Wish you were here
13 August 2001
7 August 2013
26 May 2014
20 January 2014
New rules provide a framework for Shanghai free-trade zone to open the doors on VATS: a cause for optimism?
23 April 2014
30 September 2013
It may seem as if there is little that can stand in the way of the juggernaut-like progress of the modern global law firm. But there are plenty of places left on the planet that can resist its charms and are more than happy to fly in the face of the trend towards the opening up of legal markets. By way of an example, last month City firms and the Law Society renewed efforts to open the highly-valued - but totally inaccessible - South Korean market to foreign firms. "It's like putting in a 30-ton of effort just to get a sugar cube," complains one jaundiced City lawyer. But, he says, you have to keep trying.
It has been more than a year since the UK implemented the European Establishment of Lawyers Directive, providing EU lawyers with the right to practise law under their own title in any other member state. One might reasonably have envisaged a new era of freedom and opportunity for international lawyers; however, an eventful 12 months suggests otherwise.
Luxembourg went so far as to challenge - unsuccessfully - the directive in the European Court of Justice (ECJ), and a number of member states continue to drag their feet over its implementation. Earlier this month, the ECJ began legal action against France, Spain and Ireland for their failure to recognise lawyers qualified in other countries.
If legislators on the Continent have been slow to act over the last 12 months, local bar societies have proved more zealous than ever at protecting local markets and generally giving UK lawyers a hard time.
"They'll have to carry me out first," were the reported words of solicitor Ronald Swyer, after Portuguese police threatened to shut down his Algarve office over allegations of illegal practice. The European Commission (EC) started legal action against Portugal at the beginning of the year following complaints over the treatment of Swyer and another ex-pat lawyer by the Faro bar.
|"While lawyers get hot under the collar around the dinner tables in Seoul, their colleagues in India took to the street in violent demonstrations last March. Commentators in the press compared the threat posed by foreign lawyers to a reincarnation of the East India Company"|
In May this year, criminal charges were dropped against 29 solicitors from 12 firms - including Norton Rose, Richards Butler and Clyde & Co - that were accused of practising illegally in the Greek port of Piraeus. There were similar threats of legal action in the Slovak Republic and Romania.
David Anderson, a partner at London firm Sykes Anderson, recounts a cautionary tale which illustrates just how far local lawyers are willing to go to keep out the English. Moving from London to the South of France might seem like a relaxing pursuit, but this was not the case when Anderson attempted to set up a Montpellier office to tap into the wealthy community of ex-pats at the end of the 1990s.
It might be easier for large firms opening up a new office which might be "coming in on the back of some commercial client", he believes, but smaller firms targeting local business have a harder time of it. "Obviously, we were going to have an aggressive marketing approach and take business away from local people, and at that stage it turned quite nasty," he says.
Indeed it did - not only did the lawyer have to sit the normal professional exams to qualify in the Montpellier region, but an extra hurdle was also introduced. As Anderson recalls, the head of the bar intervened personally to conduct his own verbal examination. "I passed all the exams on aggregate, but the one exam which he gave me I failed on," he remembers. Overall, the lawyer scored a respectable 60 per cent (the directive simply requires a pass mark) but the bar ruled that the UK lawyer had failed. "When I started protesting he basically told me to go home and not to come back," says Anderson.
The regional bars run independently without an opportunity for appeal or any form of complaints procedure. "This guy has overall control, and if you fall out with him there's no point in continuing," says Anderson.
According to Christian Wisskirchen, a member of the Law Society's International Policy Executive for Europe, the worst-case scenario at the moment is taking place in the Slovak Republic.
|"You always have the fear they're going to come in, shut you down and say that you have to be out of there in three months"|
Jason Mogg, Linklaters, Slovak Republic
"The current situation is that no foreign lawyers are allowed to give any legal advice whatsoever - it's terribly bad," Wisskirchen reports. "So what firms have done is establish different business vehicles from the traditional law firm." The Slovak bar, however, refused to believe that foreigners - including Allen & Overy (A&O) and Linklaters & Alliance - were not providing direct legal advice and threatened legal action. The prosecution was abandoned in May this year, shortly after the Lord Chancellor, Lord Irvine paid a visit and raised the subject.
