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In a different meeting between AGC and a representative from The Law Society of England and Wales (The Law Society), the latter raised the concern that the term “joint law venture” (JLV) had negative connotations for English law firms due to the perceived failure of JLVs in Singapore.  The Law Society also indicated to AGC that the Malaysian Government’s offer of stand-alone law firms may not be sufficiently attractive to encourage English law firms to open offices in Malaysia if the only permitted practice area would be Islamic finance. 

AGC was therefore interested to know if BC had any suggestions in response to these comments.  BC stated that it was fully aware of these views.  With respect to stand-alone law firms, it has been consistently against the proposal by Bank Negara Malaysia (BNM) ever since it was first proposed in 2006.  Even at that time, BC had informed BNM that foreign law firms would not be too keen to incur the expense of setting up a law firm just to undertake Islamic finance work.  This was why right from the very beginning and even before  BNM had made its proposals, BC had already proposed the JLV model, where the range of permitted practice areas was wider (and included Islamic finance work).  A progressive approach in opening up the legal services sector, with more practice areas on offer, would make Malaysia a more attractive destination.  However, BNM was very adamant that its proposal was sufficient to attract foreign firms to come to Malaysia to benefit from the growth of the robust Islamic finance sector, as BNM believed “foreign clients would follow their lawyers”. 

BC further explained that its proposed JLV firm could graduate to a stand-alone entity after five years in operation, where the foreign partners could then own full equity in the JLV.  The BC-proposed JLV would be beneficial to the local legal services sector as it would allow local partners in the JLV to acquire best practice management know-how and expertise from their daily working relationships with foreign partners.  This was in addition to knowledge and familiarity with innovation for new legal products.

BC understood that stand-alone foreign firms would hire local lawyers but such transfers of know-how would not immediately bring benefits to the legal profession as a whole.  It would take time for local lawyers working in the stand-alone foreign firms to disseminate these best practices.  BC believed this would not expedite the production of local lawyers with an international competitive edge.

As for the negative connotation towards the term “JLV”, BC believed this was a minute issue as the term could be changed.  More important was for the structure to remain as proposed by BC.

From BC’s point of view, the JLV model did not fail in Singapore.  It was more the case that the model rather quickly outgrew itself.  One of the problems of the JLV model in Singapore was that at the start foreign firms were allowed to come into Singapore only as offshore firms and so local lawyers hired were not allowed to practice Singapore laws.  This was not part of BC’s proposal.

BC suggested that the government look at the liberalisation approach taken by the accounting sector, where local accounting firms formed some form of partnerships with international firms.

To add weight to the point for the stand-alone model, AGC said that Malaysia could limit the number of licenses offered and control the scope of practice areas allowed to foreign firms. BC rebutted that although the number of licences could be limited, Malaysia might not be able to control the size of the stand-alone firms. BC also disagreed to a suggestion to allow stand-alone foreign firms to practise in all areas under non-Malaysian laws, in addition to doing Islamic finance work.

Due to the differing views between AGC and BC, BC suggested that the appropriate way to liberalise the legal services sector in Malaysia would be to adopt a two-track approach: to offer stand-alone licences to five foreign firms with Islamic finance as the only permitted practice area, as announced by the Prime Minister in April 2009, and simultaneously offer the JLV licenses with a wider permitted practice areas to other foreign firms interested to enter the Malaysian market, as proposed by BC.

To a question on Malaysia’s commitments to liberalise its legal services sector under free trade negotiations, BC responded that its proposed roadmap for liberalisation was based on an autonomous approach – meaning law firms from any countries could enter the Malaysian legal services sector once the policy was in place, if all the criteria were met.  AGC in turn informed BC that Malaysia was keen to participate in trade liberalisation discussion amongst the Trans-Pacific Partnership (TPP) countries.  Talks with Australia were ongoing, but interest from the US had quietened down.

Meanwhile, to a question posed by BC on the issue of allowing lawyers from Peninsular Malaysia to practise in Sabah and Sarawak and the liberalisation of the legal services sector for the whole of Malaysia, AGC responded that it would not be addressing this matter.  The present focus was on the liberalisation of the legal services sector in Peninsular Malaysia only.  BC strongly disagreed with this approach, arguing that it was detrimental to law firms in Peninsular Malaysia.  If the Government was interested in pursuing comprehensive liberalisation, then the maintaining of a closed legal services market in Sabah and Sarawak while opening up only Peninsular Malaysia would create additional economic disparities and imbalances.

Before the conclusion of the discussion, BC repeated its request firstly that AGC remove Section 28A of the LPA that allowed for ad-hoc licensing by the Attorney-General, and secondly that AGC allow BC to study the updated draft amendment bill for the LPA pertaining to entry of foreign law firms into Malaysia, before it was tabled in Parliament.  Puan Haliza said that she would forward these requests to the AGC management.