Regulations to Legal Profession (Amendment) Act to be finalized end Q2?

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Jal Othman is cautiously optimistic that Malaysia stands to benefit from the opening up of the legal services industry

In the first part of the article on the Legal Profession (Amendment) Act 2012 (the “Amendment Act”), I looked at what benefits there could be for the legal ecosystem in Malaysia arising from the fact that foreign individual lawyers can be engaged by local law firms and where foreign law firms can operate in Malaysia.

As a quick recap, the “Amendment Act” was passed by Parliament in mid-2012 and subsequently gazetted. However the Amendment Act has yet to come into force.

According to a well placed source from the Bar Council, the dabate on this issue rages on among practitioners who nontheless are resigned to accept the inevitable – that competition in the legal sector is going to get even more intense. But will it be all bad?

Jal Othman, who is a legal practitioner with over 20 years of experience at an established Kuala Lumpur-based law firm set up in the early 1900s, is cautiously optimistic that Malaysia stands to benefit from the opening up of the legal services industry. He points out the possible upsides and benefits.

  • The opening up would be regulated and depend on the detailed regulations being worked out and how effectively they are being enforced on the ground. Of paramount importance is the need to ensure technology and knowledge transfer by the foreigners to the locals. The latter might lack experience in certain areas, such as preparing the legal documentations for a high speed rail service spanning several countries, but indeed possess the intellectual capacity to do such work.
  • Affiliations or joint ventures between Malaysian and foreign firms would be legally recognized and appropriately supervised.
  • Clients would have at their doorstep a selection of foreign law firms to choose from without the need to shop around overseas. Fees could be negotiated to acceptable levels based on local market needs and conditions, and they would be paid in RM thereby eliminating the uncertainties of forex exposure.
  • Opening up the legal services industry would be the catalyst for change needed to raise the caliber of legal education and training in Malaysia as law firms would likely grow in tandem with the increase in the volume of work. Malaysian firms can also extend their reach internationally thereby creating opportunities for Malaysian lawyers to hone their skills overseas.
  • Based on the infrastructure projects and initiatives envisioned under the Government Transformation Plan, there are many projects in the pipeline requiring the experience of foreign legal experts.

Jal Othman cautions that learning from the Singapore experience, the viability of any joint venture between the foreign-based law firms and their Malaysian counterparts would depend on how well they adapt to each other, but critically, also depend on how local business practices and cultural eccentricities are embraced by the foreigners.

According to a well informed source, the regulations accompanying the Amendment Act are expected to be finalized by the second quarter of 2013. Hence enforcement could commence later this year. The process of liberalization would likely be gradual and progressive to ensure the entry of foreign lawyers is balanced with the need for the Malaysian law firms to develop and sustain their legal acumen to stay competitive.

The good news is that following liberalization, the Malaysian legal services sector can expect to increase its contribution to the nation’s GDP, emulating the Singapore experience where, according to media reports, the contribution by the legal services sector there grew by S$400 million in just four years.

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