APPENDIX 9
Memorandum submitted by Clifford Chance
SUMMARY
1. The UK legal services industry has achieved
a leading position in the global market, with offices all over
the world. However, while the UK legal services market is one
of the most liberal in the world, UK law firms face barriers and
restrictions in key markets abroad. There are significant investment
opportunities for UK law firms in Brazil, but restrictions on
the practice of law in Brazil make it difficult for UK law firms
to take full advantage of these opportunities, despite the fact
that Brazilian lawyers may freely practise here. Liberalisation
of the legal services market in Brazil, by permitting foreign
law firms to operate more effectively in Brazil, would not only
benefit UK law firms, but also contribute to Brazilian economic
growth, and the dissemination of legal skills. We hope the Committee
will recognise the key importance of legal services, and that
the Committee will recommend that the UK government urge the Brazilian
government to take action to resolve these issues.
CLIFFORD CHANCE
AND THE
UK LEGAL SERVICES
INDUSTRY
2. This submission is made on behalf of
Clifford Chance LLP, in response to the invitation by the House
of Commons Trade and Industry Committee to submit evidence on
trade and investment opportunities with Brazil.
3. Clifford Chance is the first fully integrated
global law firm, with 29 offices in 20 countries,[1]
and over 3,500 legal advisers, the largest number of which are
based in London. We are regulated by the Law Society of England
and Wales.
4. 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.
5. Our policy has been to follow clients'
needs and expectations in deciding where to set up offices. Thus,
the countries where we have offices include the United States
of America, all of the major European economies and other key
growth economies around the world including Russia, China and
Brazil.
6. Opportunities for law firms are limited
in Brazil are limited by Brazilian restrictions, most importantly,
the restriction on multi-jurisdictional partnerships. Local regulation
prohibits foreign firms from entering into a joint venture with
a Brazilian law firm or advising on Brazilian law.
7. It is clear that Brazil is a very important
market, and that its importance will continue to grow. Permission
to practise freely in Brazil will be mutually beneficial to the
UK and Brazilian economies.
8. We note the Committee intends to focus
its inquiry on the IT, life sciences, oil and gas, aerospace and
financial services sectors. However, we would like to encourage
the Committee to take into account the crucial significance of
the provision of legal services to all these sectors. As Peter
Mandelson said, in his letter to Brazilian Minister, Celso Amorim,
on 30 May, "Legal services are business-enabling services
that are particularly important for economic development and play
an important role in creating an investmentand business
friendly environment." All major transactions involving significant
cross-border investment or financings 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.
9. Legal services are therefore just as
important as other infrastructure services, such as financial
or telecommunications services, in facilitating foreign investment
and developmental projects that offer many benefits to developing
economies, including Brazil. Large investors and global corporates
are wary about participating in projects without the assurance
provided by competent and experienced legal advisors.
10. Our concerns are shared by other international
law firms, as well as the Law Society of England and Wales, which
has been very active in this debate.
LEGAL SERVICES
AND RESTRICTIONS
IN BRAZIL
11. We have been providing services to clients
based or active in Brazil for over 30 years and ours is the largest
non-Brazilian law firm in the country. Since 1990 we have completed
several hundred transactions for, or in connection with, Brazilian
private and state-owned companies from a wide range of industries.
Much of our work, and that of similar international firms, is
international and involves assisting financial institutions and
commercial organisations in connection with the acquisition, development
and financing of businesses around the world. This includes infrastructure,
natural resources, the development of the capital and financial
markets and privatisations, as well as foreign direct investment
more generally.
12. However, the restriction on multi-jurisdictional
partnerships hampers our ability to offer a full service to clients,
and constrains our further investment in Brazil. We also believe
that the failure to liberalise legal services impedes the future
development of the Brazilian economy (see below).
13. Our service to clients is affected in
a number of ways. Because we are not able to enter in partnership
or joint venture arrangements with Brazilian law firms, we are
not able to advise on Brazilian law. This leaves us unable to
offer a "seamless" service, as we have to refer some
work to Brazilian law firms. Furthermore, we are unable to contribute
to net investment in human capital in Brazil.
