INTRODUCTION
As is well known, China is still a country of statute law in which most of the laws and regulations are enacted and promulgated by the authority of legislature though the judicial interpretations by the Supreme Court and Supreme Procuratorate Office. Generally speaking, judgments in China are not regarded as precedents for the other courts but the references of judges and lawyers. However, those that are promulgated by the Supreme Courts are exceptions. Therefore, Chinese lawyers pay close attention to the legal information usage and management in their legal practices to help them with their work.
Li Zheng
The legal practices of Chinese lawyers can be divided into two main areas which are non-litigation practice and litigation (arbitration) practice. This article, written from a Chinese Lawyer's perspective, aims to explain how legal information is managed at a practical level throughout both practices.
NON-LITIGATION PRACTICE
i. Case registration
When clients retain lawyers to handle a non-litigation case, lawyers firstly register the case in the database of the law firm in order to check if there is any conflict of interests. If not, the appropriate case registration shall be made. The management system of the law firm is the first place to conserve the relevant case information. Generally, the administrative director of the law firm is in-charge of legal information management and research.
ii. Business conditions
From the angle of non-litigation practice, lawyers make clear the business arrangement of the parties of the transaction. For example, in the event of a merger and acquisition case, the lawyers should know and understand the business conditions of both parties such as the basic information of the target company, the target share or assets intended to be transferred, the consideration of the share or assets, the transaction method and the conditions of closing. The business conditions are the foundation of the legal information collected.
In order to make clear the background of the target company, due diligence is essential to every investor and for each transaction. The lawyers investigate and survey the legality of the establishment of the company and check the share structure of company and the assets acquired. The due diligence report that is made by the lawyers is then provided to the retainer for evaluation of the transaction risk. Lawyers call the retainer's attention to the legal risk in the due diligence report which is relied on by the retainers in the event that they make decisions. Therefore, the due diligence report as legal information is very important for the set of business conditions.
The lawyers, in their practices, make a preliminary evaluation of the business conditions for the legality and probability of the transaction. Though the business conditions are commercial, they are part of the future contract and could be considered as part of the information of the legal service.
iii. Legal research
Generally speaking, if the answer to the preliminary evaluation is positive, the lawyers conduct their legal research regarding the transactions. First of all, lawyers research the laws and regulations. Second, they research the statute promulgated by the ministries or local governments. Then they research the legal interpretations of the Supreme Court and the Supreme Procuratorate office.
The legal research may be conducted using an electronic service, such as the LexisNexis China law database (lexiscn.com) or the database, China Law Info. These legal databases provide not only the articles of laws and regulations, but also interpretations for the meaning of the laws and relevant cases, especially with cross-references between different laws and regulations. Naturally, this is convenient for lawyers. The legal materials are used to create the legal route for the parties of the transaction at issue. Such materials are often reserved and arranged according to the requirements for setting up the transaction route.
iv. Transaction route
Indeed, one of the most important duties of lawyers is to create the legal transaction route for their clients. The creation of the transaction requires the lawyers to have legal knowledge, practical experiences, understanding of business and of tax duties. The lawyers make sure that the transaction route is not only legal but a fulfillment of the business intentions of their clients. Sometimes concerns about illegal tax evasion could be made. Some clients have proposed routes regarding the transactions. However, lawyers evaluate the feasibility and legality of the proposed route and revise it, or promote it. The transaction route is considered to be a combination of the business ideas and commercial route in accordance with the legal requirements. The transaction route could be considered as a logical series of thoughts to fulfill the transaction in a legal and efficient way. There are always different routes to the same goal. The task of the lawyers is to find the approach which is mostly applicable to the demand of the clients and to maximise profits. The transaction route should be confidential before the agreement is granted by the both parties. In the event of the agreement on the route, the lawyers shall write it down for both parties for confirmation of the preliminary intent of transaction.
v. Letter of intent
For the convenience of further discussion, the lawyers draft a Letter of Intent for both parties. The letter of intent shall include the main business conditions and transaction route which are the foundation of further negotiation for both parties. Some clients would like to have a preliminary discussion before the conclusion of the letter of intent which could be used in further contract discussions. However, such a letter of intent shall not be legally binding to both parties. Letters of intent are always the foundation of the guideline of the transaction and most of clients should respect the principles involved. When the letter of intent is signed by both parties, both parties shall act according to the content of the letter of intent in further negotiations.
vi. Negotiation
After the conclusion of the letter of intent, further negotiations shall be made regarding the details of the entire transaction. If the structure of the transaction is complex, such negotiations shall be done over several rounds of meetings and the minutes with various aspects of legal information, should be conserved by both parties. The history of the negotiations has the significance of ‘interpretation of article’. If a dispute occurred in the implementation of the contract at a later date, the negotiation history can be used to find the original meaning of the articles.
