Hong
Kong Structure and Regulation of the Legal Profession
The
legal profession in Hong Kong bears a strong
resemblance to that of the UK, on which it is
modelled. Thus, it is a split profession, with
barristers and solicitors. It is largely autonomous,
and its rights to be self-regulating were explicitly
preserved in the Basic Law introduced in 1997
when Hong Kong reverted to Chinese rule.
There
are about 565 practising barristers and 3,300
practising solicitors in Hong Kong. Barristers
have a right of audience in all courts, whereas
solicitors' rights of audience are generally
limited to the lower courts; a client must approach
a barrister through a solicitor; and a solicitor
must be present when a barrister is in court,
takes instructions from a client or interviews
a witness.
As
in the UK, this antiquated system needs loosening
up, but the lawyers who benefit from it will
not accept change very readily. A relaxation
of the differences between solicitors and barristers
would increase competition, improve access to
barristers and lead to reduced costs.
While
recognizing that there is a need to retain and
develop a strong group of specialist advocates,
the Administration thinks that rights of audience
should be based on competence, not on whether
a lawyer is a barrister or solicitor. There
are proposals for change:
-
to
allow solicitors to acquire rights of audience
in all courts, if they have relevant experience
and have passed necessary examinations;
-
views
are to be sought as to whether any limitations
based on years of experience should be imposed
on barristers' rights of audience in the
higher courts;
-
as
in some other jurisdictions, members of
recognised professional bodies and employed
barristers should have direct access to
barristers;
-
barristers
should be able to decide whether the interests
of the lay client or the interests of justice
require the attendance of a solicitor in
court; and
-
the
two-counsel rule which prevents Queen's
Counsel (senior barristers) from appearing
in court without a junior barrister should
be abolished.
Retaining the two branches of the profession
but eliminating the practices that can no
longer be justified would both benefit consumers
and continue to provide a choice for legal
practitioners. However, barristers have continued
to oppose modernisation of the profession,
and so far these proposals have only been
adopted to a small extent.
In
addition to its structural problems, Hong
Kong's legal sector is plagued by under-capacity.
The
average waiting time between a request for
a court date and the actual hearing is 216
days in the civil court, although time spent
on preliminary matters means that the average
litigant will have to wait for about 400 days
to have a case heard.
A
recent paper on civil justice reform said
the number of judges in Hong Kong had not
changed significantly in the past decade despite
sharp increases in workload.
The
caseload of the High Court has increased 82%
since 1991, so that judges have thus had to
cope with higher pressure and bigger workloads.
The panel of Masters will deal with work in
the High Court that encompasses summary judgments,
where a case is instantly disposed of, and
interlocutory applications, ie technical queries
that don't require a court hearing as such.
They will also dealing with so-called 'taxation',
meaning the scrutiny of legal bills to allocate
costs between litigants.
Evidently
wanting yet more work, in September, 2003,
the Hong Kong Bar Council met with the Chinese
Ministry of Justice, in order to attempt to
persuade the Chinese authorities to allow
Hong Kong's barristers the same rights to
practice on the mainland as have been afforded
to the territory's solicitors.
Under
the auspices of the Closer Economic Partnership
Agreement (CEPA), Hong Kong lawyers will be
permitted to study for qualifications as mainland
lawyers with a view to practicing there. However,
SAR-based solicitors are prohibited from practising
any kind of litigation work, and barristers
have been excluded from the agreement altogether.
Alan
Leong SC, head of the Bar Council's mainland
practice relations committee suggested that
there were several reasons, both socio-economic
and political, why barristers have been excluded
from the draft agreement thus far. He observed
that: 'Litigation is the bread and butter
for most mainland China lawyers,' and went
on to explain that: 'The Chinese mainland
does not practice adversarial or hostile litigation
like we do. I do not rule out that our style
and concepts of litigation would have an impact.'
However, he added that in light of the fact
that the SAR is prepared to allow mainland
lawyers to practice litigation in the territory,
a degree of reciprocity should be expected.
In
December, 2003, it was announced that, as
from 1st January, 2004, Hong Kong law firms
will be permitted to form alliances with Chinese
firms. Major international law firms took
great notice of this development, which should
lead to a major increase in the size and prestige
of the Hong Kong legal profession.
