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The following is the text of the paper Mr. Duffy gave at the ABA Conference in San Antonio, Texas, that was simultaneously broadcast to locations in New York, New York, and Washington, D. C.  Attendees at this presentation received Continuing Legal Education credit for their participation. 

American Bar Association



Prospects for the Joint-Licensing of Attorneys in North America

                                                                                        James P. Duffy, III
                                                                                        Berg and Duffy, LLP
                                                                                        7, rue du Gabian
                                                                                        MC98000 MONACO

I would like to begin our discussion in the mid-1950's in New York. At this time, New York lawyers had already established offices in France and England. They were recognized as lawyers, albeit New York lawyers, in those jurisdictions. A Mexican lawyer who was admitted only in Mexico wanted to do the same thing in New York. He only held himself out as a Mexican lawyer. He wished only to advise clients on the law of Mexico. However, New York strongly opposed his plan. In Matter of , 144 N.E.2d 24 (NY 1957), the New York Court of Appeals ruled these activities constituted the unauthorized practice of law and sustained an injunction prohibiting them. The Court did not focus on the Mexican attorney's competence, ability, or fitness to practice Mexican law. Rather, the Court focused on the giving of legal advice in New York. Rather, it held only New York attorneys were competent to do that. I might add parenthetically that some of the positions taken by the Mexican delegation in the recent Tri-Bar negotiations under NAFTA were reminiscent of the Court's 1957 position.

About a decade later, the attitude in New York changed radically. New York was the first State to recognize the status of foreign lawyers as foreign legal consultants and to permit foreign legal consultants to practice in New York. Foreign legal consultants remain subject to certain limitations; however, these limitations are easily overcome because New York also permits foreign legal consultants to employ New York lawyers and to offer full New York legal services through those New York lawyers. New York now also permits foreign legal consultants to become partners with New York lawyers. As part of this complete reversal in position, the emphasis became one of inquiry into whether or not the foreign person was a "lawyer" as that term is understood in New York. Thus, the focus became primarily one of determining whether the person was competent to give legal advice in the areas of claimed competency, whether that person was subject to reasonable standards of ethics and discipline (with particular emphasis on the confidentiality of client information), whether the person was of good moral character, etc. If these standards were met, such a person could come to New York and offer legal services as a foreign legal consultant.

Today, very few people would dispute that New York's foreign legal consultant provisions are the most liberal in the United States. The consequences of this to New York have been very dramatic and positive. Many very prominent foreign law firms have established large branch offices in New York and employ large numbers of foreign and New York lawyers in those offices. You can see a reasonably up to date list of these firms and the lawyers in them on the International Law and Practice Section page of the New York State Bar Association website. While, for reasons not relevant to this discussion, it is difficult to get an accurate count, foreign legal consultants in New York number well into the hundreds and are still growing.

The New York State Bar Association has made a tremendous efforts to welcome these foreign lawyers and to include them among its members. In fact, not too long ago, Thomas Verhoeven, a German lawyer who is also a foreign legal consultant in New York, was Chair of the New York State Bar Association International Law and Practice Section. Similarly, Carlos Alfaro, an Argentinean lawyer who is also foreign legal consultant in New York, served as co-chair of the Section's Fall meeting, its most important meeting of the year. Most foreign legal consultants in New York are members of the International Law and Practice Section and very active participants in it. The benefits to New York from the presence of such a large body of highly competent foreign lawyers are enormous. It is possible to get competent legal advice from highly skilled lawyers who are literally "just down the block". This has helped contribute to making New York a thriving international legal center. I would suggest this is a good model for the future.

Because of the importance law plays in our society and the role lawyers play in the effective functioning of our legal system, there have been strong societal interests in making sure only

  • competent people

  • of good moral character

  • who are subject to appropriate ethical standards and

  • subject to discipline if those standards are breached

offer legal services to the public. In the United States and in most other, this has led to an elaborate system of legal education and formal admission to the Bar. This system is designed to weed out, in the first instance, people not meeting threshold requirements of competence and character. Thereafter, the system attempts to make sure that competence is maintained and ethical standards are upheld. These standards have proven particularly useful in the small consumer oriented practice of the law. These small consumers and other infrequent users of legal services are not often well able to evaluate the competence and skill of a lawyer or the lawyer's adherence to ethical standards. Thus, at this level the current system would seem to be of critical importance.

However, in the international practice of the law these standards have often proven to be a non-tariff barrier to trade in legal services. They also serve to frustrate international clients’ needs and interests. I will try to make the argument today that, because of the decidedly different nature of the legal services required in international transactions and because of the nature of consumers of legal services in those transactions, the need to apply traditional notions is greatly attenuated and could, in most cases, be safely eliminated, without any harm to those requiring these services. Thus, the interests of society would not suffer if traditional notions were relaxed in these areas.

Today's large multinational transaction is often entirely too large and complex for any single group of lawyers in one jurisdiction to handle. Moreover, there are usually significant components of the transaction in numerous other jurisdictions that make it practically impossible for any "single jurisdiction" law firm to handle the entirety of it. The consumers of legal services in these transactions are interested mainly in receiving:

  • competent legal advice,

  • in a timely manner, and

  • at a reasonable cost.

