Globalisation of Trade & Services is Liberalisation & the Advent of Foreign Lawyers Inevitable?

Transcription

1 Globalisation of Trade & Services is Liberalisation & the Advent of Foreign Lawyers Inevitable? Speech given by Tim Bugg, President, Law Council of Australia at the Australia-China Legal Services Seminar, Shanghai 7 July 2006 GPO Box 1989, Canberra ACT 2601, DX 5719 Canberra 19 Torrens St Braddon ACT 2612 Telephone Facsimile Law Council of Australia Limited ABN

2 In answering the question of whether the liberalisation and the advent of foreign lawyers is inevitable in the Chinese context, it is not only relevant, but also natural for me to draw upon both the Australian attitude towards and experience with what, understandably for some, might be a confronting topic. The Law Council of Australia, the peak national body of the Australian legal profession, represents almost all of Australia s 50,000 practising lawyers on national and international issues. It firmly believes that a legal system which is able to provide legal services across multiple jurisdictions is essential as part of a robust economy. It considers that ability to be essential if a country is to provide growth in transnational trade and investment. The Law Council is very much supported in that view by the Australian Government and its relevant departments and agencies. The Law Council has worked both harmoniously and constructively with them for many years to advance this principle. At its meeting in Vienna in June, 1998, the Council of the International Bar Association ( IBA ) passed a resolution on the general principles for the establishment and regulation of foreign lawyers. In doing so it acknowledged a number of realities which included: the phenomenon known as globalisation had resulted in a dramatic increase in the movement of people, capital goods and services across national borders; the increase in cross-border activities of all types posed particular challenges for the legal profession, one of the most important of which being the establishment in certain jurisdictions of foreign lawyers authorised to practise in other jurisdictions; the desirability and the public interest for member organisations of the IBA to review and consider the manner in which their respective regulatory regimes address all issues posed by cross-border legal practice, including, but not limited, the issue of cross-border establishment by foreign lawyers; there are essential principles which are common to all legal professions and they include: - the commitment to the independence of lawyers and the legal profession; - the commitment to preservation of client confidences; Globalisation of Trade.docx Page 2

3 - the prohibition against conflicts of interest in the practice of the law, and - the maintenance of high ethical standards. Those considerations remain relevant as globalisation continues. Australia is recognised by its trading partners as playing a leading role under the World Trade Organisation ( WTO ) in promoting the liberalisation of transnational trade and legal services. It has tabled three negotiating proposals on legal services, primarily promoting a limited licensing regulatory model for the practise of foreign law and recommending an expansion to the current classification of legal services under the WTO to allow a greater number of countries to provide more meaningful commitments on legal services. The initial negotiating proposal identifies six guiding principles developed by the International Legal Services Advisory Council ( ILSAC ), a part-time advisory body established in 1990 by the Australian Government to help improve Australia s international performance in legal and related services. Those principles are: 1. formal recognition, on reasonable terms, of the right to practise homecountry law, international law, and where qualified, third-country law, without the imposition of additional or different practice limitations by the host country; 2. formal recognition, on reasonable terms, of the right of foreign law firms to establish a commercial presence in a country or economy without quota or other limitations concerning professional or other staff, location, number and forms of commercial presence, and the name of the firm; 3. formal recognition, on reasonable terms, of the right of foreign law firms and lawyers to enter freely into fee-sharing arrangements or other forms of professional or commercial association, including partnership with international and local law firms and lawyers; 4. the right to practise local law to be granted on the basis of knowledge, ability and professional fitness only, and this to be determined objectively and fairly through a transparent process; 5. formal recognition on reasonable terms, of the right of a foreign law firm to employ local lawyers and other staff, and 6. formal recognition of the right to prepare and appear in international commercial arbitration Globalisation of Trade.docx Page 3

