economic development and the development of the legal profession in china
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Economic Development and the Development of the Legal Profession in China. Randy Peerenboom Associate Fellow Oxford University Centre for Socio-Legal Studies Director Oxford Foundation for Law, Justice and Society China Rule of Law Programme Professor of Law, La Trobe University Melbourne. - PowerPoint PPT PresentationTRANSCRIPT
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Economic Development and the Development of the Legal Profession in China
Randy PeerenboomAssociate Fellow Oxford University Ce
ntre for Socio-Legal StudiesDirector Oxford Foundation for Law, Justice and Society China Rule of Law Pr
ogrammeProfessor of Law, La Trobe University
Melbourne
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Overview
• development of legal profession and legal system have closely tracked economic growth patterns in China – modernization thesis without liberal democracy
• challenges confronting the legal profession, and in particular the commercial bar
• comparison of elite foreign and domestic firms
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Development of the legal profession and legal complex
• Law schools: 8 in 1976, 62 in 1989, 183 in 1999, 389 in 2003 and 559 in 2005
• Number of law students: 25,000 in 1991 to 450,000 in 2005
• Number of lawyers: 1980s, 3000; today, 130,000 to 150,000 (definition issues)
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Quality and professionalism• 1997: only 33% of lawyers had college or gradua
te degrees • 2004, two-thirds had such degrees, including 11
% graduate degrees, 44% LLBs and 12% undergraduate degrees in other subjects
• Trend: higher level of legal skills at all levels (countryside, urban, elite, govt, in-house)
• More independence: most firms private partnerships; state-owned firms now financially independent
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Two way street: economic growth and development of legal system/profession
• rule of law and good governance highly correlated with wealth;
• institutional development and growth mutually reinforcing • correlation between GDP and the World Bank indicators
for rule of law r=.82; government effectiveness r=.77; control of corruption r=.76; voice and accountability (i.e. civil and political rights) r=.62
• China good test case; political, culture factors same: Shanghai’s GDP per capita is RMB 55,000 (roughly $8000), Beijing 37,058; Guangdong 19,70; Gansu 5,970l Guizhou 4,215
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Provincial data
• strong correlation between provincial GDP per capita and lawyers per capita (.98)
• legal education measured by the number of law graduates per capita (.90)
• litigation (.92)
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General litigation data• The general trend: more litigation, less mediation,
arbitration stable but insignificant • number of first-instance economic cases increased from
44,080 in 1983 to 1,519,793 in 1996• number of first instance civil cases increased from
300,787 in 1978 to 3,519,244 in 1999. • between 1983 and 2001, economic disputes increased
an average of 18.3% a year, an increase twice the rate of civil disputes, and four times the rate of criminal cases
• since then litigation rates have been relatively stable
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Types of commercial disputes
• First-instance purchase and sale contract cases increased from 23,482 in 1983 to 422,655 in 1996.
• Contracting out of land in rural areas increased from 21,459 in 1983 to 87,503 in 1995.
• Money-lending cases increased from 1,264 in 1983 to 558,499 in 1996
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Litigation and lawyers• developed countries non-litigation work = 80% of legal work: China
litigation work exceeds non-litigation work by 1.8 times• strong correlation between litigation per capita and lawyers per
capita. Concentration of lawyers in few places • The rate of litigation in
– Beijing, Shanghai and Tianjin per 100,000 people is 1,307, 994, 802 respectively,
– compared to between 177 and 230 in poorer provinces such as Hunan, Jiangxi and Tibet.
• The number of lawyers per 100,000 people is – 54.3 in Beijing, 32.3 in Shanghai, 17.1 in Tianjin, and 12.2 in
Guangzhou, – 6.4 in Hunan, 4.4 in Jiangxi, and 1.3 in Tibet
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Legal system and growth• Education and professionalism of judges and
lawyers highly correlated with wealth• Enforcement better in wealthy urban areas
– Local protectionism• Corruption: better in some areas, some courts
– Problems of presidents of courts: political figures; rational to bribe them; responsible for other judges
• General satisfaction:– Number of disputes, nature of disputes, willingness to
go to court, satisfaction with courts > all better on whole in urban developed areas
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Oversupply of lawyers?• 200 - 260,000 people take the national judicial exam • 190,000 pass 2002• Total number of “lawyers”: 150,000
– 26% of law graduates go to firms or in-house counsel in companies,
– 23% took jobs in government agencies– 7% in other non-private agencies– 21% went to graduate school, took jobs in academia, left the cou
ntry or joined the military.• That still leaves another 23% unable to find work. • Of 214 majors, law ranks 187th in terms of students abilit
y to get jobs
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Not oversupply, but low quality (READ CHEAP) demand
• China is a lower-middle income country; huge regional differences; many disputes small change
• Lawyers don’t want to live in rural areas, and don’t want to work for low fees charged by legal workers (statutory and market requirement)
• Actually, legal workers provide more advice than lawyers, handle more cases in many places
• Barefoot lawyers: two roles – compete with legal workers; sensitive cases
• Criminal law – another story
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Show me the money• medium income: RMB 100,000; average 80,000 in 2005• multiply median income in China by 20 (GDP per capita d
ifference with US), adjusted median income $260,000• Cf. information technology RMB 35,000, finance 27,000;
real estate 19,000 education 16,000, govt 18,000 • BUT, huge gap between elite and non
– 22% of lawyers make less than RMB 50,000– Beijing: 60% of all legal service revenues and 30% of income – Within firms in the same city, also increasing differentiation in sal
aries. 12 out of over 1,000 firms in Beijing had revenues in excess of RMB 100 million in 2007.
