Legal Ethics, in Chinese Style

Risking shameless self-promotion, I post the highlights of my article Chinese Law on Lawyers Amended: Progress Made and to be Made, published by the China Law & Practice in February 2008.



(Somehow, the endnotes seem to be messed up in copy-and-paste process. I apologize for the mess.)

Introduction Omitted.

EXPANDED SCOPE OF THE DUTY OF CONFIDENTIALITY

Compared to its predecessor, the Amendments take a more expansive view of lawyers’ duty of confidentiality to their clients. Before the Amendments, the Lawyer’s Law required lawyers to keep confidential 1) secrets of the State, 2) commercial secrets of their clients that they come to know in the course of the representations, and 3) private affairs of their clients.[i] Article 38 of the newly amended law tracks the original provisions on confidentiality under the original Lawyer’s Law as set forth above; but, paragraph two of Article 38 inserts the difference—with respect to confidential information of clients and other third parties that lawyers come to know in the course of representation, lawyers shall not disclose such information unless exceptions apply.[ii] Obviously, protected information now includes personal privacy, commercial secrets, and any other information that clients want to keep confidential during the course of the representation. And the expanded scope of confidentiality adjusts the attorney-client relationship for better protection of clients’ interests.

In comparison with other jurisdictions, such as the United States, the duty of confidentiality imposed by the Amendments is limited if not sparse since lawyers only have to maintain secrets of current clients, and those of the State. The Amendments do advance clients’ interest in confidentiality, but the protection afforded does not seem to go beyond current representation[i] as confidentiality relative to former and prospective clients are not addressed in the Amendments. Under the American Bar Association’s Model Rules of Professional Conduct (ABA Model Rules), lawyers have the duty to keep confidential information of not only current clients, but also former and prospective clients unless such clients give informed consent or relevant exceptions apply.[ii] Furthermore, the ABA Model Rules by comparison set a low threshold for what constitutes confidential information—“information relating to the representation of a client”[iii] or “information learned in consultation”.[iv] This liberal standard on confidentiality “contributes to the trust that is the hallmark of the client-attorney relationship.”[v] It remains to be seen whether China’s All Lawyers Bar Association will adopt governing rules with as expansive a view toward confidentiality as the ABA Model Rules, following the adoption of the Amendments.

STRICTER PROHIBITION AGAINST CONFLICT OF INTEREST

The Amendments also widen Chinese lawyers’ duty of loyalty by imposing stricter standards on the avoidance of conflicts of interest. Under the previous version of the Lawyers’ Law, a lawyer was prohibited from simultaneously representing clients with direct conflicts, for example, opponents of the same case. Pursuant to Article 39 of the Amendments, a lawyer shall not represent clients whose interests are adverse to those of the lawyer or the lawyer’s family members, in addition to the proscription against representing clients with direct conflict. Furthermore, the Amendments specifically prohibit a lawyer from inappropriately accepting property or benefits from a party opponent or third party, and from colluding with a party opponent or third party to injure the interests of his or her client. With respect to law firms, the Amendments require them to establish a conflict checking mechanism to avoid conflicts of interests among their clients, which codifies similar mandates in the China Rules of Legal Ethics.[i] Unfortunately, the Amendments do not define what constitutes a “conflict of interests”, and for a practicing attorney in need of guidance, the answer lies in the current China Rules of Legal Ethics. Article 76 defines a conflict of interests as any situation where representing a new client might cause conflict with the representation of another existing client.[ii]

ALTERNATIVE ROUTE TO THE BAR

An alternative way to obtaining a bar license emerges in the Amendments. Previously, individuals could legally become lawyers only if they passed the national bar examination, or if they were professionals in legal research or education with special permission from the Ministry of Justice. Given a shortage of experienced lawyers in certain specialized areas, such as finance, securities, intellectual property, and international law,[i] the Amendments provide a practical measure to overcome such a critical shortage. Individuals with a bachelor’s degree and more than 15 years of working experience in the above-referenced shortage areas may obtain their law license in those specialized areas upon passing relevant tests conducted by the Ministry of Justice. And according to the Amendments, the State Council will issue regulations about the implementation of this alternative licensing program.

