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THE TRANSNATIONAL PRACTICE OF LAW:
STAGGERING GROWTH IN SPITE OF ECONOMIC AND REGULATORY BARRIERS TO ENTRY
Stephen M. Worth
I. INTRODUCTION
For at least the past twenty years, transnational law firms have been growing in
number and importance to the legal community and world economy. Generally, a
transnational law firm can be defined as a law firm with offices in multiple countries,
specializing in providing counsel on foreign law and cross-border litigation and business. The
recent growth of such firms has been phenomenal. In fact, “most of the growth has occurred
in the last two decades, and most of that since the 1980‟s.”1
With this growth, however, have come a great number of interesting challenges and
questions for practitioners of law in the twenty-first century. “Transnational practice presents
a number of issues which are treated differently from one country to the other: Professional
conduct and responsibility, the scope of attorney-client privilege and professional secrets, . . .
disciplinary procedures, [and the] independence of professional judgment.”2 For this reason,
the future of the transnational law firm, and, perhaps more importantly, the lawyer
specializing in international law, is anything but certain. Nevertheless, because of the
growing importance of free trade to the world economy, it seems likely that such legal
practices will continue to be demanded by companies operating internationally.
II. TRANSNATIONAL LEGAL PRACTICE IN GENERAL
1
Richard L. Abel, Transnational Law Practice, 44 CASE W. RES. L. REV. 737, 738 (1994).
2
Jaime Cortes Rocha, Transnational Practice of the Legal Profession in the Context of the
North American Free Trade Agreement, 15 INT‟L L. PRACTICUM 111, 111 (2002).
1
In general, the majority of the practitioners of international and transnational legal
services are in large commercial firms.3 The good news for those of us likely to practice in
the United States is that American law firms, along with British law firms, are in the forefront
of transnational legal practice. Shearman & Sterling, for example, is a leading American firm
that obtains forty percent of its revenue from cross-border transactions.4 Another U.S. firm,
Baker & McKenzie, based in Chicago, “long ago established the model of using primarily
locally licensed lawyers in its many offices around the world.”5
Despite American successes in the transnational law arena, British firms also play a
major role. In fact, London‟s Clifford Chance likely leads the way in the transnational
practice of law. In 2000, Clifford Chance merged with New York‟s Rogers & Wells and
Germany‟s Punder, Volhard, Weber & Axster, thus creating the world‟s largest law firm 6 and
the firm with the greatest revenues, at $1.3 billion annually.7 American firms are clearly not
3
Wayne J. Carroll, Innocents Abroad: Opportunities and Challenges for the International
Legal Adviser, 34 VAND. J. TRANSNAT‟L L. 1097, 1100 (2001).
4
David. S. Clark, Transnational Legal Practice: The Need for Global Law Schools, 46 AM. J.
COMP. L. 261, 273 (1998).
5
Id. at 274.
6
Lawyers Go Global: The Battle of the Atlantic: The World’s Leading Law Firms, Based in
New York and London, Disagree About the Best Way to Respond to Globalization,
ECONOMIST, Feb. 26, 2000, at 79.
7
Gary John Previts, Comment: Global Multidisciplinary Practice: A Word on “The Future,”
52 CASE W. RES. L. REV. 947, 957 (2002). (hereinafter “Previts”).
2
alone in their belief that bigger is better and that a transnational practice will give them a
competitive edge in the marketplace.
Law firms have generally followed one of two approaches when embarking on an
international merger. “The first is a „home office approach,‟ whereby the firm sends a U.S.
partner overseas to establish a presence, then periodically rotates U.S. lawyers from the home
office through the foreign office.”8 Firms executing this approach typically consider
themselves to be nationally-based with a home office that controls management and sets
quality standards for the domestic and foreign offices.9 This approach is the one typically
utilized by U.S. law firms operating domestically that also have an office here or there in
Europe and Asia.
The second approach to growing a global practice capitalizes on foreign lawyers and
makes their expertise in foreign law central to the firm‟s growth in that jurisdiction. This so-
called franchise approach is modeled by Baker & McKenzie, which has offices in more than
thirty jurisdictions, staffed primarily with lawyers licensed to practice in the foreign
locations.10
This belief that multinational law firms make good business sense and are
economically viable can also be supported with concrete data. According to The Economist,
“[a]dvising on cross-border deals is becoming the fastest-growing and most lucrative aspect”
8
Bryant G. Garth & Carole Silver, The MDP Challenge in the Context of Globalization, 52
CASE W. RES. L. REV. 903, 932 (2002).
9
Id. at 932.
10
Id. at 932.
3
of the business of larger law firms.11 Further, many partners in transnational firms agree “that
market segmentation is the key to legal services, because quality and reputation matter more
than size or geographical reach.”12 It stands to reason, then that the true asset of the
transnational law firm is not so much the size of the firm, but rather their ability to appeal to a
particular group of businesses that function internationally and value the “one stop shop”
convenience of the transnational firm. This rationale on the part of the client at first seems to
make sense. If a company is satisfied with a firm‟s transactional service, for example, it
seems logical that their litigation service would also be competent. Similarly, if a company is
satisfied with a firm‟s work in North America, it seems logical that their service in London or
Hong Kong would also be competent. This company might even think that with added
business supplied to the firm, they might be given a “quantity discount.”
Needless to say, none of this logic is necessarily true. First, like any other business,
every law firm has its strengths and weaknesses. In any given market, there are the top-notch
litigation firms and the leading transactional firms – the two may not necessarily coincide.
Second, especially in the case of a “franchise firm” or a firm that is created by a “mega-
merger,” there is no guarantee that two offices will have similar competencies. Finally,
although a firm may be given a “quantity discount,” it seems more likely that a larger client
will actually be taken advantage of through unethical billing and expense practices, since a
few thousand dollars here and there are not as likely to be noticed as with a smaller client.
11
Lawyers Go Global: The Battle of the Atlantic: The World’s Leading Law Firms, Based in
New York and London, Disagree About the Best Way to Respond to Globalization,
ECONOMIST, Feb. 26, 2000, at 79.
12
Id.
