Cablegate: Singapore Begins Legal Services Liberalization
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #0939/01 2470921
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R 030921Z SEP 08
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 5699
RUCNASE/ASEAN MEMBER COLLECTIVE
UNCLAS SECTION 01 OF 02 SINGAPORE 000939
E.O. 12958: N/A
TAGS: ETRD ECON SN
SUBJECT: SINGAPORE BEGINS LEGAL SERVICES LIBERALIZATION
1. (SBU) Summary: Singapore's government is taking applications
from foreign law firms for approximately five licenses to practice
Singapore law, an area long protected from foreign competition.
Singaporean authorities are pushing to make Singapore a center for
legal services, both to boost another industry and to support the
growth of other service industries like corporate finance that
require high-end legal work. U.S. firms welcome the new measure,
but predicted that interest would be slight given the relatively
small size of the domestic legal market and ample domestic
competition. A scheduled review of the licensing measure in the
next two years may lead to full liberalization of the legal sector.
Cracking the door
2. (U) On August 27, Parliament passed an amendment to the Legal
Professions Bill that opens the door to increased liberalization of
legal services in Singapore for foreign law practices (FLP). The
amendment enables foreign firms to apply for Qualifying Foreign Law
Practice (QFLP) licenses to practice Singapore law through
Singapore-qualified lawyers, with notable areas of legal practice
still excluded. Foreign firms have until October 9 to apply for one
of likely only five licenses to be awarded, each valid for five
years. A selection committee chaired by Minister of Law K.
Shanmugam will choose the five foreign licensees toward the end of
the year. Criteria to be considered for a license include the
number of lawyers to be based in Singapore, intentions to establish
firm headquarters in Singapore, and the firm's areas of legal
practice and its track record within them.
3. (U) Currently, FLP's can practice Singaporean law only in
partnership with a Singaporean law firm in a Joint Law Venture or as
part of a Formal Law Alliance, which may include more than two
firms. Under the new QFLP scheme, foreign firms will be able to
hire Singaporean lawyers and practice Singaporean law in permitted
areas. Excluded areas include conveyancing, criminal law, family
law and domestic litigation. The new legislation also enhances the
Joint Law Venture program and expands FLP participation in
international commercial arbitration.
4. (SBU) Valerie Thean, Director of the Legal Policy Division at
the Ministry of Law, told Econoff that the licenses were a first
step toward a fuller liberalization of Singapore's legal services
sector. Thean said that in typical Singapore style the GOS was
taking a measured approach, but that the direction toward
liberalization was clear. A slow liberalization process would also
give Singapore's established local firms time to adjust and better
compete. The GOS will review the progress of the liberalization in
18 to 24 months and decide then on how to continue.
5. (U) The legislation follows on September 2007 recommendations
from a GOS-sponsored Committee to Develop the Singapore Legal
Sector, which concluded that Singapore's existing legal
infrastructure was insufficient to support the growth of other
legal-intensive business sectors like corporate finance and banking.
The GOS is also seeking to turn Singapore into a regional center
for legal services, and hopes to attract foreign law firms that will
bring in a greater volume of offshore legal work. The GOS also
hopes to stanch the outflow of Singapore-qualified lawyers to firms
in other legal hubs like Hong Kong. Opponents of the amendment said
they feared that Singaporean firms would fall by the wayside under
competition from foreign firms, or that local lawyers would flock to
better paying foreign firms in Singapore.
U.S. law firms yawn at business prospects
6. (SBU) Econoff spoke to partners at several U.S. law firms who
described the opening as significant, but said their firms were only
marginally interested in applying for a license and practicing
Singapore law. Although Singapore is a major business center
hosting a multitude of multinational corporations, the Singapore
legal market is relatively small. Most foreign law firms based in
Singapore practice foreign law elsewhere in the region or do
cross-border legal work, and establish headquarters in Singapore
mainly out of convenience. Foreign firms say they are active in
project financing, cross border merger and acquisition, and private
equity, but are less interested in Singapore corporate work. Few
had bothered to establish Joint Law Ventures to pursue Singaporean
legal work, and many of the ventures attempted had failed. U.S.
firms say that the Singaporean market is already well served by
local firms that charge half what foreign firms typically bill.
7. (SBU) The U.S. firms admit, however, that there is little
downside to applying for a license and several will likely do so.
Despite the small market, opportunities exist in arbitration, IPOs,
intellectual property and picking up the Singapore side of
cross-border work. However, these opportunities are not considered
highly lucrative and would unlikely be sufficient to attract
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well-known U.S. firms who are not yet represented in Singapore. One
U.S. firm predicted that the response to the license offering would
be so minimal that the GOS would opt to liberalize the entire sector
after its review in 18 to 24 months.