.lawinfochina.com, and 司法部关于执行外国律师事务所驻华代表机构
管理条例的决定 [Provisions of the MOJ on the Execution of the Regulations on the Administration of Foreign Law
Firms' Representative Offices in China] (amended and promulgated by the MOJ, June 22, 2004), L
AW
I
NFO
C
HINA
,
available at http://www.lawinfochina.com.
Pure corporpate
•Haiwen
•Boutique law
firm specialized
in high-end
corproate
market
especailly IPO
•Strict seniority-
based lockstep
•Classic Cravath
system of
training and
pomoting
associates
•No expansion
strategy
Mix of corporate
and commission
•King & Wood
•Leading big full-
service
corporate law
firm
•Seniority-based
lockstelp mixed
with
performance
•Expansion
mainly through
sending own
partners to
open new
offices; still high
level of
integration
Pure Commission
•Dacheng
•Leading big full-
service
corproate law
firm
•Has both equity
partners and
non-equity
partners
•Eat what you
kill: a lawyer
turns in a
percentage of a
his/her billings
as commission
to the firm and
keeps the rest
• Expansion
through
franchising the
firm's brand;
limited
integration
Agressive
Commission
•Yingke
•Fast growing
corporate law
firm
•Except for a few
senior partners,
everyone else
only receive
salary and does
not share
equity
•Eat what you
kill: a lawyer
only turns in a
fixed annual
management
fee or a very
low percentage
of his/her
billings to the
firm and keeps
the rest
•Expansion
through office
space rental;
minimum
integration

15
in China in the name of “consultancy firm”.
67
These representative offices are not allowed to hire
Chinese lawyers,
68
meaning that a licensed Chinese lawyer must suspend his/her license during
the entire period of working for an international law firm in China.
69
In terms of permitted
business scope, they can practice international law and the laws of their home country, hire local
counsel and enter into long-term relations with Chinese law firms, and provide information on
the impact of the Chinese legal environment; but are generally excluded from practicing Chinese
law.
70
According to the interpretation of the MOJ, this means that they must refrain from
participating in litigations in China, opining on Chinese law related matters, and representing
clients in the relevant procedures at governmental and administrative authorities.
71
Despite these statutory restrictions, international law firms have been creative in operating
in China, effectively expanding their business scope beyond the regulatory constraints and
competing with their Chinese counterparts on many Chinese law related fronts. Typically, this is
done via a number of practices including but not limited to the following: (a) hiring licensed
Chinese law professionals as “paralegals” or “law assistants”; (b) engaging in non-litigation legal
services and advising on Chinese law matters, not in the form of “legal opinion” officially but
rather in various informal forms such as memoranda, emails, and/or telephone calls; (c)
conducting legal due diligence about projects located in China; (d) effectively participating in
litigations and arbitrations in all stages except for appearing in court; (e) cooperating with a
“puppet” Chinese law firm on Chinese law matters which is either capitalized or controlled by
the foreign firm; and (f) branding, on the basis of the abovementioned practices, them as
qualified in Chinese law.
72
It is interesting how these practices, tiptoeing at the verge of being
legal and illegal, have generated drastically different reactions from domestic Chinese
67
Regulations on the Administration of Foreign Law Firms' Representative Offices in China, id., art. 6.
68
Id., art. 16.
69
Mark A. Cohen, International Law Firms in China: Market Access and Ethical Risks, 80 F
ORDHAM
L
AW
R
EVIEW
2569, 2570 (2012).
70
Regulations on the Administration of Foreign Law Firms' Representative Offices in China, supra note 66, art. 15.
71
Provisions of the MOJ on the Execution of the Regulations on the Administration of Foreign Law Firms'
Representative Offices in China, supra note 66, art. 32.
72
境外律所违法执业情况严重
涉外法律服务市场亟待规范
[Foreign Law Firms Maintain Serious Illegal
Operations in China, Urgent Regulatory Measures Needed], work report of Shanghai Bar Association, Apr. 17,
2006, available at http://www.lawyers.org.cn/info/87489f4d5e074956b01545be0351ee5f. See also 冯源 [Yuan
Feng],
艰难的突围
——
中国法律服务市场的结构分析，暨刘思达博士《割据的逻辑》、《失落的城邦》书评
[A Hard Breakout – An Structural Analysis of China’s Legal Service Market and a Review of Two Books from Dr.
Sida Liu], a book review written for Peking University Law Review, Nov. 13, 2012, available at
http://www.pkulawrev.com/?p=454.

16
practitioners and the community of foreign law firms. In the eyes of the former group, they are
identified as evidence for the serious but illegitimate competition from foreign law firms, which
has cut into the profits of Chinese lawyers.
73
In the eyes of the latter, these practices rather
showcase the difficulty of doing business in a highly closed market, and are thus used to support
their claim for further liberalizing legal service industry and allowing equal access also to foreign
lawyers.
74
All in all, it is submitted that while the business competition between foreign law
firms and their local counterparts in the market is significantly intensified, the jurisdictional
boundary between them is also becoming increasingly blurred, which gives rise to a hybrid of
localized expertise among Chinese corporate lawyers.
75
In 2014, Shanghai Free Trade Zone launched a pilot program to allow mutual secondment
of lawyers across and joint ventures between Chinese and foreign law firms.
76
Specifically, a
Chinese law firm can second Chinese lawyers to a foreign firm to act as consultants on Chinese
law related issues, and a foreign law firm may also second foreign lawyers to a Chinese law firm
(or its branch) to act as consultants on foreign law matters, as long as either of the two firms has
a premise in the Shanghai Free Trade Zone (“FTZ”).
77
As a more alleviated form of
collaboration, Chinese and foreign law firms are also allowed to set up joint operation offices in
the Free Trade Zone, where they can provide legal services within their respective scope of
practice to both Chinese and international clients, and join forces to handle cross-border and
international transactions.
78
In April 2015, Baker & McKenzie and Fenxun Partners, a Beijing-
based Chinese law firm, formed their FTZ joint operation office in Shanghai, thus becoming the
73
Id.
74
Cohen, supra note 69, at 2575.
75
Sida Liu, Globalization as Boundary-Blurring: International and Local Law Firms in China’s Corporate Law
Market, 42 L
AW
&
S
OCIETY
R
EVIEW
771, 801-802 (2008).
76
上海市人民政府办公厅关于转发市司法局制订的《中国（上海）自由贸易试验区中外律师事务所互派律
师担任法律顾问的实施办法》《中国（上海）自由贸易试验区中外律师事务所联营的实施办法》的通知
[Notice of the General Office of the Shanghai Municipal People’s Government on Forwarding the Implementation
Measures for Mutual Assignment of Lawyers to Serve as Legal Consultants by Chinese and Foreign Law Firms in
China (Shanghai) Pilot Free Trade Zone and the Implementation Measures for Economic Association between
Chinese and Foreign Law Firms in China (Shanghai) Pilot Free Trade Zone Developed by the Shanghai Municipal
Bureau of Justice] (promulgated by Shanghai Municipal People's Government, Nov. 18, 2014), L
AW
I
NFO
C
HINA
,
available at: http://www.lawinfochina.com.
77
Implementation Measures for Mutual Assignment of Lawyers to Serve as Legal Consultants by Chinese and
Foreign Law Firms in China (Shanghai) Pilot Free Trade Zone, id., art. 2.
78
Implementation Measures for Economic Association between Chinese and Foreign Law Firms in China
(Shanghai) Pilot Free Trade Zone, supra note 76, art. 2.

17
very first mover under the new pilot program.
79
It is worth noting that, this kind of joint
operation office is based on a rather loose contractual arrangement, under which two partners
must still remain structurally separate in terms of their legal status, names, and financials, and
should be separately liable for each of their contractual obligations.
80
While certainly liberalizing, the significance of such measures is rather modest. For years,
foreign firms are found to have chosen the appropriate form and level of collaboration with
domestic Chinese firms strategically based on the practice areas and financial costs involved.
Even in the cases where a clear division of labor exists with respect to who in charge of what,
foreign and local firms still cooperate with each other to the extent of exchanging comments on
the relevant transactional documents.
81
In this sense, although both mutual secondment and the
joint operation office between local and foreign law firms do contribute to the end of
streamlining the collaboration process, actually neither of them bring about substantive changes
to the current regulation on foreign firms, which are still explicitly prohibited from practicing
Chinese law. As such, these recent innovations initiated by the Shanghai Bureau of Justice in
FTZ are rather passive in nature. On the one hand, because law is a field where a great deal of
professional and cultural stakes are involved,
82
the Chinese regulator is unwilling to open up the
legal market to the same extent as other similar lines of professional services, despite its general
obligation of gradually offering market access liberalization after its WTO accession.
83
On the
other, the regulator is surely aware of the reality of foreign law firms offering Chinese law
services in many ways, in particular through hiring qualified Chinese legal professionals and
establishing de facto collaboration with their Chinese local counterparts. Such practices are
already too entrenched to be completely corrected. It is under such a dilemma that the new
measures came into being: in a special zone where more liberal regulations are expected, the
regulator repackages what’s already there and attaches a new label on it so as to show a good
gesture from the outset, but refuses to make concession on the core issues.
79
See http://www.bakermckenziefenxun.com/.
80
Implementation Measures for Economic Association between Chinese and Foreign Law Firms in China
(Shanghai) Pilot Free Trade Zone, supra note 76, art. 2.
81
Liu, supra note 75, at 780.
82
Id., at 802.
83
Cohen, supra note 69, at 2569.

18
2.2 Legal Service Providers Other Than Practicing Lawyers
The legal profession in China is highly fragmented in nature, which is deeply rooted in its
unique historical development as well as the political fragmentation in the regulatory regimes,
both competing and inter-depending on each other, that are applicable on it.
84
Note that, the
current bar exam of China is officially titled “State Judicial Examination”, and passing this exam
is a must if one is to work as a lawyer, prosecutor, judge, or notary.
85
But this is far from the only
qualification examination out there that decides who is able to enter China’s legal profession. In
addition to lawyers practicing in law firms (both domestic and international ones), there are also
a number of “significant others” in the competitive landscape, including at least “basic-level
legal workers” (基层法律工作者), various types of advisory agencies offering legal consulting
services, enterprise legal advisors (企业法律顾问), patent agents, and trademark agents, each of
which is separately licensed, and also a large number of unauthorized “black lawyers” (黑律师)
and “barefoot lawyers” (赤脚律师).
86
Table 2 below lays out the regulatory framework of these
alternative lines of occupation in the legal profession, to the extent that they are separately
regulated in the first place.
84
刘思达 [S
IDA
L
IU
],
割据的逻辑 [T
HE
L
OGIC OF
F
RAGMENTATION
]
(2011).
85
国家司法考试实施办法 [Measures for Implementation of State Judicial Examination] (promulgated by the MOJ,
Aug. 14, 2008), L
AW
I
NFO
C
HINA
, available at http://www.lawinfochina.com, art. 2.
86
Liu, supra note 7, at 277.

