Joint Law Ventures and Formal Law Alliances — A New Legal Era

Joint Law Ventures and Formal Law Alliances came into being in August this year, signaling the start of a new era for the legal profession in Singapore. Kamalarajan Chettiar provides a brief introduction on their development.

The Government appointed the Legal Services Review Committee (‘the Committee’) in September 1997 to ‘review Singapore’s strategic legal needs in the financial sector and the conditions under which foreign law firms and foreign lawyers are allowed to operate in Singapore, in the context of ensuring Singapore’s competitiveness in financial services.’

The Committee, comprising of the Attorney-General, a High Court judge, senior lawyers and heads of some of the top local and foreign banks in Singapore, submitted its report to the Minister for Law on 8 June 1999.

The Committee made the following recommendations to strengthen Singapore’s legal capabilities to meet the needs of the financial services sector:

  1. More top-quality offshore law firms from other jurisdictions should be encouraged to locate their regional practices in Singapore. Existing offshore law firms should be encouraged to locate a wider range of top legal expertise in Singapore to support the origination and adaptation of strategic financial products;

  2. In-house counsel, compliance and execution departments of global banking and financial institutions should be attracted to locate in Singapore to generate more legal work;

  3. Collaboration between offshore and Singapore law firms must be intensified to provide convenient and efficient legal services for cross-border financial transactions; and

  4. A vibrant onshore legal services sector must be developed by upgrading the legal expertise of Singapore law firms.

To achieve the above recommendations, the Committee proposed that Joint Law Ventures (‘JLV’) and Formal Law Alliances (‘FLA’) between offshore and Singapore law firms be allowed. The foreign lawyers under the JLV are to be allowed to practice Singapore law in respect of corporate, financial and banking work only. They are not to be allowed to practice in the areas of litigation and conveyancing. As such, foreign lawyers are not allowed to appear in Singapore courts.

The Committee further proposed that the Singapore Academy of Law, offshore and Singapore law firms can award training grants and scholarships for Singapore lawyers to be sent on overseas attachments and training to acquire the necessary knowledge in offshore laws.

The Government accepted the Committee’s recommendations and appointed a second Committee chaired by the Attorney-General, with representatives from the Ministry of Law, the Monetary Authority of Singapore and the Law Society to oversee the implementation of the first Committee’s recommendations.

Subsequently, the Legal Profession (Amendment) Act was passed by Parliament on 17 January 2000 to provide for the formation of JLV and FLA between Singapore and foreign law firms. The Legal Profession (International Services) Rules 2000 were formulated to give effect to the amendments to the Act. Both the amendments to the Act and Rules came into effect on 5 May 2000. [See The Singapore Law Gazette, March 2000 (pages 37 to 41) and July 2000 (pages 30 to 32) for commentaries on these legislations.]

The Attorney-General’s Chambers is the issuing body of the JLV and FLA licences. Initially, the Government only wanted to issue five joint venture licenses. This was extended after the Attorney-General’s Chambers received nine applications as at the closing date of 15 July 2000.

When announcing the Singapore law firms which have been granted the JLV, the Attorney-General said the entry of the JLV signaled the beginning of a new era for the legal sector in Singapore, which for the last 30 years, had demarcated foreign law firms from the Singapore ones. He further said that the JLV would be able to provide their clients with a ‘one-stop shop’ for cross border transactions.

The following firms were granted the JLV status on 10 August 2000:

  1. Allen & Gledhill and Linklaters & Alliances;

  2. Drew & Napier and Freshfields;

  3. Shook Lin & Bok and Allen & Overy;

  4. Wong Partnership and Clifford Chance;

  5. Lee & Lee and Lovells;

  6. Helen Yeo & Partners and Orrick Herrington & Sutcliffe; and

  7. Colin Ng & Partners and White & Case.

Alban Tay Mahtani & de Silva and Freehills was awarded a FLA licence.

With the introduction of the JLV and FLA, foreign law firms have now entered into the Singapore legal market which was solely dominated by Singapore law firms since Singapore’s independence. Such a move aims to place Singapore in the same league of top legal service providers such as Europe, United Kingdom and United States of America. Although the foreign law firms can practice Singapore law in restricted areas of law, this move would create some competition between the corporate and banking lawyers in Singapore. The Singapore lawyers would now have an opportunity to do international work and to receive training and exposure to international corporate deals which was not within their reach prior to the introduction of the JLV. For the clients, the quality of services would undoubtedly be enhanced.  