However,
only lawyers born in Hong Kong will be allowed
to re-qualify to practice local law on the
mainland, and even they will only be permitted
to practice commercial law. Many US and UK
law firms are nonetheless said to be looking
to register locally as Hong Kong practices
in order to take advantage of the opening-up
of the Chinese legal sector.
Finally,
in June, 2004, a working party was established
to examine the ending of the monopoly held
by the territory's barristers on conducting
trials in the High Court. Although the announcement
that a think-tank will examine the issue was
cautiously welcomed by solicitors, many within
the legal community are doubtful that this
new initiative will yield positive results,
or even cover new ground compared to earlier
reviews. Among other concerns, solicitors
fear that the choice of appointments to the
working party is likely to influence its conclusions,
with the possible appointment of more traditional
judges likely to swing the debate in favour
of barristers retaining their monopoly.
In
August, 2004, Hong Kong law firm Woo Kwan
Lee & Lo became the first SAR-based organisation
to create an alliance with a Chinese law firm
under the auspices of the Closer Economic
Partnership Arrangement (CEPA) between the
jurisdiction and the mainland. Woo Kwan and
the Beijing-based Grandall Legal Group will
share office costs, resources, and staff.
The move is likely to be closely watched by
the various international law firms who see
the alliances permitted under CEPA as a potential
gateway into the Chinese market, which has
traditionally been off-limits to them due
to restrictive practice rules.
Chinese
law firm Duan and Duan, the first independent
partnership law firm to establish itself in
China, announced its expansion into the Hong
Kong market, with the opening of its first
office in the city in May 2007.
The
main focus of the firm's business will be
to help international companies wishing to
invest in China to navigate the country's
complex legal, cultural and linguistic environment.
It plans to provide advice in the fields of
corporate law, international investments and
trade, finance, mergers and acquisitions,
arbitration and litigation.
Duan
Duan has partnered with J. Lai and Company,
an established Hong Kong law firm, to further
enhance their cross-border strengths and connections.
Speaking
at the opening, Mr Duan Qi-hua, a partner
in Duan and Duan observed that: “Hong
Kong is the ideal base to set up operations.
The city provides a platform for the international
community to gain access to opportunities
in China. Equally Chinese companies are able
to use Hong Kong to launch themselves globally.”
Duan
observed that since China’s accession
to the World Trade Organisation, a greater
number of foreign companies have been looking
to invest in the Mainland. The country’s
new found confidence was also reflected in
the number of Chinese companies looking to
expand on to the international stage.
Hong Kong Solicitors 'Accounts' Rules
Hong
Kong solicitors earn interest on clients' money
held by them and usually retain this by virtue
of a contractual provision entitling them to
do so. In the absence of such a provision, the
interest belongs to the client.
This
situation is anomalous, since in England there
have been rules since 1965 requiring solicitors
to pay interest to clients when it is reasonable
for them to do so, while in many other common
law jurisdictions interest on client monies
is paid to a central fund and used for improvement
of the profession.
There
is no statutory client protection or indemnity
fund in Hong Kong. Solicitors are required to
have professional indemnity cover, but barristers
are not. It is proposed that barristers should
fall into line with solicitors, and also that
a compensation fund should be set up.
Hong
Kong Advertising
Solicitors
are prohibited from promoting their practices
except in accordance with the Solicitors' Practice
Promotion Code. This code prohibits (amongst
other things):
-
advertising
on television or radio, in the cinema, or
on any public display;
-
advertising
that is reasonably considered to be in bad
taste; and
-
advertising
that is inappropriate having regard to the
best interests of the public or the solicitors'
profession.
Barristers
are generally prohibited by their Code of Conduct
from any form of advertising.
The
rules in force in England and Australia are
much less restrictive. Advertising of services
is in the public interest and makes for greater
transparency in the delivery of professional
services, which helps consumers to make an informed
choice.
It
is proposed that the only restriction on advertising
and promotion by lawyers should be that it must
not be false, misleading or deceptive, that
restrictions based on subjective criteria should
be removed, and the Bar Association should actively
encourage the dissemination of information about
the services offered and fees charged by barristers.
Hong Kong Fees and Disputes
Solicitors are generally under no duty to explain
to a client the amount of fees he will be charged,
or the basis on which they will be charged.
