This item has been updated since initial publication.
The Legal Profession (Amendment) Act 2012 and further amendments to the legislation, Legal Profession (Amendment) Act 2012 (Amendment) Act 2013 and Legal Profession (Amendment) Act 2013, came into force on 3 June 2014 together with the Legal Profession (Licensing Of International Partnerships And Qualified Foreign Law Firms And Registration Of Foreign Lawyers) Rules 2014. Foreign law firms and foreign lawyers will now be permitted to practise in Peninsular Malaysia in the manner set out in the legislation.
Three categories of licences
Under the newly–created Part IVA of the LPA, licences may be issued to foreign law firms to operate either an International Partnership with a Malaysian law firm, or as a Qualified Foreign Law Firm (“QFLF”). Alternatively, a Malaysian law firm may choose to employ a foreign lawyer.
As its name connotes, an International Partnership will be a partnership between a foreign law firm and a Malaysian law firm. Approval shall be given for the name of the International Partnership to be a combination of the names of the foreign law firm and the Malaysian law firm.
A foreign law firm licensed as a QFLF will not require a Malaysian law firm as a partner. However only up to five QFLF licences will be granted, as this avenue has been created to support the Malaysian Government’s Malaysian International Islamic Finance Centre (“MIFC”) initiative, as announced by the Prime Minister in his policy speech on 22 Apr 2009.1 QFLF licences will therefore only be granted to international law firms that have proven expertise in international Islamic finance, and which would be able to support and contribute to the MIFC.
Licences for International Partnerships and QFLFs will be for a period of three years and are renewable. Application and registration fees will apply. Licences may be granted subject to terms and conditions.
If approved, a Malaysian law firm will be granted a three–year licence to employ a foreign lawyer.
All individual foreign lawyers working in an International Partnership, QFLF or Malaysian law firm will have to register as a foreign lawyer. Application and registration fees will apply. Registrations may be granted subject to terms and conditions, and will have to be renewed annually.
Foreign lawyers working in International Partnerships and QFLFs will have to reside in Malaysia for not less than 182 days in any calendar year.
(a) Permitted Practice Areas
International Partnerships, QFLFs and foreign lawyers employed by Malaysian law firms can only practise in the permitted practice areas. This is defined as a transaction regulated by Malaysian law and at least one other national law, or a transaction regulated solely by any law other than Malaysian law. In the case of a QFLF, the Malaysian Bar has stated that there should be a proviso that such aspect of work regulated by Malaysian law shall be undertaken in conjunction with one or more advocates and solicitors of the High Court of Malaya holding a valid and subsisting Practising Certificate.
Practice in the permitted practice areas will specifically exclude: constitutional and administrative law; conveyancing; criminal law; family law; succession law, including wills, intestacy, probate and administration; trust law, where the settlor is an individual, and the law relating to charities and foundations, whether the settlor is an individual or a corporation; retail banking, including corporate or commercial loans to small and medium enterprises; registration of patents and trademarks; appearing or pleading in any court of justice in Malaysia; representing a client in any proceedings instituted in such a court or giving advice, whether or not the main purpose of which is to advise the client on the conduct of such proceedings; and appearing in any hearing before a quasi–judicial or regulatory body, authority or tribunal in Malaysia.
(b) Qualifying Criteria
Foreign law firms and foreign lawyers will have to show that they have the relevant legal expertise and experience in the permitted practice areas. In addition, the Malaysian law firm in a proposed International Partnership will also have to show that it has the relevant legal expertise and experience in the permitted practice areas.
As stated earlier, a foreign law firm applying to be licensed as a QFLF will have to prove that it has the relevant expertise and experience in international Islamic finance and would be in a position to support and contribute to the Government’s MIFC initiative.
(c) Equity and employment considerations
The equity and voting rights of International Partnerships, QFLFs and foreign lawyers employed by Malaysian law firms shall be as determined by the Selection Committee. This will be determined by reference to a business plan that must be submitted as part of the application process. The Malaysian Bar will recommend that the Selection Committee adopt the following guidelines in respect of this area:
i) The Malaysian law firm should not have less than 60%, and the foreign law firm no more than 40%, of the equity and voting rights and of the total number of lawyers in the International Partnership;ii) The number of Malaysian lawyers in a QFLF shall not be less than 30% of the total number of lawyers in that firm; andiii) The number of foreign lawyers employed by a Malaysian law firm shall not be more than 30% of the total number of lawyers in that firm.
(d) Reporting and prudential requirements
There will be annual reporting and accounting requirements in respect of International Partnerships and QFLFs, and annual performance reporting in respect of foreign lawyers employed by Malaysian law firms.
International Partnerships and QFLFs will also be subject to prudential requirements in terms of professional indemnity insurance at a level appropriate to the nature and extent of their business.
