Japan bar penalises foreign joint ventures

The Japan Federation of Bar Associations has passed a protectionist measure designed to penalise Japanese firms in joint ventures with foreign lawyers

In the face of protests from foreign law societies, the Japanese legal body has ruled that Japanese-foreign law joint ventures cannot take advantage of limited liability status if they practise under the name of the foreign firm.
Limited liability status has been introduced only recently in Japan. It allows Japanese lawyers to have more than one office and gain tax advantages.
The measure will effectively bar foreign firms from registering as limited liability partnerships if they want to use cross-firm branding for their Japanese practices. Freshfields Bruckhaus Deringer, which practises as Freshfields Law Office and Freshfields Foreign Law Office, will be particularly hard hit, as will Cleary Gottlieb Steen & Hamilton.
Japan has become a key destination for firms keen to pick up restructuring work from the struggling Japanese economy. There is also a significant amount of work for foreign direct investors as protectionist barriers have come down in most areas of business and there are good opportunities for inward investment.
Just last month, German firm Haarmann Hemmelrath & Partner and US firm Dorsey & Whitney secured Japanese joint ventures.
Clifford Chance has also moved to strengthen its Japanese practice with the addition of five new bengoshi. This gives the firm a total of 17, putting it in the top tier of foreign firms with Japanese practices. The lawyers came from Nakagawa & Takashina, which formed a joint venture with Clifford Chance on 4 March.
Japanese managing partner Rob Burley said: “We needed more bengoshi because 12 isn’t enough for a decent sized deal. We were considering the deal when we signed up with Tanaka & Akita, but it was too much to do it all at once.”
Burley added: “We were all very disappointed with the bar association rule, but we knew it was coming.”