19
T
ABLE
2:
R
EGULATORY
F
RAMEWORK FOR
A
LTERNATIVE
L
EGAL
S
ERVICE
P
ROVIDERS
Place of Practice Regulatory
Authority
License Needed How To Obtain License? Law Degree
Required?
Basic-Level
Legal
Workers
Basic-level legal
service firms
Ministry of Justice License for Basic-
Level Legal
Workers
By passing a separate qualification
exam
Exam is waived for certain group of
people, who can also be licensed
upon the approval of the competent
local Bureau of Justice
Not required
But a law degree is
one of the waivers
for the exam
Enterprise
Legal
Advisors
All kinds of
enterprises,
especially state-
owned ones
Ministry of
Personnel,
State-owned Assets
Supervision and
Administration
Commission, and
Ministry of Justice
License for
Enterprise Legal
Advisors
87
By passing a separate qualification
exam
Exam is waived for certain group of
people, who can also be licensed
upon the approval of the competent
local Bureau of Justice
Yes
Company
Lawyers
(公司律师)
Companies Ministry of Justice License for
Company
Lawyers
88
The candidate already holds a
lawyer’s license; and
The company agrees to retain the
candidate as a company lawyer.
Yes
Patent
Agents
Patent agency
firms, intellectual
property agency
firms, or law firms
State Intellectual
Property Office
License for Patent
Agents
By passing a separate qualification
exam
No, but rather the
knowledge about
Patent Law is
required
87
This license is cancelled in 2014 by the State Council. See 国务院关于取消和调整一批行政审批项目等事项的决定 (国发〔2014〕27 号) [Decision of the
State Council on Matters on Canceling and Adjusting a Group of Administrative Approval Items] (No. 27 [2014] of the State Council), L
AW
I
NFO
C
HINA
,
available at www.lawinfochina.com.
88
This license was created as a result of a 2002 MOJ pilot program, see 司法部关于开展公司律师试点工作的意见 (司发通 (2002) 79号) [Opinion from the
MOJ on Starting Company Lawyer Pilot Program (MOJ (2002) No. 79)]. Although the pilot program was never officially stopped, its practical significance was
almost non-existent nowadays.

20
Place of Practice Regulatory
Authority
License Needed How To Obtain License? Law Degree
Required?
with patent agency
business
Trademark
Agents
Trademark agency
organizations
State Administration
of Industry and
Commerce
License for
Trademark Agents
By passing a separate qualification
exam
Yes
Notaries Notary offices Ministry of Justice License for
Notaries
By passing the State Judicial
Examination
Exam is waived for certain group of
people, who can also be licensed
upon the approval of the competent
local Bureau of Justice
Yes
Government
Lawyers
(公职律师)
Party committees
and government at
all levels
Ministry of Justice License for
Government
Lawyers
89
The candidate already holds a
lawyer’s license; and
Works at a governmental agency.
Yes
* Summarized based on the relevant regulations of these professional groups.
89
This license was created as a result of a 2002 MOJ pilot program, see 司法部关于开展公职律师试点工作的意见 (司发通 (2002) 80 号) [Opinion from the
MOJ on Starting Government Lawyer Pilot Program (MOJ (2002) No. 80)]. Although the pilot program was never officially stopped, its practical significance
was almost non-existent nowadays.

21
While it is indeed true that different lines of legal professions carry different legal missions
which may call for separate regulatory bodies for each of them, it remains debatable to what
extent is such fragmented regulatory regime really motivated by this concern. To the contrary,
the table above arguably presents a highly kaleidoscopic system where a variety of law
practitioners do similar work under different labels, filling up the large interstitial space between
market and state, consistent with the findings of Liu (2011).
90
A direct example is the “enterprise
legal advisors” and “company lawyers”. To be sure, it does make sense to treat corporate in-
house counsel differently than normal lawyers in law firms, because the embedded position of
the former as an internal employee of the corporation may impair his/her independent
professional judgment.
91
Difficult situations may rise for an in-house counsel, when the role as a
lawyer of the single client demands for confidentiality on the basis of client-attorney privilege,
but the role as a compliance officer requires blowing the whistle and disclosing illegal conducts
to third parties.
92
Looking around the world, actually more jurisdictions do not grant bar
membership to in-house counsel, who are instead licensed and trained under different procedures
than normal lawyers.
93
This said, there is hardly any substantive reason for granting two different
licenses to essentially one group of same people, i.e., corporate in-house counsel. The only
meaningful explanation for such dichotomy is the failure of the MOJ to establish, after
competing with other more powerful administrative agencies, universal regulatory authority over
the fragmented legal market, which was resulted from the historical privatization of lawyers form
the state apparatus in the 1980s. In particular, because of the strong confrontation from the
State-owned Assets Supervision and Administration Commission, and also of the low level of
practical relevance to the existing professional groups, the MOJ’s effort to create a separate
company lawyer license under its power has barely brought any substantive change to the
regulatory framework of corporate in-house counsel.
94
As a result, except for state-owned
enterprises (“SOE”), lawyers working in private and foreign-invested companies in China are
90
Liu, supra note 7, at 285.
91
Deborah A. DeMott, The Discrete Roles of General Counsel, 74 F
ORDHAM
L.
R
EV
. 955, 966 (2005).
92
Tanina Rostain, General Counsel in the Age of Compliance: Preliminary Findings and New Research Questions,
21 G
EORGETOWN
J
OURNAL OF
L
EGAL
E
THICS
465, 483 (2008).
93
The Regulation of In-House Counsel – Overview of International Trends, N
ATIONAL
O
RGANIZATION OF
B
AR
C
OUNSEL
,
https://www.nobc.org/docs/Global%20Resources/In%20House%20Counsel%20-%20Research%20OverviewMarch
2015.pdf.
94
See Sida Liu, Palace Wars over Professional Regulation: In-house Counsel in Chinese State-owned Enterprises,
W
ISCONSIN
L
AW
R
EVIEW
549 (2012).

22
almost entirely left out of state regulatory power. Practically, these firms just recruited
experienced lawyers as their in-house counsel.
95
The most recent effort from the MOJ to make up the fragmentation is the contemplated
reform of the State Judicial Examination, which is renamed from 2018 as “National Unified
Qualification Examination for Legal Profession” and broadened to embrace more occupations
into its big umbrella, including arbitrators (of the legal kind), and governmental officials engaged
in the verification, administrative reconsideration and administrative decision-making on
administrative punishments.
96
Although this new testing and licensing system is well intended in
that it surely contributes to enhance regulatory clarity, this is not the first time that the MOJ has
tried to broaden its jurisdiction by taking other professional groups under its regulatory power.
Historically, the MOJ has already failed twice in its “palace wars” with the other ministries in
fighting for the regulation over the legal work in governments and state-owned corporations in
China.
97
Such failure are not only explained by MOJ’s own weak structural position in China’s
political system, but also by its lack of contacts with the professional groups that it seeks to
regulate
.
98
This said, the practicality of the endeavor to consolidate every potential lines of law-
related profession under one roof remains questionable even if the unique institutional context of
the fragmented regulatory powers in China is disregarded. As will be discussed later in this
paper, because of the disruptive innovations in legal service provision, legal professionals can no
longer fully control access to the market as unlicensed new entrants offer a widening range of
services. In this sense, the exclusivity enjoyed by legal professionals, and the precise scope of
activities to which it applies, are becoming unclear; and the existing regulations may face the risk
of being circumvented.
99
While such question cannot be sufficiently answered within the scope
of this paper, which for now only focuses on the regulatory issue of the legal entity choice and
95
Xueyao Li & Sida Liu, The Learning Process of Globalization: How Chinese Law Firms Survived the Financial
Crisis, 80 F
ORDHAM
L.
R
EV
. 2847 (2012).
96
国家统一法律职业资格考试实施办法 [Implementing Measures for National Unified Legal Profession
Qualification Examination] (promulgated by the MOJ, Apr. 28, 2018), available at
https://www.chinacourt.org/article/detail/2018/02/id/3199478.shtml, art. 2.
97
See Liu, supra note 94, at 570.
98
Id.
99
OECD Secretariat, Protecting and Promoting Competition in Response to "Disruptive" Innovations in Legal
Services, DAF/COMP/WP2(2016)1, June 13, 2016, available at
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/WP2(2016)1&docLanguage
=En, at 2 & 23.

23
ownership structure of law firms, the analysis here nevertheless helps to shed light on the
question.
2.3 Bar Association – the Limp Self-Regulator
Every licensed lawyer and law firm in China shall become a member of the All China
Lawyers Association (“ACLA”),
100
which is the nationwide self-regulatory organization for
lawyers.
101
According to existing literature, one important rationale for respecting private
ordering and adopting self-regulation in knowledge intensive professional services like
lawyering is to maintain the profession’s independence from the state’s regulatory power, and
create its own “living space” between the government and the market.
102
Essentially, the co-
existence of self-regulation with state regulation means that the state partially outsources the
authority of establishing rules relating to the access and pursuit of a profession to the respective
professional associations.
103
Typically, self-regulation rules delineate a sphere of expertise,
establish conditions for membership, limit competition from non-members, and impose conduct
on professionals, for the purposes of safeguarding the integrity of the profession and the quality
of the service provided.
104
In order to ensure compliance by the members of such rules, self-
regulatory bodies are also equipped with certain enforcement mechanisms,
105
which for the
most part include the implementation of legal ethics rules against misconduct or fraudulent and
deceptive practices of lawyers.
106
The ACLA also carry the aforementioned functions which are explicitly conferred by the
Lawyers’ Law upon it.
107
Theoretically, the intention is to leave the MOJ and its local
100
Lawyer’s Law, supra note 43, art. 45. See also 中华全国律师协会章程 [ACLA Articles of Association]
(amended and adopted by the 9
th
All China Lawyers’ Congress, Mar. 31, 2016), available at
http://www.acla.org.cn/zhangchen.jhtml, art. 7.
101
ACLA Articles of Association, id., art. 2.
102
See Panagiotis Delimatsis, The Future of Transnational Self-Regulation – Enforcement and Compliance in
Professional Services, 40 H
ASTINGS
I
NTERNATIONAL AND
C
OMPARATIVE
L
AW
R
EVIEW
1, 13-15 (2017) (giving
examples of US, EU, and Canada in support of the importance of safeguarding independence of legal services).
103
Id., at 12.
104
S
TEVEN
B
RINT
,
I
N AN
A
GE OF
E
XPERTS
:
T
HE
C
HANGING
R
OLE OF
P
ROFESSIONALS IN
P
OLITICS AND
P
UBLIC
L
IFE
(1994).
105
Julia Black, Decentering Regulation: Understanding the Role of Regulation and Self-Regulation in a Post-
regulating World, 54 C
URRENT
L
EGAL
P
ROBLEMS
103 (2001).
106
Delimatsis, supra note 102, at 37.
107
Lawyer’s Law, supra note 43, art. 46, and ACLA Articles of Association, supra note 100, art. 6. Note that, these
two provisions are exactly identical to each other, which can be reasonably interpreted as an official authorization of

24
counterparts only with overall supervision power, and let the bar association exercise specific
administrative tasks.
108
In practice, however, the ACLA barely has any substantive independence
from the MOJ or the state regulatory power in general. By contrast, “upholding the leadership of
the Chinese Communist Party” ranks very first among the various key missions of the ACLA
according to its articles of association, prior to the missions of “defending and preserving the
constitution and laws”, “protecting lawful interests of clients”, “ensuring the rightful
implementation of laws” and “ensuring the fairness and justice in the society” (as in their
original order).
109
In addition to such express declaration of its subordinate status to the power of
the ruling party in its mission statement, China’s bar association is also very closely connected to
the MOJ and local bureaus of justice (“BOJ”). This is often referred to conveniently as “one
troop, two flags”. Very often, offices of the local bar associations are located within the same
building as the local BOJs, and the secretariat, which is the most powerful position with the
organization, is almost always served by former or future officials from the local BOJ.
110
Such
service is essentially just “job-rotations” that are part of their career paths within the Communist
Party. When it comes to enforcement, the bar association can deploy such soft mechanisms as
reprimand, criticism within the industry, public condemnations, and disbarment. It may only
suggest the relevant governmental regulatory authorities to take measures in case a member is
found to be in violation of the laws, regulations, and disciplines.
111
Based on the analysis above,
the self-regulation of China’s bar association can at best be described as “ancillary” to the state
regulatory power, if not completely a “puppet”. Because of the lack of independence, the bar
does not play a substantive role in regulating the profession.
2.4 Evolution and Institutional Context
Having sketched the regulatory framework and the key participants in China’s legal
profession, one important question still remains unanswered, namely, how did these institutions
and organizational structures evolved into their current status? After its establishment in 1949
and resulted from its policy of demolishing the Republican old relics and leaning towards the
108
刘思达 [Sida Liu],
中国律师行业管理体制批判
[A Critique of the System of Lawyer Management in China], 新
公民运动
[N
EW
C
ITIZENS
M
OVEMENT
], June 18, 2014, http://xgmyd.com/archives/4526.
109
ACLA Articles of Association, supra note 100, art. 3.
110
Liu, supra note 108.
111
ACLA Articles of Association, supra note 100, art. 29.

