MinLaw defers decision to renew licences of 4 foreign law firms

SINGAPORE — Falling short on their promises, the four foreign law firms given Qualifying Foreign Law Practices (QFLP) licences to operate here will have two years to prove themselves to the authorities or face the cut.

Their five-year licences given in 2013 are up for renewal next year, but the Ministry of Law (MinLaw) announced on Wednesday (Dec 13) that it would defer the decision until 2020 “to better assess each firm’s performance and contribution to Singapore” and their respective proposals for the new licence period.

Law firms Gibson Dunn & Crutcher, Jones Day, Linklaters, and Sidley Austin will have their licences extended for two years until a decision is made.

The firms are from the second batch of foreign law companies that were awarded the licence.

The QFLP scheme was introduced in 2008 to liberalise the legal industry and turn Singapore into a legal hub. Licensees can only practise in certain areas of Singapore law, such as the commercial and corporate fields, through Singapore-qualified lawyers with practising certificates or foreign lawyers holding the foreign practitioner certificate.

In the case of the four firms, they were affected by the weaker-than-expected growth in the Asian economies, a drop in commodities prices, and a fall in mergers and acquisitions, which led to a weaker demand for legal services in the region over the past two years.

A MinLaw spokesperson said that their respective performances have “fallen short of the initial commitments they made”, but was unable to share the specific details of the commitments made by the companies, citing business confidentiality.

However, the spokesperson acknowledged that the four companies have contributed to the growth of Singapore’s legal sector. For instance, they managed to increase their revenue from offshore work and doubled their headcount of their Singapore offices since they got their licences.

COMPETITION FROM FOREIGN FIRMS

When the scheme was first rolled out, the first batch of six companies were awarded their licences in 2009 after much hand-wringing among Singapore players regarding the impact on domestic firms. Five of the foreign companies renewed their licences in 2014 but the sixth, Herbert Smith Freehills, did not.

Among the five, White & Case was given a one-year conditional licence in 2014 that will be extended for four years if they could meet certain quantitative targets set by MinLaw. The remaining four, namely Allen & Overy, Clifford Chance, Latham & Watkins and Norton Rose Fulbright, had their licences renewed for five years.

In 2011, some Singapore lawyers voiced their concern that the competition posed by these foreign companies may make it harder for resident firms to attract and retain top talent.

Mrs Lee Suet Fern, head of Morgan Lewis Stamford’s international leadership team, also questioned last year if the scheme had produced a good enough outcome. She noted that while the first batch had generated S$1.2 billion in revenue between 2009 and 2014, they had hired just “about 100 out of thousands of Singapore-qualified lawyers”.

There are nine foreign law firms here that hold QFLP licences and they have generated more than S$400 million in total revenue for the 2016/2017 period, the ministry said. They employ more than 450 lawyers in their Singapore offices and, of these, about a third are Singapore-qualified lawyers.

The MinLaw spokesperson told TODAY that the licences for the first batch of QFLP firms are due for renewal in 2019. “MinLaw will assess the performance of the first batch of QFLPs and the approach for renewal in end-2018 or early 2019, taking into account the prevailing economic conditions,” he added.

A representative from Linklaters said that MinLaw’s announcement on Wednesday was a “welcome development”, adding that the company has seen “exceptional growth” here in the last four years and the number of lawyers has increased significantly.

Mr Christopher Bradley, managing partner of Linklaters’ office here, said: “Singapore is an important part of our global business and, most recently, has played a central role in the firm’s global drive for innovation. The office continues to go from strength to strength and we will continue to invest in and develop our presence here.”

The other three firms were not able to respond to TODAY before publication.