Kamalarajan Chettiar  
Allen & Gledhill

Common Conditions Imposed on all Joint Law Venture (JLV) Licences

Structure of JLV

1 Name of JLV

The name of the JLV and its letterhead and logo should reflect its JLV status and contain the name of the SLF and that of the FLF.

2 Entity and name of SLF

The SLF must maintain a separate entity at all times for the practice of Singapore law in areas of practice not included in the JLV. The SLF must use its own letterhead and file court registry papers in its own name.

3 FLF’s practice

The FLF may only practise offshore law and Singapore law, where applicable, through the JLV.

4 Secondment of SLF lawyers

The SLF may second all its lawyers to practice in the JLV, but their earnings derived from Singapore law practice, other than in areas permitted to the JLV, have to be treated separately in the accounts of the SLF and JLV.

Management

The management and control of the JLV by the SLF and the FLF must be joint and equal. It is not acceptable for the FLF to have outright control of the JLV.

Permitted areas of legal practice of the JLV

1 Banking finance and corporate work

The areas of legal work in Singapore law permitted to the foreign lawyers (when registered to do so) in the JLV are in banking, finance and corporate matters. The FLF and SLF may agree among themselves the parameters of corporate work.

2 Foreign lawyers

All foreign lawyers in the JLV may practise offshore law in all areas of practice in which they are qualified to do so.

3 Singapore law

Singapore lawyers may practise Singapore law in the JLV in all areas of practice.

4 One-stop shop

For marketing and accounting purposes, the FLF and the SLF may pool all areas of practice within the JLV as may be mutually agreed between them, but only the SLF may actually practise those areas of practice not permitted to the JLV under para (c)(i).

Sharing of profits in the JLV

The FLF and the SLF may share in the profits of the JLV in such proportion as may be mutually agreed upon. However, the FLF’s share of the JLV’s profits cannot exceed the total profits of the JLV arising from banking, finance and corporate work.

Status of partners in JLV

1 FLF partners

A foreign lawyer in the JLV may become or remain a partner of the FLF. If he elects to become a partner of the SLF, he must cease to be a partner of the FLF.

2 SLF partners

A SLF lawyer in the JLV may not become an equity or profit sharing partner in the FLF. If he does so, he will be regarded as a FLF lawyer in the JLV. However, there is no objection to a SLF lawyer playing an active role in the regional or international management framework of the JLV, eg to become part of the FLF’s regional management team.

Modification to the JLV agreement and business plan

No material modification may be made to the JLV agreement and business plan without the prior approval of the Attorney-General. What constitutes ‘material modification’ will depend on the terms of the JLV agreement and business plan as well as the facts and circumstances of each case.

Common Conditions Imposed on all Formal Law Alliance (FLA) Licences

  1. The FLA does not create a new legal entity. The full names of the constituent Singapore Law Firm (SLF) and Foreign Law Firm (FLF) must appear on all their respective firm’s letterheads but each letterhead may refer to the formal law alliance between the SLF and FLF.

  2. The FLA is intended to facilitate cross-border work by providing a ‘one-stop-shop. ‘Cross-border work’ refers to transactions involving or subject to the laws of more than one jurisdiction. There is no profit-sharing but the SLF and FLF lawyers working in a cross-border transaction may allocate the fees derived from cross-border and offshore work between themselves. No fees may be shared in wholly Singapore law work. However, the SLF may pay technical support fees and consultancy fees to the FLF for advice in structuring and documenting any transaction.

  3. The SLF must maintain a separate entity at all times for the practice of Singapore law in areas of practice not involving cross-border work. The SLF must use its own letterhead and file court and registry papers in its own name.

  4. The FLF must practise offshore law in non-cross-border transactions as a separate entity from the SLF and FLA and use its own letterhead for this purpose.

  5. The FLA can only bill its clients as if it were a single law firm in respect of cross-border and offshore work but the bill must be issued in the name and letterhead of either the SLF or FLF.

  6. Separate accounts must be kept by the SLF and FLF in respect of their Singapore and offshore law practices as well as cross-border work.

  7. No material modification shall be made to the FLA agreement and plan without the prior approval of the Attorney-General. What constitutes ‘material modification’ will depend on the terms of the agreement and plan as well as the facts and circumstances of each case.