APPENDIX 5
Memorandum by Clifford Chance
1. This submission is made in response to
the invitation by the House of Commons Select Committee on Trade
& Industry to submit evidence on the current WTO negotiations
in the areas of trade in services and non-agricultural market
access prior to the Hong Kong Ministerial in December 2005.
2. Clifford Chance is the largest law firm
in the world, and operates in 28 offices in 19 countries throughout
Europe, the Americas and Asia. The current GATS negotiations are
of direct practical relevance to us in addressing the barriers
we face in providing legal services to multinational clients.
Our concerns are largely shared by other international law firms,
as well as by the Law Society of England and Wales, which has
been very active in this debate.
3. According to a report by International
Financial Services London, published in March 2005, legal services
contributed £12.9 billion or 1.4% of the UK's GDP in 2002,
net exports generated by international law firms totalled £1,802
million in 2003, and international law firms in London generated
an estimated £2.6 billion in UK tax revenue in 2001-02.
4. While further liberalisation in the legal
services sector would benefit both individual law-firms and the
UK economy, we believe there are clear benefits also for countries
which open up their markets to legal services. The multinational
companies for which we typically act need sophisticated, complex
legal advice, often spanning a number of jurisdictions. International
law-firms therefore provide a service which would otherwise not
be available, the lack of which may deter inward investment in
that jurisdiction. It also means we do not generally compete directly
with local law-firms. Typically we aim to employ local lawyers,
and, where permissible, to join in partnership with them. Local
regulations which prevent us from doing this hamper our attempts
to provide a comprehensive service to clients as well as curtailing
career prospects and experience for local lawyers.
5. For example, we already have offices
in China, Japan and Brazil, but the restrictions on the practice
of law make it difficult for us to provide a full service. In
China we are still unable to enter into partnership with local
lawyers, and any local lawyers employed by us are prohibited from
giving legal advice on Chinese law. In Brazil also, we have set
up an office, but are unable to provide advice on Brazilian law
or to enter into partnership with local firms. In South Korea,
India and Malaysia domestic regulation prevents us from establishing
a presence.
6. As yet, however, there is little sign
that Doha will deliver any tangible benefits in the field of legal
services, as so little progress has been made generally in the
services negotiations. There seems to be widespread recognition
of the importance of the Hong Kong Ministerial for the success
of the Doha Round, but no agreement as to how that success can
best be achieved.
7. The Director General DG Trade, Mogens
Peter Carl, said in a statement by the EU to the WTO Trade Negotiation
Committee on 28 July that there had been hardly any progress on
services:
"The number of revised, improved offers
still falls far short of what is needed and most of those submitted
so far do not provide for new market access opportunities. Indeed,
in most cases they do not even reflect existing levels of liberalisation
in some developed countries! This situation is unsustainable and
must be corrected by Hong Kong (HK)."
"For Hong Kong we need to achieve modalities
with a similar level of specificity in services as for agriculture
and NAMA. The request-offer method of negotiating has not generated
meaningful results. We should now, as suggested in the Chair's
report, explore complementary approaches to the negotiations in
order to ensure that there is a substantive outcome in services
in the DDA. We strongly encourage the Chair of the services negotiation
group to pursue this work from September so that Ministers can
decide in Hong Kong on a set of modalities for services."
8. In view of the fact that the main stumbling
block in the negotiations so far has been the failure to reach
agreement on agriculture, we particularly welcome Peter Mandelson's
recent statement (Speech in Washington DC, "The Right choices
for the Doha Round", 13 September 2005) that the EU must
demonstrate "a commitment to lower agricultural tariffs in
a way that brings a meaningful real gain in access for exporters
in all sectors". We hope that further movement from the EU
on agriculture (together with movement from the US) will enable
a greater focus on the services negotiations. Mr Mandelson echoed
the Director-General's call for complementary approaches in his
speech when he called for agreement between the US and the EU
"on the means by which we propose to inject new momentum
into the Doha negotiations in the vital area of services".