4
Although rapid growth can offer great yields, mergers and rapid growth are obviously
not without risk. In the volatile economy in which we live, lawyers and businesspeople alike
are reminded, with stark reality, that the world can change overnight. For example, “[t]he
setbacks suffered by Microsoft in its antitrust litigation and by General Electric in its
unsuccessful bid for Honeywell, which was blocked by the European Commission, suggest
that the global merger movement has slowed, but certainly has not halted.”13 Certainly, the
economic slowdown following September 11 has had a huge impact on the world economy
and thus the business of the transnational law firm. Since so much emphasis is placed on
cross border transactions and mergers, unlike other legal practices, which consider themselves
“recession proof,” the business in transnational firms will likely ebb and flow in the same way
that investment banks and consulting firms see highs and lows based on the economy.14
Because of the great gains to be realized by their constituents, numerous special
interest groups have stepped in and expressed their interest in facilitating transnational
practice. In 1999, a “Forum on Transnational Practice for the Legal Profession” was held “to
investigate the possibility that the international community could make a concerted
presentation to the WTO‟s Working Party on Professional Services, which is formulating
proposals for the liberalization of trade in service, including professional services.”15
Presenters at the forum discussed key issues in multinational practice, including the
13
Previts, supra note 7, at 956.
14
For example, the former Silicon Valley powerhouse Brobeck recently splintered due, in
large part, to the severe economic slowdown witnessed in the technology industry.
15
Donald H. Rivkin, Transnational Legal Practice, 33 INT‟L LAW. 825 (1999).
5
formulation and enforcement of ethical codes and forms of licensure for attorney‟s wishing to
practice in a particular jurisdiction.
The American Bar Association (ABA) has entered the lobbying scene as well. For
example, the ABA argued that the Paris Bar‟s two-day written and oral exam administered in
French on the whole range of French law, which Americans must pass to practice in France, is
“unnecessarily burdensome.”16 Regarding practice of law by Americans in Japan, the ABA
has had little success. In Japan, the core restriction preventing American and Japanese
lawyers from forming partnerships and the inability of American lawyers to employ Japanese
lawyers have largely remained untouched.17
Nevertheless, the large, multinational corporation seems to be here to stay and the risk
of mergers to provide services to these companies might prove worthwhile. Michael Bray,
Clifford Chance‟s Chief Executive, commented on the three-way merger,18 stating that the
results were “‟proof positive that the calculated, first mover risk . . . in going global is paying
off.‟”19 “Such global entities, the argument goes, will require integrated, efficient services
from the knowledge professions in whatever part of the world their business can take them.”20
First, such companies will undoubtedly require that the firm that represents them be able to
advise them, if not represent them, in all matters all over the world. Second, it seems possible
that global corporate entities will look for a “one stop shop” to provide them with more than
16
Id. at 826.
17
Id. at 826.
18
See generally supra text accompanying note 6.
19
Previts, supra note 7, at 958.
20
Id. at 956.
6
legal advice, but rather also provide them with accounting, consulting, and business advice.
In the end, as the world grows smaller through additional technologies, it seems likely that
law firms will, at the same time, continue to grow larger, emulating the corporate structure.
III. ACCOUNTANTS AND LAWYERS
For some years, the accounting and consulting industry were joined at the hip, with the
Big Five accounting firms providing all sorts of services to their clients. Some in the legal
community have advocated a similar relationship between lawyers and accountants, arguing
that “[c]lients who value [accounting] services and the economies that come with „one-stop
shopping‟ will hire the Multi-Disciplinary Practices wherever they technically have their
bases of operations.”21 The term “Multi-Disciplinary Practice” (MDP) essentially means a
company that provides several different services to its customers, including, for example,
accounting, consulting, and legal advice.
The benefits of such horizontal growth are obvious. The firm or MDP can essentially
represent a given corporation in all aspects of its business. The firm can help the client
organize itself as a particular legal entity, assist the client in making an initial public offering
or creating an employee stock option plan, enable the company to acquire other properties or
companies, and defend or initiate litigation – essentially perform all the functions of any firm
that assists clients in different legal related matters. However, the MDP can also help the
client file its taxes, withstand an IRS audit, tighten its fiscal governance to lower the bottom
line – essentially perform all the functions of any accounting firm. Finally, if a consulting
practice were also included in the MDP, the firm could assist the company through difficult
times, enabling them to find ways to reduce costs and increase profits and assist the company
21
Garth & Silver, supra note 8, at 903.
7
in finding the right market niche or sector for increased growth. At least at first glance, such
MDPs would seem to have a competitive advantage over separately run accounting firms, law
firms, and accounting firms. This would especially be true if the MDP were one of the Big
Five accounting firms, with offices and experience all over the globe.
Further, such MDPs seem to be getting support from governmental entities. Currently,
however, at least in the United States, the Model Rules of Professional Conduct prevent
lawyers and accountants from organizing businesses together.22 “Although other countries
likely have similar restraints on multi-disciplinary practice, recently, the Advocate General of
the European Court of Justice stated that a ban on associations between lawyers and
accountants was anti-competitive.”23 “Clearly, the opinion of the Advocate General of the
European Court of Justice carries with it little import, especially in the United States.”
Nevertheless, the statement might exhibit the current sentiment of businesspeople and lawyers
in Europe, who could seek to gain a competitive advantage over U.S. firms by forming
conglomerate legal and accounting firms.
However, although it has been argued that “cross-fertilization” of different
organizational forms would produce a “hybrid product” with “new competitive advantages”24
and such hybrids have been ostensibly supported by some authorities in Europe, it is not clear
that such “mega-mergers” will actually benefit the legal and accounting firms involved.
Some, for example, have commented that “the Big Five will not be able to muster a real
22
MODEL RULES OF PROF‟L CONDUCT R. 5.4
23
Previts, supra note 7, at 957.
24
Garth & Silver, supra note 8, at 908.
8
challenge to the traditional corporate law firms, especially the more elite ones, without a
strong organizational base in the United States, particularly in New York and Washington.”25
Clearly, the fact that some of the largest and most profitable law firms have had
decades to entrench themselves in the legal market would pose a great challenge to any
accounting firm with the inkling to try its hand at the practice of law. After all, it seems
unlikely that the dubious benefit of “one-stop shopping” alone would cause a company to
change its legal counsel from the firm with which it has been working for years to an
accounting firm with little or no experience in the legal field, outside of tax work.