4 Foreign law firms can open offices in Australia. Current legislation in a number of Australian States and Territories allows for partnership between local and foreign lawyers/law firms. In particular, in States and Territories in which foreign lawyers have shown the most interest a hospitable and comprehensive regulatory system is in place. The principal purpose of the implementing legislation in those jurisdictions is: to encourage and facilitate the internationalisation of legal services and the legal services sector by providing a framework for the regulation of the practice of foreign law in the State by foreign-registered lawyers as a recognised aspect of practice in the State. 1 Australia s foreign lawyer regulation is based on a limited licensing model, an approach which is consistent with the IBA resolution referred to above. That is, a limited licence is provided to foreign lawyers: to practise in Australia the law of their home-country, third-country and international law without having to undertake examinations or gain a licence to practise Australian law; to enter voluntarily into commercial association/partnership with an Australian law firm, and to have the right to use their own firm name. A limited licence system protects the practice of host-country law for hostcountry lawyers. However, it allows for foreign and local lawyers or law firms to provide fully integrated legal services, covering multiple jurisdictions, to both local and international clients. National Profession Project During the past four years or so, the Law Council has committed considerable time and resources to the National Professional Model Laws Project. The Project has involved the Law Council working closely in consultation with the Commonwealth Attorney-General s Department and the Standing Committee of Attorneys-General to establish a regulatory regime within Australia for the practice of law which meets the goals of public protection, economic efficiency and the maintenance of the principles of the rule of law. A further objective has been to allow the practice of law to occur on an Australia-wide basis with the removal of jurisdictional based regulations which hinder the ease of national 1 Legal Profession Act 1987 (NSW) Section 48ZF; Legal Practice Act 1996 (Vic) Section 63F Globalisation of Trade.docx Page 4

5 practice, whilst not contributing to public protection or maintenance of the rule of law principles. To achieve these objectives, the general approach adopted has been to harmonise existing Australian State and Territory regulation of the profession in accordance with the national standards. The Project comprises 10 major streams of regulation. One of those streams deals with the practice of foreign law in Australia by foreign lawyers. The practice of foreign law in Australia by foreign lawyers will be permitted on an open and consistent basis in all States and Territories. The aim is to ensure that the hospitable regulatory system for foreign lawyers which already exists in a number of States and Territories is extended to be uniform across the country. Uniform legislation will encourage and facilitate the internationalisation of legal services and the legal services sector. Current Status In May 2004, SCAG released the finalised version of the National Legal Profession Model Bill, heralding the beginning of a new era for the Australian legal profession. In July 2005, SCAG approved the supporting Model Regulations. The next stage in the process will also see the Model Bill being incorporated within the separate regulatory regimes of each state and territory. Most jurisdictions have already commenced doing this. The Law Council s aim is for all States and Territories to adopt the reforms in There will be continuing refinement of the Model Bill as operational experience matures. There is also the establishment by SCAG of the Law Council/SCAG Officers Joint Working Group to monitor the implementation of the Model Bill to ensure that inter-jurisdictional consistency is maintained. Trade in Legal Services To date, only a small number of foreign firms, largely USA based, has established a presence in Australia. This probably reflects the extremely competitive market in Australia for international business and commercial services. These firms practise their home-country law, third-country and international law. Some of these firms have partners and/or employees admitted to practice in Australian jurisdictions and thus practise Australian law as well. Foreign lawyers, including Chinese lawyers, may practise their home-country law in Australia and service the needs of foreign and local clients in Australia Globalisation of Trade.docx Page 5

6 Foreign lawyers in law firms may also establish voluntary forms of commercial association, such as partnerships, with Australian lawyers and law firms. Australia s experience over the last decade is that this internationalisation process within Australia has encouraged an increasing number of Australian law firms to innovate and become involved in the export of legal services. This has played a significant role in the steady growth of Australia s own exports of legal services, generating mutual benefits to the local legal sector as well as the economy. Australia s hospitable foreign lawyer regulatory system is now an important and essential element of the Australian economy. In terms of legal services exports, Australia has maintained a positive balance of trade since the Australian Bureau of Statistics started collecting data on legal services exports in 1987/88. There has been a very favourable average growth rate in legal services exports of 27% per annum over the last 10 years. More recently, since the year 2000, we are experiencing an even higher rate of growth of 39% per annum. The 2001/02 figures provide all time high figures in exports (346 million) and balance of trade in legal services (231 million) It appears that the largest export market for Australian legal services are the United States of America, the United Kingdom, Japan, New Zealand and, of course, China. Australia s experience is that a hospitable foreign lawyer regulatory system is compatible with maintaining the integrity of the local profession and in creating an atmosphere that encourages law firms to innovate and become involved in providing legal services internationally, without detriment to those lawyers who wish to practise domestic law only. The liberalisation of practice by foreign lawyers within Australia has not impinged upon the domestic practice of Australian law firms. Australia s experience is that a hospitable foreign lawyer regulatory system also: assists mutual understanding of each other s laws, legal system and culture; encourages and facilitates the transfer of knowledge and skills; greatly assists innovation in the internationalisation of local legal practices, whilst protecting aspects unique to each country s legal system; encourages and provides a greater degree of certainty to foreign investors; Globalisation of Trade.docx Page 6