These consumers are almost always represented by in house or other regularly retained attorneys, and, if not, by competent business people who are skilled in doing international business. They are well capable of selecting attorneys to represent their interests and can normally fend for themselves in determining the competence, ethics, and fitness of those attorneys they select to attend to the projects they undertake. Moreover, they are quite content to let those attorneys make the decision as to whether it is necessary to consult other professional advisors on particular legal questions that may arise. International clients are not at all interested in having to retain numerous law firms and lawyers in various jurisdictions and try to assemble and make sense out of the massive quantity of legal advice that would be received in the process. Rather, they want a single point of contact with lawyers who will "run the deal" in the legal sense.

When analyzed from this perspective, the concerns of the legal regulators do not seem to match well with the needs of those who require legal services. I am certainly not advocating the elimination of home country criteria for establishing and maintaining a home country legal profession. I am, however, advocating the need for considerably greater flexibility than exists at present for the creation of an international, or multi-jurisdictional, legal profession which would, nevertheless, be based on lawyers in recognized jurisdictions somewhere. Consumers of international legal services need a system that allows lawyers from various jurisdictions to associate together in whatever form they feel suits the lawyers' economic needs and interests so these lawyers can offer true international legal services to those individuals and businesses who require them. If you accept my thesis that most, if not all, of such users of legal services are highly sophisticated and are, in most cases, lawyers (i.e., in house counsel) or represented by lawyers, there seems to be very little reason or need to protect these people who give every indication of being well able to protect themselves. The lawyers involved in this sort of international legal system would still be members of a recognized legal system and subject to the standards and controls of that system.

It would probably be appropriate to say a few words about the Tri-Bar negotiations because I suspect that is probably one of the reasons why the conference organizers initially asked Steve Nelson, the Chair of the U.S. delegation in those negotiations, to be your speaker. Steve was a very competent and able Chairman, and I was very pleased to have had the opportunity to work very closely with him during those negotiations. They were long and difficult. Our Mexican colleagues, in particular, raised many important concerns, and the U.S. and the Canadian delegations tried to address them as best they could. Having heard my previous comments, I am sure you can understand that the position of the U.S. negotiators was not particularly sympathetic to any rules that would likely restrict the provision of legal services to those involved in international transactions. I am not sure our Mexican colleagues ever felt comfortable with the representations of the U.S. negotiations that few, if any, U.S. law firms had an interest in coming to Mexico and competing with their Mexican colleagues in the practice of Mexican law. Rather, I suspect our Mexican colleagues felt Mexico would be awash with U.S. law firms the minute the negotiations concluded. However, I do not believe any New York law firm wishes to go anywhere in the world and set up a law firm that competes with local lawyers solely for local business. Rather, these firms go to foreign jurisdictions so that they can facilitate the needs and interests of their international clients who do business across many jurisdictions. This sort of business is not likely to go to locally focused law firms, in any event.

I can greatly sympathize with the concerns of local lawyers who believe, probably rightly so, that large U.S. law firms are well financed, well organized, and very client oriented. This may give rise to the perception of a very formidable competitor. That is probably true in an international transaction; however, local law firms have a very limited ability to compete for that sort of business directly. But, this is not likely to be true in a purely local transaction. In my opinion, the local lawyer will always have the advantage in a purely local transaction. Among other things, the locally oriented law firm can organize its fee structure to be far more competitive than the international law firm. These firms simply can not handle purely local transactions as cost efficiently as a locally oriented firm.

All this being said, last June, in Mexico City, the Tri-Bar negotiators met to try to salvage several years of difficult negotiations that had produced a result that was unacceptable to the United States. The U.S. negotiators indicated that, absent some breakthrough, they were prepared to report to the United States Trade Representative that agreement could not be reached. The practical consequences of this were not fully known but it was generally understood this would put the matter back into the hands of the government negotiators. While there was an inherent concern on the part of U.S. lawyers that they would prefer to make their own deal rather than let their government make it for them, the sense was that any deal the U.S. government might make on behalf of U.S. lawyers would likely be better than the deal that was negotiated to that point. Happily, the parties were able to make accommodation on some key points and the Joint Recommendation and Model Rule followed.

The Model Rule has proven to be quite controversial in New York even though it falls well within the parameters of existing New York foreign legal consultant rules. Somewhat to my surprise, when I sought to have the New York State Bar Association endorse it, the reaction was it should not be endorsed because it was too restrictive. It did not come close enough to the broad freedom provided in the New York rule which does not even require reciprocity. You should keep in mind that there are already a number of Mexican foreign legal consultants in New York and they are quite welcome and very active in the New York State Bar Association. Thus, New York felt Mexico should have been more accommodating. The outcome was, therefore, that New York declared its rules were far more liberal than the Model Rule and basically instructed the U.S. negotiators to contact the U.S.T.R. for assistance in further negotiations. This position would not prevent the Model Rule from becoming effective in New York because the Model Rule requires only that local rules be no more restrictive, and New York’s rules, N.Y. Ct. Rules § 521.1 et seq., certainly are not.

