SingaporeThe 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.

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Like +0 Object -0 Anonymous guest 05 Jun 10, 05:42
Some Indian law firm owners may prefer JV route as this will give them opportunity to cash in on the exclusivity that will be granted to them. The foreign firms will have no option but to tie-up with an indian eneityt to practice. In return the owners would want a higher valuation/premium for themselves (plus kids, if any).

In my humble view the Indian JV's are likely to face the same issues that plagued the Singapore model. In fact, the problems may be more acute due to cultural differences between Singapore, a city state and India a diverse and a giant nation.
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Like +0 Object -0 Anonymous guest 05 Jun 10, 05:42
Foreign law firms MUST be allowed in India because we are a country of one billion where people need jobs and liberalisation in all sectors is the need of the hour. Indian law firms are like village industries compared to the powerful foreign law firms. It's ridiculous depending on the Shroffs, the Khaitans and the Luthras to create jobs. They are in fact cutting down on recruitment, while more NLUs spring up.

The pros of allowing foreign law firms in India exceed the cons by a huge margin. People who oppose foreign law firms can be compared to the unscrupulous business barons in India who opposed liberalisation in the 90s. Shame on them!
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Like +0 Object -1 Anonymous guest 05 Jun 10, 22:53
Foreign law firms should not be permitted at least for the next 5-7 years. Indian law firms should be given an opportunity to get adequate experience, grow their practices and be in a position to compete. Foreign law firms have the advantage of centuries of experience in the kind of work that has flown to Indian firms for only about 20 years.
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Like +0 Object -0 Anonymous guest 06 Jun 10, 02:50
"Foreign law firms should not be permitted at least for the next 5-7 years. Indian law firms should be given an opportunity to get adequate experience, grow their practices and be in a position to compete. Foreign law firms have the advantage of centuries of experience in the kind of work that has flown to Indian firms for only about 20 years."

Haha, is your dad one of those people who owns a law firm and is lobbying not to allow foreign firms? Indian firms have been in existence for only 20 years? Really? FYI Indian firms like Khaitan and Fox & Mandal were in operation ever since Calcutta was the capital and it's obvious from their names they were not run by the British. And even if Indian firms were around for only 20 years, that's more than enough time to build a practice. As it is, most firms have got rich by chamcha-ing politicians and bureaucrats in some way.

The plain fact is that Indian firms represent the most debased form of crony capitalism and are scared of a true free market, where only merit matters. The biggest advantage of allowing foreign law firms is that there will be far more jobs for younger lawyers, and the law firm owners can't act like exploitative slavedrivers.

Please go tell this to your dad.
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Like +0 Object -0 Anonymous guest 08 Jun 10, 03:33
The Singaporean JLV model is already in existence without any formal introduction by the government and Bar Council of India. In terms of exclusive (practically for all purposes) referral arrangements that exist in the country in form of best friend relationships, it is no different than the Singaporean model. The domestic lawyers practice local law and foreign lawyers from the best friend firm practice their respective foreign laws albeit in the Indian context without a formal JV and from outside the Indian borders. Quite frankly it is ridiculous for the Bar to not recognise that without their approval things have been happening and if they only had approved a more formal process, all the foreign law practice associated in the context of the Indian deals, if done by an Indian JLV (which would have been the case if a formal Indian JV existed), could have been taxed and regulated by Indian authorities. This would have meant getting more money to the Indian economy plus the development of the legal sector. BCI has been plainly less intellectual and more political.
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Like +0 Object -0 Anonymous guest 12 Jun 10, 18:18
I think that the JV model in Singapore is a good entry point towards liberisation. A JV is like a marriage and there the rules of engagement in a marriage apply. Trust, respect, give and take and common goals are important traits to develop and nuture. I manage Singapore's first and only JV between Singapore and China. Our relationship has been smooth with both parties acknowledging that together we are more powerful than we if we stand alone. With this hybrid model we are able to bridge gaps that previously seemed too big. Our JV signed a best friends arrangement with Vaish Associates making we I believe to be the first India - China legal collaboration.
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