25
Communist camp, the People’s Republic China has built up its judicial system largely by
transplanting that from the former Soviet Union.
112
Among other things, lawyers were
considered as “legal workers for the state”,
113
working in the so-called “legal advisory divisions”
(法律顾问处), which modelled after the Soviet law offices and were set up in major cities
following the order of the MOJ.
114
This did not change much even within the first few years after
mid-1980s, when the legal profession started to witness a long-lasting unhooking and
privatization (脱钩改制) reform.
115
Formally, lawyers lost their membership in the state-sector,
as legal advisory divisions were gradually transformed into law firms; in practice, however, the
earliest law firms were still state-owned public institutions, where the lawyers were allocated
slots in the quotas for state employees and were paid by state funds.
116
In this sense, lawyers
remained embedded in an inextricable part of the state bureaucracy.
117
The privatization of
lawyers started from the creation of “cooperative law firms” (合作所) in 1988, which were
characterized by being “formed on voluntary basis, responsible for their own profits and losses,
and able to self-regulate”.
118
These cooperative law firms are considered as a transitional
business form during the privatization process, as China did not recognize partnerships back
then.
119
More conventional law firms did not emerge until 1993, when the MOJ started the first
partnership law firm pilot program in Beijing.
120
Private law firms finally became the
mainstream after a massive “unhooking” campaign, which took place already around the
beginning of the new millennium.
121
Given such historical path, it is not surprising that Chinese
lawyers have shown deep political embeddedness.
122
112
何勤华 [Qinhua He],
关于新中国移植苏联司法制度的反思
[Reflections on Transplanting the Soviet Judicial
System into New China], 3 中外法学 [P
EKING
U
NIVERSITY
L
AW
J
OURNAL
] (2002), available at
http://www.aisixiang.com/data/15414.html.
113
Id.
114
Id.
115
See Liu, supra note 7, at 283.
116
慕振东 [Zhendong Mu],
三十年律所
[30 Years of Law Firms], 9 方圆律政 [F
ANGYUAN
M
AGAZINE
] (2014),
available at http://www.szlawyers.com/info/b600f04c125a4d7a9fc7fa3b3a9ed8f2.
117
Ethan Michelson, Lawyers, Political Embeddedness, and Institutional Continuity in China’s Transition from
Socialism, 113 A
MERICAN
J
OURNAL OF
S
OCIOLOGY
352, 365(2007).
118
Mu, supra note 116.
119
Li & Liu, supra note 95, at 2849.
120
Mu, supra note 116.
121
See Liu, supra note 7, at 283.
122
Michelson, supra note 117.

26
It is worth noting that, relative to the largely laissez-faire history of the Anglo-American
professions, the development of professions in most so-called Global South countries has not
followed such an endogenous route.
123
The legal profession in the Anglo-American world is
known as being organized in a rather uniform manner, in that a lawyer may perform a large
number of tasks that on the European continent are performed by different and specialized legal
professionals.
124
Moreover, it is also distinguished by the professional autonomy from the state
and self-regulation as the founding features of professionalization.
125
By contrast, and consistent
with existing research,
126
China’s legal profession is characterized by a strong and interventionist
nation-state from the very beginning, and the relationship between the professions and the state
involves more than a universal form of compromise. As show above, this is evidenced by the co-
existence of many professional groups that compete in China’s legal service market, which are
regulated by multiple state agencies with distinct interests and power.
127
In addition, the development of China’s legal profession is also to a great extent resulted
from the interactions between local and global actors in the process.
128
According to
Faulconbridge & Muzio (2012), the foundations of a transnational sociology of professions
involve, beyond the nation-state, a five-level analysis where clients, practitioners, super-national
governance regimes, universities and firms jointly play a role in reshaping the professional
realities.
129
They find that one representative feature in contemporary professions is the global
professional service firms (“GPSF”), which serve as a vehicle for sustained interaction between
different national varieties of professionalism and the rescaling of the mechanisms of the control
of production of and by producers.
130
Such findings find support in the Chinese case. In
particular, it is submitted that the entry and development of global law firms in China have not
only brought valuable expertise to the Chinese legal profession, but also greatly facilitated the
123
See Sida Liu, Overlapping Ecologies: Professions and Development in the Rise of Legal Services in China, 3
S
OCIOLOGY OF
D
EVELOPMENT
212 (2017).
124
R.L. Marcus, The Balkanized American Legal Profession, in T
HE
L
ANDSCAPE OF THE
L
EGAL
P
ROFESSIONS IN
E
UROPE AND THE
USA:
C
ONTINUITY AND
C
HANGE
3,
16
n.42
(A. Uzelac & C.H. van Rhee eds., 2011).
125
See James R Faulconbridge & Daniel Muzio, Professions in a globalizing world: Towards a transnational
sociology of the professions, 27 I
NTERNATIONAL
S
OCIOLOGY
136, 139 (2012).
126
See the findings in M
ICHAEL
B
URRAGE
&
R
OLF
T
ORSTENDAHL
(
EDS
.)
P
ROFESSIONS IN
T
HEORY AND
H
ISTORY
:
R
ETHINKING THE
S
TUDY OF THE
P
ROFESSIONS
(1990);
and
R
OLF
T
ORSTENDAHL
&
M
ICHAEL
B
URRAGE
(
EDS
.)
T
HE
F
ORMATION OF
P
ROFESSIONS
:
K
NOWLEDGE
,
S
TATE AND
S
TRATEGY
(1990)).
127
See Liu, supra note 7 & 123.
128
Liu, supra note 123.
129
Faulconbridge & Muzio, supra note 125, at 144-45.
130
Faulconbridge & Muzio, supra note 125, at 143.

27
globalization of the Chinese economy, especially since China’s WTO accession in 2001.
131
The
very first 12 foreign law firms, out of which 11 were from common law jurisdictions,
132
came
into China in 1992, not long after the start of the privatization of lawyers. By allowing their
entry, the government intended to signal to foreign investors that China also had a legal
profession that was autonomous to the state and the Communist Party, and thus convincing them
to stay and invest in China.
133
As a matter of fact, the early privatized Chinese firms got first
exposed to foreign-related legal work through their cooperation with foreign law firms, which
was a major step for these new corporate firms.
134
Such expertise was quickly enhanced when
more and more talents with international legal education experience, mostly from the US and
UK,
135
returned to China to found or work in domestic law firms.
136
According to the official
records of the MOJ, an aggregate of 223 foreign law firms have offices in China as of September
2017, among which 106 are from the US, and 31 are from the UK.
137
Along with the massive growth of foreign law firm offices in China, lawyers became more
mobile between the two group of firms in both directions, and the social boundary between
foreign and Chinese lawyers were blurred by global market forces, giving rise to an increasingly
large number of lawyers with both global “know-how” and local “know-who” in complex
corporate transactions.
138
Although China, despite its WTO accession, places significant limits
on the entry and business operations of foreign law firms,
139
they have nevertheless acted much
more aggressively in practice by effectively performing many tasks that are beyond their allowed
business scope.
140
However, the MOJ chose not to actively enforce its rules because substantive
sanctions on foreign law firms would have hampered efforts to attract foreign investment into
131
Liu, supra note 123.
132
Two firms were from the UK, one from the US, one from France, and the rest were all from Hong Kong (back
then still a British colony). See 司法部关于批准高特兄弟律师事务所等十二家外国(境外)律师事务所在国内设
立办事处的通知 [MOJ Circular on Approving Coudert Brothers and Other Eleven Foreign (Overseas) Law Firms
to Open Representative Offices in China] (Dec. 29, 1992), available at
http://www.chinabaike.com/law/zy/bw/gw/sfb/1345046.html.
133
Liu, supra note 75, at 777.
134
Sida Liu, Client Influence and the Contingency of Professionalism: The Work of Elite Corporate Lawyers in
China, 40 L
AW
&
S
OC
’
Y
R
EV
. 751, 758-59 (2006).
135
Li & Liu, supra note 95, at 2866.
136
Id., at 2850.
137
中华人民共和国司法部公告 [MOJ Circular No. 175] (Sep. 1, 2017), available at
http://www.moj.gov.cn/2017/0901/5910.html.
138
Liu, supra note 75, at 774-75. See also Liu, supra note 123.
139
Sida Liu et al., Mapping the Ecology of China's Corporate Legal Sector: Globalization and Its Impact on
Lawyers and Society, 3 A
SIAN
J
OURNAL OF
L
AW AND
S
OCIETY
273, 276 (2016).
140
See Section 2.1.2, supra.

28
China.
141
Arguably, such approach was a more flexible and realistic strategy for regulating
professionals in a rapid changing the legal services market like China.
142
This also provides a
vivid example of how GPSFs have managed to exploit the WTO regulations to expand their
markets and challenge local jurisdictions, which contributed to the hollowing out of the role of
the nation-state and the consolidation of transnational governance regimes around the
profession.
143
The impact of globalization on China’s legal profession can also be observed in the
evolution of organizational structures and operational practices of law firms. As business grows
and the interaction with international law firms deepens, elite Chinese corporate firms grow in
size, and gradually adopt management styles similar to their Western counterparts, departing
from the traditional “eat what you kill” model.
144
The introduction of the LLP as an entity choice
for Chinese law firms is considered to symbolize the final step in their structural convergence to
the global norms in law firm organization and management.
145
In particular, it is observed that
for many partners in Chinese law firms, the 2008 global financial crisis has taught them the first
major lesson on the importance of nurturing long-term attorney-client relationship, as well as
personnel management and cost control.
146
Overall, it can be said that the evolution of law firms
in China from the 1980s to the 2000s was a process of global convergence and structural
diversification, in which the privatization of Chinese law firms and the expansion of foreign law
offices were the two main themes of transformation.
147
III. O
THER
A
PPROACHES IN
R
EGULATING
A
LTERNATIVE
L
EGAL
S
ERVICES
P
ROVISION
:
A
S
PECTRUM
While allowing non-professionals to capitalize and/or manage law firms may contribute to
the enhanced availability of legal services in general, such practices also give rise to inevitable
concerns about the quality of the legal services, and the potential conflicts of interest between
141
Liu, supra note 75, at 798-99
.
142
Li & Liu, supra note 95, at 2852.
143
JR. Faulconbridge & D. Muzio, Global professional service firms and institutionalization, in P
ROFESSIONAL
NETWORKS IN TRANSNATIONAL GOVERNANCE
(L. Seabrooke & LF. Henriksen eds.), 219-232 (2017).
144
Li & Liu, supra note 95, at 2853.
145
Id., at 2853.
146
Id., at 2861-62.
147
Id., at 2855.

