Negotiations for a comprehensive Free Trade Agreement (FTA) between Australia and China were announced last week by Prime Minister John Howard, who said it was the outcome of a joint feasibility study between the two nations. China and Australia will negotiate as equal World Trade Organization (WTO) trading partners, Howard said.

“Australia will recognise market economy status for China for WTO purposes, and the two countries will seek an FTA consistent with WTO rules.”

Australian lawyers are currently restricted to providing advice on international law and Australian law in China, and are not allowed to provide advice on Chinese law, Siva Somasundrum, a lawyer at Minter Ellison’s International Trade Group told Lawyers Weekly.

As well, there are restrictions on foreign practitioners in terms of the number of years experience they must have before they can practise in China. Practitioners need to be in China for about six months to meet residency requirements, “so [firms] can’t fly in and fly out legal services”, Somasundrum said. There are also restrictions on foreign firms employing Chinese lawyers, Somasundrum said, as in some countries firms hire local lawyers to provide advice on local law.

But these are all impediments that could be tackled in Free Trade Agreement (FTA) negotiations with China, and there are scoping opportunities that could push the agenda on legal services, Somasundrum said. But, he added, “it will depend on what is seen by both governments as an appropriate balance”.

As of September 2004, there were 114 foreign law firms in China, seven of which are Australian, said Somasundrum, and part of this process was kick started by the commencement of China in the WTO, he said. An FTA with China will provide opportunity to go beyond what has already been achieved in the WTO, he said, which is the “policy rationale of most FTAs”. “FTAs provide a platform to go further than the WTO,” he said.

Blake Dawson Waldron (BDW), however, says it is too early to tell what effect the FTA may have on its own operations. BDW executive partner of International operations, Philip Edmands, said in an interview with Lawyers Weekly that in terms of the way law firms may operate “it is a bit premature to speculate what might come out of [the FTA]”.

“There are some things that may streamline operating in China. As to exactly what they may entail and how they might affect our operating environment there, it is too early to speculate,” Edmands said.

Lawyers will join accountants and management consultants in potentially benefiting from the possible FTA, according to the joint feasibility study. Legal services, the study states, are becoming increasingly important “as bilateral trade between Australia and China broadens and deepens”.

“There is opportunity to develop a more open legal market and explore through a possible FTA the benefits to both China and Australia the removal of unnecessary regulatory or other barriers to trade in legal and other business services between the two countries,” the study says.

Barriers that could be removed may include restrictions on joint partnerships and other commercial associations between local and foreign firms, as well as the ability of law firms to employ local or foreign lawyers, and to admit partners from other jurisdictions, the study states. Also, “scope of practice issues… minimum experience and/or post qualification requirements, residency requirements and prudential requirements relating to professional indemnity insurance” are barriers that could be removed in an FTA.

The feasibility study also claims that “at a minimum, an FTA would need to go beyond each country’s commitments in the WTO to maximise economic integration between Australia and China”.

Addressing regulatory measures affecting trade in services between Australia and China, the study suggests Australia’s national profession Model Bill includes provisions that will allow foreign lawyers to practise foreign law.

“These conditions currently apply in most states such as New South Wales, Victoria, Western Australia and Tasmania as well as the Australian Capital Territory but legislation still needs to be effected in Queensland and South Australia. It is expected that the provisions in the Model Bill will be implemented by all States and Territories by the end of 2005,” it states. For Chinese lawyers, this will also allow them to practise under their own or their firm’s name, it states.