190 GLOBALISATION OF LEGAL PRACTICE First of all I would like to thank Mr Justice Lai for his kind invitation to speak at today s seminar. This first conference of the Academy of Law, comes at a time of challenge and promise for the profession in Singapore and it is an honour and a pleasure for me to be taking part in this way. Globalisation of legal practice in the coming decade is a fairly substantial subject. In the time available I shall set out some views (which are personal rather than necessarily those of my firm) about why, and to what extent, legal practice is becoming international, possible future trends, the challenges facing practitioners and possible responses to those challenges. Any discussion of globalisation of legal practice cannot avoid regulatory questions affecting the profession. Accordingly I shall also mention some of the issues which may face those who are charged with regulating the profession around the world. Economic Background The last 45 years have seen a remarkable lowering of barriers to the movement of goods and capital and the provision of services between many countries. This has contributed to a sharp rise in levels of prosperity in much of the world. Other things being equal those countries with the most open economies appear to have been those which have benefitted most. An integrated global economy, in which barriers to the supply of goods and services are steadily falling away, is increasingly a reality. Commercial or financial transactions which in some way cross national frontiers are increasing constantly and at an accelerating rate. These development have important consequences for the legal profession. This is especially the case for those in commercial practice and in those countries which are most exposed to relatively open trading and financial systems such as the United Kingdom and Singapore. We should, however, keep these trends in perspective. While they are relevant for those in commercial practice, for those engaged in other practice areas their significance at present is limited. The issues facing lawyers For many commercial practitioners, the actual nature of the legal issues with which they are confronted increasingly have an international or crossborder element. Lawyers are required to respond smoothly and very promptly indeed to difficult problems involving substantive legal issues under the laws of more than one jurisdiction.
2 S.Ac.L.J. Part II Globalisation of Legal Practice 191 Perhaps the requirements and pressures on lawyers are better understood by trying to look at the position from the point of view of the client. The client is increasingly a company or institution which, reflecting economic trends, conducts business on an international basis. The individual involved, in any particular matter may well lack the time or indeed knowledge to assemble and coordinate a team of lawyers in different jurisdictions. His preference will frequently be to speak to a lawyer with whom he normally deals in one of the jurisdictions involved and leave it up to that lawyer both to arrange the team and take the necessary action on the legal front, whether this is arranging the preparation of a memorandum of advice, institution proceedings, drafting documentation or whatever. In a few cases, large organisations which have very regular and substantial dealings with lawyers around the world see benefits in regulating their relationships with their lawyers in a very structured manner. They may wish to follow very clearly stated procedures in respect of, for example, billing and, very occasionally may find it easier to make such arrangements with a limited number of lawyers worldwide. Regardless however, of how the relationship with lawyers is organised the client s priorities are firstly to be assured of receiving the highest possible standard of service, at an acceptable price. Secondly, as the pace of business around the world accelerates, the client requires this to be done in the promptest possible manner. A client, perhaps under intense competitive pressure, may well be impatient at the prospect of delay if its lawyers in a particular country need to educate themselves about the underlying commercial matters involved in a particular type of matter even if these are of considerable complexity. For a lawyer to be able to meet these client expectations, knowledge of the substantive law of his own jurisdiction, while clearly essential, may be insufficient. A clear understanding of the underlying commercial practices, which in turn may well reflect elements of foreign laws, will also be essential. Moreover it is clear that increased involvement with cross-border matters means that lawyers must both know and have the easiest possible access to lawyers with appropriate expertise in other jurisdictions. The arrangements between such lawyers must allow them to work together in the most efficient possible manner. I believe this requirement is central to present trends in the development of international legal practice. Options for Lawyers The challenge for practitioners therefore is how best to organise their relations with lawyers in other jurisdictions so as to provide a service of the type expected.