Another factor that seems to weigh against MDPs is exemplified in the accounting and
consulting firm fallout that has taken place since the Enron scandal. In the past year, each of
the Big Five accounting firms have allowed their consulting practices to split off and become
an entity separate from the original accounting firm. For example, even before Enron, Arthur
Andersen had unveiled its plan to organize its consulting practice under the guise of
Accenture. Other accounting firms have followed suit, with Ernst & Young, for example,
creating a separate consulting entity known as Cap Gemini. This experience shows us that
bigger is not always better and can actually drive companies out of business or force them to
part ways. Undoubtedly, this is due, at least in part, to ethical conflicts arising between
different practices of the company, especially in the case of accounting and consulting firms.
Further, this experience might show that some types of businesses are simply better left
independently operated – too many conflicts of interest may arise, for example, with
accounting firms providing business to their legal departments, and vice versa.
25
Id. at 905.
9
Nevertheless, some have expressed confidence in the ability of the Big Five to bounce
back after Enron and once again gain the trust of the public. Garth & Silver argue that the Big
Five have learned their lesson. Thus, they are “skeptical that MDPs controlled by the Big
Five and offering legal services will promote one-stop shopping, shameless cross-marketing
of services and subordination of professional values because of the combination of auditing
and consulting.”26 Perhaps the Big Five have learned their lesson and a horizontal merger of
accounting and legal entities could prove harmless to the public and benefit the company.
Although such mega-mergers between legal and accounting firms have yet to
happen,27 loose affiliations between certain accounting firms and law firms have already
developed. So called “captive law firms” are “organizations that have formally affiliated with
a non-law professional services firm, such as one of the Big Five accounting firms.”28 “The
“captive firm” lawyers generate work through referrals from the Big Five as well as
separately in the way that law firms typically operate.”29 Such “captive law firms” have
“fueled the anti-MDP movement, since the number of lawyers working for the Big Five
directly and indirectly has been proliferating at a tremendous rate,” challenging even the
absolute number of lawyers employed by firms such as Clifford Chance and Baker &
McKenzie.30
26
Id. at 908.
27
The exception being, of course, the numerous tax lawyers employed by the Big Five and
other accounting firms; Id. at 911.
28
Garth & Silver, supra note 8, at 910.
29
Id. at 909.
30
Id. at 911.
10
IV. AMERICANS PRACTICING ABROAD
The existence of law offices internationally presents two distinct problems to the firm.
First, there is the difficulty of setting and keeping firm-wide standards. Although the foreign
firm might look impressive on the letterhead and, in some cases prove lucrative, in general,
these outposts seem to be losing money. In the end, this puts great stress and heavy burdens
on partners of the domestic firm, who see profits dwindle as the organization grows larger and
less collegial. Second, there is the basic difficulty many American lawyers find in getting
licensure to practice abroad. Like the United States, with different jurisdictions requiring
different examinations and applications, every foreign country has its own governance of
lawyers, varying in degree but at times making practice in the foreign country nearly
impossible.
A. Firm Governance Worldwide
For many American firms, the foreign offices sustain annual losses and exist only for
bragging rights, as an addition to the firm letterhead, and as a discreet form of advertising.31
Undoubtedly, these constant losses can irritate domestic partners in the firm, who are likely
outraged by the losses of profit that occur due to overseas offices. On the other hand, for
many multinational firms, overseas offices are extremely profitable. Some have gone so far
as to claim that “[t]he U.S. corporate law firm is probably the most successful legal export we
have – both in the amount of revenue that corporate lawyers generate for the United States
and in the large and growing number of imitators found around the world.”32
31
Abel, supra note 1, at 741.
32
Garth & Silver, supra note 8, at 904.
11
Although the effect of international offices on the bottom line will differ greatly from
firm to firm,33 having multiple offices in numerous countries can fragment the firm as a
whole. If there are partners, for example, in forty-five countries, there is undoubtedly no
lingua franca shared by all of the partners. Further, the sheer number of lawyers in the firm
will challenge law firm governance. For example, it must be incredibly difficult for a firm
with some 5000 lawyers worldwide, such as Baker & McKenzie, to generate any firmwide
camaraderie or standard procedures whatsoever. When a firm has more than forty offices
worldwide, with many of the offices existing in non-English speaking countries, it would be
difficult to bring the managing partners of all these offices together for something as integral
to the health and well-being of the law firm as an organizational meeting. Without a doubt,
“[s]ize alone undermines collegiality among the partners.”34
Ultimately, however, whatever the challenges are that face the multinational firm,
several firms have found ways to be successful in the market. Certainly, then, it is possible,
and perhaps profitable for a law firm to establish a branch in a foreign country. Nevertheless,
33
Inherently transnational firms, such as Baker & McKenzie and Clifford Chance, likely rely
on non-domestic offices for a great deal of the profits such firms pull in. However, in spite of
this, with so much business taking place in North America, Europe, and perhaps Asia, one has
to wonder just how profitable the smaller offices in South America, the Middle East, and
Africa can be to the firm as a whole. Nevertheless, it seems likely that domestic firms that
earn the vast majority of their profits domestically see international offices as less integral to
the overall profitability of the firm.
34
Abel, supra note 1, at 745.
12
another difficulty arises when lawyers from that firm attempt to practice or act as legal
counsel in that jurisdiction.
B. Foreign Bar Admissions
1. Introduction
There are several different ways in which a lawyer can be involved in the international
practice of law. A form of international practice by American lawyers is done by advising
foreign clients on domestic law in the domestic tongue. “The only real „international‟ element
in this picture is that the client happens to come from a jurisdiction outside the one in which
the advising lawyer generally practices.”35 Ultimately, the actual work of the lawyer changes
little. Obviously, this varies with the type of client being advised, the law being discussed,
and the language being used – all of which require varying levels of expertise on the part of
the lawyer.
What the author is concerned with for the purposes of this paper are the requirements
and qualifications that an American lawyer must obtain in order to practice law or advise
clients in a foreign jurisdiction. Undoubtedly, this varies from country to country. “Foreign
branches, alliances, mergers, referrals, and accountancy legal departments have had a
significant impact” on the practice of law in foreign jurisdictions36 – these international
movements have created significant challenges for the domestic lawyer in that jurisdiction.
“Some countries, such as France, Belgium, Luxembourg, Singapore, and Japan have
35
Carroll, supra note 3, at 1101.
