The entry of foreign law firms into Singapore has been a long and rocky road, littered with failed experiments and successes. What can India learn from Singapore's incremental legal market liberalisation, Legally India asked Indiana University law professor and Asia law firm expert Jayanth Krishnan.
Legally India (LI): Can you describe the Singaporean model of liberalisation?
Jayanth Krishnan (JK): As we all know, as part of its development plan, Singapore has aggressively liberalised its economy, including its legal services sector. For decades foreign law firms have been granted admission into the country, but until recently they had been prohibited from practicing Singaporean law
So what happened was that about ten years ago the government sought to expand the scope under which foreign law firms could work. It consulted with foreign lawyers and segments within its own domestic bar, and the result was that the Singaporean government began allowing for the establishment of these joint law ventures (JLVs) in the late 1990s. The belief was that it would positively serve all parties involved. In fact between 2000 and 2009 nearly a dozen JLVs were created between foreign law firms on the one side and local Singaporean firms on the other.
The rationale for creating these JLVs was simple: The foreign firms wanted to come into Singapore because they saw an opportunity to expand their client-base and profit margins. And although the foreign lawyers could conduct international transactions within Singaporean borders, Singapore had pretty stringent licensing requirements that effectively barred these foreign lawyers from practicing Singapore's domestic laws.
What the JLV then did was to allow the interested foreign firm to develop and eventually enter into a relationship with a local Singaporean firm. The JLV therefore would be this legally distinct body that would have as one of its main advantages the ability to practice, through it locally-licensed lawyers, the laws of Singapore.
In theory then, the JLV appeared like an optimal route for these foreign (mainly American and British) law firms to pursue. Theoretically, there seemed also to be benefits for the Singaporean firms. The Singaporean firm was supposed to have an opportunity to gain international contacts, learn skills and ‘best practices’ from the foreign counterparts, and link itself to a high-prestige foreign firm. It was supposed to be a win-win strategy for both sides.
LI: Did they work?
JK: Unfortunately, the theory didn’t end up meshing with reality for several of these JLVs. Yes, there are a handful that remain and that are working well. But a number simply never lived up to their expectations. And the basic reason was that there was too little trust and too little development of strong ties and strong relationships between both sides. The foreign lawyers, for example, often saw their Singaporean partners as sub-par, territorial with local clients, and unappreciative of the foreign firm’s prestige and reputational boost they (the foreign firms) were adding to the Singaporean side.
The Singaporean lawyers, on the other hand, viewed the foreign firms as arrogant, unwilling to share best-practices, precedent documents, and international client-contacts. Plus many of these Singaporeans resented the unequal pay-scales between them and their foreign partners.
LI: How did Singapore aim to address this with enhanced JLVs and the Rajah Report?
JK: To try to address these problems, the Singaporean government formed a committee (headed by Justice Rajah), and put forth a report to remedy the situation. What's interesting is that the Committee didn’t move away from the language of the "joint law venture" in its reforms. Instead it acknowledged that while there had been difficulties with the original JLV program, having a new, better, "enhanced JLV" would ameliorate many of the problems that beset the initial model. And this included, for example, allowing a Singaporean-licensed lawyer to join a foreign law firm that participated within a JLV, while still allowing that lawyer to practice Singaporean law. Before, this wasn’t allowed.
The Committee also recommended expanding the JLV’s jurisdiction in one important lucrative area – international commercial arbitration.
And the Committee concluded by suggesting that not only should JLV- profits be shared more generously between the two sets of lawyers, but that there should be increased integration in the management and administration of the joint venture.
For the Committee the main goal was to make the JLV more organic and allow for the development of greater, productive relationships among the different lawyers within the venture.
But the most important recommendation that the Committee made was to introduce the concept of the QFLF license -- or the qualified foreign law firm license. What this QFLF license did was to allow for foreign firms to practice Singaporean law by hiring Singaporean lawyers directly and by bypassing the JLV altogether. The big exceptions were that these foreign firms couldn’t engage in litigation, criminal law, retail conveyancing and a few other areas.
In adopting this recommendation, the government held a competition and awarded QFLF licenses to a group of foreign law firm applicants, and while it will be interesting to see what the developments of this process will be, what I think the QFLF shows is the Singaporean government's retained commitment to keeping certain aspects of the legal services sector open to foreign law firms.
LI: What does the Singapore experience let you conclude about the future options for the Indian market and about the logical progression of current best friendships in India? Do you have ideas for a more practicable approach in India?
JK: In terms of India, the context of Singapore's story with respect to foreign law firms is of course much different. There are obviously so many different legal, political, economic, and structural variations between the two countries. As I've argued in Globetrotting Law Firms (read paper), in my view, even with the latest Bombay High Court judgment, the foreign law firms debate in India is really much more political than legal, with a whole host of parties involved in India that simply are not present in the Singapore case.
Nevertheless, I think one key lesson the Singaporean example may have for those who are trying to reach some type of end-point on the foreign lawyers-in-India debate, may be the fact that going down the joint venture route – as some have proposed for India – may have a host of consequences that could lead to many more, other problems, the likes of which were encountered by those failed ventures in Singapore.
Professor Jayanth K Krishnan is Charles L. Whistler Faculty Fellow & professor of law at Indiana University-Bloomington Maurer School of Law. He focuses on empirical research on law firms, with a particular focus on Asia. To read his full paper examining the Singapore JLV model click here.
By Kian Ganz Friday, 04 June 2010 17:02
Photo by Christopher_Chan
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