In the negotiations, with the collaboration principles, collaboration routes, the consideration, the payments of the consideration, and the liabilities of defaults, dispute settlement shall be discussed and confirmed. It is normal for the clients to make changes to the transaction from time to time. Lawyers shall conserve each result of the negotiation which could be used in future rounds of negotiations. Sometimes the legal information in the negotiations shall be recalled and reused, even abandoned temporarily.
vii. Contract draft
During the entire course of negotiation or discussion, the formal contract is prepared by lawyers according to the result of negotiations. The letter of intent is used as the framework of the contract. The details of the contract are be filled in when the lawyers draft the contract. The lawyers shall supplement some details which both parties had not discussed for the purpose of the entirety and precision of the contract. A good contract shall not be about the enumeration of rights and obligations but a route of transaction for both parties which can decrease the business and legal risks during the implementation.
In the event that the draft of the contract is concluded, it is provided to both parties for further negotiations. After the review of both parties, the lawyers will further revise the draft contract if both parties agree on any revisions. Such revisions should honestly reflect the true intentions of both parties and should be agreed on by both parties. The lawyers shall record every revision for the further amendment.
viii. Signing of contracting
The lawyers then make up the list of all documents of the contract and prepare every signature page of the subsidiary agreement for the entire contract. It is necessary for a company in China to stamp its seal on the contracts to make them effective. The effect of the seal shall prevail compared with the signature of chairman of Board of Director or General Manager in a company.
ix. Filing up
After the conclusion of the contract, the lawyers always reserve one set of documents for filing up. If the clients want to look for some information in the contract, lawyers could find the relevant content immediately.
LITIGATION (ARBITRATION) PRACTICE
x. Case registration
Case registration is always the first step in the process of legal information collection. It is also the point for checking any conflicts of interests. In the information database of law firm, lawyers can sometimes find previous cases that were dealt with by other colleagues. If there is a conflict of interest, the lawyers will settle who could handle the case.
xi. Evidence
As a litigation lawyer, the evidence is crucial to evaluate and judge the case. Generally speaking, the clients always provide the main evidence or clues of evidence. The lawyers carefully analyse and select evidence to testify the facts which is used as the foundation for the judge. The catalogue of evidence shall be gathered for the case analysis and the indictment to the court.
xii. Legal research
1. Laws and Regulations:
Based on the facts found by the evidence, lawyers shall look for the appropriate laws and regulations which could apply to the case. As previously mentioned, the databases lawyers use for researching laws and regulations are the LexisNexis' China law database (lexiscn.com) or China Law Info.
2. Case Research:
The relevant cases shall be searched as well, for lawyers to deduce the possible result and persuade the judge to accept the lawyer's point of view in the basis of similar facts.
In 2012, for the first time, the Supreme Court of PRC promulgated twelve cases which are effective in terms of precedent in China. The Supreme Procuratorate Office also promulgated eight cases as guidance in China. Such cases can be searched in the mainstream legal databases. Every court in China shall respect the judgments for these twenty cases (“the precedent cases”) and shall not make different judgments from them. Lawyers shall compare the precedent cases with the cases that they handle so as to find the appropriate legal points to persuade judges to make judgments that are favourable to their clients.
xiii. Litigation strategy
After conducting their research and case studies into laws and regulations, the lawyers consider how to create the litigation strategy which is used to persuade the judges to make the judgment in favour of the lawyer's clients. Every case has its positive side for the retaining lawyers. The task of the lawyers is to find the logic and strategy and look for more evidence to enforce the strategy for the purpose of persuading the judge and make them believe that the statement made by lawyers are in accordance with the facts.
xiv. Court hearing
Before the court hearing, lawyers prepare the relevant legal ground for the case and the guidelines of indictment or defence which are provided to the judge for his reference.
When the lawyer attends the court hearing, they shall provide evidence to implement their litigation strategy and adjust it according to the ongoing court hearing. Lawyers shall record the entire course of the court hearing for the writing of the statement after the hearing on behalf of clients.
CONCLUSION
In a word, the management of legal information shall be in place throughout the entire course of legal practice. Every lawyer pays attention to it in China.
