Singapore to allow mergers between foreign and local firms

Singapore’s parliament has passed amendments to its Legal Profession Act that will pave the way for foreign firms to merge with local firms and make it easier for foreign QCs to appear in Singapore courts.

The Legal Profession (Amendment) Bill was passed on 14 February following the second reading speech by the nation’s Minister for Law, K Shanmugam. The Ministry of Law will implement the changes in the second quarter of 2012.

The aim of the change is to allow Singapore law practices more flexibility to grow and enhance their international competitiveness.

One of the key changes will see foreign law firms be able to for the first time take a profit and equity share in Singaporean law firms. Currently, only individual foreign lawyers can take profit or equity shares in local law firms, up to a maximum of 25 per cent. In addition, when there is a collaboration between a Singapore firm and a foreign firm, a lawyer will be allowed to be a partner in both practices.

The six international firms that have a Qualifying Foreign Law Practice (QFLP) licence (5 December 2008) will be offered the option to enter into a Formal Law Alliance (FLA) or Joint Law Venture (JLV) with a local firm while retaining their QFLP licence.

In the second reading speech, Shanmugam stated: “The legal services market today is a globalised one and increasingly competitive. Size, international presence, and economies of scale matter. Consolidation is the trend. The international market is dominated by a handful of large international practices, which secure the most lucrative transactional work. Singapore law practices realise this, and many of them are moving to embrace the new paradigm.”

After having consulted with The Law Society of Singapore and a diverse range of Singapore law practices, the Ministry of Law has decided to introduce these legislative changes to give Singapore firms more flexibility to collaborate with foreign firms.

This new act will be of particular interest to firms such as Allen & Overy and Singaporean firm Allen & Gledhill, which are considering the option of a tie-up. The two firms announced in November 2011 that they were in preliminary talks that may lead to proposals for a combination (7 November 2011).

Another important change will provide easier admission for foreign expert counsel, such as QCs, to appear in Singapore courts. The change was driven by a strong growth in the demand for top-tier legal representation as Singapore has grown exponentially as a business and financial centre.

There will be a less restrictive approach to the ad hoc admission of QCs and foreign counsel holding an equivalent position, and the courts will be given greater discretion in admission decisions. However, in areas of constitutional and administrative law, criminal law and family law ad hoc admonition still needs to be justified by special reasons.