THE JAPANESE government is poised to reject proposals that foreign firms should be allowed to practise domestic law - dashing the hopes of US and UK firms based in Tokyo.
The committee set up by the government two years ago to examine the issue is due to make its final report at the end of this month.
But it is an open secret that it will recommend that the current ban on foreign firms employing local lawyers should remain in force.
The news has disappointed foreign lawyers who have been battling for a relaxation of the rules for almost two decades and who originally had high hopes of a favourable result.
Jonathan Inman, a partner at the Tokyo office of Linklaters & Paines who gave evidence to the committee on behalf of UK lawyers, said: "Because the government had agreed to look at the employment issue we were fairly confident that the committee would do something to allow bengoshi [members of the Japanese Bar] to be employed by foreign law firms."
But he said there had been several hints that the committee, whose members were mainly local lawyers, was preparing to take a hard line.
Andrew Grenville, partner at Clifford Chance's Tokyo office, added: "As it continued its deliberations, we heard rumours and began to feel less optimistic."
Foreign lawyers are also concerned that the focus of the review was too narrow. The committee was briefed to look only at the employment issue
Inman said: "The really big issue is whether or not partnership between bengoshi and foreign lawyers is allowed. Employment is not a satisfactory solution because nobody would want to be employed if they were not going to be able to become a partner."
Unsuccessful attempts - including a plea from the then Law Society president Tony Girling on a visit to Tokyo earlier this year - were made to persuade the committee to consider the partnership issue
Jonathan Goldsmith, international director at the Law Society, said the society would continue to put pressure on the Japanese to change the rules.
Other possible courses of action include making a direct approach to the Japanese prime minister or taking the matter further in trade negotiations.