192 There is clearly no right or wrong way of arranging relationships between lawyers in different countries. The individuals who make up a law firm and the clients they serve are unique in each case. What may well be the right approach for the circumstances of one firm may be quite wrong for another. I shall simply run through some of the options. I shall begin with the normal basis for cooperation between lawyers in different jurisdictions which is the relationship of correspondents. This is simply where a law firm in one country, on behalf of a client, instructs a lawyer in another jurisdiction. This is the usual way in which these matters have been handled historically and remains today the main basis of cooperation between lawyers from different countries. It is a type of relationship which law firms may feel can be enhanced in various ways such as for example a programme of temporary exchanges of lawyers between firms. It is also a form of co-operation which many firms may, after careful consideration, consider to be quite sufficient for their purposes. A major attraction of this approach is that a law firm retains complete freedom of choice to select the most appropriate lawyer from whichever firm seems suitable for any particular matter. Other lawyers may, however, seek a closer relationship than simply that of correspondents. Groups of law firms may join together on a regional basis in fairly informal club arrangements in which normally one law firm from each jurisdiction would be represented. Others may see benefits in associating themselves in a rather more formal manner. We have seen recently, for example, firms in different member countries of the European community enter into such public and formal alliances. Some of those arrangements may extend to opening of joint offices outside their home jurisdictions. (For example, I understand that an English and an Australian firm have pooled resources in a joint office in Singapore.) In such cases there can presumably be cost savings. The detailed arrangements between particular firms will vary from case to case. For regulatory reasons it may well be easier and more common to establish a cost sharing arrangement than a relationship which involved profit sharing, which would in any event be significantly closer. One usual feature of formal associations between firms will be that in normal circumstances the lawyers in each jurisdiction would refer work to their associated firm rather than any other firm. The commercial decision
2 S.Ac.L.J. Part II Globalisation of Legal Practice 193 for the firms involved requires careful consideration of whether the loss of referral work from other firms, which may be expected to result from such a formal and presumably, in normal circumstances, exclusive relationship, is offset by the benefits. These decisions can be quite difficult. In a country where many competitior firms have entered into such associations the commercial benefit could be seen to lie in continuing without such arrangements. One possible drawback to any formal association between lawyers in different countries which I think is worth mentioning is the opportunity cost of the time which may be taken up in simply managing the relationships involved. Given like minded individuals and careful initial planning everything should go smoothly. In practice this is not always the case and a significant drain of a law firm s most precious resource, its lawyers time and energy, may result. A formal association may of course, (and whether the original intention or not) be an interim step along the road to, so far as possible, a full merger. This may be the case in the European Community where it may in due course, be possible to establish law firms, able to practice throughout the Community, although at present there are regulatory questions of great sensitivity which have not been resolved. A more dramatic form of cooperation is when lawyers in different countries decide to enter into arrangements whereby they regard themselves as one firm and hold themselves out to the world as such. This is clearly a much more fundamental step than an association between two or more separate entities. Again, the exact arrangements will vary from case to case. On the one hand, they may simply amount to a confederation of financially independent partnerships around the world which strive to achieve some level of good common practice. Alternately the relationship between the lawyers involved may be much closer. Among possible benefits which would flow from an arrangement whereby lawyers in different countries are integrated in the same firm would be: (a) First the opportunity for professional colleagues to exchange ideas and discuss any aspect of their practice freely. I believe this is one of the greatest benefits to be gained from full cross-border partnerships and is in fact simply an extension of an important benefit to be gained from any professional partnership. In an international context it can be of a special value in enabling lawyers to formulate imaginative solutions to legal problems of an international nature which face their clients.