7 provides an infrastructure that strikes a balance between the public interest in maintaining the integrity of a country s legal system and the access requirements of transnational legal service providers; does not provide a system for foreign practitioners to take away work that is traditionally the domain of host-country practitioners; provides for flow-on benefits to host-country practitioners, and provides a framework that facilitates meeting the needs of transnational clients who demand fully integrated transnational legal services that can be delivered at predictable standards across multiple jurisdictions. Australia-China Free Trade Agreement On 18 April, Prime Minister John Howard and Premier Wen Jiabao of China agreed that Australia and China would commence negotiations on a Free Trade Agreement (FTA) following consideration of the joint FTA Feasibility Study. That study concluded that there would be significant economic benefits for both Australia and China through the negotiation of a Free Trade Agreement. Of course, this decision to go ahead with a China-Australia Free Trade Agreement will have ramifications for the trade in legal services between the two countries. Advantages of a Free Trade Agreement Concern has been expressed that a Free Trade Agreement would have a negative impact on some Australian industries, especially given the growing size and competitiveness of China s industries compared with Australia s. The fact is, China s rapid economic growth and increasing competitiveness will be a challenge for particular Australian industries regardless of whether we have an agreement with China or not. Australia has an open and transparent trading regime and China already has liberal access to our market. China already has a strong presence in the Australian economy. In 2004, China was our third-largest trading partner in goods and services, accounting for 8 per cent of our exports and 11 per cent of our imports Globalisation of Trade.docx Page 7

8 Two-way trade in goods and services with China has increased on average by nearly 17 per cent per year over the past decade, and is predicted to continue to grow given the high growth rates of the Chinese economy. A Free Trade Agreement offers us the opportunity to set the terms for future trade to strengthen the competitive position of Australian exporters and investors, particularly relative to other foreign competitors, by reducing tariff and other barriers to trade and investment. A Free Trade Agreement can open up the Chinese market, so that Australian exporters can take advantage of the opportunities that it offers. China s trade with the rest of the world is growing, too. The Australian Government s ambitious trade agenda, including negotiating FTAs with other trading partners, is also helping to ensure that Australian exports to other countries remain competitive. Combined with our agreements with Singapore, Thailand and the United States, our negotiations with ASEAN, Malaysia and the United Arab Emirates are seeking to assist Australian exporters compete with China in other markets. In broad terms, according to the Department of Foreign Affairs and Trade, the agreement will provide the following benefits to Australian professionals providing services in China: Access to Chinese markets has been enhanced for Australian service suppliers such as providers of professional, business, education, environmental, financial and transport services. A framework to promote mutual recognition of professional services has been developed - a big gain for Australian professionals doing business in China. The FTA Consultation and Concerns As part of the Australia-China Free Trade Agreement negotiations, the Government has been consulting extensively with interested Australian stakeholders, and called for public submissions. This will continue throughout the negotiation. Some of the concerns raised by the providers of professional services, including legal services, include: limits imposed on the forms of partnerships Australian firms can establish with Chinese firms Globalisation of Trade.docx Page 8

9 restrictive regulations on the employment of Chinese nationals and of foreign nationals restrictions on where in China commercial activities can be undertaken restrictive regulations relating to licenses for foreign practitioners recognition of qualifications for foreign practitioners and the scope for mutual recognition of qualifications. On a broader level, Australian businesses in general have also voiced the following concern about the proposed China-Australia Free Trade Agreement. border barriers tariffs, as well as tariff rate quotas in agriculture, and the administration of those systems, which can be complex standards and quarantine issues customs procedures intellectual property rights protection discrimination against foreign suppliers of services exports investment-related issues the overall business environment and the legal framework, including a sense of lack of transparency and regulatory uncertainty a desire to position Australia as a preferred destination or supplier against third-country competitors concern about increased competition from China. Some of the difficulties of doing business in China are tied up with the nature of government in China. Through the negotiation of a Free Trade Agreement, Australia cannot, and will not seek to, recreate the Chinese economy in our own image. But Australia is aware of the real concerns of businesses over such issues as transparency and intellectual property rights protection, and the Government will seek practical mechanisms or processes that can help Australian companies that are facing problems in these areas Globalisation of Trade.docx Page 9