Solicitors'
fees relating to non-contentious work (such
as the sale and purchase of a flat) are charged
according to the standard scales laid down by
a statutory committee. The committee is chaired
by a High Court Judge. Half of the members are
solicitors. At present, a person buying a flat
for $3 million, with a 70% mortgage, would pay
scale fees of about $36,500.
Conditional
fees were not permitted in Hong Kong until 2005
(see below). Notarial fees, where relevant,
are included in the final bill to the client.
There
are some hundreds of complaints every year about
solicitors and barristers in Hong Kong, and
these are handled by the Law Society and the
Hong Kong Bar. However the guidance to solicitors
provided by the Law Society, and the Bar's Code
of Conduct, do not contain requirements in respect
of "client care", i.e. the information
to be given to clients about the cost of services,
and procedures for dealing with complaints.
The
two professional bodies do not have a general
power to provide a remedy for shoddy work that
does not amount to professional misconduct.
The English Law Society has had such a power
since 1985 and the English Bar plans to create
a similar power. In addition, English solicitors
are required to have complaints-handling procedures.
It is proposed that the two professional bodies
in Hong Kong should have the power to provide
a remedy for shoddy work, and solicitors' firms
should be required to establish complaints-handling
procedures.
A
consultation paper released in September, 2005,
by the Law Reform Commission of Hong Kong recommended
that existing prohibitions against the use of
conditional fee arrangements should be lifted
for certain types of litigation, thereby helping
improve access to the law for middle income
groups.
Conditional
fees are a form of “no-win, no fee” arrangement.
If the case is unsuccessful, the lawyer will
charge no fees. In the event of success, the
lawyer charges his normal fees plus a percentage
“uplift” on the normal fees. Conditional fees
are different from the American form of contingency
fee, where the lawyer’s fee is calculated as
a percentage of the amount of damages awarded
by the court.
At
present, conditional fees, like other forms
of “no win, no fee” arrangements, are unlawful
for civil legal proceedings involving the institution
of legal proceedings. The restriction has its
origins in the ancient common law crime and
tort of champerty and maintenance.
Given
the high cost of litigation in Hong Kong, those
in the middle-income group whose means are above
the limits set down by the Legal Aid Scheme
and the Supplementary Legal Aid Schemes would
have difficulty financing litigation.
The
consultation paper recommends that lawyers should
be allowed to use conditional fees in certain
types of civil litigation, including: personal
injury cases, family cases not involving the
welfare of children, insolvency cases, employees’
compensation cases, professional negligence
cases, some commercial cases, product liability
cases and probate cases involving an estate.
The
paper cautioned against the introduction, at
least initially, of conditional fee arrangements
for defamation cases, criminal cases, and cases
in which an award of damages is not the primary
remedy sought.
To
maintain a healthy balance between the rights
of claimants and defendants, the sub-committee
also recommended some mechanisms to safeguard
defendants against nuisance claims.
The
consultation paper points out that conditional
fee arrangements cannot function properly without
the availability of “After-the-Event” insurance
(“ATE insurance”). However, the indications
are that it is possible that ATE insurance may
not be available at an affordable level and
on a long-term basis in Hong Kong.
To
cater for the possibility that conditional fees
cannot be successfully launched without ATE
insurance, the sub-committee recommends that
the Government should increase the financial
eligibility limits of the Supplementary Legal
Aid Scheme, as well as expanding the types of
cases covered by the scheme.
The
sub-committee has further recommended the setting
up of a “non-government contingency legal aid
fund” (“CLAF”), which would probably be run
by an independent body, and that applicants
would have to satisfy a “merits” test in respect
of their proposed litigation, but would not
be subject to any means test. The scheme would
take a share of any compensation recovered,
so that it would be self-financing. Lawyers
working for the scheme would be paid on a conditional
fee basis. The scheme would also pay the defendants’
legal costs in unsuccessful cases and so would,
in effect, take over the role of ATE insurance.
Professor
Edward K Y Chen, chairman of the LRC’s Conditional
Fees Sub-committee. stressed that the recommendations
in the consultation paper were put forward for
discussion and did not represent the sub-committee’s
final conclusions. The sub-committee invites
and views, comments and suggestions on any issues
discussed in the consultation paper.