194 (b) (c) (d) (e) There may be opportunities to develop a closer relationship with existing clients of the home office or to attract new clients for the home office. There may be opportunities for the transfer of expertise between the various offices. For example in financing structures (which seem to be in a state of constant evolution), similar commercial and legal issues may need to be addressed in transplanting a particular form of transaction, such as, say, securitisation of assets, from one country, or set of countries, to another. There may, as, for example, between England and Hong Kong, be circumstances in which legal research carried out in one jurisdiction may be of immense value in another clearly related jurisdiction. The opportunities for offering continuing education for lawyers may be enhanced. There can be considerable benefits for the offices and individuals involved in a systematic programme of rotation of lawyers between offices. This is clearly linked to the question of transfer of expertise. The effects may be seen, if, for example a group of banks approach a French lawyer in France for advice when a sovereign state seeks to reschedule its borrowings under French law agreements. Although the relevant law is different it could be an enormous advantage from the client s point of view, in a rather esoteric area, if the lawyer in question has had experience obtained in London, say, where such exercises are much more common. I believe this educational aspect is of considerable importance and may be one of the greatest potential benefits of cross-border law firms. If lawyers have the opportunity of working in, say, two or three offices over a period of a fair number of years by the end of that time, they have probably been exposed to a wide range of business cultures and commercial and legal problems. This should enable them to deal more readily and effectively with a wide range of client problems. This type of career structure may offer a greater educational benefit than can be achieved by relatively short term desk exchanges. (f) As a slightly separate issue, some lawyers may regard the opportunity for inter-office movement of this type as offering an intrinsically more fulfilling and challenging career, which they are able to follow while remaining with the firm of their choice. (g) Technical compatability between offices in different countries can be enhanced. To take a straight forward example, there may be considerable practical benefits in being able to transmit documents by modem
2 S.Ac.L.J. Part II Globalisation of Legal Practice 195 (h) link between offices. There may be substantial benefits, and increasing, to practitioners in different countries in being able to draw on shared data bases. Where a close relationship between two systems of law facilitates relatively easy dual qualification (as with England and Hong Kong) the intrinsic inefficiency of having to use two lawyers where only one is necessary, can be avoided. There are of course enormous problems to be overcome in trying to combine the activities of lawyers in different countries into a common structure of some type. The most obvious is clearly the question of control or perhaps, quite often, perceived control. Independence of its members is always a source of strength to the legal profession. Lawyers in any event tend by temperament to be fairly independently minded people. Even if one believes, as I do, that there are advantages in lawyers pooling resources in partnership there can, as we all know, be problems in holding a group of fairly strong-minded individuals together, even when they are practitioners in the same jurisdiction. An international element can compound these difficulties enormously. Nevertheless my own view is that given a group of sensible people with the same objectives, it is certainly not beyond the wit of man to create genuinely international firms in which (subject of course to any relevant regulatory restrictions) control resides in a partnership formed of practitioners drawn from a number of jurisdictions. The evidence suggests that this is certainly one of the future options for lawyers in Europe. It is perhaps worth noting without comment that the accountancy profession appears to have been able to deal, reasonably satisfactorily, with the various internal organisational problems posed by cross-border firms. A parallel development to the closer relations between practitioners qualified in different jurisdictions has been the spread of overseas branch offices of law firms. By this I mean overseas offices in which the lawyers practise only as lawyers of their home country. There are a number of reasons for the existence and continuing spread of such offices. One has been the fairly widespread adoption of the laws of England or the laws of the State of New York as the law of choice in relation to certain types of cross-border transaction. This is one reason why so far the largest numbers of overseas branch offices have been established by English or United States firms. There are, however, law firms from many other countries which also have overseas offices of this type. On one recent count, in London, there are now branch offices of 104 overseas law firms of which 53 are from the United States and a further 51 from 19 other
196 countries. Nearer home in addition to the various forms of association between Singaporean and Malaysian law firms I understand that at least one Singaporean firm now has an office in Hong Kong and I see no particular reason why there should not be other overseas offices of Singaporean firms. The main purpose of any such office is naturally to practice and earn fees as lawyers of their jurisdiction of qualification. One effect of such offices is to provide readier access to such services and thereby enhance the efficient co-operation between lawyers from different countries, and the service provided to clients, which I mentioned earlier. There are, however, other less tangible benefits. These may include a wish to establish relationships with a larger number of lawyers in the country of the overseas office in the hope, once again, of attracting more referral work. It will be far easier to achieve a working familiarity with the business and legal issues which arise in a country, which may in turn enhance the service which can be provided by the firm as a whole. There may also be a desire to establish some sort of presence in a country in anticipation of a change in practice rules which would enable the firm to establish an office in which locally qualified lawyers would practise fully. In this category one thinks of the various offices being opened by European firms in each others countries in anticipation of