"It's an ongoing battle," reports Jason Mogg, head of Linklaters' Bratislava office. "At any moment, you always have the fear they're going to come in, shut you down and say that you have to be out of there in three months."
Legislators are currently working on the Slovak Advocacy Act. It was hoped that the legislation would provide comfort for foreign lawyers, but instead the opposite effect has been achieved. In March, the Law Society offered a cautious welcome to the redraft of the second draft amendment of the act, which for the first time introduced a separate status for foriegn lawyer consultants.
"Each time we get one clause taken out, another one pops in there, which would have an equally repugnant effect," says Mogg. "They keep trying to get a formula that would have the effect of making life completely miserable for foreign firms."
One clause stipulates that a payment of a euro500,000 (£308,995) bond must be paid to cover professional liability. "Blatant protectionism" is the incensed view of one lawyer. According to Mogg, any firm required to put up that kind of money for its lawyers "has got a huge cashflow problem indefinitely".
Under the draft, foreign lawyers could advise on domestic and international law. The Law Society said this was "acceptable" but wanted it broadened to include any law except Slovakian. The redraft requires that for foreign lawyers to achieve international lawyer status they need five years experience under their home professional title which, according to the society, violates the Slovak Republic's commitment under Gatt (General Agreement on Tariffs and Trade).
While some of the former Eastern Bloc states remain intransigent, others are surprisingly open. CMS Cameron McKenna became the first Western firm to enter Belgrade, arriving two months before Slobodan Milosevic was dramatically toppled from office last October.
The new office falls under the remit of the Austrian practice CMS Strommer Reich-Rohrwig Karasek Heinz. According to partner Alfred Strommer, setting up the office could not have been more straightforward. "It was easy," he recalls. "You can have a licence for consultancy work and we applied for it with the help of our Serbian partner and got it within a fortnight." The government licence is for law and economic consultation and the office employs three local lawyers, who handle local work in their own name. "It's a very practical solution we've found," adds Strommer.
Away from Europe, there are some major battles to be won. Last month, there was a flurry of activity as the City firms and the Law Society renewed their efforts to overturn the blanket prohibition on foreign lawyers in South Korea. Foreign Secretary Jack Straw raised the issue with his Korean counterpart Dr Han Seung-Soo; then there was a meeting between the British Ambassador Charles Humfrey and the Law Society Korean Taskforce to confer on strategies; and then the first secretary of the British Embassy Guy Harrison quizzed the trade minister Hwang Doo-yun about legal services.
James Walker, based at Clifford Chance's Hong Kong office as head of the firm's Korean group, says that it is slow going, but that finally there are real signs of movement, before comparing the '30-ton weight' of energy invested in lobbying to the 'sugar cube' of progress.
He says that a turning point came with Chris Patten's visit in his role as External Affairs Commissioner for the EU. Walker heads the EU Chamber of Commerce's Legal Services Committee in Korea.
"My own view is that the Korean bar will only really respond to World Trade Organisation (WTO) pressure and the need to keep the Americans on board," argues Walker. While the liberalising agenda of the WTO might prove irresistable, the influence of US law firms is less obvious. US firms have tended not to "go out and pioneer", but rather "do deals and fly home again", says Walker, adding that the Americans appear to be comfortable with the strong relations that they have built with the Koreans through secondment schemes.
One concern for domestic practitioners is that any liberalisation of the market will pave the way for the return of Koreans who are qualified as lawyers in the US. "I think that's a bit of an excuse myself," says Walker, adding that both Hong Kong and Singapore dealt satisfactorily with the same issue. As he points out, the international firms will not be targeting the Korean home market work, but rather servicing international clients.
Establishment issues might seem a dry, esoteric subject, but they are certainly capable of exciting strong feelings. Clifford Chance chairman Keith Clark was invited to a dinner hosted by the British Ambassador in Seoul last year, along with senior members of the Korean Bar Association. "We had a very heated debate, and there's no doubt that the bar and the old school, all of whom are very close professionally, are very concerned about opening the door," says Walker.
While lawyers get hot under the collar around the dinner tables in Seoul, their colleagues in India took to the street in violent demonstrations last March. Commentators in the press compared the threat posed by foreign lawyers to a reincarnation of the East India Company.
