Changes to the Singapore Legal Market: Part II

I touched on the changes to the legal education and admission to the legal profession in Part I of this post. In Part II, I hope to highlight some of the aspects of the further liberalisation of Singapore’s legal sector.One of the significant changes is that foreign firms will be allowed to completely set up on their own and to advise on Singapore law. There are also further changes to the present Joint Law Venture scheme to make it more attractive for foreign firms to partner up with local firms.

Present System Involving Foreign Law Firms

The Committee to Develop the Singapore Legal Sector, headed by the Judge of Appeal Justice VK Rajah, first reviewed the present system in Singapore in relation to foreign law firms. The Committee took note of the fact that the number of foreign law firms based in Singapore have remained more or less stagnant over a 10-year period. As of 31 July 2007, there were 72 foreign firms with 645 foreign lawyers. While these foreign firms have offices in Singapore, the lawyers in their Singapore operations are restricted from practicing Singapore law and are not permitted to appear in court. This situation was described as a ‘parallel dimension’ – where the foreign firms are physically in Singapore but not connected to or engaged in the Singapore legal system.

…there has been a steady stream of Singapore-qualified lawyers migrating to join the foreign firms both in their overseas offices and the Singapore offices.

The Committee noted that notwithstanding the inability to practice Singapore law, there has been a steady stream of Singapore-qualified lawyers migrating to join the foreign firms both in their overseas offices and the Singapore offices. The often quoted reasons are to gain better international exposure, better pay and career prospects and improved working hours. The statistics reveal that in 2001, there were 61 Singapore lawyers who had left the profession to move to a foreign firm in Singapore, and by February 2007, this number nearly doubled to 119. These numbers do not include lawyers who had left to practice directly overseas.

The present closed market also does not encourage these foreign firms to advise clients to adopt Singapore law as the governing law of their regional/international transactions.

The Committee noted that the Joint Law Venture scheme, in which a foreign firm partners with a local firm, has been of limited success and while the JLV was intended to provide a one-stop shop to clients, it has not always worked out to be so in practice. I have blogged about the high-profile departure of Freshfields from its JLV association.

Proposed Changes

The major shake-up would be that up to 5 foreign law firms, dubbed Qualifying Foreign Law Firms (QFLFs), will be allowed to employ Singapore-qualified lawyers to practice Singapore law in all areas except for litigation and general practice. Therefore, this encompasses the high-end corporate work, arbitration and maritime areas of practice. The practice of criminal law, retail conveyancing, family law, administrative law and all aspects of commercial litigation will be ring-fenced.

The present JLV scheme will also be tweaked to the Enhanced Joint Law Venture scheme. There will be a relaxation on the restrictions of profit sharing and the foreign law firm will also be allowed to hire Singapore-qualified lawyers to advise on Singapore law.

At a macro level, it may pave the way to an increase in volume and quality of high-end transactional work going to Singapore. At a micro level, it may help stem the tide of lawyers leaving Singapore to work in other financial sectors. Singapore lawyers can work in these approved foreign firms and obtain exposure to high-end international work.

The Committee was also guided by the Hong Kong experience in liberalising its legal market. Despite the rising number of foreign firms and foreign lawyers in Hong Kong, the number of local firms and local lawyers have also risen. Therefore, liberalisation need not be at expense of local legal community. In fact, one commentator attributes Hong Kong’s sterling reputation as the region’s legal hub to its far-reaching liberalisation, as compared to Singapore’s.

“Perhaps the real question to be addressed is not whether Singapore should take this step forward but how quickly.”

In relation to the liberalisation of the legal market, the Committee stated that: “Perhaps the real question to be addressed is not whether Singapore should take this step forward but how quickly.”

Some Thoughts

From the perspective of a young lawyer, there will be an increase in the options available, with the attractive avenue of working for a foreign law firm, enjoying an international exposure while still retaining a Singapore practicing certificate. As commented by the Ashurt Singapore managing partner: “The proposed changes also look very positive for young local lawyers, giving them an opportunity to continue to practice Singaporean law while having the platform of an international firm to work on exciting transactions regionally and globally.”

It will make the competition for legal talent all the more heated, with the local Singapore firms possibly losing more lawyers to the foreign firms.

It remains to be seen whether Singapore’s plans for liberalisation goes far enough to attract the foreign firms. It seems that the UK firms have been lukewarm in response to the proposed changes.

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