It is a great honour for me to be given this opportunity to speak at this historic conference. As Hong Kong moves forward in a new era, the SAR government welcomes the strengthening of its working relationships with its neighbours. As the first Secretary for Justice, I particularly welcome the opportunity we have for greater mutual understanding and co-operation in legal matters.

The Pearl River Delta Region has of course become a great economic powerhouse. The fact that the region covers three distinct legal jurisdictions might, at first sight, be thought to be problematic. However, provided the jurisdictions can co-operate effectively, and provided those doing business in the region make informed choices about the location of their activities, the existence of three jurisdictions can be a source of strength and vitality for the region, rather than a problem.

I am sure that the more that we lawyers in the region understand each other's legal systems, the more we can assist in developing the region into one of the wonders of the 21st century. I therefore congratulate the organisers of this conference for their vision in arranging this law conference.

The need to adapt

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This morning, there have been three talks on the changing roles of lawyers in the region. Lawyers, like everyone else, must adapt to change, whilst preserving those elements of their profession which are regarded as fundamental.

The need to adapt may arise from various causes. The services required by clients can change over time; new legislation, or the extension of legal aid, can give rise to more business; or increasing competition can make a certain type of work less profitable.

Hong Kong lawyers

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In Hong Kong, the principle of "one country, two systems" has ensured that the common law system remains in place after reunification. This means that Hong Kong lawyers have not had to adapt to any major change in the legal system, other than to master the Basic Law.

They are, however, in a constant process of adapting to other changes. Over the years, these have included the introduction of China's "open door" policy and increasing business links between Hong Kong and the Mainland. There is one particular influence at work which I would like to highlight today, since it is likely to be of interest to lawyers in the Pearl River Delta Region. That influence stems from Hong Kong's membership of the World Trade Organisation (WTO) and its obligations under the General Agreement on Trade in Services, known commonly as 'GATS'.

Background to GATS

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Movements to promote 'free trade' have been in existence for more than 150 years, and have traditionally focused on the removal of trade barriers in respect of goods. The first attempt to address, through multilateral negotiations, the elimination or reduction of trade barriers in services began only in 1986. The negotiations aimed to extend to trade in services rules and disciplines based on those which govern trade in goods, with a view to promoting trade in services on a competitive and non-discriminatory basis. Eventually, the negotiations were successful and 'GATS' was born.

In October 1994, the Hong Kong Government ratified the WTO Agreement and thus became a founding member of the WTO. Since the coming into effect of the WTO on January 1, 1995, Hong Kong as a member of WTO, has enjoyed the rights, and must observe the obligations, arising from the GATS. These rights and obligations are applicable to legal services and, as I hope to show, are likely to have a significant influence on the legal profession. Since the Mainland may soon join the WTO, Hong Kong's experience with GATS may be of some interest.

What obligations arise under the GATS?

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There are two types of obligations imposed by GATS -

(a) general obligations which apply to all service sectors and all members; and

(b) specific obligations which take effect only for those sectors in which a member has made an explicit commitment.

Hong Kong has not made any specific commitments in respect of legal services, and so it is the general obligations that I will turn to.

General obligations under the GATS

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There are three general obligations which are relevant to the provision of legal services.

(a) Most-favoured-nation (MFN) treatment (Article II)

The first is most-favoured-nation (MFN) treatment. MFN is the founding philosophy behind the GATS. Under this general obligation, any measure taken by a member to services supplied by and service suppliers of another country must immediately and unconditionally be accorded to like services and service suppliers of all members on no less favourable terms. MFN treatment must apply except where a member has specifically sought and obtained an exemption. Where exemptions are not sought, MFN-inconsistent measures run the risk of being challenged unless they can be justified under specific provisions of the GATS or for public order or public security reasons.

(b) Recognition requirements (Article VII)

The second general obligation relates to the recognition of qualifications. GATS permits the automatic and mutual recognition of education and experience obtained, requirements met, or licences or certifications granted, in a particular country, provided that adequate opportunities are afforded to qualification holders from third countries to prove competency and be recognized if they meet the required standards. This general obligation also requires members to set objective, reasonable, non-discriminatory and competency-based criteria for assessing professional qualifications. It is this particular general obligation which has major implications for the legal profession in Hong Kong.

(c) Transparency (Article III)

The third general obligation requires members to publish, or otherwise make publicly available, information on measures affecting trade in services. In Hong Kong, this requirement is satisfied by the publication of such information in the government Gazette or the laws of the Hong Kong SAR. There are some exemptions, so that, for example, confidential information affecting public or commercial interests need not be disclosed.

I now propose to discuss the major implications for the legal profession in Hong Kong of the GATS under two broad headings: the first being the admission of foreign lawyers in Hong Kong; and the second being the indirect impact of GATS on the way in which law firms are organised.

