Malaysia tightens grip on foreign law firms

Malaysia has amended its Legal Professional Act in a move that some believe will become a double-edged sword on foreign legal practices operating in the country.

Concerns have been raised about ammendments to domestic legislation that would in effect prevent international firms from flying into the country to provide non-domestic advice on deals.

The Legal Profession (Amendment) Act 2012, which was enacted by the Parliament of Malaysia in June, was initially welcomed as the country’s bid to open up the domestic legal services market to foreign law firms.

However, some suggest in fact the law has been tightened up to add further regulatory burdens on international firms.

The tension was particularly pertinent following a speech given by Malaysia’s Bar Council Chairman Lim Chee Wee two weeks ago in Kuala Lumpur.

Lim highlighted that one unnamed London firm and two Singaporean firms were in contravention of the Legal Profession Act, stating that two had solicited Malaysian work from a Malaysian client, while another marketed itself as having experience and knowledge in Malaysian Competition Act 2010. According to Lim, the Bar Council is planning a crack down on rule breaches.

The teeth of the new law is said to be in the amendment of the section 37, which sets out that “any unauthorized person who either directly or indirectly, does or solicits the right to do any act which is customarily within the function or responsibility of an advocate and solicitor, including but not limited to advising on law (whether Malaysian or otherwise) shall, unless he proves that the act was not done for or in expectation of any fee, gain or reward, be guilty of an offence under this subsection”.

One Singapore-based said the difficulty was in the interpretation of Section 40 B, reading “no foreign law firm shall practise in Malaysia unless it is licensed under this Part.”

The partner said: “The common view is that advice given in relation to foreign law in Malaysia or even an email or letter of advice given by a foreign firm and sent into Malaysia could be caught under this section.

It’s really caused a lot of confusion among foreign lawyers. Without further clarification of the new law, we are not sure how we can stay fully compliant when servicing our Malaysian clients or cross-border transactions involving Malaysian companies.”

Another partner based in the jurisdiction added: “Rather than liberalising the legal market, the new law seems to be an attempt for the regulator to gain more controls over foreign firms. Previously, foreign firms could advise their Malaysian clients or Malaysian centred transactions on foreign law on a fly in and fly out basis from Singapore or other places. But that model has become an offence under the new law.”

Currently, Trowers & Hamlins is the only UK firm to have an official non-trading representative office in Malaysia. The office was opened in July 2012 (11 July 2012). The firm expects to apply for a licence once the relevant regulatory framework is in place.