The Hong Kong Law Society is stirring controversy in the city’s legal community after claiming that foreign lawyers in the city are advising on Hong Kong matters “through the back door”.
The society wants to close what it sees as a loophole and impose tougher limits on the number of foreign lawyers that firms can hire and restrictions on matters they can advise on.
In-house lawyers who rely on the diversity of legal talent in the city have criticised the proposal. “The nature of Hong Kong as a global hub requires global expertise and talent to ensure quality of delivery,” says Carl Watson, general counsel of Arcadis Asia.
“This new rule is being sold as intended to prevent foreign lawyers from giving ‘back door’ advice on cases/transactions involving Hong Kong law — that is fundamentally going to back fire,” he continued. “Sure, if the issues are Hong Kong specific, no lawyer is going to risk taking a view if they’re not experienced or qualified. That is a professional obligation in any event. An insular, protectionist approach will diminish the credibility of the legal solutions we can deliver here and unnecessarily undermine the rich local talent by incentivising a quantitative rather than qualitative agenda in recruitment and development.”
Under a rule that has been in force since 1994, Hong Kong law firms have been required to employ one local lawyer for every foreign lawyer. But in a letter sent to law firms this month, the society has proposed increasing the ratio to 2:1. The proposal would also restrict foreign lawyers to only working on matters that involve the overseas jurisdiction they are registered in.
In response, according to the South China Morning Post, partners from 15 international law firms sent a joint letter to the society’s new president, Melissa Pang, reportedly expressing “enormous concern” that the proposal will have “colossal negative repercussions for the economy of Hong Kong and for Hong Kong’s status as an international financial centre”.
The proposed changes, which are open for consultation until the end of the year, would potentially affect 1,547 registered foreign lawyers in Hong Kong.
However, the move is seemingly at odds with the previous Law Society president’s position. As recently as March this year, Thomas So (who was succeeded by Pang in June) wrote: “We embrace diversity and welcome talent from other jurisdictions to join and strengthen our legal services sector. The current open regulatory regime for foreign lawyers achieves the right balance between ensuring free competition for all on a level playing field, maintenance of high professional standards and protection of clients’ interests.”
Restricting the ability of foreign lawyers to work in the city may also frustrate the city’s Financial Services Development Council (FSDC), which was set up in 2013 to promote Hong Kong’s development as an international financial centre — and is chaired by a Hong Kong barrister, Laurence Li, who first practised as a New York attorney and only qualified in Hong Kong in 2006.
One of the FSDC’s key goals is to position Hong Kong as a hub for work related to China’s Belt and Road initiative, which will not be helped by a proposal to restrict the ability of mainland lawyers to work in the city.
“The PRC is a huge stakeholder in Hong Kong and global businesses that its PRC entities invest in,” says Watson. “That investment requires PRC talent to be able to operate here.”