Another Look at Opening Up of the Legal Profession
I have always been in favour of opening up the legal profession. Singapore is too small a country to have a closed economic policy, and as we look at countries like North Korea and Myanmar, it is obvious that a closed economy does not work to the advantage of the citizens. One may even try the argument that the economy can be open, but the legal profession should remain closed. I can think of no good reason why that should be so, and “closed” must mean “protected completely”. There is no compelling reason for the legal profession to be so specially treated (although later on I will explain why the legal profession is different from other professions, and does deserve some special treatment).
In any event I have pointed out elsewhere that the opening of the legal profession has largely benefitted the local legal profession. Although there has been some pain, competition usually means that those seeking to continue to survive and strive will always try harder, and so benefit from the competition. The top local law firms are more than 200 lawyer-strong each, and the largest has more than 300 lawyers. These law firms have managed to grow to their current sizes because the economy has expanded; and this expansion would not have been possible without an open policy.
In tandem with this, I have also pointed out that the authorities have generally been protective of the local legal profession. It has been about 30 years since a licence was granted for the first off-shore law firm (meaning foreign law practice or “FLP”) to the granting in 2010 of a licence for a QFLP or Qualifying Foreign Law Practice, which allows a FLP to practise Singapore law in transactional matters. This means a FLP’s lawyers cannot act as counsel or solicitor in Court matters. There have been areas where I thought that the authorities had got it wrong, but by-and-large the authorities have been careful not to put the local legal profession in jeopardy. I would say that the authorities have been very good on this point.
So why am I re-visiting the matter? I do so because of recent press reports that there are about 25 applications for the QFLP licence. I had been wondering how the government will respond to this large number of applications. I do not know how many applications were made in 2010. The government did not approve any applications for 2011 and this year. There were various rumoured reasons for the lack of QFLP licences for these two years: that there were no applications from large international firms, especially from New York; the authorities were waiting for some impact from the 2010 licences; the bad world economy was not a good time for allowing more QFLPs to practise here. Who knows?
So back to the question of the 25 or so applications. The authorities are keeping their cards very close to their chest. We do not know if the number of 25 is more or less correct. We do not know how many are from London, New York or other cities. We do not know how many of these applicants are what one can describe as international firms. We do not know the specialisation of these applicants and how they can contribute to the legal profession in Singapore, and to the economy as a whole. We also do not know the criteria for the issue of the licence – must an applicant somehow be “better” than a local firm? It would be good to know at least the broad criteria of how and why a QFLP licence is granted.
After the first batch of six QFLPs was granted in 2010, a foreign lawyer asked me what the criteria was, thinking that as President of the Law Society, I knew how these things were done. I told him I did not know, and asked him why he wanted to know. He said that he was rather surprised to see that a FLP which was previously a partner with a local law firm in a JLV (Joint Law Venture) had been given a licence for a QFLP. He wanted to know if the authorities had looked into the causes of the failure of the JLV to see if the FLP was at fault. His view was that if the FLP was at fault, then it should not be rewarded with a QFLP licence. My response then was that I could not see the authorities wanting to be the judge in what could be a commercial issue, and deciding on who was “right’ or “wrong” in such circumstances. His retort was that the authorities should nonetheless look into this issue on a broad basis and ask the local law firm for its views.
I think seeking the views of the local law firm in such circumstance would have been useful. It is not to punish the FLP, but to continue to refine the thinking and criteria for something that is so new and untested. So I would agree to some extent with the view of this foreign lawyer.
So how many of the 25 applications would be approved? Without knowing the criteria for the award of the QFLP licence and the quality of the applicants, it would be difficult to come up with any intelligent numbers.
Aside from the questions I raised earlier regarding what we do not know, I would raise another question: have the authorities some idea of the number of QFLPs they would want to approve this year and for the next few years? The largest FLP is a QFLP. By and large I think the QFLPs hire more lawyers than those FLPs that are not QFLPs. The largest QFLP has about 72 lawyers (as at September this year), larger than all but about 10 local law firms. In addition, they also hire more support staff. Obviously, they compete with local firms for the best lawyers and the best staff. This is one area which has upset many local lawyers. On the other hand, some will say that staff and young lawyers have better job prospects, and in addition these FLPs also provide good training for the young lawyers.
There are about 5,000 practising lawyers in Singapore, of which slightly over 1,000 lawyers are foreign. One interesting bit of information about these numbers is that while the number of foreign lawyers in Singapore has been steadily increasing over the last few years, the increase in the number of local lawyers has not been so smooth. For several years, the number of practising local lawyers had stood at about 3,800, despite the addition of roughly 250 new lawyers each year. This means that the total leakage was about 250 lawyers each year for that period. Then it rose to 4,000. Last year it jumped to about 4,400, but by June this year, it had slipped back to about 4,000. After the Mass Call in August, the number rose again to about 4,400 lawyers. What this means is that the local legal scene has had an attrition rate of about 400 lawyers in the last two years.
So with these present statistics in mind, is it possible that in the near future we could be seeing two foreign lawyers out of five lawyers in Singapore, instead of the one in five today? Could we be seeing three in five at the end of, say, 15 years? And the leading question must be: is it good for Singapore to have such numbers where the number of foreign lawyers outstrips the number of local lawyers? I suspect those in charge of the situation will have two answers to this question. The first is that when the number of foreign lawyers reaches the danger-point (whatever that is remains to be seen), the authorities will simply turn off the tap, as they have done recently in other sectors of the economy. The second answer is that one should expect to see an increase in the hire of local lawyers in FLPs so that the number of foreign lawyers in FLPs will see a natural ceiling.