This process of involving the U.S.T.R. began on February 11, 1999, when Steve Nelson and I attended a meeting at the U.S.T.R.'s office in Washington, D.C., to review the concerns of certain U.S. law firms and try to plot a course for the future. I might add Steve Nelson and I feel the Model Rule is not as well understood as it should be. It is indeed complex in certain areas, particularly those areas relating to forms of association. However, he and I believe, despite these complexities, it is easily possible for U.S. lawyers to come to Mexico and to form the types of international law firms that can effectively offer the international legal services I discussed above.

This suggests to me that we have to do a better job in explaining the Model Rule. It also suggests that those people who feel aggrieved by it need to make a more conscientious effort to study the Model Rule and to indicate exactly how it inhibits them from doing the things they feel they must do in order to function successfully as an international law firm. The answer may lie somewhere between what the negotiators think they accomplished and what the critics think they do not have. In any case, I would like to think we will continue the Tri-Bar negotiations, perhaps on a slightly less formal level such as, through private negotiations with the Mexican negotiators seeking clarification of language and certain issues to provide comfort that the Model Rule does, in fact, give the latitude necessary to create in Mexico a so-called "international law firm". I, for one, strongly feel it is better for the legal profession to work out its own rules than to let government do it for us.

Looking now to the future, I think lawyers interested in the international legal profession have to be very concerned. Curiously enough, in New York at least, there is no formal definition of the term "lawyer" in the Code of Professional Responsibility. Rather, the Code clearly prohibits certain activities by "non-lawyers". In deed, a lawyer is defined, as noted earlier in my presentation, by certain general characteristics. Discussions of these characteristics can be found in many places, and an example of some of them, can be found in Opinion 846-6/8/93 (49-92) of the New York State Bar Committee on Professional Ethics wherein the Committee opined:

If the foreign lawyer's educational training is of insufficient rigor or the foreign lawyer is subject to professional standards that are vastly incompatible with our own, the New York lawyer's partnership with the lawyer licensed in a foreign jurisdiction might compromise the New York lawyer's ability to uphold the standards of professional conduct applicable in this State. Of particular concern is the New York lawyer's duty of confidentiality under DR4-101. A New York lawyer's sharing of client confidences with a foreign partner could result in inappropriate disclosures or misuse of those confidences if the foreign partner lacked adequate understanding of, or respect for, this ethical obligation.

Interestingly enough, the very next year, New York legislation specifically permitted foreign legal consultants and New York lawyers to form partnerships. This effectively removed any restriction in any situation where a foreign lawyer could be a foreign legal consultant. There are very few situations I know of where a foreign lawyer would not be considered a lawyer in New York. One example would be lawyers in the former Eastern Block countries where their duty was often more to explain to the client the needs and interests of the state than to advance the interest of the client against the state’s interest. Happily this problem has largely disappeared.

However, while ethics committees and others have been expressing concerns like this, a very important change has been occurring in large parts of the world. I refer, in particular, to the so-called "multi-disciplinary practice" that is becoming quite common in Europe and elsewhere. Some of the largest law firms in Europe are now the legal services arms of the major accounting firms. This is particularly true in France. Happily, the organized Bar has started to take notice of this development and has begun to take positions that support the independence and the integrity of the legal profession as a separate profession.

We must be particularly mindful, however, of the needs of our clients. As I understand them, and as I define them above, competence is only part of the picture. Timeliness and cost effectiveness are probably of equal, if not greater, importance to the client. Thus, we have to recognize what clients want and need, and we must find ways in which we, as a profession, can fill those desires and needs. If we cannot find reasonable solutions that satisfy our clients, we have very substantial organizations waiting in the wings who are quite ready, willing, and able to do so. While it might not be as easy for the large international accounting firms to qualify as law firms in many U.S. jurisdictions, they have been able to do so in other parts of the world and will probably do so in some parts of the U.S. Unlike the concerns of our Mexican colleagues in the Tri-Bar negotiations, I believe the large international accounting firms are well able to take away significant business from the legal profession unless the legal profession is prepared to recognize what clients need and want and to provide the mechanisms whereby the profession can respond to those needs and wants.

Rather than ending on a somewhat gloomy note, I would like to return again to the New York model and the example I gave earlier of the benefits of having a liberal approach to foreign legal consultants and international law firms. New York is not the only city in the world that has developed a thriving international legal practice because of a liberal approach to licensing foreign lawyers and permitting foreign lawyers to associate with local lawyers. An enlightened approach to international law firms would, in my opinion, always give the organized Bar the advantage. The system is working well in New York. The legal community is pleased with it, and from what I can see so are the clients. We have a base of experience upon which we can build and I hope the NAFTA Model Rule can be used to further that process. I have said privately to many of my friends in the Mexican delegation a good Model Rule would assure Mexico would play a leading role as an international legal center for Latin America. I would like to see that happen.

I would like to thank you for your time and attention and I would be pleased to respond to any questions you may have within the balance of the time remaining to me.

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