Assistant Secretary of Commerce Nicole Y. Lamb-Hale
Manufacturing and Services
"Trade & Legal Services: The Role of GOvernment in Helping to Build a Global Legal Profession"
Harvard Law School
Thursday, April 12, 2012
As prepared for delivery
I am so pleased to be here at the request of my dear friend and mentor Professor David Wilkins. Professor Wilkins was my civil procedure professor back in 1988 when we were both child prodigies! I was privileged to be in his class for a full year. He made civil procedure engaging, which from my point of view is a tough thing to do! I'm so proud of Professor Wilkins and his contributions to the advancement of our profession. Thank you for inviting me to participate on this important panel.
I graduated from the law school in 1991 with one of Harvard's star alumni, my friend and my boss, President Barack Obama. I practiced law for 18 years in Detroit in the area of business restructuring before joining the Obama Administration. I left my firm which has an international footprint and where I served as Managing Partner of our Detroit office. I observed the firm's efforts in entering international markets to serve U.S. clients so I understand and appreciate the importance of our topic today. As more and more of our nation's companies increase their international business, they will need lawyers by their sides who understand both their business objectives and international law.
It's exciting to be in government at this particular time in the history of our nation and to look for ways, from a trade policy standpoint, that the U.S. Government can help to build and sustain a global legal profession to support trade, and in particular an increase in U.S. exports of goods and services to sustain and create jobs. This is the goal of President Obama's National Export Initiative which calls for a doubling of exports by the end of 2014 to support millions of jobs here at home. As an Assistant Secretary of Commerce for international trade, my job is make the National Export Initiative successful. The creation of a global legal profession is one means of facilitating that success.
But before turning to our topic today, let me take a moment to acknowledge a very important visitor to Harvard earlier this week, President Dilma Rousseff of Brazil.
In connection with her visit with President Obama on Monday, President Rousseff came to Massachusetts to talk about education, and her government’s new initiative to offer approximately 100,000 scholarships to Brazilian students to go abroad for a portion of their graduate and undergraduate studies in leading edge technologies and sciences.
This is a forward-looking program to invest in the future of Brazil, and we hope to host a large share of those students in the United States. Governor Deval Patrick’s team has been working actively to secure a significant role in this program for Massachusetts institutions of higher learning. It is a pleasure to note that leading universities in Massachusetts are already engaged.
We wish the government of Brazil every success in this endeavor.
In speaking about the role of government in creating a global legal profession, much of my perspective is shaped by my current work in the International Trade Administration. My remarks will address three areas:
- How an open market for legal services facilitates trade and investment, and encourages the growth of a truly global legal profession;
- Market access issues in global legal services; and
- How the U.S. government has been working to promote open markets for legal services and the development of the legal profession here and in other countries.
1. Trends in international trade affecting the global legal profession
I begin with the premise that open markets for legal services facilitate trade and investment in the global economy. Global business involves huge trade flows in an ever-expanding number of goods and services.
Investment in foreign markets is near historic highs and is increasingly important in international business. These transactions – whether in managing trade or investing in facilities or companies abroad – all depend on the availability of top-quality legal services.
Often these services come from the leading international law firms, well-known and trusted advisors to the companies doing business. Most companies prefer to go abroad with their established counsel as far as possible and build out their team with firms from the target market. Today’s complex international trade and investment deals cannot be done without the services of a sophisticated legal profession.
A critical new development is that today most services and a great deal of manufacturing are provided internationally by means of subsidiaries in the foreign markets, where they are more integrated into the local economy than, say, traditional exporters.
As a result, the nature of the trade and investment agenda itself is changing and increasing the demand for a global legal services profession.
As investment and economic integration increase – the clearest example is probably the North Atlantic economy and U.S.-EU economic integration – the policy agenda increasingly reflects the clash of differing regulatory systems in highly integrated economies.