29
legal and non-legal professionals. Traditionally, the rationale for regulating the legal service
provision includes information asymmetry and negative externalities, which may lead to the
failure of market coordination. In addition to market failure, regulations are also made on the
basis of fairness, so that the access to justice can be safeguarded at certain quality and certain
price.
148
Across different jurisdictions, such potential market failure are generally addressed by
imposing restrictions on (a) market entry issues, both qualitative and quantitative; (b) fees; (c)
advertising; and (d) legal form, ownership, and management of law firms.
149
This Section III
compares China’s regulations on the business form and multidisciplinary practice (“MDP”) of
law firms, which are highly restrictive, to those of other five jurisdictions, which are all more
liberal yet to different degrees. As presented in Table 3 below, the different approaches adopted
by the six jurisdictions in total can be roughly placed into a spectrum, with China and the US
standing on the restrictive end, the UK and Australia representing the liberal end, and Upper
Canada (Ontario) and Germany covering the middle band.
The key question is, to the extent that the regulations deviate from the conventional
“partnership + pure legal services” model to adopt a more liberal approach, whether they are
sufficient to address the potential market failures resulted from breaking lawyer exclusivity and
introducing multidisciplinary practices. To the extent of the regulations surveyed in Table 3,
these concerns are dealt with through a number of substantial holdbacks. For the non-lawyers
part, the owners / managers in a MDP are generally limited either by the lines of business they
are in, or by a “fit-to-own” test, or both. To check and balance non-lawyers’ participation, legal
professionals are empowered with greater control in the business, which can be at the levels of
ownership or management, or both. Moreover, they are also vested with greater responsibility,
both for the business in general and for the non-lawyers actions in particular. To be sure, in order
to judge the efficacy of these regulatory measures, one must first understand what kinds of
potential market failures may arise from the innovative legal and multidisciplinary services,
which further requires important empirics about how the service providers operate and how
clients accept and review their services. All of such research is certainly not to be contained
within the scope of this paper. For now, it only intends to open up academic discussions about
the topic and its potential challenges to current legal profession regulations, which are still
148
OECD Secretariat, supra note 99, at 15-16.
149
Id., at 16-17.

30
completely missing in China so far. As the very first step, the following Section IV goes on to
spotlight the innovative practices that are already emerging, both from within and outside the
camp of licensed legal professionals in China.

31
T
ABLE
3:
R
EGULATIONS ON
B
USINESS
F
ORM AND
M
ULTIDISCIPLINARY
P
RACTICE OF
L
AW
F
IRMS
Restrictive Permissive Liberal
Jurisdiction China US Upper Canada (Ontario) Germany UK (England &
Wales) Australia
Applicable
regulations
Lawyers’
Law
ABA Model
Rule
By-Law 7 of the Law Society of
Upper Canada
Bundesrechts-
anwaltsordnung
Berufsordnung
Legal Service Act Legal Profession Act
Incorporated
law firm
allowed?
No
Only LLP Yes
Yes
(professional corporation, but
not applicable for MDP)
Yes
(Rechtsanwalt
GmbH)
Yes Yes
Public law firm
allowed? No No No No Yes Yes
MDP allowed? No
No (except for
District of
Columbia)
Yes Yes Yes Yes
Can MDP
provide non-
legal services?
Not
applicable No
Yes, but only to the extent of
the services from a profession,
trade or occupation that
supports or supplements the
legal service
Yes
No in case of legal
disciplinary practices
(“LDP”)
Yes in case of ABS
Yes
Requirement for
lawyer majority
ownership
and/or control
Not
applicable Not applicable Yes
No
For
Rechtsanwalt
GmbH, both yes
Yes in case of LDP
No in case of ABS No
Mandatory
presence of
lawyer(s)
Not
applicable Not applicable Yes
At least one
lawyer in every
MDP office
Overall at least one
active lawyer
owner/manager
Overall at least one
Legal Practitioner
Director / Partner

32
Non-lawyer
investment in
law firms
No No Yes Yes Yes Yes
Requirement for
non-lawyer to be
“fit-to-own”
Not
applicable Not applicable “Good character” requirement
for non-lawyer No
Yes if the interest of
the non-lawyer is
more than 10%
No
To be ruled by the
Supreme Court
Restrictions on
lines of business
of non-lawyers
Not
applicable Not applicable
Non-lawyer should be a
professional, and should be
from a profession, trade or
occupation that supports or
supplements the practice of law
of the MDP
Patent lawyer,
tax advisor,
auditor, tax
assistants,
sworn-in
accountant
No No
Requirement for
higher
malpractice
insurance than
normal law firms
Not
applicable Not applicable No Yes No Not mentioned
Obligations of
lawyers vis-a-vis
non-lawyers
under
professional code
of conduct
Not
applicable Not applicable
The lawyer “shall have effective
control” over the non-lawyer’s
professional practice of his or
her profession, in a sense that
the lawyer may, without the
agreement of the professional,
take any action necessary to
ensure compliance with
professional conduct
Non-lawyer
must abide by
lawyers
regulations and
ethics
Disciplinary sanctions
can be imposed
against the entity as
well as lawyer and
non-lawyer managers
and employees
Legal Practitioner
Director / Partner is
responsible for
ensuring the entity to
provide legal services
in accordance with the
legal professional
obligations

33
IV. I
NNOVATION
I
NITIATIVES IN
C
HINA
’
S
L
EGAL
P
ROFESSION
Having sketched the status quo, this Section IV goes on to identify and discuss the various
innovations that have happened or are emerging in the China’s legal profession in the recent
years. As a commonality, they all pose challenges to the current regulations on the legal form
and ownership structure of law firms, as well as the provision of multidisciplinary services by
law firms. These innovation initiatives have been identified not only among the largest corporate
law firms in China, but also from the “significant others” than the mainstream incumbents, most
noticeably from the online legal service providers.
4.1 Innovation from Law Firms as the Mainstream Market Participants
4.1.1 Birth of International Big Law – All Roads Lead to Rome
In January 2015, Dacheng Law Offices and Dentons merged to form the world’s largest
firm by the number of lawyers, surpassing Baker & McKenzie.
150
In an industry whose top tier
was almost always consisted of the super big law firms from either the US or the UK, it is a fair
surprise to see a China-based international firm suddenly surpassed all the well-known names
from the Wall Street and the Magic Circle and became the new number one. But actually this is
not even the first time. The debut was made already in 2012 when King & Wood, a leading
Chinese firm, joined force with Australia’s top firm Mallesons Stephen Jaques, creating the
record of the largest law firm merger without a US or UK partner.
151
Obviously, the
internationalization strategy of these Chinese law firms goes hand in hand with the emergence of
China a substantial outward investor, which gives rise to significant demand for cross-border
legal services.
152
It is worth mentioning that although the term of “merger” is often used to
conveniently denote the association of two or more law firms, it is actually not an accurate
depiction of the real situation in that the connection between the law firms is actually much
looser than in real mergers. Officially, these mega law firms such as Hogan Lovells, Baker &
150
Andrea Tan, Dacheng and Dentons to Form World’s Largest Law Firm, B
LOOMBERG
.
COM
, Jan. 21, 2015,
http://www.bloomberg.com/news/articles/2015-01-22/dacheng-to-form-biggest-law-firm-with-dentons-merger.
151
Jennifer Smith & Allison Morrow, Law Firm Merger Creates Global Giant, July 31, 2013,
http://blogs.wsj.com/law/2013/07/31/law-firm-merger-creates-global-giant/ (last visited Dec. 6, 2016).
152
Tom Mitchell, Law firms benefit from China’s liberalisation, F
INANCIAL
T
IMES
, May 31, 2016, available at
www.ft.com.

34
McKenzie, DLA Piper, Squire Sanders and Norton Rose Fulbright take the business form of
Swiss verein,
153
under which each of the members remains only responsible for the commercial
and professional liability of itself, and there is typically no sharing of revenues and pooling of
profits.
154
Instead, they only share marketing strategy, common branding, and information
technology, and thus are often criticized for lacking a common culture and standardized
practices.
155
It is worth mentioning that these two names do not complete the list yet when it comes to
the internationalization of big Chinese law firms. A couple of other prestigious ones, such as Jun
He, Tahota, and Tiance, have also managed to avidly expand their presence and/or influence
overseas, each using a unique dominant strategy. Comparatively, another top Chinese law firm
Zhonglun chooses not to rely on one particular strategy for internationalization, but rather
deliberately leave itself open to all possibilities, thus remain flexible and responsive to the highly
diversified institutional, business and cultural conditions in foreign jurisdictions.
156
The
following Table 4 summarizes the internationalization strategies of the six Chinese law firms.
T
ABLE
4:
I
NTERNATIONALIZATION
S
TRATEGIES OF
B
IG
C
HINESE
L
AW
F
IRMS
Representative
Law Firm
Key Strategy Important Features of the Key Strategy Level of
Collaboration
/ Integration
Dacheng Merging with
foreign firm
but does not
assume control
• Merges with Dentons to form the world’s largest law
firms by number of lawyers
• A poly-centric global law firm with no headquarters, no
centralized management, no revenue sharing or profit
pooling, and no firm-wide culture;
• Shares common branding and marketing
• Sets up the “Nextlaw Global Referral Network
”
Low
153
Edwin B. Reeser & Martin J. Foley, Are verein-style law firms ignoring fee-splitting ethics rules?, Oct. 1, 2013,
http://www.abajournal.com/legalrebels/article/are_verein-style_law_firms_ignoring_fee-splitting_ethics_rules/ (last
visited Dec. 6, 2016).
154
Nick Jarret-Kerr & Ed Wesemann, Enter the Swiss-Verein: 21-century global platform or just the latest fad?, 5
E
DGE
I
NTERNATIONAL
R
EVIEW
26, 28 (2014), available at http://www.edge.ai/wp-
content/uploads/2014/05/enterswissverein_2012.pdf.
155
Id., at 29.
156
Going Global, Prod. Lin Ying, SMG Oriental Financial Channel, Feb. 16, 2017, available at
https://mp.weixin.qq.com/s?__biz=MzA4MTU5Nzg5MQ==&mid=2651861440&idx=1&sn=249ed98aaacc4cea8bd
36e222ebebeae&chksm=8476156cb3019c7abac7f95b21b6a34b2d672a5de1651142163169731dfc2a33eeef912a080a
&mpshare=1&scene=1&srcid=0216H6G7m7dRBk50OC8qZWAV&pass_ticket=LsJ7%2BxzpjwtvWjeo0JckSZq1z
FMdExpRqXau%2B%2FTCvQfT8xOtHEaIURJidjAM2elr#rd.

35
Jun He “Best Friends”
model
• Joining leading global networks of independent law
firms such as Lex Mundi and MultiLaw;
• Setting up long-term non-exclusive “best friends”
relationship with prestigious local firms in foreign
jurisdictions; and
• Collaborate on an ad hoc basis with small and mediums-
sized local law firms.
Low
King & Wood Merging with
foreign firms
but assumes
dominant
position
• Merges with Mallesons (Australia) and SJ Berwin (UK)
• Aims at learning management experience and not at
financial profits
• Takes dominant position and does not lose the firm’s
brand in the Swiss verein
• Maintains good collaborative relationships with other
big American firms in the meantime
High
Tahota Opening
overseas
offices
• Setting up new offices by sending lawyer there
• Forming alliance with local firms
• Merging and integrating with local firms when the time
comes
Low
Tiance Initiating own
global referral
network
• Initiates China’s very first global law firm network,
namely, Sino Global Legal Alliance, of which Lovell is
also a member
• Beside this, Tiance has only two offices
Low
Zhong Lun Flexibility • No one particular model, open to various strategies Low
Summarized on the basis of Liu & Wu (2016),
157
interviews from the TV show “Going Global”,
158
“Road to Big
Law” series interviews done by Intelligeast,
159
official websites of the concerned law firms, and various anecdotes
and websites.
Although one may contend that these strategies in general do not look so much innovative
when compared to law firms from other countries or even to other lines of business in general, it
must be noted that import empirics are still missing. Among other things, not much is known
with respect to the number of Chinese vs. foreign lawyers in local branches, how they serve their
clients, the legal structure used for the local presence, and the rights and obligations of the
Chinese law firms and its local partner firms. This being said, the sheer fact that Chinese law
firms are keenly expanding themselves is in itself already remarkable, especially considering that
157
Liu & Wu, supra note 58.
158
Going Global, Prod. Lin Ying, SMG Oriental Financial Channel, Feb. 9, 2017, available at
https://mp.weixin.qq.com/s?__biz=MzA4MTU5Nzg5MQ==&mid=2651861413&idx=1&sn=23aebd48db28b7ca13
75f3c6d5ae7114&chksm=84761509b3019c1f8ad0e07e91c4a8b8205100fc6f7456cd3211dad5ecbba6c6232d3e2931
28&mpshare=1&scene=1&srcid=020977aAALC1Tdoi1h8PfDCj&pass_ticket=LsJ7%2BxzpjwtvWjeo0JckSZq1zF
MdExpRqXau%2B%2FTCvQfT8xOtHEaIURJidjAM2elr#rd.
159
大所之路
[Road to Big Law], archives of columns by 智合法律新媒体 [Intelligeast],
http://www.zhihedongfang.com/category/zhuanlan/%e5%a4%a7%e6%89%80%e4%b9%8b%e8%b7%af/.