10 For Australia, a Free Trade Agreement must be comprehensive and deliver commercial benefits for Australian companies across the board. The Australian Government s negotiating position will be strengthened by having as much specific information as possible from Australian companies large and small about their interests and concerns, and the sorts of barriers they face in China. Australia s Department of Foreign Affairs and Trade (DFAT) will continue to collect this information throughout the negotiations The Australian Government has not putting a timeframe on the negotiations it will spend as much time as is required to negotiate a high-quality agreement that contains commercially meaningful outcomes for Australian businesses and is consistent with the rules of the World Trade Organisation (WTO). At a Global Level Whilst no reliable data is available on the size of the global international legal services market, the Australian experience over recent years suggests that it is significant. World services trade in 2001 was estimated at US$2,905 billion or 19.4% of total world trade, compared to 16% of total world trade in The large American and English law firms dominate the market for international legal services and are aided by the preference of multi-national corporations and major financial institutions for American or English law as the governing law of contracting cross-border transactions. Current trends suggest that there is much competitive pressure on the bigger law firms to become international and to keep expanding those operations. An increasing number of clients with globalised operations are demanding legal and other professional services that can also be delivered on a global scale at predictable standards throughout the world. The demarcation between national law firms is becoming less clear as American law firms employ English lawyers, English firms employ American lawyers and so on. Australian firms are emulating this practice, either by employing lawyers admitted to practise in overseas jurisdictions, establishing alliances of forms of profit-sharing other international firms, or by seconding professional staff to law firms overseas Globalisation of Trade.docx Page 10

11 A new feature of the market for international legal services is the growth and emerging export activity of Asian law firms, particularly from Hong Kong and Singapore, but also from other countries. This trend will accelerate. The Government of Singapore initiated an export strategy for the Singapore legal services sector as far back as 1987 and has played a successful catalytic role in the establishment of the Singapore International Arbitration Centre which is now recognised as an important centre in the Asia-Pacific region for commercial dispute resolution. Movement in the international legal services market will continue to put the pressure on countries which have restrictive regulations for access to their legal services market by foreign lawyers. Conclusion The liberalisation and the advent of foreign lawyers is considered to be inevitable. Already, foreign lawyers have a presence in China, although on a flyin, fly-out basis only. There is considerable momentum within China to open up the legal services market to foreign lawyers. There is increasing activity on the part of law firms from other countries in the region to export legal services. The commercial pressure for change in a rapidly shrinking world will increase. The Australian experience shows that corollaries of the liberalisation of a country s legal services market are not only the mutual benefits which flow, but also the development of a vibrant export market in legal services. If a legal system is able to provide legal services across multiple jurisdictions its economy will be enhanced, to the benefit of its lawyers and without detriment to the domestic practice of its lawyers. The Australian experience also shows that engagement between the legal profession and government in this process can be extremely advantageous. An agenda for liberalisation cannot be imposed from without. A country should control it and manage it to its own advantage. China has a mature legal system and a vibrant economy. It can control and manage the liberalisation of its legal services market. It should have no difficulty in establishing a regulatory system for foreign lawyers which does not detract from domestic practice. Whilst it is understandable for a country s lawyers to be concerned about foreign lawyers overwhelming the local profession, there is no evidence of this occurring anywhere in the world. It has not happened in Australia Globalisation of Trade.docx Page 11

12 The liberalisation of a country s legal services market provides many opportunities. It enables us to import skills which will expand and improve the knowledge and experience of our profession. We are then better able to meet the needs of our clients. It enables us to work alongside lawyers from other countries who represent international corporations investing in our country. As far as China is concerned, liberalisation may provide a wonderful opportunity for Chinese lawyers to internationalise to the extent that they are able to export their expertise in a variety of areas. These opportunities should be grasped. That further adds to the inevitability of the liberalisation and the advent of foreign lawyers. Disclaimer: This document remains the property of the Law Council of Australia and should not be reproduced without permission. Please contact the Law Council to arrange a copy of this speech. Elenore Eriksson Director, Public Affairs m e. elenore.eriksson@lawcouncil.asn.au Globalisation of Trade.docx Page 12