STATUTORY CONFLICT

Despite the many clarifications for and additions to the Lawyer’s Law, the Amendments still leave an apparent conflict between the Lawyer’s Law and the Criminal Procedure Law of the People’s Republic of China (Criminal Procedure Law). As discussed, one goal of the Amendments is to expand the scope of the duty of confidentiality. However, Article 84 of the Criminal Procedure Law imposes an all-encompassing duty on all entities and individuals to report suspected criminals or incriminating facts to law enforcement authorities.[i] Logically, lawyers have the duty to report any incriminating facts gathered in the course of representing their criminal defendants unless the Chinese Criminal Procedure Law provides them an exemption. Unfortunately, neither the Amendments nor the Chinese Criminal Procedure Law explicitly exempt lawyers from the crime-reporting duty. Paradoxically, a representative from the Ministry of Justice stated, in a press conference subsequent to the adoption of the Amendments, that the Amendments have accomplished major statutory safeguards for lawyers: better protection for lawyers’ bodily safety, exemption from liability for viewpoints expressed in professional representation, and lawyers’ right to non-disclosure of clients’ confidential information.[ii] Furthermore, these accomplishments laid a firm foundation for improving the overall professional environment for lawyers, according to the representative. Nonetheless, without an express provision of immunity from the Chinese Criminal Procedure Law,[iii] Chinese lawyers might not be able to share the same kind of optimism as expressed by the representative in the press conference mentioned above.

THE ABSENCE OF RULES ON IN-HOUSE LAWYERS

Unlike the ABA Model Rules, the Amendments do not contain any provisions on in-house lawyers. In the context of lawyers’ duties of confidentiality under Rule 1.6, ABA Model Rule 1.13 clarifies the duties and responsibilities of in-house counsel whose client is the organization itself. In the best interest of the organization, an in-house lawyer must “report up” to the management when he or she knows a corporate insider intends to act or refuse to act in a certain way which will likely injure the interests of the organization. Moreover, a lawyer for an organization may “report out” to shareholders and/or prospective investors relying on the lawyer’s previous legal opinions for the organization if “reporting up” did not resolve the relevant issues and he or she is “reasonably certain” that the organization will suffer substantial injury due to the unresolved issues. This rule provides additional guidance for in-house lawyers with respect to confidentiality, and is designed to protect the best interests of the organization as a whole. As more lawyers in China join the ranks of in-house counsel, a similar rule is warranted in China to protect organizational clients. As of yet, both the Amendments and the China Rules of Legal Ethics have no provisions or rules on in-house lawyers.

[The rest of the article is omitted.]

[i] See Zhonghua Renmin Gongheguo Xingshi Susongfa (1996 Xiuzheng) [Criminal Procedure Law of the People’s Republic of China (1996 Amendments)] (amended by the National People’s Congress, March 17 1996, effective January 1 1997), available in Chinese at: http://vip.chinalawinfo.com/NewLaw2002/SLC/SLC.asp?Db=chl&Gid=13912 (last visited January 2 2008) hereinafter Chinese Criminal Procedure Law].
[ii] See Ministry of Justice Press Conference Question and Answers Regarding the Revised Lawyer’s Law, available in Chinese at: http://www.npc.gov.cn/zgrdw/common/zw.jsp?label=WXZLK&id=374005&pdmc=1541 (last visited January 2 2008).
[iii] The Chinese Criminal Procedure Law is currently undergoing intense debate before its next round of amendments. See Amendments to the Criminal Procedure Law: from Divergent Ideas to Common Understanding, available in Chinese at: http://www.legaldaily.com.cn/2007fxy/2007-11/18/content_743015.htm (last visited November 18 2007) (one area of concerns in the debates involves coordinating the Criminal Procedure with the Lawyer’s Law to protect lawyer’s rights to keep clients’ confidential information).
[i] See Law Revised to Solve Three Difficulties in the Legal Profession, available in Chinese at: http://www.npc.gov.cn/zgrdw/common/zw.jsp?label=WXZLK&id=374001&pdmc=1541 (last visited January 2 2008).
[i] See China Rules of Legal Ethics, supra note 4, Articles 39, 44, 77-83.
[ii] See id., Article 76.
[i] The Amendments do not contain any provision as to protecting former clients’ confidential information. However, Article 59 of the China Rules of Legal Ethics does provide such protection for former clients. Whether the China All Lawyers Association will revise the China Rules of Legal Ethics to address confidentiality relative to prospective clients is uncertain.
[ii] See American Bar Association Model Rules of Professional Conduct, Rules 1.6, 1.9(c)(1), 1.18 (2006) (Hereinafter ABA Model Rules).
[iii] See id., 1.6(a).
[iv] See id., 1.18(a).
[v] See id., 1.6, comment [2].
[i] See Zhonghua Renmin Gongheguo Liushifa (2001 Xiuzheng) [Law on Lawyers of the People’s Republic of China (2001 Amendments) ] (amended by the National People’s Congress, December 29 2001, effective January 1 2002), available in Chinese at: http://www.law-lib.com/law/law_view.asp?id=16820 (last visited January 2 2008) [hereinafter Lawyer’s Law 2001 Amendments]., Article 33.[ii] The added provision in effect codifies relevant requirements in the current version of the Rules of Professional Ethics and Conduct (Provisional) (2004), available in Chinese at: http://www.law-lib.com/law/law_view.asp?id=82747, (last visited January 2 2008)[hereinafter China Rules of Legal Ethics], Article 56.