International Partnerships, QFLFs and foreign lawyers employed by Malaysian law firms will be regulated by the Bar Council. The new legislation provides for the establishment of a Selection Committee that will be responsible for considering all applications, and for making recommendations for approval/non–approval to the Bar Council.
The Selection Committee will be co–chaired by the Attorney General and the President of the Malaysian Bar, and will have five members in all. The Bar Council will serve as the Secretariat for the Selection Committee. All applications should therefore be directed to the Bar Council, using the forms prescribed by the new legislation and the rules to be made thereunder. These are still in the process of being finalised. In addition, the Selection Committee will draw up guidelines and notes — which will be made publicly known — to indicate how it intends to apply the regulations.
All International Partnerships, QFLFs and foreign lawyers employed by Malaysian law firms will have to comply with the same rules and regulations governing advocates and solicitors in Peninsular Malaysia.
The Amendment Act that was passed on 13 July 2012 introduced a new subsection, which reads as follows:
37(2A) Any unauthorized person who does or solicits the right to do any act which is customarily within the function or responsibility of an advocate and solicitor, including but not limited to advising on law, whether Malaysian or otherwise, unless he proves that the act was not done for or in expectation of any fee, gain or reward, be guilty of an offence under this subsection.
The Malaysian Bar received feedback, from both foreign law firms and Malaysian banking and corporate entities, that the above prohibition was wide and unnecessarily restricted the latter’s freedom to instruct counsel of its choice in international transactions that do not involve Malaysian law.
As such, an exception has been introduced under the recently passed Legal Profession (Amendment) Act 2012 (Amendment) Act 2013, which will now allow a foreign lawyer advising on non–Malaysian law to enter Malaysia for up to 60 days in a calendar year, subject to immigration approval.
The new subsection reads as follows:
(2B) Subsection (2A) shall not apply to a foreign lawyer who –
(a) Is duly authorized or registered to practice law in a state or territory other than Malaysia; and(b) enters Malaysia to advise or consult with a client on matters pertaining to law not involving any aspect of Malaysian law, provided always that the accumulated period of stay of that foreign lawyer shall not exceed sixty days in total in any one calendar year and that immigration authorization for each period of stay shall have first been obtained.
The recently passed Legal Profession (Amendment) Act 2013 also introduced a new subsection, which reads as follows:
37A. (1) Sections 36 and 37 shall not apply to –
(a) any arbitrator lawfully acting in any arbitral proceedings ;(b) any person representing any party in arbitral proceedings; or(c) any person giving advice, preparing documents and rendering any other assistance in relation to or arising out of arbitral proceedings except for court proceedings arising out of arbitral proceedings.
(2) In this section, “arbitral proceedings” means proceedings in an arbitration which is governed by the Arbitration Act 2005 [Act 646] or would have been governed by such Act had the seat of arbitration been Malaysia.
A major consideration undergirding the new legislation is a desire to ensure that the liberalisation of the Malaysian legal services market and the entry of foreign lawyers is balanced with the need for the development of Malaysian law firms, and to enable these firms to achieve a level of expertise that will allow them to compete with foreign law firms on a level playing field. This consideration means that the process of liberalisation will continue to be gradual and progressive.
The three (3) Amendments to the Legal Profession Act 1976 together with the Legal Profession (Licensing Of International Partnerships and Qualified Foreign Law Firms And Registration Of Foreign Lawyers) Rules 2014 and the guidance notes are available in the Malaysian Bar website.
For further inquiries kindly contact the officers–in–charge, Roobalavaniah Rengasamy (03–2050 2171; email@example.com) or Nurul Hafika bt Noor Hamid (03–2050 2172; firstname.lastname@example.org).
Trade in Legal Services Committee
Bar Council Malaysia
Date: 6 June 2014
1“As part of the measures to develop Malaysia as an international Islamic financial hub, the legal profession will be liberalized to allow up to five top international law firms with expertise in international Islamic finance to practice in Malaysia. These firms will only be allowed to offer legal services in international Islamic finance. Successful law firms will be determined based on credentials and the business plans in respect of the office to be established in Malaysia.”
This statement was reiterated during the debate on the Legal Profession (Amendment) Bill 2012 and appears in the Hansard dated 11.6.2012. The statement on page 44, para 1 states as follows: “Sehubungan dengan itu, profesion undang–undang di Malaysia akan diliberalisasikan bagi membolehkan lima firma guaman antarabangsa terulung yang mempunyai kepakaran dalam bidang kewangan Islam antarabangsa menjalankan amalan mereka di Malaysia. Akan tetapi firma–firma tersebut hanya akan dibenarkan untuk menawarkan perkhidmatan perundangan dalam bidang kewangan Islam antarabangsa.”