Hong Kong/Amnesty. Chinese puzzle for Hong Kong firms

Unlicensed UK and US law firms practising in China are being forced to pack their bags following a crackdown by the Ministry of Justice on illegal offices. Foreign firms say authorities are enforcing long-ignored restrictions on their local operations without warning.

The hard-line stance appears to have spread to those practices working legally on the mainland. Since 1994, the number of foreign law firms officially licensed to operate in China has been cut by 9 per cent.

The 40 foreign law firms operating in China specialise in areas covering corporate finance, joint ventures, property, securities, tax, commercial law and foreign investment.

"It is a golden rule that foreign firms in China do not touch human rights cases," says one UK lawyer. "It is just not in their best interests if they want to continue practising in the mainland. My concern is if this attitude is adopted in Hong Kong after 1997."

The recent clampdown is related to anticipated changes in Chinese regulations. Originally, firms were allowed into China with representative offices by concession. The situation changed in 1993 when the 'one law firm, one licence, one place' rule was introduced to formalise the whole system.

Next year, the Ministry of Justice will implement new rules allowing companies which already have legitimate offices to open branches in other cities. Before issuing multiple licences, it wants to clear out all unregistered offices.

One of the major problems anticipated with 1997 is how China will conduct human rights cases. Many legal experts are sceptical and say there are serious worries about how China will adhere to Hong Kong's legal system.

Politician and barrister Martin Lee QC was recently banned from attending an international law conference in Beijing because of his political stance. This incident highlighted a concern that looms larger as the British colony approaches its return to Chinese sovereignty. Will Beijing continue to respect the territory's rule of law?

Further fuelling anxiety are doubts about whether Hong Kong will have a court to act as a final avenue for legal appeals during the crucial transition period leading up to the handover.

Frightened by Hong Kong's potential legal risks, businesses here are also acting to protect themselves after China takes over. Many Hong Kong listed companies have taken out insurance on 1997 by relocating - at least on paper.

More than half of the 529 companies listed on the Hong Kong Stock Exchange in 1994 have transferred their legal domiciles to Bermuda or the British West Indies.

The first such notable case involved Jardines. The group, traditionally one of the strongest expatriate organisations in the colony, moved its domicile to Bermuda to protect it from a Chinese 'buy-out' after the handover. The move was prompted by China's refusal to forgive Jardines for its part in the opium wars in the late nineteenth century which led to Hong Kong becoming a British colony.

More recently, barrister Martin Lee was banned from attending the recent Law Asia international conference in Beijing. Zou Yu, head of the China Law Society, said that there was "no place at the conference for people like him" because he was a core member of the 'subversive' Hong Kong Alliance in Support of Patriotic Democratic Movement in China.

Ironically, Lee was presented with the American Bar Association's International Human Rights Award the week before the conference. And it was Lee's Democratic Party and its allies who emerged recently as the dominant force in Hong Kong's new representative Legislative Council.

China made some headway in reforming its legal system following the acceptance by a Beijing court of a lawsuit filed by dissident Zhou Guoquiang which said that it had not documented the laws he had allegedly broken.

However, it is widely acknowledged that there can be no real improvement until China reforms its political structure. Human rights groups say that while they welcome the opportunity for dissidents to challenge authorities' decisions in the courts, nothing too significant should be read into it.

Wang Dan tried to sue the Beijing police under the same law for violating his privacy. He claimed he was followed and kept under 24-hour surveillance, but as there is no provision covering this right under the administrative litigation law, his efforts proved fruitless.

Many people are worried that Hong Kong's efficient legal system will change once the territory becomes accountable to China. Their anxiety is based on China's enigmatic stand on a British plan to set up a court of final appeal for the territory.

Hong Kong officials say that setting up a court of final appeal, which would replace the Privy Council in London as Hong Kong's ultimate arbiter of law, is essential to avoid a legal vacuum during the transition to Chinese rule.

In 1991, China and the UK agreed a formula for how the court of final appeal would be manned. But Chinese negotiators now refuse to endorse Hong Kong legislation to set it up (The Lawyer, 27 June 1995).

Even with the establishment of such a court, legal uncertainty would not disappear. One reason is a provision of the transitional Basic Law that says a standing committee of China's National People's Congress gets the final say in Hong Kong court cases concerning affairs which are the responsibility of China's central government.

The main cause of concern is that any case can come under this category after 1997 as Hong Kong effectively becomes part of China.