Admission of 'foreign lawyers'

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When discussing the admission of "foreign lawyers", I must emphasis that I use the expression "foreign lawyer" in the way it is used in Hong Kong's Legal Practitioners Ordinance i.e. as meaning a lawyer qualified in a jurisdiction other than Hong Kong. For the purposes of the Ordinance, therefore, lawyers qualified in Macau or in the Mainland are regarded as "foreign lawyers".

So far as the admission of foreign lawyers is concerned the general obligations of the GATS are to ensure that the admission requirements set for lawyers in Hong Kong are objective, reasonable and standards-based. Practising lawyers in Hong Kong are admitted either as solicitors or barristers, and there are different admission requirements for the two branches of the profession.

Admission of foreign lawyers as solicitors

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Until recently, a person could only be admitted as a solicitor in Hong Kong if he or she had obtained professional qualifications in the United Kingdom or certain other common law jurisdictions such as Australia, Canada, New Zealand, Singapore and Zimbabwe. Foreign lawyers who wished to practise foreign law in Hong Kong were subject to an informal procedure for the regulation of their practice based on an undertaking given to the Law Society. Under that informal procedure, the Law Society issued administrative guidelines specifying the terms on which foreign lawyers and foreign law firms were permitted to practise foreign law in Hong Kong.

Such an informal procedure was not satisfactory, because foreign lawyers and foreign law firms were not subject to the Law Society's rules regulating professional conduct, ethics and discipline. In addition, there were no statutory criteria which set out the conditions for the establishment and regulation of foreign lawyers' practices in Hong Kong.

In October 1991, the Hong Kong Law Society released two reports entitled respectively "Outline Proposals for the Regulation of Foreign Lawyers and Foreign Law Firms" and "Scheme for Admission of Non-Hong Kong Qualified Lawyers", proposing a new regulatory scheme. After extensive consultation conducted by the Law Society and the Hong Kong Government, the new regulatory scheme was generally supported by foreign lawyers, foreign law firms and various foreign chambers of commerce. It became law in July 1994.

Principal features of the new regulatory scheme

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There are seven principal features of the new regulatory scheme.

(1) Foreign lawyers and foreign law firms must register with the Law Society before they may practise law in Hong Kong.

(2) In order to qualify for registration, a foreign lawyer must be a person of good standing in the foreign jurisdiction in which he is qualified to practise law, and must be a fit and proper person to be so registered; and for a foreign law firm to qualify for registration it must be of good standing and must have substantial experience.

(3) Foreign lawyers and foreign law firms can practise the law of their home jurisdictions or that of a third country, and are subject to the Foreign Lawyers Practice Rules.

(4) Foreign lawyers cannot employ or enter into partnership with a Hong Kong solicitor to practise Hong Kong law.

(5) A registered foreign firm can enter into an association with a local firm, provided that the ratio of foreign lawyers to local lawyers in the association does not normally exceed 1:1; the association can share premises, facilities and personnel.

(6) Existing restrictions on the admission of non-Commonwealth qualified foreign lawyers have been removed. They are replaced with objective, reasonable, non-discriminatory and competency-based criteria as set out in the Overseas Lawyers (Qualifications for Admission) Rules.

(7) Through an accreditation scheme under the Overseas Lawyers (Qualification for Admission) Rules, all foreign lawyers can gain admission as Hong Kong solicitors by passing a specified examination.

The removal of automatic recognition of Commonwealth qualifications and the provision of a competency-based scheme under which all foreign lawyers can gain admission as Hong Kong solicitors through specified examinations have brought Hong Kong into line with the general obligations under the GATS.

In addition, the new regulatory scheme has made it possible for many lawyers from other jurisdictions to practise in Hong Kong, subject to professional codes of practice and discipline, to the great benefit of Hong Kong's community. As an international financial and business centre, this is a significant development. Currently, there are in the SAR 413 registered foreign lawyers and 53 registered foreign law firms. These foreign lawyers come from 16 different jurisdictions, and include 26 lawyers qualified in the Mainland. In addition, there are nine registered associations between foreign and Hong Kong law firms.

Admission of foreign lawyers as barristers

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I turn now to the criteria for admission as a barrister in Hong Kong. Under current legislation a person may be admitted as a barrister if he or she satisfies one or more of five criteria stipulated in the Legal Practitioners Ordinance.

These are as follows:

(a) He has been called to the Bar in England, Northern Ireland or Scotland and has practised as a barrister or advocate in the United Kingdom for at least three years, or is a Hong Kong permanent resident, or has been ordinarily resident in Hong Kong for at least seven years.

(b) He has obtained a degree in law in the University of Hong Kong or the City University of Hong Kong and has obtained a Postgraduate Certificate in Law (PCLL).

(c) He has obtained a PCLL and is a permanent Hong Kong resident, or is a Commonwealth citizen or citizen of the Republic of Ireland who has been ordinarily resident in Hong Kong for at least seven years.