Businesses and investors require sophisticated and experienced legal counsel to navigate the differences in product standards, competition law, health and safety issues, and privacy and data protection issues, to name a few, and these issues are fast becoming the trade agenda of the future, displacing the first-order issues of market access.
Managing these issues demands a legal profession with global vision and a common parlance.
2. Challenges and obstacles to the growth of a global legal profession
While parts of the international market are moving in directions that demand a more and more sophisticated, global legal profession, at the national level numerous market access barriers remain. Differences between national systems, of course, are rooted in historical practice and legal tradition.
The U.S. experience
In the United States, licensing related to the legal profession is done at the state level. As such, the rules regarding the practice of law by foreign attorneys vary from state to state. Generally speaking, the U.S. legal market is rather open, and foreign lawyers are allowed to become members of state bars and, in many states, are permitted to practice law in a limited manner without becoming a member of a bar.
Because of a 1973 Supreme Court decision, states are prohibited from requiring that members of the state bar be U.S. citizens. In re Griffiths, the Supreme Court held that Connecticut’s requirement that applicants for regular admission to its state bar be U.S. citizens violated the Equal Protection Clause of the 14th Amendment. As a result, non-U.S. citizens may seek membership in State bars subject to other applicable requirements.
In addition, a majority of states have rules that allow an attorney licensed in another country to practice law in a limited manner in those states. These practitioners are known as foreign legal consultants (FLCs). The group of states that allows the practice of FLCs includes all of the larger states, both in economic terms and in the international context, includes CA, FL, IL, MA, NY, PA, and TX. This is significant in that the allowance of FLCs facilitates commerce and business transactions between these states and foreign countries. Generally, once a FLC meets the requirements of a particular state, he or she is permitted to give legal advice regarding laws of jurisdictions other than the United States. Generally, this permits a FLC to provide legal advice regarding the laws of the country in which they were originally licensed or on international law.
In many countries, the legal profession, like other professions, is regulated by nongovernmental professional organizations, whose self-interest can work against opening their markets admit foreign practitioners.
In some countries, foreign lawyers cannot sit for the bar exam or otherwise practice domestic law. Likewise, in some of our trading partners, U.S. law firms cannot practice domestic host-country law; they are limited to providing legal counsel on U.S. and international law. Furthermore, host-country lawyers working for foreign law firms may have to relinquishtheir license to practice host-country domestic law while working for those foreign firms.
Other specific restrictions often take the form of: prohibitions against partnership with local firms, and restrictions on the use of international and foreign firm names; residency requirements; and discrimination on the basis of nationality in the licensing process.
These practices are unfortunate and limit the globalization of the legal profession. In addition, these host-country lawyers are deprived of the opportunities to work on prominent international deals, collaborate with experienced foreign lawyers, and gain exposure to complex global transactions. And foreign companies seeking comprehensive legal advice on navigating the host-country law must hire host-country law firms that may not have the necessary breadth of experience on international issues.
I see these as restrictions that need to be eliminated if the world’s economies are to grow closer, if our companies are to innovate together, and if we, as lawyers, are to have the opportunities to promote commerce throughout the world.
3. Government actions in support of expanding the global legal profession
Securing and protecting market access for U.S. lawyers abroad
The U.S. Department of Commerce is taking steps to reduce and eliminate the restrictions I have just discussed. Most prominently, our General Counsel, Cameron Kerry, is engaged in government to government dialogues centered on reducing market access barriers, and exploring other ways to better understand one another’s commercial legal environments.
My office works closely with the Office of the U.S. Trade Representative or USTR to secure additional market access for our legal service providers. One recent success in opening a legal market for U.S. lawyers is contained in the recently enacted U.S.-Korea Free Trade Agreement, known as KORUS, which came into force last month, providing market access to U.S. companies in a wide range of industries.
With respect to legal services, this agreement permits U.S. law firms to establish representative offices, and opens Korea for the first time to allow U.S. licensed attorneys to provide legal advisory services as foreign legal consultants regarding the laws of the jurisdiction in which they are licensed and public international law.