In fact, the debate that sparked off the violence concerned proposals for Woolf-style reforms of the civil courts. According to Ian Scott, the partner responsible for Ashurst Morris Crisp's New Delhi liaison office, the issue of foreign lawyers was "tagged on" to complaints about the reforms. "It became an emotive issue, but I don't think it had anything to do with it," he says.
Under the Indian Advocates Act 1961, advocates are the only people allowed to practise law in India. The general view was that litigation was the monopoly of Indian advocates, but crucially, not other forms of legal activity. The legal profession is vast on the subcontinent, with some 600,000 advocates, the vast majority of whom (approximately 595,000) work in the courts.
However, that orthodoxy was challenged in 1995 by the Lawyer's Collective, a Mumbai-based forum of lawyers which commenced proceedings against a number of Indian institutions, as well as the three foreign firms holding licences for liaison offices with the Royal Bank of India (RBI). Since then, US firm Chadbourne & Parke has pulled out, White & Case has scaled down its operation and Ashursts continues as a liaison office. RBI is not granting any more licences.
"We have a long-term view of India and we still believe that it's a long-term market," declares Ashursts' Scott. "We're disappointed that matters haven't so far progressed that we're able to practise law."
Again, compliance under the WTO is expected to provide the catalyst for change. "It's not a question of whether it will happen, but when," says Scott. He expects discussions to start in earnest at the next round of WTO talks in November, and an opening up of the market in April 2003. "But what form it will take is very much in debate," he adds.
|"It's so frustrating that Brasil's such an important market, but we're faced with a situation where we can't go and implement our business model and offer the full range of services"|
Next on the Law Society hit list is Brazil, where only those lawyers qualified in the country can practise domestic law. Firms can register as consulting firms, but they can only practise the law of their jurisdiction and are not allowed to hire local lawyers.
Last month, Linklaters joined São Paulo's Goulart Penteado Iervolino e Lefosse Advogados in a cooperation arrangement. Other City firms, such as Clifford Chance and Richards Butler, also have a presence in the city, which is considered the legal centre of the country.
Again, it is a sensitive issue in Brazil and foreign lawyers are reluctant to criticise the regime. "It's so frustrating that it's such an important market, but we're faced with a situation where we can't go and implement our business model and offer the full range of services," complains one US partner with responsibility for Latin America.
The lawyer reckons that the restrictive rules are a result of the "usual combination of protectionism and nationalism; and nationalism is often a justification for many protectionist measures," he observes, adding that Brazil is the country with most potential in Latin America. "And it probably always will be," he quips.
A different kind of establishment problem is faced by lawyers in the Gulf states. "English solicitors are there in good numbers and doing good business, but they've always said that they can't rock the boat because their presence always depends on the emir's or the sheikh's personal consent," says a Law Society source.
This is not a view which Qays Zu'bi, the partner who heads White & Case's Bahrain office, recognises. At present, White & Case is the only international law firm in Manama to provide advice under both local and international law. Bahraini lawyers have to be licensed by the Ministry of Justice and Islamic Affairs to practise local law. Foreign firms wishing to practise law in Bahrain must be licensed by the Directorate of Legal Affairs at the Ministry of Cabinet Affairs. The only element of discretion is whether a lawyer qualifies and the 'needs of the country' says Zu'bi. "While giving priority to its national lawyers when considering granting a licence, Bahrain takes into account its national and economic interests and requirements," he says. "It is a recognised fact that to maintain its position as a financial and insurance hub in the region Bahrain requires and welcomes international lawyers." The laws of Bahrain are currently going through a massive revision process, including regulation of the professions.
Around the world there are many jurisdictions that suffer from over-regulation, but international lawyers in Russia find that they have the opposite problem on their hands. It used to be that firms would have to obtain a licence from the Ministry of Justice, but in 1998 the state Duma passed a law listing approximately 500 activities requiring licences, excluding legal services.
"It immediately created a vacuum," reports Daniel Gogek, Lovells' Moscow managing partner. "For a while no one was really sure whether that was intentional or not." Many lawyers expected the parliament to follow up with legislation covering regulation of the profession. Three years on and they are still waiting.
Gogek does not believe any sinister ulterior motive for this predicament other than simple legislative oversight. In fact, some foreign lawyers believe that a regulation-free environment is an opportunity because it allows them the freedom to practise in whatever capacity they like.