I guess I can believe that the tap can be turned off, if there is a will to do so. So I will not dwell on that issue. On the second I will ask if it will be good for Singapore to have a majority of their better lawyers working in foreign FLPs instead of in local firms. One has to bear in mind that many of the lawyers working in foreign law firms are likely to have come from rather privileged backgrounds in the first place and would likely have been educated overseas. In other words they are unlikely to be truly representative of the average “heartlander”, and are likely to remain so, if they continue to work in a foreign environment.
I have said elsewhere, and this is something that everyone agrees with: the legal system and laws of a country are a reflection or manifestation of the peculiar or unique needs and aspirations of a country. In a country where there are very diverse ethnic, cultural and religious communities, those special needs and aspirations require a sensitive and mature touch to develop and strengthen. But the tensions in such a situation are always, despite all the efforts, at risk of spilling over.
My concern about too many foreign lawyers therefore lies not only in the commercial arena, but in the un-quantifiable arena of human endeavours and relations. It has been argued that it is all right for our young lawyers to work in FLPs, and ultimately these FLPs will be Singaporeanised. That has happened in the major accounting firms in Singapore – all their partners are Singaporeans (except for a few that we do not hear of), so why should that not also happen to the Singapore offices of the international FLPs?
But why should the legal profession be treated the same as the accounting, medical and engineering/architectural professions? Why should lawyers be different? But that is exactly the rub - lawyers are indeed different from the other professions, because the legal system of every country is unique to the country itself.
It is true that some legal standards and underpinnings remain the same everywhere - murder is an offence everywhere. But how it is punished differs in many countries, with the European countries abhorring the death sentence while the United States and Singapore still retain that punishment. And why is this so? Because each community thinks differently about the death sentence and the place it has in its national and cultural psyche. And even within the practice of law itself, contingent fees are acceptable and legal in the United States, but not so in Singapore and in many British Commonwealth states. In other words, the law does not have a universality that other professions have.
The accounting rules and practices are similar almost everywhere where there is a modern economy. This is very much so because the accounting rules are not written by national governments, but by the main accounting bodies in Europe and the United States (although they do disagree on some important issues). This is very unlike the national laws of a country, where the laws are passed by the government, and any attempt by outsiders to influence the laws is usually brushed off with some degree of irritation, at the very least. The medical profession also has a universality that no other profession has. The human body, unlike the body politic, is the same everywhere. Treatment may differ from country to country but the basic rules of the body do not change. And as for the engineers, the law of physics is also universal – you can only put so much weight on a beam or pillar, and after that, disaster is the result. The laws discovered by Archimedes, Pythagoras and Newton (just to mention three obvious examples) remain exactly the same today (except for some refinements) as when they were first discovered by these great men. As for the architects, form and function will be more personal than systemic, and I think bad taste remains bad taste wherever you go.
Why am I so concerned about some (alleged) universal idea or rule having predominance in Singapore? In 2007, when I was moderating a panel discussion at the IBA Symposium on Rule of Law in Singapore, I upset some Scandinavian lawyers by criticising the Danish cartoon on the Prophet Mohammed. At the end of the panel discussion, I invited the lawyers to lunch to carry on our discussion. Five of them took up my invitation. It was a very friendly and animated discussion. But the Scandinavians were adamant that the right to have free expression was paramount in their society, even if the exercise of that right upset some people within the society and elsewhere. I asked if instead of insisting on their right of free expression they could consider withholding that right so as not to upset or offend a sector of their community. Wasn’t there an issue regarding respect for another person’s religion? The response was that perhaps the offended sector of their community could respect their right of free expression.
I asked if their attitude would be different if they were not living in a very homogenous society, and were instead living in a very cosmopolitan society such as Singapore. It was obvious to me as the discussion went on that they could not easily grasp the concept of living in a non-homogenous society. So in the end we agreed to disagree. I want to say that these people I was chatting with are very intelligent, well-educated and decent people. These are not rabble-rousers, and the discussion was always polite and reasoned. But it was clear to me that their social conditioning was completely different from mine.
Given the bad economic situation in Europe, and to a lesser extent in America, there is every incentive for FLPs to converge in Asia, and Singapore is a particularly attractive target. We can therefore expect that more foreign lawyers will want to work in Singapore. So while we become enriched with the experience of working with them, it cannot be overlooked that these FLPs come to Singapore also for their own material enrichment plans. So far, I see very little of their pay-back to our society for the economic opportunities we have given them. But I am digressing – my point in this Message is not the economic point. What I am saying is that with more foreign lawyers, and more local lawyers working in FLPs, there is a risk of the Singapore legal system becoming more universal than it needs to be. I accept that as the world becomes more of a global village, more things, including the law, will be more universal. Even today, the rules of international trade are almost identical in most countries. For example, the law relating to documentary letters of credit are the same everywhere; otherwise international trade would be difficult, and may be impossible. But that is precisely my point. I am not concerned about trade - I am not talking about selling apples or some commodity. I am talking about something quite intangible like culture, and protecting the way we live, and harmoniously so. I believe that this should be given greater weight than economic numbers in the right circumstances. We should therefore look beyond economic numbers and the quantifiable when we think of admitting more foreign lawyers into Singapore.
I want to emphasise that I am not against the opening up of the legal profession. I remain of the view that opening up is necessary for Singapore. But like many initiatives in Singapore, much depends on the degree, speed and the numbers in doing so. The authorities had got it largely right for the last 30 years. I hope they will continue to be right for the next 30 years too.
► Wong Meng Meng, Senior Counsel
President
The Law Society of Singapore