______
2009/SOM2/GOS/WKSP/005
Why Adopt Hospitable Foreign Lawyer Regulations?
Submitted by: MLC
/ APEC Legal Services Initiative WorkshopSingapore
30-31 July 2009
APEC CONFERENCE
SINGAPORE 30 JULY 2009
Why adopt hospitable foreign lawyer regulations?
Ladies and Gentlemen:
I am delighted to have been asked to address you this morning on the importance to all of our countries in the APEC region of the availability of fully integrated legal services to our economies as a means to facilitate transnational trade and investment.
I will draw upon my experience as both an Australian lawyer, a private practitioner for nearly 15 years in New York and Washington DC, as the first General Counsel of Telstra (Australian’s national telecommunications provider), as the former Chief General Counsel of National Australia Bank, and now in my current role as CEO of Australia’s oldest and largest private equity investor with a $4 billion global investment portfolio.
The first question I think we need to ask ourselves in considering this topic is whether fully integrated legal services are a threat, oran opportunity? What isreally in our national interests in facilitating, or obstructing, integrated legal services?
While there are a number of specific points I will speak to this morning, myconclusion is that fully integrated legal services serves all our nationalinterests, including those of our local legal professions. It is very much an opportunity, and a mutually beneficial opportunity at that.
A robust economy depends upon healthy investment flows, both in- bound and out-bound. Capital flows in turn depend uponinvestor confidence. Confidence that capital is being deployed into economies with known and manageable risks that can be fairly priced. Giving business and investors such a level of confidence requires countries getting a number of things right.
There would be few, if any, companies or entrepreneurs today who would invest across national borders without first seeking advice fromtheir trusted legal advisers. These legal advisers are the enablers. Like international accounting and auditing firms they are the hand-holders who play a vital role, often behind the scenes, in enabling capital inflows and outflows. Allowing them to freely build bridges of trust with local law firms throughout the APEC region pays high dividends for countries that recognise these advantages.
The list of questions asked by investors of their advisers will be many, but will include seeking comfort on the legal and regulatory regime under which business is to be done, taxation issues, respect for the rule of law, enforceability of contracts, transparency and openness of the regulatory environment, honesty and competence of judges and magistrates, speed and efficiency of the courts, and the overall ability to measure and price risk. An investor’s trusted legal adviser will play a key role in this investment process.
Consequently, the ability of legal firms to work together in a seamless and trusting way across national borders, to share knowledge and expertise, to share clients, to exchange staff and expose them to new professional growth experiences, to provide joint advice, and to identify gaps and compare client behaviour in a way that often no-other adviser can do, is of immense value to their clients and the economies in which they operate.
In Australia’s experience, a legal system with law firms that have the capacity to provide legal services covering multiple jurisdictions has been essential in creating a robust economic system and promoting growth in transnational trade and investment.
Australia’s foreign lawyer regulation is based on a ‘Limited Licensing’ model. That is, a limited licence is provided to foreign lawyers:
to practise in Australia the law of their home-country, third-countries and international law without having to undertake examinations or gain a licence to practise Australian law, and
to voluntarily enter into commercial association/partnership with an Australian law firm.
A limited licence system allows for local and foreign lawyers or law firms to provide fully integrated legal services, covering multiple jurisdictions, to both local and international clients. The firms who take advantage of this are not interested in practising local law. Rather, they are engaged in cross border securities offerings, global joint ventures, mining and oil and gas projects, cross border mergers and acquisitions, and international litigation and dispute resolution matters of various types.
We have found in our experience in Australia that a hospitable limited licensing foreign lawyer regulatory system also:
Assists mutual understanding of our laws, legal system and culture and in turn, our understanding of other countries’ laws, legal systems and cultures.
Encourages and facilitates the transfer of knowledge and skills. Lawyers working together inevitablymigrate best practise across national borders. Without doubt, our Australianproject finance lawyers, mergers and acquisition lawyers, securities lawyers, tax lawyers, and litigators are more skilled and experienced because they work closely with English, American, German, French, Italian, Chinese, Japanese, Singaporean, Indonesian, and Malaysian lawyers, to name just a few. They are exposed on a daily basis to new thinking, innovation and learningsfrom the world’s best lawyers.
Australian firms have also obtained many benefits from maintaining deep dialogue with UK and US firms in terms of best practice, whether it be in IT, Knowledge systems, precedents, training and development, etc. The development of relationships between local firms and Australian firms provides the opportunity for this type of technology transfer.