36
all these significant achievements have been achieved after 2008 financial crisis.
160
As a
particularly notable trend, prestigious Chinese firms nowadays seem less enthusiastic in
benchmarking themselves with the practices of the traditional Anglo-American big law firms or
the so-called “international standards”. Rather, more and more of them have rather been seeking
to define their unique competitive edges and initiating their own referral networks, with the goal
of cutting a striking figure in the global legal services market. An eye-catching example is the
“Nextlaw Global Referral Network” set up by Dacheng-Dentons.
161
According to its website,
this network differs from virtually all the other existing legal referral networks – it charges no fee
to member law firms nor does it grant members territory exclusivity, but rather uses a tracking
system and a technology platform that promote reciprocal repeat referrals.
162
In particular, the
network attaches special focus on
small to mid-sized law firms, and firms of any size that are in
one location, country or region, or that specialize in one practice area or industry sector. In other
words, the network targets at approximately 90% of the legal market.
163
Upon the official launch
in October 2016, the network already attracted 283 law firms with more than 18,600 lawyers,
offering to clients in 160 countries, debuting as the broadest legal referral network in the
world.
164
Apparently, merely joining forces to become the biggest out there does not guarantee long-
term success, especially when other firms can replicate the strategy by forming even larger
associations, and the high-end legal service market is already crowded with the super big law
firms in the first place. In this sense, the Nextlaw Global Referral Network is a more innovative
initiative than the Dacheng Dentons association itself, in that it smartly focuses on the mid-range
market that has been long ignored by the elite law firms, and leverages the existing market power
of the two big players to take boutique, specialty and small and mid-sized firms under its
umbrella. This virtually expands the influence of Dacheng Dentons without the obligation and
cost of a formally integrated scheme. In addition to this Nextlaw network, other Chinese firms
160
Liu & Wu, supra note 58, at 809.
161
https://www.nextlawnetwork.com/.
162
https://www.nextlawnetwork.com/for-firms/.
163
Dentons, Dentons disrupts pay-to-play legal referral industry with free, quality-based referral network, May 16,
2016, http://www.dentons.com/en/whats-different-about-dentons/connecting-you-to-talented-lawyers-around-the-
globe/news/2016/may/dentons-disrupts-pay-to-play-legal-referral-industry.
164
Dentons, Dentons launches Nextlaw Global Referral Network, Oct. 5, 2016, http://www.dentons.com/en/whats-
different-about-dentons/connecting-you-to-talented-lawyers-around-the-globe/news/2016/october/dentons-launches-
nextlaw-global-referral-network.

37
such as Tiance,
165
Boss & Young
166
and Zhonglun W&D
167
have also followed suit and each
created their own law firm network.
It is worth pointing out that the Chinese government, consistent with its image as the
interventionist nation-state in professional regulation, also takes a highly supportive position in
encouraging the Chinese legal service providers to “go out”. In an official policy paper jointly
issued by four ministries at the end of 2016,
168
the government has coined four major areas
where Chinese lawyers can compete with foreign lawyers in a global context. More specifically,
they are expected to provide the related legal services for: (a) significant development strategies
of the state, such as the One Belt, One Rod imitative; (b) Chinese firms and citizens outside
China; (c) China’s diplomacy policies and practices; and (d) cracking down international
crime.
169
When it comes to law firms, more specific implementing measures are also under
development, such as setting up in three years time at least 30 representative offices in countries
along the “One belt, One Road”, and fostering cooperation and business alliances between
Chinese and foreign law firms through the help of bar associations.
170
But beyond such high-profile governmental support, what are the other forces that have led
these Chinese corporate law firms to internalize? Without a doubt, clients play an important role
there by virtue of demanding for global approaches to professionalism.
171
As pointed out above,
inbound investments into China from foreign corporations constituted much of the high-end
corporate legal work during 1990s and mid-2000s, which effectively accelerated the
transformation of domestic law firms from small, state-owned firms to large and sophisticated
165
毛姗姗 [Shanshan Mao],
【大所之路】天册：区域性大所的标杆
[[Road to Big Law] Tiance: A Benchmark
for a Big Regional Firm], I
NTELLIGEAST
, Aug. 10, 2016, http://www.zhihedongfang.com/article-22326/.
166
Xu Guojian, B
OSS
&
Y
OUNG LAUNCHES
OBOR
ALLIANCE TO TARGET
C
HINESE DEVELOPMENT STRATEGY
, IR
G
LOBAL
, June 18, 2015, https://irglobal.com/article/boss-young-launches-obor-alliance-to-target-chinese-
development-strategy-5779.
167
Global Legal Alliance, http://www.dklm.co.uk/site/international/global_legal_alliance_gla/.
168
关于发展涉外法律服务业的意见 [Opinions on Developing the Foreign-Related Legal Service Industry] (jointly
promulgated by the MOJ, the Ministry of Foreign Affairs, the Ministry of Commerce and the Legislative Affairs
Office of the State Council, Dec. 30, 2016), L
AW
I
NFO
C
HINA
, available at http://www.lawinfochina.com.
169
Id., arts. 4-7.
170
[熊选国] Xuanguo Xiong,
大力发展涉外法律服务业
开创涉外法律服务工作新局面
——
在学习贯彻《关于
发展涉外法律服务业的意见》座谈会上的讲话
[Vigorously Develop Foreign-Related Legal Services to Start a
New Era of Foreign-Related Legal Work – A Speech at the Seminar for the “Opinions on Developing the Foreign-
related Legal Service Industry”], 3 中国律师 [C
HINESE
L
AWYER
] 07, 10 (2017). It is worth noting that Xiong is the
vice minister of the MOJ.
171
Faulconbridge & Muzio, supra note 125, at 144.

38
partnerships.
172
After the 2008 financial crisis, however, Chinese clients have become
increasingly important source of business for both elite Chinese law firms and their international
collaborators, thanks to the aggressive outbound investments of Chinese companies, especially
SOEs.
173
As a matter of fact, the balance of power in the Chinese corporate legal market is
already shifting towards the increasing dominance of elite big Chinese law firms.
174
The need to
serve the related legal needs of these Chinese corporations as they go abroad is thus the
endogenous reason propelling the internalization of Chinese law firms.
175
Thus far, it can be argued that the internationalization of Chinese law firms has shown
patterns of “client following” and “market seeking”, which are the initial two stages of the
organizational strategies of GPSFs.
176
The third stage, i.e., market making, involves deeper
integration into the global context, where GPSFs became active agents in the institutionalization
of new transnational regimes.
177
Based on the existing empirics, Chinese law firms do not seem
to have reached that level yet, but have nevertheless shown inclination towards that direction.
Example in support of this observation is that Chinese law firms are nowadays more interested in
setting the standards or starting their own alliance, rather than following or joining the existing
ones. Looking into the future, it is a policy goal of the Chinese government to select and
recommend qualified talents to join international economic, trade and dispute resolution agencies
as experts, so as to have a leading voice in these supra-national institutions.
178
4.1.2 Partnership or Corporate Law Firms?
In July 2015, Shandong Deheng became the very first law firm in China to float on an
equity exchange, namely, Qingdao Blue Ocean Equity Exchange (“QBOEE”).
179
Although
Deheng branded this event as a “law firm listing” in its public relation campaigns and pitches to
172
Li & Liu, supra note 95, at 2855.
173
Id. See also Liu et al., supra note 139, at 282.
174
Liu et al., supra note 139, at 282.
175
王卫东 [Weidong Wang],
中国律师如何走出去
[How Can Chinese Lawyers Implement the “Going Out”
Strategy?], 5 北京律师 [B
EIJING
L
AWYERS
] 01 (2014). It is worth noting that Wang is the chair of the foreign
relations commission of Beijing Bar Association.
176
Faulconbridge & Muzio, supra note 143.
177
Id.
178
Xiong, supra note 170.
179
Shangling Li, Shandong Deheng to become China’s first “listed” law firm, A
SIAN
L
EGAL
B
USINESS
, July 2,
2015, http://www.legalbusinessonline.com/news/shandong-deheng-become-china%E2%80%99s-
first-%E2%80%9Clisted%E2%80%9D-law-firm/69176.

39
clients, it actually differs in significant aspects from high-profiled precedents such as Australia’s
Slater & Gordon Ltd. (listed in Australian Stock Exchange in 2007) and UK’s Gateley PLC
(listed in London Stock Exchange’s Alternative Investment Market in 2015).
180
Firstly, rather
than a normal stock exchange, QBOEE is only a regional over-the-counter market limited
exclusively to sophisticated investors. Secondly and more importantly, with the debut on
QBOEE, Deheng did not do an initial public offering but rather raised funds through a very
narrowly defined private placement, open only to the internal professionals working in the firm
already.
181
Apparently, these arrangements are directly resulted from the regulatory restrictions
in the Chinese law, i.e., law firms must be organized as partnerships, which then must be owned
by licensed lawyers.
Although Deheng’s quotation on QBOEE might seem like a mere “word game” played a
local Chinese firm to the end of making itself sound “trendy”, this small experiment actually
raises some challenging questions with regard to the organization and financing of law firms. As
discussed in Section I, the theoretical rationale for law firms to be organized as partnerships is
that the key asset thereof is the long-term relationship with clients, which is neither tangible nor
firm specific. This said, partnerships find it difficult to raise substantial loans and investment
capital. While this was not much of a problem in the past when law practice was still small and
did not have significant capital needs, things are no longer the same for most of today’s big law
firms.
182
One important reason for such difficulty is that law firm lacks a firm-binding asset to be
sold to attract and retain outside investors, and thus can only obtain equity financing from
lawyer-partners.
183
However, because law firms are essentially work cooperatives whose income
is generated by highly mobile professional employees, such equity does not exist beyond the exit
for death of partners. This may give rise to short-termism. Conversely, if there are indeed some
interests that law firms can sell to outside investors, the existence of firm-specific permanent
equity may help to correct the short-term vision of law firms.
184
Partners will be more willing to
invest time in training and supervising young lawyers, knowing that they will eventually benefit
180
Paul Rogerson, Gateley float makes history as rival firms wait in wings, T
HE
L
AW
S
OCIETY
G
AZETTE
, June 8,
2015, https://www.lawgazette.co.uk/practice/gateley-stock-exchange-float-makes-history-/5049258.article.
181
Li, supra note 179.
182
Empson, supra note 9, at 16.
183
Ribstein, supra note 2, at 788.
184
Jonathan T. Molot, What’s Wrong with Law Firms? A Corporate Finance Solution to Law Firm Short-Termism,
88 S
OUTHERN
C
AROLINA
L
AW
R
EVIEW
1 (2014).

