December 18, 2002

Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington DC 20549-0609

Dear Mr. Katz,

Standards of Professional Conduct for Attorneys -- Implications for the People's Republic of China and the Hong Kong Special Administrative Region (File No 33-8150.wp)

We are U.S. attorneys practicing in the Hong Kong Special Administrative Region ("Hong Kong") of the People's Republic of China (the "PRC"). We are submitting this letter in response to the request of the Securities and Exchange Commission (the "Commission") for comments on the Commission's proposed rules regarding standards of professional conduct for attorneys.1 We appreciate the opportunity to comment on the matters discussed in the Proposing Release.


In our view, the position of attorneys in the PRC and Hong Kong is unusual and merits attention prior to adopting final rules for Part 205.

Issue. Section 307 of the Act contemplates the creation of standards of "professional conduct" for attorneys. The Commission's definition of "attorney" in paragraph (c) of proposed section 205.2 includes persons not licensed as attorneys in any State. The considerations for regulating non-attorneys are fundamentally different from those that apply to regulating the conduct of attorneys. In addition, attempting to regulate attorneys in countries such as the PRC with legal systems fundamentally different from the legal system in the U.S. also raises different concerns.

Proposal. Exclude from the definition of attorney:

    1. persons not licensed to practice law in any jurisdiction; and

    2. persons licensed to practice law only in the PRC.

We believe our suggestions are compatible with the objectives of Section 307 of the Act. We also note that there will certainly be other interpretative issues that will be identified in the course of implementing the Act and related rules in Part 205. Therefore we encourage the Commission to retain flexibility in its final rules to deal with such issues on a country-by-country and case-by-case basis.


United States

The power to regulate the practice of law, including the power to admit and to discipline attorneys, is an inherent power of the courts. Every State in the U.S. recognizes this principle. An attorney is an officer of the court in the State where admitted and whether a person shall be admitted as an attorney or disciplined is a judicial, and not a legislative question. In particular, attorneys in the U.S. owe a duty to the court in the State where admitted2and are subject to the court's discipline.3Under the constitutional doctrine of separation of powers, the judiciary has inherent and primary regulatory power over attorneys.4 The distinction between attorneys and non-attorneys is strictly maintained. Every State in the U.S. prohibits the unlicensed practice of law and has standards for the admission of attorneys to practice that are carefully enforced.5

The PRC and Hong Kong

The Chinese Constitution provides that the PRC is a unitary socialist state. Under the central authorities the PRC is divided into provinces, national autonomous regions, municipalities and special administrative regions. Under the Basic Law6 Hong Kong is authorized to enjoy significantly more power and autonomy than provinces, autonomous regions and municipalities. Nonetheless, the central authorities of the PRC retain certain powers with respect to Hong Kong.

Judicial institutions in Hong Kong are vested with independent judicial power including that of final adjudication of the Basic Law. Judicial institutions in the PRC are divided into two tracks: people's courts and people's procuratorates. The people's courts are judicial organs of the state. The presidents of people's courts are elected by people's congresses every five years. Judges (other than assistant judges) are appointed by the standing committee of the people's congresses. The people's courts at various levels are responsible to the people's congresses that created them. The people's procuratorates are state institutions for legal supervision, and exercise supervisory power over the general public, government institutions, individuals and the people's courts.

Hong Kong operates under a traditional common law system. The power to interpret laws is vested with courts and judges. In 1999, the 19th National People's Congress of the PRC incorporated the rule of law as a basic guiding principle in the PRC Constitution and included the rule of law as a separate subject in a plan for reform of the political system. Currently, Article 67 of the Chinese Constitution provides that the Standing Committee of the National People's Congress ("NPCSC") is responsible for interpreting the Constitution and laws. Interpretations by the NPCSC must be followed by other government bodies, including peoples' courts. The Supreme People's Court has the power to make judicial interpretations, but only for concrete issues on how to apply laws.

Attorneys in Hong Kong are admitted to practice and supervised on the basis of the system operating in Hong Kong prior to the hand-over of Hong Kong to the PRC in 1997, and the system is specifically protected by the Basic Law for a period of 50 years.7 Attorneys in the PRC are defined by the Law of the People's Republic of China on Lawyers (the "Lawyers Law") as "legal practitioners who have obtained business licenses according to the law and provide legal service for the society."8 Before the adoption of the Lawyers Law, all attorneys in the PRC were legal workers serving the country and the government. Under the Lawyers Law, all attorneys must join their local bar association and a lawyer joining the local bar association will simultaneously become a member of the All-China National Lawyer's Association ("ANLA").9 The ANLA has promulgated "Model Professional Responsibility and Practice Disciplines" setting forth standards of conduct for attorneys. Among other things, the Lawyers Law clearly prohibits attorneys from disclosing a "business secret" or "private information" as a general rule.10

Persons Not Licensed to Practice Law

We respectfully suggest that persons not licensed to practice law in any jurisdiction should not be included within the definition of "attorney" in paragraph (c) of proposed section 205.2. Doing so is unnecessary. Non-attorneys are not subject to an attorney's standards of professional responsibility. If the Commission wishes non-attorneys to report "evidence of material violations" to the Commission it may require them to do so without concern for the considerations of professional responsibility that make the various requirements of Part 205 necessary in the case of attorneys. We do not believe that regulating non-attorneys is an objective of Section 307 of the Act.

