The Singapore Government recently announced its plans to allow foreign firms to practise Singapore law, in response to a review of its legal market conducted by a specially formed committee.
The decision is one of a number of key recommendations aimed at liberalizing the legal market. Under the proposal, the government will introduce a qualifying foreign law firm (QFLF) scheme which will grant licenses to five foreign firms to practise Singapore law through employing Singapore-qualified lawyers.
CB: Why has the Singapore Government made the decision to liberalize its legal market?
DPM: I strongly believe that we have to look at many of the things that we do in Singapore. We have to constantly reinvent Singapore. Why? To remain competitive and to make ourselves a vibrant and dynamic place to do business.
Sovereign states and cities will continue to thrive, but for the next few decades there will be a race for competition between cities such as Shanghai, Hong Kong and Singapore. And Singapore is in the unique position of being both a city and a country, so for us to have a competitive edge economically and to have success in our growth, we need to attract investments in Singapore. We also need to attract talented people because of our declining birth rate. In short, if you look at all the policies we have adopted in recent times, we do whatever needs to be adjusted, and will revisit the fundamental ways we have been doing things, to remain competitive and to continue healthy growth.
We need to maintain our competitive edge as we are not a large country and we don't have natural resources. What we do have is geography and our people. This is all a backdrop in which we view our legal sector and services. It is not possible to view our legal services as purely servicing domestic needs of our population, the same way Singapore Airlines cannot be servicing just the needs of the Singapore population.
There are three major reasons why the Government has agreed to the liberalization. We had for some time been doing reviews and amending the legal system on an ad hoc basis, things such as the supply of lawyers, increasing the number of law schools and whether we should adjust the joint law ventures here or there are examples, but we concluded this was not enough. So we agreed to a major review of the whole legal establishment in Singapore, but with one major consideration in mind, and that is how do we position ourselves in Singapore as a centre for legal services.
The first of those reasons that I mentioned is the globalization and the implications for legal services across the region. We are growing in Asia, with China and India being the engines of that growth. With that there will be huge demand for legal services. So how can Singapore position itself was one consideration.
The second reason is that within Singapore I have had feedback that there is a need for more cutting edge legal services. Even our own financial regulatory authority tells us that there is a growing demand for such legal services.
And the third broad reason is talent. We have educated our students in English, which is an advantage as this allows them to do business in many other countries that maintain that language. But the flipside to this is that our students are increasingly becoming more mobile and, in the legal profession, many younger lawyers have left to work in foreign firms. Now this is not altogether disastrous because many of them come back, but some don't. So it would be far better if we have more foreign firms based here and these kids can find it useful to work here, because of the international law firms' connections and the resulting exposure to work they can get.
CB: Will the liberalization of the legal market put an end to the confusion in terms of in what areas international firms can practise and with whom, as is the case now?
DPM: Prior to this, the general rule was foreign firms do offshore work and they couldn't do local work unless they had a joint venture with a local law firm, and even then only the local law firms could do the local work. Those who are here and familiar with the system are probably quite clear about that.
The changes will be twofold. The first major change concerns the joint law ventures. Aside from sharing the profits and so on, if they hire a Singapore lawyer, even in the foreign law firm component, then they will be able to practise Singapore law. At the moment if a foreign law firm hires a Singapore lawyer, that lawyer is not allowed to practise Singapore law. So I think this is an anomaly that we have put right.
The new proposal which we are introducing is the Qualified Foreign Law Firm scheme, which is in reaction to some feedback we have received that some international firms do not like the idea of teaming up with local firms. So to address this we are going to have foreign law firms put in requests for proposals, and we will be giving five licences for a start. In our communication on this, we have said after 18 to 24 months we will look into increasing this. The message I have given is "Yes, we are moving", though not in a big bang approach, as we want to be sure that it works. This is the beginning of a process and there will be more changes made along the way.
CB: Other countries such as India are undergoing a liberalization of their legal market. Will your Government work with them, or share processes and procedures in relation to how their own models unfold?
DPM: I am not surprised that other countries are going through the same process. We will have to look at the models that the others are introducing in their own countries. It is a competitive situation so we would want to see what the other markets are doing. So far I have not seen any proposals from India; I hear there have been discussions, but we will study and consider whatever features we see as necessary. I see this as a process - this is not the end, this is the beginning of a series of steps.
The point I want to make is, we had a choice of taking a big bang approach or a step-by-step approach and we have got a step-by-step approach, where we can see how it works and what we may need to do to improve it.
CB: What were the main recommendations and problem areas that were raised as a result of your review of Singapore's legal system?
DPM: If I could generalize, the assessment was that to position ourselves as a centre for legal services, as well as to cater for local law, there was a felt need for the full range - a whole suite if you like - of cutting edge legal services. The feedback that was provided was not whether we should or shouldn't liberalize, but how fast.
