Select Committee on Trade and Industry Written Evidence


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 investment—and 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 largest—Demarest e Almeida—is 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


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2007
Prepared 16 July 2007