the day when partnerships operating fully throughout the community may be possible. The same is true of some of the offices opened by foreign law firms in England, where, there is a likelihood of practice rules being changed so as to permit partnership between English and foreign lawyers. There are, of course, major difficulties to be faced by any firm which is considering opening an overseas branch office. Amongst these is the cost and by cost I do not simply mean out of pocket expenses. Cost would also include, firstly, the loss of staff from the home office. Especially when looking at a new office there will almost certainly be a need for one or more valuable members of the home office to be located there which will, of course, be a serious loss to the development and perhaps income of the home office. There will also of course be the out-of-pocket expenses. It may take some years before the office is to have any serious prospect of making a profit. There is of course a further cost in the amount of management time and effort involved in simply getting the office established, which should not be underestimated. Effect of Advances in Communications When considering the development of international legal practice it is worth making the point that none of us have really digested the full
2 S.Ac.L.J. Part II Globalisation of Legal Practice 197 consequences of the enormous advances which have been made in communications in recent years. At the same time, as law firms have been opening offices overseas, it has in fact become easier, from a technical point of view, for transactions pertaining to one part of the world to be arranged and documented in a far distant part. Curiously this could have the effect of actually concentrating certain types of commercial or, perhaps more especially, financial activity into a relatively small number of major business centres. This could have a significant impact on how legal services are provided over the coming decade for the world s business and financial communities. To take an example, I understand that the overwhelming majority of aircraft financing transactions for commercial airliners to be used in Australia over the last few years have actually been arranged and largely negotiated and documented in London. This is not an anachronism reflecting a historical legacy, indeed far from it. An economic activity such as arranging aircraft finance in the world is I suspect nowadays suprisingly footloose. The actual transactions are an excellent example of the global economy at work with parties from a wide range of countries often involved. The arranging of such transactions is, however, at present largely centered on 4 major centres being London, New York, Hong Kong and Tokyo. This is a singularly lawyer intensive type of activity and of course the availability of substantial numbers of lawyers with the appropriate expertise to attend to the interests of the numerous parties involved is one factor in focusing such activity on those cities. Modern communications make such concentration of activity easier. It is an example which deserves very careful consideration because, especially in the financial field, it may perhaps be representative of trends which could affect a broader spread of activities. Future Trends Generally, however, I think it is fair to say that the present trends towards cross-border associations or partnerships between lawyers and the spread of branch offices will continue. Some, (perhaps in view of the difficulties involved, many,) of these developments will be unsuccessful. Nevertheless legitimate client expectations and the globalisation of the world s economy will cause such efforts to continue. As I mentioned earlier these developments should be kept in perspective. Taking the legal profession as a whole for quite possibly the majority of lawyers they may continue to be of very limited interest. I believe it is certainly unlikely that the next decade will see legal practice around the world dominated by a small number of firms, or networks of firms, in the same way as the accountancy profession. A continuing limited move towards internationalisation of the profession will have some consequences for people other than practitioners.
198 Legal Education First those responsible for legal education will need to ensure that so far as possible lawyers are equipped to deal with the increasing international element in their practice. I would include in this group not only those responsible for university and professional education but also law firms themselves as they arrange continuing training programmes for their lawyers. In this context internationalisation of practice is linked to a range of other practice developments which may be of greater educational consequences and it is accordingly a subject which I shall only mention in passing. Regulation of the Profession Another group who may wish to consider the underlying trends I have mentioned are those responsible for regulation of the legal profession in different countries. The central issue throughout the world is straightforward. Maintenance of the highest professional standards in the interests of the public and society at large is an overriding priority. While there may be a classic economic argument for treating legal practice as an economic activity like any other there are forceful arguments as to why this may not be possible. These arise from the unique position of the legal profession in society. In, for example, each of England and Singapore this is manifest in the concept of lawyers as officers of the court. There is a need to ensure in particular the highest ethical standards and one natural consequence of this is that the practice of law tends to be one of the most regulated of activities. It is frequently the case that lawyers are prohibited from developing the close links with overseas lawyers which they might wish, by a wide range of restrictions. The restrictions will include, naturally, qualification and immigration requirements, and also perhaps restrictions on firm names, fee or profit sharing and partnerships with lawyers from other countries (or indeed non-lawyers). Countries for whom the provision of legal services is even now still a largely domestic matter may see no benefit in changing such restrictive arrangements. For countries, however, which wish to see themselves at the forefront of international financial and commercial developments and who expect the provision of legal services to be an integral part of a wide range of services offered to the world at large there may be benefits in allowing a wider range of options to members of their legal profession in how they organise their relations with lawyers elsewhere.