CB: Is the aim to attract further foreign investment into Singapore?
DPM: The way we have always viewed our legal services is the legal system's structure and procedures, like any country's, must address the needs of your local population. A sound legal system provides critical infrastructure for economic development. Therefore predictability, reliability, perceptions of fairness and expectations of a level playing field really instil confidence in a system that has institutional proceedings. They want prompt expeditious hearings of cases and a decision given that is not arbitrary, but a reasoned judgement; these are all important. Without these assurances, foreign investors would not have confidence. You should never view legal services as something just for the domestic market.
CB: The Qualifying Foreign Law Firm scheme you mention - what does a law firm have to do to qualify?
DPM: We want to see their proposals. What we want to see in those proposals is how the firms can add value to Singapore. Not just what kind of work they will do in Singapore, but how they will operate out of Singapore and what sort of talent they will bring in. We are not going to be so rigid and say: "You must do A, B and C" because each one may come up with different ideas and propositions.
CB: Some law firms have criticized your plans, saying they do not go far enough in opening up what is a restrictive market. What do you say to that?
DPM: I am not surprised. If I was a foreign firm, I'd ask for a big bang approach and say "open it up completely". However, I'd rather take it in steps and see how it works, and then after the five have been granted licences to practise then we can reassess.
In the area of the joint ventures as well, I have previously said that yes we have made these changes, but if anybody else proposes a variation of the joint law venture schemes, then please put it to us, we will be happy to consider it.
CB: What sort of concessions will your government be willing to grant to the firms that are allowed to practise in Singapore?
DPM: Our feedback from firms is that they are not interested in the purely domestic issues such as conveyancing, criminal law and litigation in the courts, and so on. What the firms want is the high-end corporate financial business, which is what the local firms are also interested in.
CB: What can local law firms expect?
DPM: We did have formal consultations and so far the reactions have been mixed. Some firms are understandably worried that they will lose some of their talent. My response to that is these firms must be prepared for competition. We have previously done such liberalization in the banking and accountancy sector - even then we did it step-by-step and it worked out. Some of the other firms are not worried at all, and in fact are supportive and they think this kind of competition will be good.
In the long run, it will be a plus for the legal profession. For many years we just had one law school and last year we started another law school, the Singapore Management University law school. So in the same way that the National University here is no longer the sole provider of law graduates, the big firms have to be prepared for this.
Will there be a big loss in talent from some of the big firms? I think there will be some, but this will force the firms to work even harder in order to stay attractive for their talent.
CB: Both the QFLF and the Enhanced Joint Law Venture (EJLV) schemes will take up to two years to implement. Why this timeframe, and what does the government plan on doing during this time?
DPM: The main reason is so we can get the legislative changes through because the changes require amendments to the Legal Profession Act. We are working on the changes and have three committees working through this, one on the liberalization, the second on the recommendations regarding the legal profession and the third committee relates to the legal education and training of lawyers.
Where legislation is required we are targeting the middle of this year for it to make it through parliament, and while we are doing this we are finalizing the details on requests for proposals (RFPs). Once the legislation is done we will implement the RFPs, which will take a few months and then off we go. Sometime in 2009 I imagine - I wish it could be earlier but there are procedures we must follow.
CB: How will the Singapore government measure whether or not liberalization has been a success?
DPM: It's not going to be easy. We are going to have to work out some qualitative as well as quantitative measurements, it won't be a case of only asking: "How has this helped the economy?" because there are so many factors. One angle could be how much of the GDP has improved as a result of the contributions from the legal sector, but that won't be easy to do.
We also rely on qualitative measures which is feedback. We are very sensitive to this, even our own banking sector: when they tell us there are not enough lawyers for servicing this industry, we take note. Singapore is a small place and things get noticed easily here.
CB: Why should a foreign law firm want to practise Singapore law?
DPM: Singapore law is essentially common law: much of the high-end financial corporate and business law is not very different from Australia or the UK so when your firm here is told: "You cannot practise Singapore law, but you can do this", I think the demarcation is not very easy. In the areas of international financial and commercial law, I think firms currently feel that these are unnecessary constraints for them to be told they cannot practise Singapore law.
It is not as if the laws of Singapore are completely different from other parts of common law, so if a firm feels that this is a constraint, well then we will remove those constraints.
Also you can be told you cannot practise Singapore law if you are in the foreign component of a joint venture. They could have a bright young Singapore lawyer, a graduate, who is admitted to our bar, and he or she happens to work in the foreign law component but cannot practise Singapore law. I think the feedback we are getting in relation to these sorts of situations is that this is not very reasonable. So let's change it.