40
as the shareholders of the firm even if they retire at some point in the future.
185
This is beneficial
to the end of defending the reputational bonding model of the big law firms, which actually
stems from the rigorous monitoring and screening that they offer to their lawyers as a promise of
the high quality legal service.
186
On a practical note, it is also submitted that as many of today’s
legal services are in fact becoming highly standardized, they could be commoditized to form a
basis for law firms’ assets so as to attract outside financing of law firms.
187
From the perspective
of junior lawyers, being able to own a share of their firm’s equity and thus be part of its future
growth can also incentivize many of them to stay longer with the firm, even if the majority of
them cannot or will not make it to the partner level given the up-or-out tournament.
188
As a
matter of fact, this is one of the goals that Deheng wanted to achieve with its QBOEE private
placement: by introducing employee ownership across its partners, of counsels, key associates
and outstanding administrative staff, the firm aims to keep its important human resources and let
them share its long-term growth.
189
While apparently not every law firm is able or willing to embark on the same route as
Deheng and quote its equity interest on an exchange, there are nevertheless other creative
solutions to circumvent the explicit regulatory restrictions in Chinese law on the legal form and
capital structure of law firms. At least two other example are also worth mentioning here. The
first example is Yingke. Yingke is a leading Chinese law firm that has been rising at a stunning
speed in recent years. Two important reasons are identified to be attributable to such rapid
expansion. On the one hand, Yingke adopts a “professional managers” system where a separate
tier of “managing partners” is retained. Despite being licensed lawyers, these partners do not
practice law themselves but only manage the other lawyers in the local office. Their work is
essentially renting office spaces to lawyers and managing the office’s case sources and daily
administrative affairs. If the office loses money in a given year, the manager would cover 15% of
the loss out of his/her own pocket.
190
For the practicing lawyers, they can choose to be
185
Id. See also Catherine Ho, A law firm IPO? Not so fast., T
HE
W
ASHINGTON
P
OST
, Feb. 16, 2015,
https://www.washingtonpost.com/business/capitalbusiness/a-law-firm-ipo-not-so-fast/2015/02/16/d8085ff6-b09b-
11e4-827f-93f454140e2b_story.html.
186
Ribstein, supra note 2, at 762.
187
Id., at 778.
188
Ashby Jones, The Third-Year Dilemma: Why Firms Lose Associates, T
HE
W
ALL
S
TREET
J
OURNAL
, Jan. 4, 2006,
http://www.wsj.com/articles/SB113571843977932357.
189
蒋琪 [Qi Jiang],
突破
“
律所
+
资本
”
困局
[Break Through the “Law Firm + Capital” Dilemma],
FYLZ
.
COM
.
CN
,
Apr. 27, 2016, available at: http://www.fylz.com.cn/lztj/201605/t20160506_1788523.shtml.
190
Liu & Wu, supra note 58, at 823.

41
compensated by a fixed salary, or according to a commission system.
191
In the latter case, a
lawyer only pays an annual management fee to the firm, which is a modest fixed amount in case
of a non-partner lawyer and 5% of annual billings for a partner, and keeps the rest for
his/herself.
192
On the other, Yingke largely eliminates the traditional equity partner tier. Except
for a few partners in Beijing, all other lawyers, whether they are titled as associates or partners,
sign employment contracts with the firm which exclude them from sharing the firm’s profits or
equity.
193
These two arrangements, plus the fact the Yingke received large amount of capital
from non-lawyer investors,
194
exhibit a drastically different model of law firm operation. The
voting power of partners is determined by the amount of capital investment into the firm, rather
than by “one partner one vote” rule. The firm is operated under the belief that the law is a
business rather than a profession.
195
As such, traditional notions of equality, professionalism,
and collegiality are thus not very much manifest in Yingke; and the firm is actually more akin to
a corporation in practice despite that it is still a partnership by its legal form. True, Yingke has
been frowned upon by other legal practitioners for its lack of collegiality and poor visibility in
the high-end legal service market.
196
Nevertheless, one must still admit that without such capital-
centered hierarchical business model, it couldn’t have grown into what it is within such a short
period of time when it does not have much of a historical reputation like the other prestigious
Chinese corporate law firms.
197
Another Chinese law firm, namely Duan & Duan, has also reached that end though via a
different route. Faced with the infeasibility of granting lawyers with (permanent) equity
incentives with the legal form of partnership, the firm has invented a creative “parallel equity”
system. To begin with, some of the firm’s founding partners pooled their capital to set up a
191
吴剑霞 [Jianxia Wu],
盈科：盈科而后进，放乎四海
[Yingke: Fills, Advances, and Then Flows into the Four
Seas], I
NTELLIGEAST
, Oct. 17, 2016, http://zhihedongfang.com/article-23787/.
192
Liu & Wu, supra note 58, at 822.
193
Id., at 824.
194
Id., at 822. This is disclosed from two interviews. Not much more information is given about how exactly Yingke
managed to do this, and whether these non-lawyer investors get equity in the firm. Note that, Chinese law only
allows pure lawyer ownership of law firms, which is sustained not only upon the founding of, but also upon taking
in new partners into a law firm. See Table 2, supra.
195
Id., at 824.
196
Id., at 825.
197
Id., at 822.

42
company, which specializes in entertainment and media related business investments.
198
Upon
passing certain performance thresholds, a partner is entitled to receive certain amount of shares
in this investment company, calculated in such a way to correspond to his/her performance in the
firm.
199
It is worth noting that such parallel equity in the investment company does not compete
with the partner’s equity in the law firm and a partner can get both.
200
Unlike the equity interest
in the partnership, the investment company has its independent legal personality and thus can
offer permanent equity, which can survive a partner’s retirement from the law firm. If the partner
however leaves the law firm before retirement, he/she must first return his/her shares in the
investment company.
201
On a further note, the investment company is not merely a special
purpose vehicle. Rather, it has actively made investments in the film and TV industry, including
two popular TV dramas about lawyers.
202
Arguably, by creating parallel permanent equity in an
entity other than the law firm itself, Duan & Duan manages to offer an effective incentive device
to its lawyers to encourage them in making long-term investments into the firm, while
innovatively circumventing the mandatory requirement that a law firm must be organized as a
partnership.
Taken together, the examples of Shandong Deheng, Yingke, and Duan & Duan show that,
the mandatory requirement that a law firm must be organized as a partnership does not mean that
it will have a true partnership ethos in practice. Without breaching the regulation, the three law
firms have creatively worked out different solutions to effectively deviate from it. While these
three cases are certainly not yet sufficient for one to argue in favor of the concepts of “corporate
law firms” and “firm specific equity”, as the sustainability of these practices is still to be
observed for longer term empirically relative to the “partnership law firms”, they nevertheless
open up the window for discussions on these issues. To say the least, one may already question
about the necessity of compelling a law firm to organize itself as a partnership, when the efficacy
of such requirement can be significantly discounted in practice.
198
毛姗姗 [Shanshan Mao],
【大所之路】段和段：内外兼修，薪火相传
[[The Road to Big Firm] Duan &
Duan: Cultivations at Both the Inside and the Outside, and Keep Passing the Torch on], I
NTELLIGEAST
, Sep. 13,
2016, https://www.zhihedongfang.com/2016/11/24456.
199
See Duan & Duan welcome you to join our firm, D
UAN
&
D
UAN
,
http://www.duanduan.com/en/index.php/default/category/94.html.
200
Mao, supra note 198.
201
Id.
202
Id.

43
4.1.3 Legal Services vs. Multidisciplinary Services
Innovative solutions have also emerged when it comes to law firms providing non-legal
services. Deheng is again the example there. While trying to get quoted on an equity exchange is
already a remarkable step for the firm, it is actually not the first attempt of Deheng to try to test
the regulatory waters. Distinguished from most of its peers in China, Deheng operates two
parallel law firms brands, namely, Shandong Deheng (the one quoted on QBOEE, only for
business within Shandong province), and Beijing DHH (for all other China business outside
Shandong province and overseas business) under Deheng Law Group Company Limited, which
is officially registered in Hong Kong.
203
The reasons for such parallel operations are largely
historical: Deheng originally started out as a regional firm in Shandong in 1993 and has largely
established itself as a market leader in the province. In 2008, it relocated a significant portion of
its business in Beijing to embark on an ambitious expansion strategy. However, because of the
MOJ’s restriction on using the word “group” in the name of law firms,
204
Deheng had to register
itself under Hong Kong law to maintain the group management structure.
205
But Deheng Law Group is not merely about maintaining two parallel law firm brands.
More importantly, it already builds up a semi-multidisciplinary business, covering an intellectual
property agency firm in Beijing and a school providing vocational legal trainings in Qingdao
next to its legal practice.
206
Although both of these two side businesses are still law related, this
already starts to look like the hybrid business explorations of big law firms like Allen &
Overy,
207
in a sense that related services can be easily integrated with assured consistency in
quality and thus help to establish stronger bonds with clients.
208
It certainly qualifies as an
innovative initiative within the current regulatory framework in China, where law firms must just
remain law firms and nothing else – they cannot be owned or controlled by non-lawyers in the
upstream, nor can they adopt a group structure to own/control non-legal services in the
downstream.
203
毛姗姗 [Shanshan Mao],
【大所之路】德和衡：
7
年，一家律所的全球布局
[[The Road to Big Firm] DHH:
Seven Years, The Global Strategy of a Law Firm], I
NTELLIGEAST
, Sep. 13, 2016, http://zhihedongfang.com/article-
23230/.
204
律师事务所名称管理办法 [Measures for the Administration of Names of Law Firms] (promulgated by the
MOJ, Jan. 4, 2010), L
AW
I
NFO
C
HINA
, available at http://www.lawinfochina.com, art. 21.
205
Mao, supra note 203.
206
See
集团管理
[Group Management], D
EHENG
, http://www.deheng.com.cn/jtgl.
207
See supra note 52 and the accompanying texts.
208
Ribstein, supra note 2, at 798.

44
4.2 Innovation from the Other Legal Service Providers
In today’s world, information technology (“IT”) is profoundly changing people’s lifestyle
in so many ways, and legal service provision is certainly no exception. Motivated by the role
models of LegalZoom and alike, Chinese entrepreneurs quickly realize the great potential of
alternative models of legal service provision, which can either base on or derive from this
technology. As such, they have made a series of interesting attempts that contribute to refine the
traditional law practice. This Section briefly depicts two important new trends, namely, online
legal service provision, and new generation of legal outsourcing.
4.2.1 Online Legal Service Provision: Technology as Matchmaker
For many people, the impression about online legal service provision still stops at
specialized legal search engines, portals selling contract templates and legal information
resources, and law related discussion forums where lawyers provide brief answers to the
questions asked there in the hope of generating potential deal flows. The business model of such
traditional online legal service providers is rather straightforward. Internet is used for the most
part only as a platform on which the suppliers and potential users find each other. There is no
matchmaking, and the real transactions, i.e., the provision and payment of legal services, happen
offline.
209
Along with the maturing and penetration of the relevant technologies, legal service
websites have also evolved. Things are different in the new generation of online legal service
providers, which offer much higher level of resource integration and real-time matchmaking.
210
An illustrative example is the mobile phone app Pocket Lawyer (www.pocketlawyer.cn).
Basically, the app runs a platform on which registered users can place and pay for orders
for legal services using standard forms and at competitive transparent prices. Similarly, licensed
lawyers can also become registered users on the supply side, upon submission of the relevant
documentation showing their credentials, on which the Pocket Lawyer will conduct a formal
check. More importantly, every registered lawyer is asked to deposit an amount of money to
209
See Raymond H. Brescia et al., Embracing Disruption: How Technological Change in the Delivery of Legal
Services Can Improve Access to Justice, 78 A
LB
.
L.
R
EV
. 553, 567-77 (2014) (naming various kinds of web-based
innovations that enable people to access legal help).
210
Jing Li, Platform Economy in Legal Profession: An Empirical Study of Online Legal Service Providers in China,
35 UCLA
P
ACIFIC
B
ASIN
L
AW
J
OURNAL
97 (2018).