14. We believe that any concerns Brazilian
law firms may have about the impact that foreign law firms would
have on the legal sector are misplaced. There is minimal overlap
between our practice and the practices of the vast majority of
Brazilian lawyers. Clifford Chance and other international law
firms will not be competing with Brazilian law firms in, for example,
matrimonial, domestic conveyancing, wills, or criminal law. As
far as the bigger Brazilian law firms are concerned, we believe
that co-operation, and competition, with international law firms
will only have the effect of raising standards and improving the
service to the client.
15. We fully recognise the competence and
abilities of the best Brazilian law firms, including on cross-border
matters. However, it is still the case that Brazilian firms do
not have the breadth and depth of experience of global firms.
Although there are some relatively large Brazilian firms, the
largestDemarest e Almeidais still only about one-eighth
the size of Clifford Chance in terms of the number of partners.
This can create logistical problems on very large or complex transactions.
Further, they have more limited exposure to international markets,
whereas many of our partners have been involved in international
work throughout their careers. The accumulation of this expertise
in Brazil can only be hampered if foreign law firms are limited
in their contribution to the quality of the legal services sector.
THE CASE
FOR LIBERALISATION
16. Liberalisation in the Brazilian legal
services sector would provide clear benefits to UK law-firms,
the UK economy, and also for Brazil itself. The multinational
companies for which we typically act need sophisticated legal
advice, often spanning a number of jurisdictions. International
law-firms therefore provide a service that would otherwise not
be available, the lack of which may deter inward investment in
that jurisdiction.
17. Brazil has seen significant growth in
its industrial sector since the 1970s and, since the introduction
of the Real Plan to stabilize the currency and tame inflation
in the mid 1990s, there has been steady economic growth. A privatisation
programme in the late 1990s has increased the number of world
class corporations in private hands. However, its potential growth
is constrained by a number of factors. The main ones are under-investment
in infrastructure, inefficiency in services and the need for reform
in taxation and labour law practices.
18. The presence of international law firms
would help remedy this by filling a skills gap and facilitating
investment in infrastructure, as well as encouraging greater efficiency
across a number of markets.
19. A more liberal regulatory regime in
Brazil would also create a more open and transparent climate for
investment. The presence of the international auditing firms in
Brazil, for example, has helped Brazil access the international
capital markets. A similarly open approach to legal services,
and the enhanced presence of international law firms on the ground
could help affirm São Paulo's position as a regional financial
centre, generating employment and export earnings.
20. Although international law firms operate
in a highly competitive environment, we do not generally compete
directly with local law-firms, but rather with other global law-firms.
Indeed, we employ, train and enter into partnership with local
lawyers, where permitted, and transfer our skills to them. Local
regulations that prevent us from doing this in Brazil hamper our
attempts to provide a comprehensive service to clients as well
as curtailing career prospects and experience for local lawyers.
Liberalising the Brazilian legal services sector would also create
career opportunities for Brazilian lawyers.
21. The presence of international law firms
able to provide a full legal service to clients would strengthen
the Brazilian legal system and promote quality work amongst the
top Brazilian law firms.
22. 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. We are not seeking for our lawyers any opportunities in Brazil
that Brazilian lawyers have not had in England for many years.
STEPS TOWARDS
LIBERALISATION
23. With the collapse of the current GATS
talks there is a now little or no prospect of progress through
the WTO, and correspondingly a real need for the UK government
to take action with a view to achieving greater liberalisation
in the Brazilian legal services sector.
24. We would encourage the UK government,
whether through Ministerial interventions, through UK Trade and
Investment or through other channels, to help UK law firms in
their attempts to operate more freely in Brazil. It is not acceptable
for Brazil to impose restrictions on UK lawyers giving advice
on Brazilian law and entering into partnerships or joint ventures
with Brazilian law firms, while Brazilian lawyers have the benefit
of the very liberal regime in the UK.
25. We hope that the Select Committee will
agree, and will recommend that the UK government maximise its
efforts to achieve liberalisation of legal services in Brazil.
To this end, we would be glad to assist the Select Committee in
any other or further way that it may think useful.
9 October 2006
1 Includes an associated office in Romania. Back
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