2 S.Ac.L.J. Part II Globalisation of Legal Practice 199 To focus on one of the many associated issues which are involved, ease of admission in one jurisdiction for lawyers admitted in another can make de facto cross border partnerships relatively easy to achieve. Relative ease of admission from one jurisdiction to another, need not necessarily result in a lowering of standards. I think the statutory provisions in Singapore which have the effect of making it relatively easy, albeit on a discretionary basis, for Hong Kong lawyers to practise and, presumably, establish their own firms, in Singapore are a good illustration. Presumably it is possible for such lawyers to remain as partners in sister firms in Hong Kong and thereby in effect achieve cross-border partnerships between the two jurisdictions. Recent developments in each of England and Hong Kong are perhaps worth attention as these are two major financial centres which are each very international in outlook. In each case legal services are provided for a broader client base than is generated by the domestic economies of each jurisdiction. In each there is some movement towards allowing members of the legal profession greater freedom in how they organise their relationships with lawyers overseas. In Hong Kong, the authorities have moved in this direction in the face of intense opposition from the local profession which has resulted in modification of earlier proposals. I commend the various papers arising from this debate to you. They explore many very important issues, quite apart from indicating the intensity of feeling which many of these issues can arouse. The position of Hong Kong is perhaps particularly interesting. It was, historically, an easy matter for English firms to establish themselves there and 22 English firms have done so. They have enjoyed some success and indeed 2 out of the 10 largest firms in Hong Kong would I believe be categorised as basically English firms. I would not necessarily hold out size as any particular measure of success but in the absence of any other publicly available details perhaps it is as good as any. When looking at Hong Kong an important question is to what extent, if any, did the influx of English firms from the City of London, over say, the last 15 years contribute to the very rapid development of Hong Kong as a major international financial centre during that period? I believe it was a factor. Remembering the absence of some other benefits such as the base of an enormous domestic economy enjoyed by New York, or the tremendous capital surpluses recently available for overseas investment in Tokyo, it may have been a significant factor. In Hong Kong the client institutions involved, many of which operate on a worldwide basis, were
200 quite simply able to draw on the same level of expertise in the various, quite often esoteric, specialities they required, as was available to their more established operations in London. This enabled Hong Kong to capitalise on the close relationship between Hong Kong and English law. In England, the presence of foreign law firms presumably played some part in the development of London as a financial centre in the 1970s and 1980s. 63 of the foreign law firms in England which I mentioned earlier have been there for more than 5 years. Now, however, there are clear moves in the United Kingdom towards allowing full multinational partnerships. Without going into detail it is reasonable to expect that in England, foreign based law firms will before too long be able to establish offices in London which will be able to practise fully in the UK and enter into full partnership with their foreign colleagues. The protagonists of such developments believe that they will have the effect of widening the employment opportunities for young lawyers and introducing further competition into the market for the provision of legal services. Client choice will be enhanced and efficiency in situations where, foreign and English arms of such international firms are both involved may be enhanced. Some multi-national practices may constitute an important educational resource. The attractions of London as a business centre will be consolidated or enhanced. To end I would only say that there are many difficult issues involved in this area. Thank you for your attention. I hope there is something in what I have said which stimulates discussion in the remaining time. KEITH ROSS* * Partner, Clifford Chance