(d) He has been admitted as a solicitor in Hong Kong for at least three years before her or his application for admission and during that time s/he was in practice as a solicitor in Hong Kong or employed by the Hong Kong government as a legal officer; or

(e) He has been admitted as a barrister or legal practitioner in Australia, Canada (except Quebec), New Zealand, Republic of Ireland, Zimbabwe or Singapore; and has experience in advocacy; and has been employed in the Department of Justice as a legal officer for at least seven years and was so employed for at least three years on work similar to that usually undertaken by a barrister of ten years seniority; and intends, if admitted, to practise as a barrister in Hong Kong within twelve months after her or his admission.

Regrettably, these admission criteria provide no recourse for foreign lawyers coming from non-Commonwealth jurisdictions (such as Macau or the Mainland) to gain admission in Hong Kong. They are therefore inconsistent with the general obligations of the GATS. The Hong Kong Bar Association recognizes the need to change the criteria in order to allow foreign lawyers who possess the necessary qualifications and training to practise at the Hong Kong Bar, and has undertaken to propose appropriate amendments.

In order for Hong Kong to comply with the GATS requirements, it is clear that the criteria for admission as a barrister in Hong Kong must be made objective, reasonable, non-discriminatory and standards-based. One way of achieving this would be to provide for an examination to be taken by foreign lawyers who wish to practise as barristers. The nature of the examination and other requirements could properly differ as between those who are qualified in a common law jurisdiction and those who are not. Detailed proposals are being formulated by the Bar Association for consideration by the Hong Kong SAR Government, and I look forward to the elimination of the current discriminatory admission criteria.

Indirect impact of the GATS on the organisation of law firms

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I have discussed the formal criteria for admission of foreign lawyers in Hong Kong. Let me now consider the indirect impact of GATS on the way in which law firms are organised.

The admission of foreign lawyers and foreign law firms makes available to consumers a range of services that local lawyers cannot provide. At present in Hong Kong there is a rigid demarcation between local and foreign law firms, although associations may be formed between the two types of firms. It is not yet possible for multinational legal practices to be established in Hong Kong. Worldwide, there is an increasing demand for legal services, offered as a package in respect of the laws of several jurisdictions, by a single service entity offering one-stop shopping facilities. This is particularly true in Hong Kong which operates as a regional centre of international trade in goods and services. If a consumer needs advice on the law of Hong Kong and that of another jurisdiction, there are no multinational law firms to which he can turn.

The foregoing are, of course, arguments in favour of allowing multinational practices -- the arguments relate to convenience, reduced costs, efficiency and competitiveness. These arguments have prevailed in England where legislation enacted in 1990 removed the statutory barrier to such practices. Similarly, in most states in the USA local lawyers are permitted to enter into partnerships with foreign lawyers.

In 1995, the former Hong Kong Government published a Consultation Paper on Legal Services which solicited views from the profession and the wider public as to whether partnerships of local and foreign lawyers should be permitted. The public response was mixed. The Law Society was against such partnerships both because it wished to ensure that the practice of Hong Kong law remains under the direction of solicitors admitted in Hong Kong, and because it believed that a measure of caution was appropriate during the transition to reunification. In view of the mixed public reaction on this issue, no legislation was introduced to permit multinational practices.

In my view, the long-term effect of the GATS on the legal profession is that it will act as a catalyst for the development of multinational legal practices. This is because the admission of foreign lawyers and the ability of foreign lawyers to qualify as local lawyers will gradually lead to a break-down of the barriers between local and foreign firms. In addition, the need of consumers of legal advice from various jurisdictions is likely to generate a growing and irresistible consumer tide for the recognition of multinational practices.

Conclusion

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I would like to conclude with a few observations. First, if free trade is one of the building blocks of global prosperity, that principle applies as much to trade in services as it does to goods. Secondly, the provision of legal services is crucial to developed and service-oriented economies. Thirdly, it follows that there are great advantages to be gained from removing discriminatory barriers that restrict the entry of foreign lawyers to any particular market.

For its part, the SAR Government is committed to ensuring-

(a) that the community should have access to high quality legal services from local as well as foreign lawyers; and

(b) that the SAR will maintain its status as an important international centre for the provision of legal services.

Beyond such commitments, the GATS surely has a life of its own. The unstoppable consumer-led demand for one-stop shopping will lead inevitably to the establishment of multinational legal practices which will help to fuel the engine of the Pacific Century.

I hope what I have said today will be of interest to those of you from Macau and the Mainland, who have economic and legal goals that are similar to those of Hong Kong SAR. I also look forward to a continuing dialogue with you on all legal issues which are of mutual interest. Such a dialogue will help us all to achieve our goals, and to make the Pearl River Delta Region the foremost region in the Motherland for the provision of domestic and international legal services.