This greatly assists in innovation and internationalisation of local legal practices whilst still protecting aspects unique to each country’s legal system, and
Encourages and provides a greater degree of certainty to foreign investors.
Over the last decade or so, Australia has taken action to liberalise the Australian legal services market domestically and to introduce progressively more hospitable foreign lawyer rules and regulations across our States and Territories.
Our experience over the last decade is that this internationalisation process 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 in legal services generating mutual benefits to the local legal sector as well as the economy.
In the course of my career, I have used many law firms in many jurisdictions. My wrist is permanently sore from writing out many cheques for many legal fees! While there are a number of areas in which Australia struggles to achieve world class performance, legal services is not one of them. I have no hesitation in saying that Australian law firms are equal to best firms anywhere, and that they have achieved this by actively being open and involved with their global peers - both at home and abroad. Whatever parochial fears they may have had early on by being exposed to global competition, soon disappeared when they reaped the benefits from being recognised as world class.
Getting a client comfortable with doing business in a different jurisdiction does not just come from reading the laws and regulations of that country. It is an enormous asset to have one’s long standing local legal advisers work within the other jurisdiction, become friendly with local lawyers, learn the customs and nuances of how things work, the sensitivities of local regulators, and, together with the local firms with whom they have developed close relationships, guide a client as it embarks on an intellectual and emotional journey of getting comfortable committing its capital far from home. The local firm will never be displaced as the local expert. Rather, they form a seamless partnership with other law firms in other countries in a chain of advisers that guide the client in its journey.
This internationalisation period in Australiahas also coincided with a period of steady growth in Australian legal services exports.
This is demonstrated by the very favourable average growth rate in legal services exports of 27% per year over the last ten years. More recently, since the year 2000, we have experienced an even higher average rate of growth of 39% per year.
It appears that the largest export markets for Australian legal services are in the United States of America, the United Kingdom, Japan, New Zealand and China, including the Hong Kong Special Administrative Region. Of the countries in our region, it appears that the North Asian countries of China (including Hong Kong), Japan, the Republic of Korea and Chinese Taipei are the most significant. It has been for us, the proverbial “win-win” outcome.
It is Australia’s view 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.
Australia is firmly of the view that a capacity for multi-jurisdictional advice is part of the essential infrastructure required to provide a sound base to encourage and increase foreign direct investment and international trade.
Another significant benefit has been leveragingadvantages for regulators. Lawyers are officers of the court and as such owe duties of full disclosure to the court. They are also bound by an ethical code of conduct that is taken very seriously by the major law firms engaged in cross border legal work. The world’s largest and best law firms jealously guard their reputations without which they would have no business.
A regulator in one country can take some comfort from knowing that a company it is regulating that does business across a number of jurisdictions will have a seamless access to law firms of high integrity who are able to share knowledge about their client and its behaviour. Those law firms will have a level of transparency that regulators can only marvel at. Regulators often cannot have this global view, or if they do, it is slow and cumbersome. Some of us still remember the debacle of BCCI and how it played off regulators, auditors, and law firms in multiple jurisdictions hiding one global perspective of the bank from any one adviser or regulator. Global law firms play a vital role in preventing a recurrence of this sort of country arbitrage.
Reputable law firms, acting in concert and sharing information about a client, can be a positive influence on their client’s behaviour and level of compliance that is an asset that needs to be encouraged. Giving local law firms an insight into the global activities of a client through a close working relationship with that client’sother lawyers around the region is invaluable. Like the auditing profession, these law firms are often the last line of defence in ensuring compliant behaviour.
So in conclusion, I can say with confidence, that capital investment flows will favour those countries that can provide the most attractive investment environment. In so doing, they will need to get many things right. Foremost amongst those are giving investors confidence that their country is a safe and welcoming environment for foreign capital. One of the adjudicators of that test is behind the scenes and takes the form of investors’ long standing legal advisers. Building strong bridges and trust between those advisers and local firms is key. This not only benefits the investors and makes them more confident to invest, but also strengthens oversight among one of the key behind the scenes advisers in ensuring compliance is maintained.
At the end of the day, the more knowledgeable, the more skilled, and the more experienced a country’s leading law firms are, the greater the likelihood is that one key element of attracting capital inflows has been satisfied. That has been Australia’s experience, and certainly mine as General Counsel of two of Australia’s largest companies, as an investor. I look forward to discussing these issues with you further during the course of the morning.