36
Abel, supra note 1, at 748.
13
responded with protectionist defenses” to prevent foreign lawyers from threatening the
practice of law by domestic lawyers.37
The regulations put in place are, in general, nationally specific rather than enacted by
supranational organizations.38 Therefore, the regulations “that are essential to one legal
profession” in a particular jurisdiction are “quaint or even bizarre to another.”39 For example,
“some smaller jurisdictions, such as Luxembourg, Liechtenstein, and some Swiss canons”,
have extremely strict protectionist policies.40 “These areas have attracted substantial
international investment by offering tax havens and bank secrecy. In response, they exclude
foreign lawyers through requirements of citizenship (sometimes attainable only by birth),
apprenticeship, and language competence.”41 These small, tightly-knit communities of
lawyers use their professional organizations and their links with the particular government to
exclude outsiders to keep competition at a minimum.42
Other jurisdictions have utilized other means to protect domestic lawyers from
international competition. “China, Russia, and Indonesia prevent foreign firms from
37
Id. at 748.
38
“Supranational” organizations include organizations such as the World Trade Organization
(WTO) and the members of the North American Free Trade Agreement (NAFTA). See infra
Part VI.
39
Abel, supra note 1, at 751-52.
40
Id. at 753.
41
Id. at 753.
42
Clearly, this is not true in all countries, since most have dropped their citizenship and
residency requirements. See Id. at 756.
14
practicing under their home name and, instead, require them to practice under “the aegis of a
local client, a local firm, or simply to list their resident foreign lawyers.”43 Ultimately, all of
these different restrictions are ostensibly put in place for the same reason, namely, to protect
domestic lawyers from international competition, especially from British and American firms
that have opened offices (or would if they were able) in the foreign jurisdiction or merged
with a local firm.
However, the impetus behind these protectionist policies might not be so simplistic.
For quite some time the United States has been at least a dominant player in the world
economy and legal community; before this time, the United Kingdom would probably have
been considered at least a dominant player if not the dominant legal and economic authority in
the world. Moreover, American concepts are “the basis for drafting contracts and for contract
enforcement mechanisms . . . as well as the approaches to the regulation of securities, the
environment, trade, and antitrust.”44 Simply put, American and British law has been the
leading, guiding force in the world economy for some time. The result of this has been that
lawyers and businessmen, especially those from the United States and the United Kingdom,
have assumed that English is the default language of business and law, throughout the world.
Therefore, it seems likely that part of the motivation for protectionist policies has been
out of resentment of this assumption. The result is that, at least in some cases, national pride
has led authorities to require that the local language be used for legal business. For example,
at least within the legal environment, Swahili must be used in Tanzania, Bahasa must be used
in Malaysia, Chinese must be used in Hong Kong, and Afrikaans must be used in South
43
Id. at 759.
44
Garth & Silver, supra note 8, at 904.
15
Africa.45 In the end, strict requirements of foreign lawyers might be enacted in a different
vein of protectionism. Rather than attempting to simply protect the economic well-being of
the country and the economic interests of domestic lawyers practicing therein, the aim may be
to protect national heritage, culture, and language, a motive that even Americans and Britons
would have difficulty faulting.
Although every foreign jurisdiction has some sort of regulation of the legal practice
within that country, supranational regulation likewise places restrictions on the practice of
law.46 Nevertheless, the enforcement of such regulation seems to be half-hearted at best.
“For example, the European Community (EC) has told members to admit lawyers from other
member states subject only to an aptitude test.” “However, neither France nor Spain has
promulgated that test.”47
Ultimately, “transnational lawyers are generally subject to two basic regulatory
regimes: admission as local lawyers and qualification as foreign, legal consultants.”48 49
Nevertheless, the requirements placed upon lawyers who wish either to be admitted to the
local bar or qualify as a legal consultant vary from jurisdiction to jurisdiction. “Outside the
EC in particular, admission criteria depend upon factors such as reciprocity, including
whether the relevant units of the federal polities are in accord, and the degree of similarity
45
Abel, supra note 1, at 754.
46
See supra Part VI.
47
Abel, supra note 1, at 754.
48
Id. at 755.
49
See discussion infra Part IV.B.2.
16
between legal systems, principally the divide between common and civil law.”50 Within the
EC even, to gain admission to the bar, some jurisdictions require that foreign lawyers merely
register and pay a registration fee. Other jurisdictions require foreign lawyers to have five to
eight years of experience in their home jurisdictions. Finally, some countries require
reciprocity from the lawyer‟s home jurisdiction.51 For this reason, this paper will now discuss
the ability of American lawyers to practice in two different, key economic regions: the EC
and Japan, either as Foreign Legal Consultants (FLC) or a members of the jurisdictions bar.
2. European Community
The EC has recently made great strides toward an integrated market allowing cross-
border practice of law throughout Europe. The goal of the EC is to enable lawyers from
different member states of the Community to practice outside of his or her home jurisdiction
with few difficulties.52 “In recent years a trend has emerged among Member States to
liberalize national rules that enable foreign attorneys to practice law in the respective member
state.”53 This movement toward an integrated market requires that legal professionals be able
to render legal advice on a Community-wide scale without regard to national borders. The
EC grants freedom to access the Members States‟ legal systems based upon the attorney‟s
affiliation and qualifications.
50
Abel, supra note 1, at 756.
51
Id. at 757-58.
52
Jonathon Barsade, The Effect of EC Regulations upon the Ability of U.S. Lawyers to
Establish a Pan-European Practice, 28 INT‟L LAW. 313, 313 (1994).
53
Id. at 315.
17
Certainly, the EC as a whole has made great strides to liberalize the admissions
process to allow lawyers practicing in other Member States to easily transfer and practice in
that jurisdiction. Further, it seems that such liberal transfer of bar admission will likely be the
rule in Europe‟s future. With the advent of the European Union (EU) and the Euro, Europe is
becoming more and more an organization of separate nations, with individual national
sovereignty becoming less important. In the future, it seems, in order to sustain economic
viability and importance in the world market, Europe, as a whole, will have to bind together
as a single sovereign unit. Therefore, it seems that liberalization of licensing regimes is a step
in the right direction for the EC Member States, since this liberalization will enable greater
trade and unity among Member States. If Europe can combine her economic powers, the EC
will clearly be a world player in the international marketplace in the future.