Why Did My Lawyer Quit?

Commenting on Latham & Watkins’s withdrawal from representing the Chinese company Wahaha, I kept looking for the reason(s) for the withdrawal. I knew that there had to be some legitimate reason(s); otherwise, the withdrawal would be unethical under the American Bar Association’s Model Rule on Professional Ethics. My mind also led me to wonder how the Chinese law and legal ethics deal with the same issue. Bearing in mind that this post might be a bit technical, I will try to stick to simplicity and help people understand the differences between the two regimes of legal ethics, and how they protect clients’ interests when lawyers decide to quit.

First off, the ABA contemplates two types of withdrawals—permissible and mandatory. A lawyer must withdraw under the following conditions:

1. The lawyer’s physical or mental condition materially impairs the lawyer’s ability to represent the client;
2. The lawyer is discharged;
3. When the lawyer learns of a client’s crime or fraud, and the lawyer fails to dissuade the client from continuing such crime or fraud (Actual knowledge required, mere suspicion not enough). See In re American Continental Corp.

Under ABA Rule 1.16, a lawyer may withdraw if the following conditions are met:

4. The withdrawal will have no material adverse effect on the interests of the client; see Gilles v. Wiley, Malehorn & Sirota
5. The lawyer reasonably believes that the client is doing something criminal or fraudulent;
6. The client has used the client’s service to perpetrate fraud or a crime;
7. The client insists on doing stuff repugnant to the lawyer, and with which the lawyer has a fundamental disagreement;
8. Client fails to perform substantially under contract (paying fees);
9. The representation will result in an unreasonable financial burden on the lawyer or has been rendered unreasonably difficult by the client;
10. The representation will result in a violation of ethical rules or other law; or
11. Other good cause as deemed appropriate by a sitting judge.

Latham & Watkins’s withdrawal from representing Wahaha in the Los Angeles case has to be based on one of the above 11 causes. Once a lawyer decides to withdraw, she has to obtain permission from the court in a litigation case, and the court will examine the reason(s) given by the lawyer to determine whether the facts warrant a withdrawal. Of course, since the case is in California, Latham & Watkins’s lawyers in the local office have to follow California ethical rules, which might differ from the ABA Rules. Because I am not very knowledgeable about the California rules, I will just use the ABA Rules for illustration purposes.(In reality, the California rules and ABA Rules should be substantially similar with respect to terminating representation.)

Compared to the ABA Rules on withdrawal, the Chinese counterpart is far less specific. Currently, two documents provide guidance on the subject of terminating legal representation—the Lawyer’s Law of China (2007) and the Code of Conduct for Practicing Lawyers (2004 Provisional).

The Lawyer’s Law states that lawyers have the right to refuse or terminate representation in the following situations (similar to mandatory withdrawal):

1. the matter to be undertaken by the lawyer violates the law;
2. the client uses the lawyer’s service to violate the law;
3. the client purposefully withhold material facts from the lawyer.
See Lawyer’s Law (2007 Amended), Article 32, paragraph 2.

The Code of Conduct for Practicing Lawyers forbids terminating representation without appropriate cause, see Article 65; but it allows withdrawal when:

4. the lawyer learns of a present conflict of interest between her client and another existing client, (withdraw from representing the client who signed the contract but has not paid fees) see Article 85;

5. the lawyer is suddenly stricken with illness or disease and cannot physically continue the representation, see Article 89; [prompt notice to and agreement from client required before withdrawal]

6. the lawyer has changed her job and needs to move away, see Article 89 [prompt notice to and agreement from client required before withdrawal].

A simple and literal comparison of the American and Chinese rules may lead one to conclude the following:
1. Both rules mandate withdrawal when clients engage in fraud and/or crime, but the American rule requires the lawyer’s subjective knowledge, while the Chinese rule is less transparent on whether knowledge or suspicion is required for terminating the representation.

2. Where withdrawal is permissible, both rules require proper cause. The ABA Rules list six detailed and one general cause, whereas the Chinese rule provides three detailed causes for withdrawal, making the Code of Conduct much less instructive than its American counterpart. But, this is probably typical of statutes and rules in a civil law jurisdiction, where minute and exhaustive provisions on certain topics are less common than in the common law jurisdictions.

3. Overall, from a legal ethics perspective, clients with American lawyers should be able to enjoy more protection under the ABA Rules than they might under the Chinese rules. Under the ABA Rules, a client, at least, pretty much knows why her lawyer quit by way of eliminating the possibilities. But the Chinese rules leave so much room for generality that it might be hard to figure out why her lawyer terminated.