45
Pocket Lawyer’s escrow account, which will be used to cover the potential liabilities in case the
lawyer fails to render services to the satisfaction of the users. A user may have different rights
depending on the legal service he/she chooses to get. He/she can choose the one desired lawyer
from the app’s pool based on the credentials and ratings of the lawyers. But if the case is rather
urgent or if the user cannot make a decision, he/she can also choose the “speed service”. The
system then will, based on the data of the lawyers in the pool, transmit the order to the competent
ones located nearby the user to respond. For fixed-price services, the lawyer that comes back
with the quickest response will be automatically get the order. Otherwise, the lawyer can decide
whether the transmitted order is interesting, and if so, respond with a quote of price. If there is
more than one quote, the user has the final say over which lawyer to transact with. Once the
order is accepted, the lawyer then should perform the relevant legal services according to the
request in the order, be it a telephone consultation, calling a third person on behalf of the user,
drafting a contract, or attending a business negotiation meeting. In order to guarantee the quality
of its services, especially these speed services, Pocket Lawyer enforces a whole set of code of
conducts on its lawyers, such as the effective duration of the call, number of mandatory
callbacks, the timeframe during which the service must be rendered, etc.. A lawyer must fill in a
short report form online in order to close a case and get paid. Users are always offered with the
opportunity to rate the services of their lawyers, and the ratings will be displayed online for the
reference of future users.
211
It is worth noting that Shanghai Bestone, the firm that owns and runs the Pocket Lawyer
app, is an IT company.
212
It does not provide legal services itself, but rather integrates the
providers of such services and resources on a smartly-designed online platform, so that they can
be easily found by and/or matched to potential clients based on pre-defined matchmaking
rules.
213
Essentially, it is the technology that does the matchmaking. Its business revenue comes
from the fee splitting agreement with the basic telecommunication operators, which charges
211
The business model of Pocket Lawyer is summarized from various information sources, including the Help and
FAQ pages inside the app, the websites (both the user version and the lawyer version) of the app, the user
registration and service agreements, and also the website of its developer.
212
The company is called Shanghai Bestone Information Technology Co., Ltd., official website:
http://www.fabao.cn/.
213
上海百事通信息技术股份有限公司公开转让说明书 [Prospectus of Shanghai Bestone Information Technology
Co., Ltd. for NEEQ Quotation and Public Share Transfers], at 1-1-73 (Aug. 2015), available at www.neeq.com.cn.

46
users directly, because the traffic generated on the platform has to go through the network and
facilities of the basic operators.
214
4.2.2 Online Legal Service Provision: Humans as Gatekeeper and Business Conduit
Compared to Pocket Lawyer, other new generation online legal service providers adopt
more or less the same conceptual framework of linking and matching upstream lawyers with
downstream website users, but they rather use a different manner to do so. Instead of merely
presenting the information and leaving all decisions to users (conventional online legal portals),
or purely relying on technology to match users with lawyers (Pocket Lawyer), they retain an in-
house legal consultant team to serve the roles of gatekeeper and business conduit. Typically,
these people are recruited from new graduates and young paraprofessionals, who have legal
degrees but are not yet licensed and are limited in experience.
215
Primarily, they are tasked to
conduct a prima facie review of the submitted cases to identify the major issues and classify the
area of law practice. Accordingly, they will then shortlist a number of potential competent
lawyer(s) for the users to select from. Once the user makes the decision to retain the lawyer,
legal fees are paid online through the escrow account maintained by the platform, which charges
a percentage thereof as a commission fee for the matchmaking and transaction facilitation
service.
216
Representative websites implementing such business model include Yifatong
(www.yifatong.com), which offers routine legal services to individual consumers and small
businesses, and Yingle (www.yingle.com), which focuses on litigation related legal services.
217
The advantage of such business conduit model is obvious. Given the inherent information
asymmetry, a client is naturally less informed about the nature of the legal problem, the potential
remedies, and the quality of the professionals, and thus would find it difficult to shop for skilled
and trustworthy lawyers.
218
One without previous legal training may not get effective legal help
214
Id., at 1-1-69 and 1-1-128.
215
Li, supra note 210, at 145-46.
216
The business model is summarized from 厦门易法通法务信息管理股份有限公司公开转让说明书 [Prospectus
of Xiamen Yifatong Legal Information Management Co., Ltd. for NEEQ Quotation and Public Share Transfers], at
56 & 77 (Dec. 2015), available at: www.neeq.com.cn.
217
See 贺佳雯 [Jiawen He], “
互联网
+”
改写法律生态
[“Internet Plus” Reshapes Legal Industry’s Ecosystem], 17
中国经济信息
[C
HINA
E
CONOMIC
I
NFORMATION
] (2015), available at http://www.zgjjxx.net.cn/2015_17/a30.html.
218
Frank H. Stephen, James H. Love & Neil Rickman, Regulation of the Legal Profession, in R
EGULATION AND
E
CONOMICS
647, 649 (Roger J. Van den Bergh & Allessio M. Pacces eds., 2012). See also Ribstein, supra note 2, at
753.

47
if he/she merely relies on the very rough specialization areas of the lawyers shown on a portal’s
website. In this respect, having dedicated consultants to filter and recommend lawyers for them
may help to mitigate the information asymmetry, especially when the legal issues are complex
and involve more than one law practice areas. However, given the great importance that users
may attach to the portals’ recommendation, the quality of such intermediation and matchmaking
may still leave much to be desired. Among other things, can we comfortably trust that a young
new law school graduate with only one or two years of legal experience, and within the few
minutes of listening to the user’s narrative in the phone call, is able to make the correct diagnosis
of the problem, point to the most relevant and efficient specialization(s) of law, and match the
user with a list of potential lawyers?
219
Moreover, we also have to remember that a portal is
technically not a law firm and the in-house consultants that it retains are not licensed lawyers. As
such, can we also comfortably trust that a portal, without being bound by professional ethics, will
not prioritize its own interests on top of the users’ best interests by connecting them first to the
lawyers in the portal’s contracted law firms, despite that the legal problem may be solved in a
more cost-effective manner by other lawyers?
220
This being said, the limited empirical findings
available so far do not seem to provide hardcore evidence to the criticism that alternative
business structures will impede lawyers’ professional judgment, which still largely remains a
hypothesis.
221
4.2.3 New Generation Legal Outsourcing
Another innovation in the camp of alternative legal service providers is the emergence of
legal outsourcing business. In this sense, China has already been observing the emergence of
business models that are analogous to those of Axiom and Thomson Reuter’s Pangea3. In
essence, these legal process outsourcing (“LPO”) firms work with big corporate clients,
originally only focusing on rendering low-end legal services such as document review and
litigation discovery, but have recently shifted to the provision of a more sophisticated and
219
Li, supra note 210, at 146.
220
Id.
221
UK Competitive and Markets Authority, Legal Services Markets Study,
https://assets.publishing.service.gov.uk/media/5887374d40f0b6593700001a/legal-services-market-study-final-
report.pdf, Dec. 15, 2016, at 96 (pointing out that “many ABSs currently in the sector do not differ greatly from
traditional firms … The motivation for many of these firms to seek ABS status has been to bring non-lawyers into
senior roles within the firm, rather than to apply a fundamentally different business model or seek external capital
for investment”).

48
integrated set of legal solutions, which both supplement and compete with the hard core legal
services provided by conventional big law firms.
222
The LPO firms can retain their in-house
lawyer team, like Axiom,
223
but can also act as a human resource placement company by
contract and commission outside lawyers to performance the tasks they procure from corporate
clients, like Outside GC.
224
The above largely already describes the legal outsourcing business that Shanghai Bestone
does besides operating the Pocket Lawyer app. To be more specific, Bestone’s business consists
of two major parts, with Pocket Lawyer directing at individual and small business users, and
legal outsourcing targeting exclusively at big company clients, such as banks and insurance
companies.
225
It is worth noting that the outsourced legal services are not to be offered to the
banks and insurers themselves, but are actually intended for their designated customers. These
services differ from typical law-firm work, and often involve customer legal education and
provision of law information packages. Because Bestone is essentially a technology company
specializing in the legal service market niche, it engages law firms and specialized legal talents
placement firms to perform these outsourced tasks.
226
V. M
AJOR
F
INDINGS AND
R
EGULATORY
I
MPLICATIONS
5.1 The Power of the Market
The legal profession in China has changed tremendously and lots are still going on. The
first key finding is that many of the innovation initiatives named in the above Section IV are
shaped by the power of the market. This is however not to say that China’s legal profession has
already entered the buyer’s market. Quite to the contrary, one may have right the opposite
222
See Brian Peterson, Analyzing Axiom Law, D
ISRUPTIVE
L
EGAL
I
NNOVATIONS
, July 19, 2013,
https://disruptivelegal.wordpress.com/2013/07/19/axiom-law-is-not-an-lpo-but-it-is-one-of-the-most-important-
companies-in-the-legal-services-industry/ (last visited Dec. 7, 2016). See also About us, T
HOMSON
R
EUTERS
L
EGAL
M
ANAGED
S
ERVICES
, http://legalsolutions.thomsonreuters.com/law-products/solutions/legal-outsourcing-
services/about.
223
Richard Granat, Is Axiom Law a Law Firm?, Apr. 8, 2013,
E
L
AWYERING
B
LOG
,
http://www.elawyeringredux.com/2013/04/articles/legal-ethics-2/is-axiom-law-a-law-firm/ (last visited Dec. 7,
2016).
224
Leigh Jones, The rise of the new model firm, T
HE
N
ATIONAL
L
AW
J
OURNAL
, May 21, 2007, available at
www.axiomlaw.com/Docs/NLJ-Axiom.pdf.
225
See
金融机构服务
[Services for Financial Institutions], S
HANGHAI
B
ESTONE
, http://www.fabao.cn/finance/.
226
Prospectus of Shanghai Bestone Information Technology Co., Ltd. for NEEQ Quotation and Public Share
Transfers, supra note 213, at 1-1-63, 1-1-65 & 1-1-69.

49
opinion if taking a look at the numbers. As of 2012 year end, there are altogether 232,384
licensed lawyer in China, or merely 1.6 lawyers per 10,000 residents.
227
This aggregate number
saw a significant increase during the past few years and reached at almost 300,000 as of 2016,
228
but that’s still against the population base of nearly 1.4 billion. In comparison, the total number
of lawyers in the US is over 1.3 million as of 2016, or 40 per 10,000 residents on average.
229
While the US is admittedly an outlier given its unique litigious culture, other high-and medium-
wealth Western countries still hold one lawyer in 300 to 500 residents.
230
Put simply, there are
actually too few legal practitioners in China than too many, and they are still very much needed
in general.
As such, the more accurate proposition would be that China’s legal service market presents
rather discrepant competitive landscape at two extremes. On the one end, the 2008 financial
crisis has taught many Chinese law firms to attach greater importance to client needs and
satisfaction.
231
The competition for large corporate clients and lucrative business transactions is
fierce and will continue to be so, not only within the club of big Chinese corporate law firms, but
also between Chinese law firms and international law firms globally. This has to do in particular
with the aggressive overseas expansion of Chinese companies, and the fight for them is an
important motivation for Chinese law firms like King & Wood and Dacheng to also go global via
various different expansion strategies. In this sense, the balance of power in the corporate legal
sector does shift towards the buyers. On the other end, however, many legal needs are not met in
the less developed geographic regions and in financially less rewarding practice areas. There, the
market generates innovation not through the game of “survival of the fittest”, but through a more
general demand for access to justice, which needs to be attended through creative ways as
conventional ones are either inefficient or insufficient.
232
This is particularly evidenced by the
227
All China Lawyers Association,
中国律师行业社会责任报告
(2013) [China Lawyers Social Responsibility
Report (2013)], available at http://www.acla.org.cn/html/xinwen/20130827/11102.html.
228
中国执业律师近
30
万人
[China has nearly 300,000 practicing lawyers], 人民日报海外版 [P
EOPLE
’
S
D
AILY
O
VERSEAS
E
DITION
], Mar. 31, 2016, at 01, available at http://paper.people.com.cn/rmrbhwb/html/2016-
03/31/content_1665842.htm.
229
Matt Leichter, Lawyers per Capita by State, T
HE
L
AST
G
EN
X
A
MERICAN
,
https://lawschooltuitionbubble.wordpress.com/original-research-updated/lawyers-per-capita-by-state/ (last visited
Dec. 7, 2016).
230
P
HILIPS
R
W
OOD
,
T
HE
F
ALL OF THE
P
RIESTS AND THE
R
ISE OF THE
L
AWYERS
224
(2016).
231
Li & Liu, supra note 95, at 2860.
232
刘音杰 & 冯莉 [Yinjie Liu & Li Feng],
法律援助服务质量探析
[An Inquiry into the Quality of Legal Aid],
http://www.chinalegalaid.gov.cn/China_legalaid/content/2017-05/31/content_7186566.htm?node=40883
(submitting that quality of legal aid in China often does not live up to expectations).