However, there is little scholarship published which empirically analyzes just how
many lawyers in the EC are utilizing these liberal regimes. Further, it is unclear whether
these broad based policies are being utilized in practice – whether separate Member States are
putting such policies into effect. Nevertheless, it is clear that to be entitled to EC privileges
the attorney must be admitted to practice in a Member State and must be a Community
national, since EC law and the rights thereunder are available only to Community nationals.54
Therefore, such liberalization does little or nothing to enable American lawyers to gain
admission to the bar of European sovereign states.
Further, this liberalization in the EC does little to aid U.S. law firms operating in the
Community. Branches of U.S. firms already established in Member States do not qualify as
legal entities entitled to freedom of practice under Community law. Such branches, rather, are
54
Id. at 317.
18
merely extensions of the head U.S. office, and must acquire rights on a state-by-state basis.
“Accordingly, a U.S. law firm with a branch in Paris cannot establish a sub-branch elsewhere
in the EC on the basis of its Paris branch, nor can it practice in another Member State on a
temporary basis based upon its Paris facilities.”55
Nevertheless, in recent years, there has been some liberalization of European
regulatory regimes that are much more likely to directly enable American lawyers to practice
in the EC. “For example, the United Kingdom has liberalized its rules and has adopted the
Courts and Legal Services Act of 1990, which enables solicitors to form partnerships with
foreign lawyers.”56 Without this liberalization, such mega-merger formulations of
transnational law firms, such as the recent Clifford Chance merger,57 would likely not have
been allowed under the European laws of some countries.
Further, there has been some recent liberalization of the practice of law that could
affect U.S. lawyers. However, EU restrictions on admission to the local legal profession
represent a “patchwork of liberalization [that] seems to contradict the EU law principle that
Directives – the legal basis for much of the liberalization – be implemented consistently
throughout the European Union.”58 Certain liberal regimes, such as England and Wales,
Ireland, and France permit foreign lawyers to take a special qualification examination in order
55
Id. at 320.
56
Id. at 315-16.
57
See supra text accompanying notes 6-7.
58
Carroll, supra note 3, at 1112.
19
to be admitted to local practice. “This test is a conversion test that enables lawyers who are
qualified to practice in certain countries to qualify as solicitors.”59
“It is unclear whether these „liberal regimes,‟ which allow lawyers to obtain
admittance to the bar through taking a written examination are really that liberal at all.
Consider the example of France. In 1997, ABA President Lee Cooper signed a Cooperation
Agreement between the ABA and the Paris Order of Avocats by which the two organizations,
recognizing their „shared experience, competence, and deontology,‟ undertook to pursue
„common inquiries into the totality of problems posed by the practice of law,‟ and bound
themselves „to cooperate on ethical and legal matters.‟”60 Although such agreements seem to
be a step toward allowing American lawyers easier access to bar admission in Europe, this is
not necessarily so. For example, despite this agreement with the Paris Bar, the ABA has also
argued that the bar examination administered by the Paris Bar, which is a two-day written and
oral examination administered in French, is “unnecessarily burdensome.”61 Therefore,
although a great deal of lobbying and political rhetoric is being exchanged, the actual outlook
of the American lawyer who wishes to gain admission to a European bar, even in a regime
known to be liberal, is rather dim.
There are, of course, European countries that are even more restrictive in their
admission of foreign lawyers to the domestic bar. Germany, for example, leads a small
minority of EU countries that do not make any concessions whatsoever to foreign lawyers. In
59
Id.. at 1112.
60
Donald H. Rivkin and Michael D. Sandler, Transnational Legal Practice, 31 INT‟L LAW.
559, 559 (1997).
61
Rivkin, supra note 14, at 826.
20
these restrictive countries, the only alternative for lawyers who wish to gain admission to the
local legal profession is to complete the full educational program, which typically takes seven
or eight years to complete.62
Recently, several cases have been brought by U.S. born lawyers to challenge the
restrictions placed on legal practice in certain countries in the EU. In Haver v. Prufungsamt,
Haver was an American lawyer who practiced in Europe for the past twenty years. However,
when he tried to move to Germany, after twenty years of practice in France, the office in
charge of administering the examination “rejected the application, stating that Haver neither
enjoyed the rights of reciprocity under any multilateral or bilateral agreement nor under any
principles of EU law, given that he was not an EU citizen.”63
It seems, then, that one of the major arguments that proponents of restrictive EU laws
governing U.S. lawyers might make is that European lawyers enjoy no reciprocity in the
United States.64 No matter whether such restrictive laws are enacted to protect European
lawyers, to uphold the integrity of the profession, or to force U.S. bar admission standards to
be likewise liberalized, it is clear that the American lawyer who wishes to practice law will
find that he or she will have a difficult time gaining admission to the bar, except in certain
liberal regimes.
Nevertheless, no matter what difficulties an American lawyer might have in becoming
a member of a bar in the EC, that lawyer could always apply for FLC status. American
lawyers, since the United States is a member of the WTO, are able to apply for FLC status,
62
Carroll, supra note 3, at 1114.
63
Id. at 1121.
64
See infra Part V (discussing the practice of foreign lawyers within the United States).
21
thereby enabling them to practice U.S. law under their home legal professional designation
overseas. The FLC status is available to any lawyer who has been admitted to the bar in a
WTO Member State who wishes to practice, or consult as the case may be, regarding matters
of the lawyer‟s home country‟s law in any other WTO Member State.65
3. Japan
Although the European market has made some strides toward liberalization to
foreigners, the Japanese legal market has been almost impossible for outsiders to attack.
From 1949 to 1955, foreign lawyers could maintain offices in Japan and handle cases
involving foreigners without being citizens of Japan and without a reciprocity agreement with
that lawyer‟s home country. However, since 1955, only one non-Japanese has passed the
National Legal Examination administered in Japan.66 As a result, non-Japanese practice in
only six of the forty-nine firms that practice international law.67 Because of this state
empowered monopoly on the market, the practice of law in Japan has become highly
lucrative, with one lawyer in Japan reporting $300,000 of income in 1960.68
To make matters worse for foreign lawyers who had managed early on to gain entry
into the legal market of Japan, in 1987, Japan passed a law that “required foreign legal
consulatants to have five years of experience in their home jurisdiction, thereby eliminating
all the non-Japanese who had gained familiarity with Japanese law through years of work in
65
Clark, supra note 4, at 266-268.