Gogek, though, certainly does not agree. "There is just a huge amount of uncertainty; and obviously uncertainty, even in the medium term, is something that no one really wants," he says.
|"You're not welcome here" - the top five|
1. South Korea
Problem: According to a Law Society spokeswoman, there is an "effective total prohibition" on foreign lawyers practising. "If they wish to practise in Korea, they have to take the bar examination whether or not they want to practise Korean law," she says. "It's set in Korean and has a 3 per cent pass rate among Koreans taking the exam." Foreign lawyers can be employed as legal consultants in Korean firms.
Firms interested: All the big City firms, plus the shipping specialists. The Law Society Korean Taskforce includes representatives from Allen & Overy (A&O), Clifford Chance, Denton Wilde Sapte, Freshfield Bruckhaus Deringer, Linklaters & Alliance and Richards Butler.
Likelihood of reform: "There hasn't been any indication of huge pending change," says the Law Society spokeswoman. "The general Korean line is that these issues need to be negotiated in the context of the next round of Gatt. We realise that change might not be immediate, but we're hopeful that there could be small advances made." | ^ |
Problem: Under the Indian Advocates Act 1961, the only people allowed to practise law in India are 'advocates'. The general view that litigation was the monopoly of Indian advocates was challenged in 1995. A forum of lawyers, which was based in Mumbai, commenced proceedings against Indian institutions and the three foreign firms that held licences for liaison offices with the Royal Bank of India (RBI).
Firms interested: Since the legal challenge, US firm Chadbourne & Parke has pulled out, White & Case has downscaled its operation and Ashurst Morris Crisp continues as a liaison office; RBI has ceased granting any more licences.
Likelihood of reform: Discussions are expected to start with the World Trade Organisation (WTO) talks in November. | ^ |
Problem: Only lawyers registered with the Brazilian Bar Association can practise domestic law. Lawyers can register as foreign law consultants and practise the law of their jurisdiction. Firms can register with the bar as consulting firms but are limited to practising the law of their own jurisdiction and cannot hire Brazilian lawyers for the practice of local law. Local firms can enter into cooperative arrangements.
Firms interested: Last month Linklaters joined forces with Sao Paulo-based Goulart Penteado Iervolino e Lefosse Advogados in a cooperation arrangement; Richards Butler is affiliated with Advocacia Rodrigues do Amaral; and Clifford Chance also has a presence in Sao Paulo.
Likelihood of reform: Brazil is the country with most potential in Latin America, says one lawyer. | ^ |
4. Slovak Republic
Problem: The Slovak Bar dropped legal action against UK firms operating in Bratislava earlier in the year.
In March the Law Society offered a cautious welcome to the redraft of the second draft amendment of the Slovak Advocacy Act, which for the first time introduced a separate status for foreign lawyer consultants.
The society objected to the stipulation that a payment of euro500,000 (£163;310,000) per foreign lawyer be made to cover professional liabilities. Under the draft, international lawyers could advise on home and international law. The Law Society said this was "acceptable", but wanted it broadened to include any law except Slovak. The redraft required that a foreign lawyer could achieve international lawyer status only if they have "five years of experience under their home professional title". According to the Law Society, this violates the Slovak Republic's commitments under Gatt (General Agreement on Tariffs and Trade).
Firms interested: A&O, Linklaters and CMS Cameron McKenna all have Bratislava offices.
Likelihood of change: "It seems that the Ministry of Justice is very conservative and very much influenced by the Slovak Bar Association," says one commentator. However, the country is pushing hard to become a member of the EU and so would have to sign up to the establishment directive. | ^ |
Problem: Foreign lawyers exist in a vacuum. Foreign firms used to have to obtain a licence from the Ministry of Justice, but in 1998 the Duma state passed a law which listed approximately 500 activities that required licences, excluding legal services. The Law Society says: "The current legal regime governing lawyers and foreign law firms is unsatisfactory. Foreign law firms practising in Russia are currently operating in a virtually regulation-free environment. What regulation there is appears ambiguous."
Firms interested: Most international firms have a Moscow presence.
Likelihood of reform: A draft law on advocacy was published recently. However, it did not mention foreign lawyers. "We're still trying to find out whether they're going to come out with a separate statute for foreign lawyers," a Law Society spokesman said. | ^ |