– top 20% of Beijing firms = 80% of the total revenue– the bottom third accounts for only 2% (ouch)
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Let’s talk elite • Handful of top firms in first tier cities: Beijing, Sh
anghai, Shenzhen, Guangzhou• Trend toward big firms: M& A
– Some firms over 600 lawyers– A few 300 hundred +– Exceptions: Haiwen model; guanxi firms
• Expansion into 2nd and 3rd tier cities– Tianjian, Guangzhou, Chongqing, Chengdu, Hangzho
u; Xian, Dalian, Haikou, Shenyang• Outposts in major foreign markets: NY, Californi
a (LA, Silicon), Tokyo, Paris
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Practice at elite PRC firms• Higher entrance requirements
– Top law school, foreign bar, LLM or JD, experience, foreign languages
• Increasing specialization• Wider coverage:
– corporate work, M & A, private equity, securities, banking and financing (compete with for. firms)
– but also sports law, insurance, satellite, real estate, deng deng (etc.)
– Litigation monopoly– Govt relations/lobbying
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Foreign forms: background
• 200 foreign firms (more than 50 HK)• Most one office, though some have up to three• Most small: less than 20 lawyers
– Chief rep usually foreign national partner. Some will also have other foreign partners or associates.
– However, over 80% of lawyers working are PRC nationals who have studied PRC law and have LLMs (master degrees) or other degrees from foreign universities
– 70% of lawyers in foreign firms are women
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Comparison: PRC and foreign
• Domestic firm advantages:– wider range– cheaper– more experience at most levels– local knowledge: language, connections
• Disadvantages– do not do cross-border– senior partners: good with bad– management (though changing, as foreign firms do
less training because associates jump ship)
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Where we headed?• Differentiation
– Foreign firms for transnational– Niche markets: eg construction litigation and arbitration
• Cooperation with competition• Compete for senior associates
– PRC don’t pay enough• Increase pay, need to increase rates – question of trust
• Tipping point:– Sophisticated players: already greater reliance on PRC firms (th
ough don’t realize that previous advice that have to rely on particular partner is now out of date)
– Battle for Hearts and Mind of foreign in-house counsel: when will “prevailing wisdom” (ie “CYA”) catch up to market?
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Lessons: law and economics/development
• Much of focus on role of legal profession and liberal democracy/political liberalism
• Modernization thesis:– Growth and institutional development (legal professio
n/system): check– Liberal democracy: no
• Peerenboom,“Searching for political liberalism in all the wrong places: the legal profession as the leading edge of political reform in China?,” in B. Garth and Y. Dezalay eds. Lawyers and the Construction of Rule of Law: National and Transnational Processes (forthcoming 2009)
• EAM: 2- track; Not democracy, not liberal
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Not convergence, then viva la difference!
• Lawyers as self-interested actors/screen clients/obstacle to justice
• Lawyers as guanxihu = no rol, rationalization
• Lawyers as politically activists, repressed by nasty authoritarian state: Fu Hualing; Fu and Cullens
• Lawyers as sympathetic poor
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No surprises• Legal profession develop. tracks econ develop.• Legal profession on whole positive force for rol
(not always)• Elite commercial lawyers not force for political ch
ange• Lawyers economic actors: go into law because
make big RMB– Screen cases, go where money is– Very elitist, great stratification– Protectionist
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La difference• Legal profession young
– Partners less than 45 (I used to say under 40)– Management issues– Ethical issues
• China poor – most people can’t/won’t pay for legal services > lawyers engage in “sharp” practices
• Not liberal democracy, Asia • Future: more likely Singapore than Japan, SK, Taiwan,
but definitely more likely Japan/Korea/Taiwan than Myanmar, North Korea (or India, Philippines, Nepal, Cambodia, Bangladesh)