66
Abel, supra note 1, at 765.
67
Id. at 765.
68
Id. at 765.
22
Japan.”69 Although numerous groups of American lawyers have made attempts to appeal to
these harsh Japanese rules, even efforts by the U.S. Trade Representative to open the Japanese
market have failed, despite eleven American jurisdictions offering reciprocity.70
As a result of these harsh rules, U.S. and U.K. firms handle much of their Japanese
work from their home offices, sending partners to work in Japan only when necessary. At this
point, the time seems ripe for Japan to liberalize her policies toward foreign lawyers. Japan‟s
economy has been in a recession for a decade, and Japan‟s role in the world economy has
decreased steadily throughout this time. With all that Japan has gained from free trade in the
past sixty years combined with the obvious growth that the international legal market has
sustained in the past decade, it stands to reason that the Japanese would see the benefits of
increased free trade with regard to legal services as well as manufactured goods.
4. Conclusion
Clearly, this is not an exhaustive look at the ability of a U.S. attorney to practice
internationally. For example, key locations of future economic growth are not even addressed
in this paper, such as the former Soviet states, the Middle East, and areas of Southeast Asia
besides Japan. Nevertheless, the purpose of choosing the EC and Japan was to exemplify the
vast differences in regulation from country to country - from the United Kingdom, which is
one of the more liberal countries, to Japan, which is certainly one of the more stringent
69
Id. at 765.
70
Abel, supra note 1, at 765
23
jurisdictions.71 In the end, it seems that the prospect of an American lawyer hanging his or
her shingle in most foreign countries is slim. However, other options besides becoming an
admitted member of the bar are available. As discussed earlier, an attorney who only wishes
to work in a foreign jurisdiction for a short period of time and does not plan on arguing in
court could apply to serve as a FLC.72 The application process for this, in most countries,
amounts to only completing a form and paying a certain fee. Nevertheless, if the world is to
ever see true transnational practice of law, would seem an ideal goal given the international
economic environment in which we live, the harsh laws restricting practice by foreigners must
be relaxed.
V. FOREIGN LAWYERS PRACTICING IN THE UNITED STATES
This does not mean, however, that foreign lawyers necessarily find admission to
practice in the United States to be a simple process. Again, as in the foreign countries
discussed above, the various states of the United States place differing restrictions on foreign
lawyers who wish to practice domestically. In general, the important considerations to be
taken into account when determining whether there has been an unauthorized practice of law
in a multijurisdictional context are: “(1) the state in which the lawyer involved is admitted to
71
Obviously, countries such as Cuba, North Korea, or Iraq, which most Americans would
find difficult, if not impossible, to even enter would pose challenges more difficult and
immediate than the regulations those particular countries place upon foreign lawyers.
72
Clark, supra note 62, at 268.
24
practice law; (2) the location of the client; (3) the law being applied in the particular
transaction; and (4) the location of the lawyer when providing the services.”73
Nevertheless, the distinction between practicing law in a particular jurisdiction and not
practicing law in a particular jurisdiction is not necessarily always clear. For example, in In
re Roel,74 the court determined that a Mexican citizen and lawyer admitted to practice in the
courts of the United States, but who was never a citizen of the United States nor a member of
the New York Bar, but prepares documents in conformity with foreign law was practicing
law. The fact that the law practiced is exclusively foreign law does not render state law
inapplicable. Further, the court stated that the licensure of foreign attorneys to deal with
clients in matters exclusively concerning foreign law is a matter solely within the province of
the legislature. However, in another case, a Lebanese lawyer could give assistance to New
York residents on Lebanese law, when all of his contacts were by telephone and mail other
than a visit to New York after the completion of his legal services.75
Therefore, it seems that a foreign lawyer could give advice on foreign law to citizens
of the United States as long as he did not visit the United States, at least within his legal
capacity. In those cases, a great deal of importance was placed on the location of the lawyer
at the time the services were rendered to the particular client.
73
Ronald A. Brand, Uni-State Lawyers and Multinational Practice: Dealing with
International, Transnational, and Foreign Law, 34 VAND. J. TRANSNAT‟L L. 1135, 1155
(2001).
74
See generally In re Noel, 144 N.E.2d 224 (N.Y. 1957).
75
El Gemayel v. Seaman, 533 N.E.2d 701 (N.Y. 1988).
25
In spite of the apparent harshness of New York‟s policy toward foreign lawyers
exhibited in that case, New York has actually led the way in the United States toward a more
liberal method of allowing foreign attorneys to become members of the bar. “In 1974, the
New York Court of Appeals adopted a rule that permitted members of foreign legal
professions to be licensed without examination to practice law in New York as legal
consultants.”76 New York‟s so-called “Liberal Rule” allows the state to license an applicant
to serve as a legal consultant, without examination, “if the applicant has been in good standing
as a member of the bar in his or her home country for at least three of the five previous years,
possesses good moral character, is over 26, and intends to practice as a legal consultant in the
State of New York.”77
Essentially, this allows the FLC to provide advice and draft instruments and
documents involving the law of his country, the laws of other foreign countries, and
international law. “In 1995, New York registered 209 foreign lawyers as legal consultants,
most of whom were located in New York City and represented large foreign law firms.”78
New York is not alone, however, in providing liberal rights to foreign lawyers who
either wish to become members of the bar or simply serve as a FLC. In 1993, the ABA
approved a Model Rule applying to FLCs to encourage states to adopt a liberal rule
facilitating the practice of foreign lawyers.79 In general, a liberal regime would be considered
a jurisdiction that allowed the foreign lawyer, upon passing the bar exam, to have the right to
76
Clark, supra note 4, at 266.
77
N.Y. Ct. R. § 521.1 (2003).
78
Clark, supra note 4, at 266-67.
79
See generally MODEL RULES OF PROF‟L CONDUCT R. 8.5.
26
be admitted to the local bar and to practice local law upon observance of local ethical rules.80
Besides New York, the other important commercial state of California has adopted this sort of
liberal regime.