Interests of the Judiciary

We also believe the Commission should recognize that the judiciary has a compelling interest in assuring that its role in relation to other branches of government is respected. Among other things, this assures that the judgements of U.S. courts will be respected and recognized as impartial by foreign courts under principles of comity and that attorneys admitted to practice law in any State will have the opportunity to practice in other countries without being subject to undue regulatory burdens. The authority to recognize or not recognize the qualifications of foreign attorneys is fundamental to the judicial process of protecting the interests of members of the bar. Therefore the term "attorney" should not be redefined by the Commission without careful consideration. If the Commission chooses to permit foreign attorneys not recognized as attorneys by any State to appear and practice before it,11in our view it is reasonable to adopt rules that accommodate the professional responsibilities of U.S. and foreign attorneys in a uniform manner, where possible. However, we urge the Commission to maintain appropriate distinctions between foreign attorneys and U.S. attorneys, in light of the compelling interests of the judiciary and the uniform view of States that distinctions between attorneys and non-attorneys should be strictly maintained.

Hong Kong and the PRC

We also consider it appropriate for the Commission to retain the ability to make distinctions between foreign attorneys in at least some instances. The incorporation of an acceptable principle to distinguish between foreign lawyers is particularly important in the case of the PRC and Hong Kong. The legal system in Hong Kong has a well-established history of judicial independence recognized by U.S. courts12and protected by provisions of the Basic Law.13The PRC legal system is in transition with steps being taken to recognize the rule of law and the role of attorneys, but there exists no clear precedent under which U.S. courts have recognized the judicial findings of courts in the PRC under principles of comity. The combination of two distinct legal systems in one country is unusual, with relatively little precedent.14In our view, is not reasonable to ignore the significant differences that exist between the two systems or the differences between the PRC and the U.S. legal systems.

We respectfully suggest that, due to the absence of clear U.S. precedents recognizing judicial findings of courts in the PRC under principles of comity, at this time it is not sufficiently clear that attorneys licensed to practice law only in the PRC can be expected to assist the Commission in achieving the objectives of Section 307 of the Act.15 Therefore, persons licensed to practice law only in the PRC should be excluded from the definition of attorney in paragraph (c) of proposed Section 205.2.

* * * * * *

We would be happy to discuss any questions the Commission or its staff may have with respect to this letter. Any such questions may be directed to Peter Curley (011-852-2974-7172).

Very truly yours,

Peter J. Curley
Hong Kong

For myself and, by specific authorization, on behalf of:

David Johnson
Hong Kong

Jeffrey Maddox
Hong Kong

End Notes

1 SEC Release Nos. 33-8150; 34-46868 (November 21, 2002). We refer to this release as the "Proposing Release." We refer to the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7201 et seq.) as the "Act."
2 See, e.g. U.S. v. Associated Convalescent Enterprises, Inc., 766 F.2d 1342, 1346 (2d Cir. 1985); Steinle v. Warren, 765 F.2d 95, 101 (7th Cir. 1985); People ex rel. Karlin v. Kulkin, 162 NE 487, 489-490 (N.Y. 1928).
3 See, e.g. Miano v. AC & R Advertising, Inc., 148 F.R.D. 68, 74 (S.D.N.Y. 1993); In re Co-operative Law Co., 92 NE 15, 16 (N.Y. 1910); Kraushar v. La Vin, 42 N.Y.S.2d 857, 859-860 (N.Y. Sup. Ct. 1943); Chenango Valley Sand and Gravel Co. v. Paddelford 13 N.Y.S.2d 1006, 1010 (N.Y. Sup. Ct. 1939).
4 See, e.g., Middlesex County Ethics Committee v. Garden State Bar Ass'n, 457 U.S. 423, 432-434 (1982); Cohran v. State Bar of Georgia, 790 F.Supp. 1568, 1573-1575 (N.D. Ga. 1992); In re Attorney Discipline System, 79 Cal. Rptr.2d 836, 842 (Cal. 1998).
5 See (compiling unauthorized practice of law statutes from every State).
6 The Basic Law of the Hong Kong Special Administrative Region of the People's Republic of China (the "Basic Law").
7 The Basic Law, Chapter IV, Section 4, Article 94.
8 Lawyers Law, Article 2.
9 Lawyers Law, Article 39.
10 Lawyers Law, Article 33. In certain circumstances a lawyer retained by an issuer of securities may be required to publish a "qualified opinion" on the truthfulness and completeness of a document equivalent to a prospectus, explaining the reasons why it is qualified. Lawyers may also be required to provide detailed notes and records to the China Securities Regulatory Commission, including records regarding the lawyers' communications with their client. See, Code for Information Disclosure by Listed Companies, No. 15 -- Legal Opinion and Lawyers Working Report, CSRC March 1, 2001, Section 26.
11 5 U.S.C. 500(d)(1).
12 See e.g. Kwongyuen Hangkee Co., Ltd. v. Starr Fireworks, Inc., 634 N.W.2d 95, 98 (S.D. 2001); Matter of Axona Intl. Credit & Commerce Ltd., 88 B.R. 597, 611 (Bankr. S.D.N.Y. 1988), affd. 115 B.R. 442, appeal dismissed 924 F.2d 31.
13 See, The Basic Law, Chapter IV, Section 4 (enumerating the powers of the judiciary and protecting the judiciary's ability to exercise judicial power independently, free from interference).
14 Tong Wei, Recognition of Divided States: Implication and Application of Concepts of "Multi-System Nations", "Political Entities" and "Intra-National Commonwealth", 34 Int'l Law. 997 (2000).
15 See Hilton v. Guyot, 159 U.S. 113, at 202-03 (1885) (finding "a system of jurisprudence likely to secure an impartial administration of justice" as an element in determining whether recognition of judicial judgements would be extended under principles of comity).