50
rise of online legal providers which serve as an intermediary to match the supply and demand
sides. Although the quality of such intermediation and matchmaking still leaves much to be
desired, we cannot be fully confident that Googling, obtaining recommendations from
acquaintances, or dropping a random visit to a nearby law firm will necessarily provide better
solutions to consumers’ legal problems. Therefore, it is arguable that the most significant
contribution of these portals is that they help to improve the access to justice in China, by virtue
of offering an extra channel of acquiring and comparing potentially useful information in
searching for legal help.
233
5.2 More Versatile Ways of Legal Service Provision
Propelled by the market demands and benefiting from technological advancements, the
provision of legal services has become so versatile today, going beyond the office of lawyers.
This finding carries two-fold implications. Firstly, the term “legal service” has developed a much
richer connotation, covering not only hardcore law firm work, but also those services that are
related to or derived from it. These services may still be legal in nature, but may also be only
marginally law-related. A frequently stated concept here is the so-called “service unbundling” –
such as unbundling legal work from non-legal work, or complex, sophisticated work from
routine, standardized work.
234
This said, it is also to be admitted that given the complexity and
sophistication of modern business transactions, it is not always possible or economically efficient
to separate the services. In this light, legal outsourcing firms and various multidisciplinary
consultancy firms have been sharing the market with law firms for years, such as by offering
legal services as a side but integrated part of a hybrid professional advice package,
235
or by
tapping into those simple or derivative legal services that big law firms would or could not do by
themselves. The same is also identified in China recently, and the example discussed in this
paper is Bestone. But incumbents certainly do not want to stand passive and simply let the
233
Li, supra note 210.
234
See John S. Dzienkowski, The Future of Big Law: Alternative Legal Service Providers to Corporate Clients, 82
F
ORDHAM
L.
R
EV
. 2995, 3015 (2014).
235
See Charles W. Wolfram, The ABA and MDPs: Context, History, and Process, 84 M
INN
.
L.
R
EV
. 1625 (2000)
(discussing how the world’s largest accounting firms and others offer legal services through different forms of
multidisciplinary practice models); and also Dzienkowski, id., at 3001 (pointing out that “for many years,
management consulting firms, investment brokerage firms, banks, and other entities have delivered legal services
and products in connection with their nonlegal businesses”).

51
alternative providers invade their territory. In fighting back, innovative Chinese law firms have
employed creative ways to circumvent the regulatory restriction that law firms may not engage in
other business activities than legal service provision. The examples in this paper are Deheng and
Duan & Duan.
Secondly, even for those true legal services, people can access them through other
channels, especially online. Admittedly, law firms and lawyers are still the actual service
providers here, which are matched with the users through the intermediation of the online legal
service portals. From this perspective, these portals bring about two-way benefits: on the one
hand, they facilitate an easy channel for individual consumers and small-and-micro businesses to
access legal services; on the other, they also connect solo lawyers and small law firms to a
reliable source of potential clients. In a bigger picture, pooling lawyers with different
specializations onto a platform in effect equals to setting up a virtual all-service law firm, which
can afford to offer services at very competitive prices thanks to the costs saved from doing
business online. This helps to consolidate the lower-tier supply side of the legal market and
generates an economy of scale.
236
In this sense, the platform economy model is disruptive to
physical law firms, because it diverts many transactions from offline to online, thus reducing the
need for people to visit brick-and-mortar law offices.
237
5.3 Reflecting on the Current Regulatory Framework
The findings and discussions presented above provide a new angle to examine the
restrictive regulations imposed on the legal form and ownership structure of law firms in China.
To be sure, these issues have already been debated for years, generating loads of arguments both
in favor
238
and against.
239
It is not my intention here to go further in that direction and try to
236
Li, supra note 210.
237
Id., at 152.
238
For academic research in favor of deregulation in the organizational and ownership structure of law firms, see,
e.g., Ribstein, supra note 2; Gillian Hadfield, The Cost of Law: Promoting Access to Justice Through the
(Un)corporate Practice of Law, 38 I
NT
’
L
R
EV
.
L.
&
E
CON
. 43 (2013); Edward S. Adams, Rethinking the Law Firm
Organizational Form and Capitalization Structure, 78
M
ISSOURI
L
AW
R
EVIEW
777 (2013), Dzienkowski, supra note
234; and McMorrow, supra note 31. All of these research papers argue for a more liberalized approach in the US on
the capital and ownership structure of law firms.
239
The ABA largely represents the voice when it comes to the arguments against non-lawyer ownership and
multidisciplinary practice. See, for example, ABA Commission on Ethics 20/20, Summary of Actions by the ABA
Commission on Ethics 20/20, Dec. 28, 2011, at 7, available at
https://www.americanbar.org/content/dam/aba/administrative/ethics_2020/20111228_summary_of_ethics_20_20_c
ommission_actions_december_2011_final.authcheckdam.pdf (submitting that the Commission has rejected the

52
argue which side has more merits. After all, proper judgement cannot be made without empirical
knowledge on how the innovative initiatives work and how they are accepted in practice, which
is beyond the scope of this paper. This being said, the market realities observed thus far can
already lead one to question the efficacy of the regulations. On the one hand, the most
entrenched incumbents in the legal industry, represented by some of China’s top tier corporate
law firms, have creatively incorporated various key corporate features in financing and managing
the partnerships, cutting into the traditional values of equality and collegiality. As a result, the
mandatory partnership requirement is carefully circumvented on a de facto basis, and is thus
rendered toothless. On the other, a lawyer’s office is no longer the only destination for the ones
in search of legal services, which can be accessed from many alternative service providers.
Because they are technically not law firms, the exclusivity requirements on lawyer ownership
and legal service provision are not applicable to them, thus are not triggered in the first place.
On a further note, the case of online legal service portals shows that alternative providers
nowadays have started to offer substantively similar legal services as law firms. Contrastingly,
however, they are free to bring in private equity investors, issue equity incentive plans to their
employees, or raise money from public stock market, just because they are technically not law
firms and thus can organize themselves as corporations. Confronted with such competitive
pressure, law firms are not even able to fight back properly, as they are prohibited from availing
any of these tools given the business form and ownership restrictions unless they decide to make
a de facto deviation from them in the first place. In this sense, these regulations work more as an
extra burden, despite they are originally intended as an extra safeguard of lawyers’ professional
integrity. Therefore, maybe it is now the time for China to start reflecting on its restrictive
position on the regulation of law firm legal form and ownership structure. This is arguable not
only because deregulation may bring about potential benefits such as broadened finance sources
and improved access to justice,
240
but also because the intended effect of the mandatory
proposals to amend the Model Rules to allow non-lawyer ownership of and investment in law firms). See also Nick
Robinson, When Lawyers Don’t Get All the Profits, Non-Lawyer Ownership of Legal Services, Access, and
Professionalism, 29 G
EORGETOWN
J
OURNAL OF
L
EGAL
E
THICS
1 (2016) (questioning the impact of ABS on
improvement of access to justice). For a summary of the arguments from both sides, see The ABA Commission on
the Future of Legal Services, For Comment: Issues Paper Regarding Alternative Business Structures, Apr. 8, 2016,
available at
http://www.americanbar.org/content/dam/aba/images/office_president/alternative_business_issues_paper.pdf, pp. 7-
11.
240
For a summary, see the ABA Commission on the Future of Legal Services, For Comment: Issues Paper
Regarding Alternative Business Structures, Apr. 8, 2016, available at

53
restrictions are significantly discounted in practice anyway. In particular, the Ministry of Justice
should realize that its power cannot reach every corner, just as it has failed to prohibit a
consulting company from hiring a number of lawyers to do preliminary legal consulting on
projects.
241
Fundamentally, firms cannot survive in the long run unless they manage to listen and
cater to the needs of their customers, including by building their reputations for long-term fair
dealing.
242
In this reasoning, liberalizing legal form and ownership restrictions may even be truly
beneficial, if, based on the relevant future empirical research, it is motivated by the changed
client needs in the first place.
VI. C
ONCLUSION AND
F
UTURE
R
ESEARCH
Legal profession in China is heavily regulated. In a fragmented market, lawyers coexist not
only with local peers, but also with foreign law firms and other separately-licensed legal service
providers. But this is not the whole picture of the competitive landscape yet. Based on a
description of the current regulatory framework and its evolution, the paper goes on to provide a
state-of-the-art sketch of China’s legal profession, in particular the latest innovation initiatives
and alternative business models, which happen simultaneously among the law firms as the
incumbents, and the other legal service providers. It finds that, the latest developments in
China’s legal profession in general converge into the similar trends as seen elsewhere in the
world, tilting the market towards the buyers’ side. Along with China’s increasing weight and
deepening involvement in the world’s economy, the globalization of Chinese legal profession
has included not only the creative destruction of national barriers and the restructuring of the
indigenous legal profession, but also the outward expansion of local law firms and their clients
onto the global stage.
243
The current wave of leading Chinese corporate law firms avidly
expanding themselves overseas, even creating mega global law firms on the one hand, and the
various creative collaboration modes between Chinese law firms and their foreign counterparts
on the other, are vivid examples of this finding. This said, there is still an acute demand for
access to legal services when it comes to small and micro businesses and individual consumers,
http://www.americanbar.org/content/dam/aba/images/office_president/alternative_business_issues_paper.pdf, pp. 7-
9.
241
Liu, supra note 7, at 292.
242
Ribstein, supra note 2, at 791.
243
Liu et al., supra note 139, at 285.

54
whose legal needs are typically of small financial value and thus are not the targeted clientele of
high-end service providers. As such, the new generation of Internet-based legal service portals
serve to provide an effective alternative to improve the access. Instead of being organized as
traditional law firms, these sites are founded and financed by non-lawyers, and have rather
adopted various creative business models which pose new challenges to China’s restriction on
non-lawyer ownership. Such creative innovations are met with similar initiatives from the
incumbents as well, when some of the top tier law firms in China have also creatively deviated
from the traditional partnership legal form and incorporated key corporate features in running the
business and compensating partners. As such, this paper argues that it is now the time for China
to start reconsidering its restrictive position on the regulation of law firm legal form and
ownership structure, since the intended effect of the restrictions are significantly discounted in
practice anyway.
Above being concluded, it is worth noting that this paper is only the start of a series of
potential research, and the questions it raises outnumber the ones that it can answer for now. For
example, although this paper is more inclined towards the liberal regulatory approach, it does not
touch upon how far should China go in that direction. With regard to the spectrum of the existing
regulations by different jurisdictions, where should we position ourselves? Should we only allow
non-lawyer ownership in law firms which must still only provide legal services, or should we
embrace full-fledged multidisciplinary services? Based on the existing experience from other
jurisdictions, what regulatory devices are effective and thus can be borrowed into China? What
else can be done in order to strike the right balance between mitigating the information
asymmetry in legal service market and correcting potential market failures one the one hand, and
encouraging competition and safeguarding access to justice on the other? All these questions
certainly warrant future research, which should start first with a deepened empirical investigation
into China’s legal profession within the already changed competitive landscape.