Over the next several years, additional elements will come into force, including, after two years, Korea will allow FLC offices to enter into cooperative agreements with Korean law firms in order to be able to jointly deal with cases where domestic and foreign legal issues are mixed and after five years, Korea will allow U.S. law firms to establish joint ventures with Korean law firms. KORUS is a modern trade agreement that fully contemplates the nature of our current trading system- and represents the goals of open markets that the U.S. broadly supports.
Another positive development is the recent ruling by the Madras High Court in India which upheld the right for foreign law firms to provide counsel to their local clients on non-Indian law. This ruling supports the bilateral trade and investment between the U.S. and India that has grown from $18 billion in 2001 to over $72 billion in 2010.
Support for capacity building in the global legal arena
Another means that the U.S. Government supports the global legal profession and responds to challenges in the global legal arenas is by putting a priority on furthering the expansion and maintenance of the rule of law -- not just in each individual country, but in the global economy as a whole. One way the USG has done this is through international capacity building.
The value of transparent, rules-based systems has increased powerfully over the past 30 years. When rules exist, even if they are different from nation to nation, if they are clear and transparent, they can be navigated by businesses and their lawyers.
The world’s trading powers, old and new, have prospered through the evolution from a cross-border trading system to a system increasingly marked by international investment.
International transactions in a global economy demand legal counsel that is well versed in the intricacies of home-based, host-based, and international law. But these lawyers must be supported by an institutional framework in which business decisions are supported by predicable and enforceable commercial and contractual practices.
Within my own Department, we operate a capacity development program called the Commercial Law Development Program (CLDP). The mission of the CLDP is to improve the legal environment for doing business in developing and transitional countries around the globe, thereby fostering greater political stability and economic opportunity for local entrepreneurs and U.S. companies alike.
Key areas of expertise include:
•Trade & Customs Law Reform
•Intellectual Property Rights
•Commercial Rule of Law
•Free Trade Agreements
•Transparency and Governance
CLDP also advises host governments in their efforts to develop efficient, transparent, and impartial government contracting infrastructure. Such programs address accession to and compliance with international government procurement agreements, implementation of necessary legislative and regulatory frameworks, and the training of critical contracting personnel. The program began by assisting countries of the former Soviet Union and Eastern Europe, many of whom have transformed into robust economies and close trading partners.
I believe these government efforts dovetail nicely with Harvard’s GLEE project which tracks the transformation of corporate legal sectors in major emerging economies and how these developments may in turn reshape legal practice in established markets such as North America and Europe.
Bilateral Investment Treaties (BITs)
Another role for government has been in making impartial dispute settlement available, both through multilateral and bilateral agreements. By negotiating Bilateral Investment Treaties (BITs) for example, the U.S. government has contributed to increasing available protections for foreign direct investment and encouraging the adoption by its trading partners of market-oriented domestic policies. BITs also support the development of international law standards consistent with these objectives, and also provide investors with the means to settle disputes through binding international arbitration of investment disputes, which in turn has led to a developing body of international law on standards on the treatment of investment.
Battered by economic challenges, the last few years have been very difficult for individuals and governments. Many have questioned the efficacy of traditional free market models and have advocated for an increased role to be played by state capitalism. At the same time, we have seen the maintenance of a relatively stable global trading system, with far less reversion to protectionism than may have been expected.
One can attribute at least some of the difference in the relative stability of the global trading system that has developed since World War II to the advent of a legal system and other mechanisms that are supported by international agreements and policed by a cadre of skilled international lawyers, both from within and outside of government.
And I might add that the globalization of the legal profession has been instrumental in various other improvements to our markets such as the adoption of corporate responsibility practices and the increased focus on intellectual property rights. Governments, especially the U.S. government working with the private sector and professional associations, have facilitated these efforts as we strongly believe that increased trade and investment, supported by globalized legal services and clear international norms will lead to sustained economic growth and development. Thank you.
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