What Next on CEPA

It has been 16 years since the coming into operation of The Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) on 1 January 2004. Through the effort of all stakeholders over the years, this free trade agreement signed between the Mainland and Hong Kong has gradually expanded its scope by subsequent supplemental agreements, achieving liberalisation in market access for different service sectors in both jurisdictions.

Firm Level

Mode of Operation

For the legal profession at the law firm level, the permitted mode of operation for Hong Kong law firms in the Mainland has progressed from a representative office (with the two-month Mainland residency requirement for representatives of the office completely removed since 2007), to a non-partnership association with a Mainland law firm (from 2004), and further to a partnership association with a Mainland law firm (from 2014). Unlike a non-partnership association which only allows the firms in the association to separately employ their own lawyers, a partnership association is permitted to employ Mainland and Hong Kong lawyers direct in its own name. This is a big step towards enhancing a sense of belonging of the lawyers to the partnership association and creating a genuine partnership that can offer integrated legal expertise from both jurisdictions to a much wider pool of clientele.

Geographical Restriction

The formation of a partnership association between a Hong Kong law firm and a Mainland law firm was initially restricted to Qianhai, Nansha and Hengqin in 2014. The geographical restriction was relaxed and the measures relating to partnership associations were extended to cover Guangzhou, Shenzhen and Zhuhai in 2016, then the whole of Guangdong Province in 2017 and finally the entire Mainland in March 2019. As of October 2019, 11 partnership associations between Hong Kong and Mainland law firms have been set up, with seven in Shenzhen, two in Zhuhai and two in Guangzhou. With the relaxation of the geographical restriction, it is expected that this mode of operation will be taken up outside the Guangdong Province very soon.

Scope of Practice

A partnership association can handle and undertake non-litigation legal matters, civil and commercial litigation and administrative litigation, but not criminal litigation involving Mainland law.

Capital Requirement

The capital injection requirement on the Hong Kong firm in a partnership association has also been relaxed. The Hong Kong firm partner used to be required to contribute not less than 30 percent (but not more than 49 percent) of the total capital injection of the partnership association. The minimum 30 percent capital injection requirement on the Hong Kong firm partner was removed in the Guangdong Province in August 2019 and will be removed for the entire Mainland in June 2020.

Individual Level

Legal Consultant

At the individual lawyer level, there is increasing flexibility for Hong Kong lawyers to provide case specific professional assistance to their Mainland counterparts. Hong Kong lawyers were formally permitted to be employed by Mainland law firms under CEPA in 2004, but they must first obtain a Hong Kong legal consultant permit. From 2005, they are no longer required to apply for the Hong Kong legal consultant permit if they provide legal assistance on an individual case basis at the request of Mainland law firms. From June 2020, the current restriction that a Hong Kong lawyer can work as legal consultant in one Mainland law firm only will be relaxed to not more than three Mainland law firms at the same time.

Qualification as a Mainland Lawyer

Those who wish to qualify as Mainland lawyers and who fulfil the eligibility requirements may take the National Legal Qualification Examination organised by the Ministry of Justice. To facilitate Hong Kong residents to take the Examination, since 2005, the Examination has been arranged to be held in Hong Kong each year so that candidates do not have to travel to the examination centres in the Mainland. In 2018, 108 Hong Kong residents passed the Examination.

Internship Requirement

Further, since 2009, the internship requirement has been relaxed to allow Hong Kong legal practitioners with five years or more professional experience to be exempted from the one-year internship requirement except for at least one month’s intensive training organised by the local lawyers association in the Mainland. This solves the difficulty of many Hong Kong lawyers who cannot be away from their Hong Kong practice for one year to complete the internship training.

Scope of Practice

A Hong Kong resident who is also admitted as a Mainland lawyer shall only handle non-litigation matters in his or her capacity as a Mainland lawyer. Since 2013, the scope of permitted service has been extended to include acting as agents in civil litigation cases relating to Hong Kong covering disputes in family and matrimony, succession, contracts, intellectual property rights and corporate securities and insurance.

Practice in Greater Bay Area

Further, as published recently, eligible Hong Kong legal practitioners, upon passing a special examination, will be qualified to practise in specific areas of Mainland law in the nine Mainland cities of the Greater Bay Area. This liberalisation measure will take effect from June 2020 with the exact details and the commencement date of the special examination to be announced later. This is a much welcomed breakthrough as it provides an avenue to enable experienced Hong Kong lawyers in identified practice areas to qualify as Mainland lawyers and helps strengthen the talent pool to support the growing demand of multi-jurisdictional legal services in the Greater Bay Area. It also provides an incentive to more Hong Kong lawyers to actively pursue a better understanding of the Mainland legal system through studying for the special examination and nurtures deeper mutual understanding of the differences in the legal systems of both jurisdictions.

The brief stock-take above shows the hard work that all sides have put in to maximise the benefit that can be derived from the synergy of the two legal systems. There are still many other areas that need to be worked on including the practical hurdles in operating a partnership association (eg the requirement of minimum capital injection of RMB5 million, the maximum limit of the capital ratio of 49 percent for Hong Kong firms and the prohibition against individual lawyers becoming partners, etc). Members’ comments on the areas that require improvement are most welcome.

Jurisdictions: 

Secretary-General, Law Society of Hong Kong