On the other hand, a restrictive regime would be a jurisdiction that required the
individual to complete the same requirements as any aspiring U.S. lawyer, namely passing the
full legal curriculum and the local bar examination.81 Today, “[a]lmost half the American
states permit [foreigners] who have completed their legal education in foreign countries to
take a state bar examination under certain circumstances.”82
Although different states, then, have different rules regarding whether or not the
foreign lawyer may sit for the bar exam, as discussed earlier, “[m]ost lawyers, at least those
from WTO Member States, are able to apply for [FLC] status, thereby opening the door to
practice their local law under the home legal professional designation.”83 However,
“[f]oreign lawyers wishing to practice local law are generally treated the same as out-of-state
lawyers,”84 meaning that the foreign lawyer who has received FLC status does not have the
full rights of a lawyer who has been admitted to the bar, including the ability to appear in
court.
Ultimately, then, it seems that foreign lawyers who endeavor to practice law in the
United States have a much easier time than American lawyers who attempt to gain admission
80
Carroll, supra note 3, at 1107.
81
Id. at 1108.
82
Clark, supra note 4, at 268.
83
Carroll, supra note 3, at 1107. See also supra text accompanying note 62.
84
Id. at 1107.
27
to the bar in a foreign country. The two most important commercial regions of the United
States, namely California and New York, have pioneered the way toward liberal acceptance of
foreign lawyers, allowing them to sit for their respective state‟s bar exam. Certainly, other
foreign countries have similar schemes, such as France and Britain.85
Nevertheless, it is clear that disparities do exist between the United States and foreign
countries. One might only speculate why such inequalities exist between, for example, the
United States and Germany. One might argue that the lack of mutual reciprocity between the
United States and a given foreign nation is the reason for the foreign country‟s more
restrictive law. However, as already discussed, at least half of the states in the United States
would allow a German citizen to sit for their bar.
Therefore, the “lack of reciprocity” argument seemingly fails since the United States
has relatively liberal admissions standards and offers FLC status to any member of the WTO.
One also might argue that the purpose of restrictive foreign regimes is purely protectionist.
With certain countries, such as Liechtenstein and certain Swiss canons, this is undoubtedly the
case. With Germany, however, more than mere economic protectionism is likely at play,
since the protection of economic principles as well as cultural and lingual traditions also
compels the stringent regulation.
85
Although the ABA has argued that the Paris Bar should be administered in English, this
argument does not seem likely to make much headway. After all, it seems unlikely, and even
ridiculous that Paris, or New York, for that matter, would offer the bar examination in the
native language of every person taking the bar. Not only would the administrative costs of
this be astronomical, there is no assurance that the words and phrases used are even
translatable.
28
VI. INTERNATIONAL AGREEMENTS AND ETHICAL CONCERNS
Despite the apparent barriers to entry that both the United States and foreign countries
have put in place, which make the transnational practice of law more difficult, recently,
through NAFTA and the WTO, some of these boundaries have been lowered. Nevertheless,
there are clearly some important ethical concerns that make strict regulation of the practice of
law an important governmental interest.
NAFTA recognized the need for close cooperation between Mexico, Canada, and the
United States86 to eliminate barriers and to facilitate the cross-border trade of legal services.87
The Member States have also sought to encourage the development of joint recommendations
by the relevant governing professional bodies of the three countries for the licensing of FLCs
and the establishment of forms of association or partnership between fully licensed lawyers of
a country and FLCs of the other countries.88 In this way, a U.S. law firm could thereby make
a Canadian or Mexican FLC a partner or member of the U.S. firm. Additionally, NAFTA
established that lawyers licensed in any of the three countries may act as FLCs in the territory
of the other member countries with respect to the law in which they are licensed to practice.89
86
Note that although these three countries are the only who are a part of NAFTA, there has
been considerable discussion of allowing other countries to join.
87
Rocha, supra note 2, at 112.
88
Id. at 112.
89
Id. at 112. Note that although this is certainly a step in the right direction, it does not take
us very far. As discussed in Part IV.B.2, any lawyer licensed in a member state of the WTO
can be licensed as a FLC in any other Member State.
29
In December of 2000, the WTO published its proposal for a liberalization of legal
services worldwide, with the express purpose of “[m]aking it easier for lawyers and law firms
to provide services . . . to clients in international transactions.”90 “The main thrust of the
proposal is for the removal of “Mode 3” barriers to services, which include residency,
citizenship, commercial presence, and the local affiliation requirements for licensing as well
as scope of practice and local affiliation rules for foreign-qualified lawyers.”91 Further, as
discussed earlier, the WTO, like the members of NAFTA, have provided for reciprocity of
FLCs, meaning that a lawyer admitted to practice in one Member State may apply and be
granted admission as a FLC in the other Member State.92
To most observers, these liberalizations likely seem to be a step in the right direction.
Some have even proposed, as an alternative, or perhaps a supplement to these international
agreements, that global law schools such as that at New York University provide some
solutions to these problems since such schools “[w]ould encompass a broader range of
opinion than that typically found in today‟s local schools.”93 Essentially, the idea is that a
broader range of ideas would result if law schools were international in scope, covering not
only international and comparative law, but also being composed of a diverse student body.
By all reports, this has been an enormous success at New York University. It stands to reason
that if the study of law were international in scope, with students in various international law
90
Carroll, supra note 3, at 1115.
91
Id. at 1115.
92
See supra text accompanying note 62.
93
Clark, supra note 4, at 262.
30
schools around the world essentially being taught the same curriculum, then some of the
ethical concerns which keep the practice of law highly regulated would be assuaged.
Although this argument might be true, in reality, statistically, very few lawyers
practice what could be considered international law. Therefore, the demand for such
international law schools, at least at this point in time, is probably sated by the handful of
international law schools in existence. Nevertheless, although the future of the practice of law
and legal education is not clear, it seems apparent that the law, business, the economy, and
every other aspect of our lives will have a more world-based, rather than country-based
viewpoint in the future.
A great deal of progress has been made in recent years to enable the cross-border
practice of law. Nevertheless, there is reason for some concern. The practice of law, at least
in recent times, has been a highly regulated area. The lawyer is able to exercise a great deal
of control over the average individual‟s life, and, at least in common law countries, acts as
both an advocate and an officer of the court. Further, the lawyer has undoubtedly amassed a
great deal of knowledge and therefore knows the “rules” of society that are very much a
mystery to laypeople. Ultimately, then, the lawyer has a great deal of power over the lives of
individuals who request help from the lawyer, typically when the individual is in dire straits.
