The Bar Council has today come out stronglyagainst the Government allowing foreign firms to set up stand-alone branches here in Malaysia.The Bar Council is understandably taking the position that there should always be quid pro quo in that the foreign firms get to enter a new legal market, while the local legal industry gets to benefit from some form of knowledge transfer. Hence, the Council’s insistence that a joint law venture framework be implemented. On the other hand, the Government and the Bank Negara wants to keep Malaysia at the cutting edge of Islamic finance, and having major foreign firms (mainly from London) set up practice here will help the industry and also help to bring in their clients.

I’ve never quite believed the concept of the clients moving to regions where their service provider heads to. The reason why such foreign firms are keen on establishing themselves here must be to tap the pool of clients here in Malaysia and the surrounding region.

Perhaps the other aspect of this ongoing ‘tussle’ (there really hasn’t been much development on this issue since 2006) is that foreign firms will be unlikely to want to have a joint venture with a local firm. It will be more attractive for these firms to maintain their profit sharing arrangements and have complete autonomy on how they want to run the firm.

I am not quite sure on which side of the fence I stand on this. From the perspective of the legal industry, I am not sure whether our legal market is developed enough to compete with the foreign law firms. Of course this issue is confined mainly to the practice of Islamic finance, which will only affect several firms which practice in this area. This partial liberalisation will not affect most of the other litigators and even corporate lawyers.

However, without the benefit of some knowledge-transfer arrangement, or easing in period (akin to the long period of time where Singapore implemented their joint law venture), the local established Islamic finance law practitioners are unlikely to benefit. There may be no guarantee that young lawyers practicing in Islamic finance will also be able to be employed at such foreign firms.