9. Within the services negotiations, legal
services are particularly neglected, with greater emphasis being
given to telecommunications, financial services and energy related
services. This is to ignore the crucial role that legal services
plays in any major transaction, whether it is a joint venture
between telecommunications companies, the establishment of a bank
branch office, or the funding and installation of a cross-border
gas pipe-line. All of these are likely to require expert and detailed
advice in the law of more than one jurisdiction from lawyers with
experience in multi-jurisdictional commercial transactions. Establishing
the bases necessary in order to provide a full service to our
international clients requires adequate market access in other
countries, authorisation to establish partnerships with local
lawyers, or to employ them, recognition by those countries of
foreign professional qualifications, permission to practise there
and guidelines to support proper ethical and professional standards.
10. The UK has one of the most liberal regimes
for legal services in the world. There are no restrictions on
the provision of legal advice, whether on the law of this or any
other country or supranational organisation, or on international
law. Some of the other Member States have defensive interests
and, as the UK is in the vanguard of the move towards international
practice, they have fewer offensive interests, leading to a more
protectionist stance.
11. Nevertheless, the EU's initial offer
on legal services was good and its revised offer (2 June 2005)
extended market opportunities to foreign lawyers practising in
law firms and to self-employed lawyers. The offer would permit
foreign lawyers and law firms to establish a commercial presence
in any Member State and provide legal services, whether from abroad,
through that commercial presence or through temporary entry into
the EU, in respect of the law of any country in which the lawyers
are qualified to practise (lawyers must be admitted to a Bar in
the EC in order to practise EU law or the national law of Member
States). Legal services has also been added to the list of sectors
in which the EU offer would permit self-employed services suppliers
based overseas to enter the EU for up to six months at a time
to provide services to clients based in any of the 25 EU Member
States, subject to compliance with EU employment law requirements,
and to security considerations.
12. We acknowledge the considerable difficulties
faced by the Commission in these very delicate negotiations and
would like to stress that we have been very encouraged, both by
the generally liberal approach the EU has taken in the negotiations,
and by the genuine dialogue between the Commission and the services
sector. Clifford Chance is a member of the European Services Forum
and we have been very pleased with the level of openness which
European Commission officials dealing with the services negotiations
and the national representatives on the 133 Committee have displayed.
Both the Commission, and the UK government (the Department for
Constitutional Affairs and the Department for Trade and Industry),
have consistently sought the views of service providers, have
taken them onboard, and have provided feedback on the negotiations.
We welcome the signs that they are planning to move further on
agriculture, and that they are open to ideas as to how to make
progress in services.
13. We would therefore encourage the European
Commission in its negotiations in the Doha Round to make legal
services a target area for real progress. Since there seems real
concern that the current method of negotiations is not producing
results, we would suggest that a separate reference paper on legal
services might help to achieve greater impetus in this sector.
Such a paper would enable WTO members to carve out certain areas
where there is a genuine reason to do so, for example in legal
representation/advocacy services. We believe that the Communication
submitted by Australia on 6 September 2005 ("Development
of Disciplines on Domestic Regulation for the Legal and Engineering
Sectors") is a positive development in this context and could
provide a useful basis for such a paper.
14. Much emphasis has been given in the
debate peripheral to the negotiations to Mode 4 issues, or the
temporary movement of services personnel. More important for us,
however, is the capacity to employ, or form commercial association
with, lawyers or law firms in the host country. In this regard,
we welcome the Joint Statement on Legal Services[20]
issued in February which, while mainly aimed at the classification
of legal services, did urge Member States to consider providing
such capacity. We hope the EU will pursue this goal vigorously
in the negotiations.
15. We also welcome recent suggestions from
some WTO members (including the EU) for the establishment of mandatory
minimum market access requirements for services trade, as an alternative
to the request-offer process which has so failed to produce worthwhile
results. Noting objections from some developing countries, it
seems clear that any such mechanism would need to incorporate
fully the principle of Special and Differential Treatment.
16. Finally, while we support the completion
of multilateral talks as offering the best way forward for liberalisation
of services, we accept that the current Doha Round may not be
able to deliver significant progress in this area. If that were
to be the case, then it would clearly be in the interests of the
UK and of the EU to make as much progress as possible through
market-opening agreements on a bilateral, regional or plurilateral
basis.
Clifford Chance LLP
30 September 2005
20 Communication from Australia, Canada, Chile, the
European Communities, Japan, Korea, New Zealand, Singapore, Switzerland,
the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu
and the United States dated 24 February 2005, TN/S/W/37. Back
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