For this reason, governing ethical rules seem vital to the health and efficacy of the profession.
For these reasons, the transnational practice of law likewise raises some questions and
issues since we want to prevent the abuse of this authority. First, not only does the regulation
of the law vary from country to country, but the social mores behind these regulations also
differ greatly. For example, according to Abel, “[n]o country is willing to tolerate the
American contingency fee [and] many European countries, such as Belgium, Spain, and Italy
31
do not allow much advertising beyond the sending of brochures to existing clients.”94
Another example relates to the practice of law by American lawyers in the EC. Within the
EC, the “[c]ommunications with U.S. attorney will not be recognized as a protected privileged
communication, unless of the course the U.S. attorney has attained the status and credentials
of a Member State lawyer.”95
Some of the discrepancies that exist among countries have been alleviated by multi-
national ethical agreements. For example, in 1998, the Member States of the EC proposed a
Community-wide Code of Conduct for Lawyers. “The Code is to be applied to all cross-
border activities between lawyers in the EC and to professional activities of lawyers in a
Member State other than their own state.”96 Such multinational agreements would seem to
provide for ethical codes that could be applied in any country adopting such agreements and
therefore ease some of the ethical concerns driving the prohibition or limitation of
multinational practice.
Within the United States, the ABA has recently revised Model Rule 8.5 to address
“some of the nuances of multijurisdictional practice, albeit the focus on multijurisdictional
practice in the United States.”97 The ABA has also established the Forum on Transnational
Practice for the Legal Profession, the goal of which is to liaise with other foreign bar
associations to encourage liberalization of the rules regarding licensure and practice. “One of
the aims of the Forum is to create a right of establishment for foreign lawyers „in a framework
94
Abel, supra note 1, at 758.
95
Barsade, supra note 49, at 323.
96
Id. at 324.
97
Carroll, supra note 3, at 1116.
32
of bilateral agreements . . . fixing the recognition of qualification standards and the terms of
actual reciprocity between the bars.‟”98 Clearly, the United States and the EC seem to be
putting a great deal of effort into harmonizing ethical regulations internationally, thereby
providing for a more ethical and efficient practice of transnational law.
At the same time, however, there are problems with such agreements. The regulation
of transnational practice and professional associations has generated a great deal of
controversy, largely because it is so easy to evade transnational regulation and large areas of
transnational practice remain unregulated.99 Further, some argue that the practice of law
should not be included in any economic transnational arrangement. The rationale behind this
is that a legal system is inherently national. Therefore, each individual country has an
inherent interest and responsibility to closely regulate and supervise attorneys to ensure the
protection and stability of their internal ethical scheme. Nevertheless, it seems likely that
while legal systems at the present time are nationally based, this is highly likely to change in
the future. It seems logical that in spite of national pride and history, supra-national
organizations, such as the WTO and the EU, will continue to grow in importance and power,
someday fulfilling the role that the nation-state currently plays.
Nevertheless, there has even been considerable debate as to whether global self-
regulation of the legal profession is desirable at all. Ultimately, some have concluded that
“global rules of professional responsibility based on core values will add value to private
98
Id. at 1117
99
Abel, supra note 1, at 760.
33
clients, but they will add little to the public interest.”100 For this reason, many support the
ethical deregulation of transnational law, arguing that the practice of transnational law “lacks
significant asymmetries of information and inequalities of bargaining power, and those that do
exist favor clients rather than lawyers.”101 The argument goes that all transnational lawyers
have secured home qualifications, undergone a rigorous selection process, and endured
lengthy training, no matter what the jurisdiction in which they are admitted to practice.
Further, law firms, especially large multinational law firms, have an ample stake in upholding
their reputation by ensuring quality and ethical viability.102 Simply put, the clients served by
multinational firms are not merely individuals who have fallen on hard times, but astute
organizations lead by savvy businesspeople.
Ultimately, it is easy to see how one could argue that multinational agreements are
unlikely to have any effect on the practice of law, since such agreements would be difficult, if
not impossible to enforce. At the same time, although the free market of information will
certainly curtail some heinous violations of ethical violation, on the premise that multinational
law firms will have a great stake in upholding their reputation, it seems unlikely that the
average lawyer, practicing in an international environment, would consider such broad based
repercussions to reputation when choosing a course of action. Therefore, it seems that at least
some sort of regulation is necessary to maintain the integrity of the profession. To what
100
Christopher J. Whelan, Ethics Beyond the Horizon: Why Regulate the Global Practice of
Law?, 34 VAND. J. TRANSNAT‟L L. 931 (2001).
101
Abel, supra note 1, at 762.
102
Id. at 762.
34
extent such regulation should dictate the day to day conduct of the transnational lawyer and
exactly how such regulation is to be enforced has yet to be seen.
VII. CONCLUSION
The advent and proliferation of huge transnational law firms and market niche of the
transnational lawyer is almost undoubtedly here to stay. With technology, specialization,
comparative advantages, and free trade, the world will continue to decrease in size, thereby
making international business more profitable and viable. The law profession will be there to
provide the counseling and negotiating skills these companies need to thrive in this
environment.
Nevertheless, despite the apparent movement toward transnational law, this is an area
of law practiced by very few lawyers worldwide – a relatively recent phenomenon that has yet
to become established in the world marketplace. Great changes are in store for the world, the
practice of law, and the transnational practice of law in the future. Because of the relative
youth of this type of practice, it is difficult to speculate how the world powers will adapt to
adhere to this change. Will restrictive regimes open their doors to the world, allowing their
protectionist policies to die away? What will be the role of the supranational governmental
unit be in the future? Is the transnational practice of law, with single firms employing 5000
lawyers throughout the world really an economically viable business? Ethically speaking,
what changes must be made to keep the practice of law uniform throughout these countries?
How can we avoid transgressions as the world grows larger and more difficult to regulate?
This paper has only touched the surface of these questions, which will clearly be debated for
some time to come. Nevertheless, the possibility of practicing in a multinational environment
35
is an exciting one, and the changes that will be made by the world‟s polities to regulate and
enable this practice have yet to be seen.
36
