"The introduction of the professional liability system is an important guarantee of the creditability of lawyers," said Li Dajin, vice-president of the Beijing Lawyers Association.

The new system will help improve lawyers' services, Li said, adding that concerns over lawyer misconduct must push law firms to strengthen their management.

"The improvement in services using this system is in line with the rules of the market," said Li.

"The system will influence the profession in profound way, making it quicker and smoother."

In May, Li's association and the Ping An Insurance Company of China pioneered the industry by signing a contract under which the association, at an annual premium of 2 million yuan (US$240,000), can give a total of 400 million yuan (US$48 million) in compensation to parties whose economic losses can be proven to be the result of a lawyer's misconduct.

According to Li, a special committee of the association has already taken up its first case in which a Beijing company claimed that the misconduct of three local lawyers caused great economic losses to the company. The courts have already ruled against the three lawyers.

Minister of Justice Zhang Fusen said during a national conference late last year that a system of professional liability for all law firms is needed as they will face fiercer competition now that an increasing number of foreign law firms are expected to enter the Chinese legal service market as a result of the nation's entry into the World Trade Organization.

"The lack of a professional liability system will not only become a barrier to competition by local law firms with their foreign counterparts, but will also hinder their exploration of the international market," Li said.

Li Jingbing, a lawyer with the Beijing-based ZY & Partners, said that his firm's foreign clients have found the lack of such a professional liability system "unimaginable."

He was confident that the introduction of this practice will help his firm break new ground in the foreign legal service market.

The system, a common practice in the legal profession in foreign countries, is still new in China. There is no mention of it in the law governing lawyers, but sources with the Ministry of Justice said that a related regulation is being developed.

The ministry is also working on a standard version of insurance contracts which stipulates under what situations compensation should be paid and how it should be paid.

Meanwhile, cities and provinces are encouraged to try out the system with their law firms to prepare for possible compulsory implementation nationwide.

Apart from Beijing, nearby Tianjin and East China's commercial hub Shanghai are also contacting insurance companies in hopes of introducing the system into the profession.

An increasing number of companies have held lawyers and law firms liable for losses they have incurred. In one such case, a law firm in Shanghai was ruled by a local court to pay a whopping 2 million yuan (US$240,000) for their misconduct.

It is estimated that there are at least seven or eight cases demanding a total compensation of more than 20 million yuan (US$2.4 million) from lawyers in Beijing.

(China Daily August 6, 2002)