Malaysian firms can gain from a liberalised market if they change their mindset and learn from newcomers
Chew Seng Kok, managing partner, Zaid Ibrahim & Co
With the Legal Professional (Amendment) Act (LPA) passed in June, Malaysia has embraced an era of liberalising the legal profession. The amendment allows foreign firms to practise in Malaysia as qualified foreign law firms or to partner with a Malaysian counterpart as international partnerships.
Foreign lawyers will also be able to practise in Malaysia under the two new entities, or with a Malaysian firm. However, foreign firms and lawyers will be limited to
practising within prescribed areas of law. This measure is consistent with similar ring-fencing in other ‘liberal’ jurisdictions, such as Singapore.
Pending the issuance of licences it is difficult to predict the outcome and effects of the liberalised regime on the profession in Malaysia.
We can expect to see more competition in work such as capital markets, banking, projects and corporate transactions. Domestic firms with strong practices in these areas should brace themselves.
Many observers predict that competition may cause some lawyers in Malaysia to struggle. However, the entry of foreign firms need not be to the detriment of local lawyers. We should draw lessons from the experience of lawyers in liberalised environments such as China, Japan and Singapore.
At a practical level, local firms should expect to benefit from a wider pool of clients and new practice areas through working with international firms.
They might also be able to get involved in more sophisticated legal products, transactions or projects - especially those with cross-border or multi-jurisdictional elements. Hopefully, they will benefit from transfer of knowledge, sharing of best practice and working alongside international firms, but this is by no means certain.
The challenge for local lawyers is to look for the opportunities or ‘white spaces’ created by the entry of foreign firms. Not all areas will be of interest to foreign firms. The cost structure and skills of international firms are geared towards high-end transactions where they can command premium fees. In run-of-the-mill transactions where they cannot compete on cost, it is likely they will collaborate with domestic firms. This will create more opportunities for new practices, clients and products.
Lawyers in Malaysia need not fear competing so long as they are willing to embrace change and adopt a more competitive mindset. They must be prepared to invest in management systems and tools to enhance their client service to match the standards of international firms.
They should also take a broader view of the market for their services beyond Malaysia. Otherwise, they could lose out on opportunities to get involved in the major projects and mega-corporate deals taking place in their own back yard.