In what was perhaps the biggest news for the legal industries on both sides of the Taiwan Strait, the mainland lifted the ban on Taiwan residents from becoming PRC-qualified lawyers. The move saw the first Taiwan resident, Zhu Xiangyang, permitted to practise law in the mainland in January this year.
Just as the direct transport and direct postal links, commenced last December, will give a valuable boost to the economic ties between the two sides, the opening up of the mainland legal market to Taiwan residents will stimulate more cooperation and business opportunity for law firms on both sides of the Strait.
"Permitting Taiwan residents to practise law in the mainland is a good move, which will promote positive cross-strait relations," said Dong Xiao, partner at Beijing Lantern. "The move allows lawyers from both sides to learn from each other and better understand each other's legal system."
Under the general rules, Zhu Xiangyang is required to take a one-year internship in a law firm before he can be granted a lawyer certificate to be a fully PRC-qualified lawyer. He is currently a trainee lawyer with Beijing Lantern, working with partner Dong Xiao.
In April 2008, the Ministry of Justice allowed Taiwanese to sit the mainland judicial exam and 37 out of over 600 Taiwanese candidates passed the exam in September last year. Many of them are now applying for internship with firms in Beijing and Shanghai.
According to the administrative measures issued by the Ministry of Justice last December, qualified Taiwan lawyers with a PRC licence can even become partners of domestic firms. PRC firms are welcoming the measures and expect Taiwan lawyers and partners to bring more business to mainland firms.
"Local firms with Taiwan lawyers can provide value-added legal services to Taiwanese companies and investors doing business in the mainland. These firms will attract more Taiwan clients and instructions on cross-strait deals," said Dong.
Mainland companies to invest in Taiwan
Since the mainland let in Taiwan companies in the early 1980s, their investment in the mainland has reached US$47.66bn by the end of 2008, accounting for 5.6% of the mainland's total FDI inflows.
Providing legal services for Taiwan companies investing into the mainland has been regarded as an established and traditional practice in many firms. The most anticipated new trend and area of growth is facilitating mainland investment into Taiwan.
The regions are expected to sign a financial industry memorandum of understanding later this year. Lawyers from both sides are looking forward to a surge in mainland investors into Taiwan after the memorandum is signed.
Mainland financial institutions are likely to lead the new wave, as the Bank of China (BOC) and Industrial and Commercial Bank of China (ICBC) are reportedly eyeing a stake in Taiwan's Mega Financial Holding and seek to enter the island market.
"A significant number of companies in Taiwan are in need of capital and are hoping to attract investment from mainland companies," said Wang Guangming, managing partner of the Dacheng Shanghai office. "We expect Taiwan to allow mainland companies to enter its market soon. Letting in mainland investment will help the Taiwan economy to recover from the global financial crisis."
Last November, Dacheng launched The Cross-Strait Legal Service Center ("the Center") in Shanghai, a joint initiative of the firm and the Taiwan All-China Federation of Industry and Commerce ("TAFIC").
The Center aims to provide legal services for both Taiwan and mainland clients, and has a particular focus of filling the gap in legal services for those who intend to invest in Taiwan. "With improved cross-strait relations, our domestic clients are increasingly interested in investing into Taiwan. We are proactively taking steps to facilitate client needs," said Wang.
Concerns about competition
The ability of the Taiwan residents to take the PRC bar exam and be admitted is a welcome development. But there have been some concerns over how competition between their legal markets will develop.
The main question is whether Taiwan firms will lose more legal talent to mainland firms, as more lawyers are lured by the higher earning potential and larger market in the mainland. "The mainland legal service market is lucrative, and the new measure will attract more Taiwan lawyers to practise in mainland firms," said Dong.
However, Baker & McKenzie's Taipei managing partner H Henry Chang remains doubtful about the effects on the two legal markets.
"Sharing of legal talent will undoubtedly increase as the cross-strait trade and investment relationship grows but it will not become interchangeable as a result of the current trade liberalisation polices," Chang said. "For the time being and for the short term, we will see more inter-firm cooperation in cross-strait business deals."
Another question remains, as to whether Taiwan is likely to reciprocate and open its bar to mainland lawyers. This seems unlikely, as an official in Taiwan ruled has out the measure, giving differences in the legal systems and an overcrowded local industry as the reasons.