Speech by Law Minister K Shanmugam at the Law Society's Dinner and Dance

12 Sep 2009 Posted in Speeches

The Honourable The Chief Justice, Mr Chan Sek Keong,
Solicitor-General, Mrs Koh Juat Jong,
Senior District Judge, Mr Tan Siong Thye,
President, Law Society of Singapore , Mr Michael Hwang,
Distinguished guests,
Ladies and gentlemen,

1. Introductory Remarks

1. In the last 12 months, a tsunami has swept through the financial world.

2. Over the same period, winds of change have also swept through our legal landscape. The changes that were conceptualised and started by Prof Jayakumar were implemented.

3. I think it will be useful to take stock of these changes. And consider what their impact might be. I will also share some thoughts on what role the Law Society can play in this fast changing landscape.

2. The Recent Changes

1. Qualifying Foreign Law Practices (QFLPs)

4. One of the most important recent developments is that in December 2008, we awarded QFLP licences to six foreign law firms. They can now practice Singapore Law. Our commitment to a calibrated liberalisation has also attracted new foreign law practices to Singapore to practice foreign law. These have grown from 85 last year to 98 this year. There are now almost 900 foreign lawyers in Singapore .

5. I will come back later, to the possible impact of the QFLPs.

2. New Qualification Rules

6. Second, we have made it much easier for Singaporeans as well as PRs to qualify for the Singapore Bar.

7. To qualify, they would now have to take the Bar Exam, consisting of two parts and fulfill 12 months of Training Contract. Relevant work experience (whether overseas or in Singapore ) can be used to set off against up to six months of the Training Contract requirement.

8. If these Singaporeans or PRs have two years of legal experience, and have qualified in a common law jurisdiction, they would need only to pass Part A of the Bar Exams.

9. In general, foreign lawyers cannot be called to the Singapore Bar. But, there has always been discretion to admit foreign lawyers who have gained relevant legal experience and demonstrated potential to contribute to our legal profession and country.

10. We have also announced that an Exam, known as the Corporate Practice Exam, will be introduced. The Corporate Practice Exam will streamline two previous schemes to allow foreign lawyers to practise in specific permitted areas of Singapore law, which include most corporate-type practice areas.

3. Pupillage

11. Third, we have also recently made changes to the pupillage system by replacing it with a Training Contract system. The Training Contracts will put the onus on law firms, rather than on individual pupil-masters, to provide structured training to the trainees.

4. Institute of Legal Education

12. Fourth, next year, the Institute of Legal Education (ILE) will be set up. The ILE will be an umbrella body to coordinate, and handle Continuing Legal Education as well as the Bar Exams. There will be much more emphasis on Continuing Legal Education. It will function under the supervision and direction of the Honourable Chief Justice and the Academy.

5. Other Changes

Arbitration

13. We have been consistently rated as a leading arbitration centre. We intend to cement that reputation and move ahead. To this end:
    1. The Singapore International Arbitration Centre (SIAC) has to become a leading international arbitral authority. It has taken, and continues to take steps, to make sure its brand, rules and procedures are world class. It has recently internationalised its Board by appointing nine leading international arbitration lawyers from Singapore , Australia , US, UK , Switzerland , Korea and India . Its Chairman, Mr Michael Pryles is an Australian, who is well known in the international arbitration field. Taking this step sends a clear message on what SIAC hopes to achieve.
    2. The recently renovated Maxwell Chambers is ready. It is one of the finest centres in the world to conduct an arbitration in.
    3. Top international arbitral institutions have set up offices in Singapore, including the Permanent Court of Arbitration, the American Arbitration Association, the International Chamber of Commerce’s International Court of Arbitration and most recently, the World Intellectual Property Organization’s Arbitration and Mediation Centre.
    4. Further, members of two sets of barristers’ chambers from London , one of which is the 20 Essex Street , will be taking up space within the Maxwell Chambers to run their arbitration practices out of Singapore . There will be more than 30 barristers involved, at least half of whom are likely to be Queen’s Counsels.
    5. Our legislative as well as judicial philosophy is completely supportive of arbitration.

14. As a result of these changes, we expect the number of international arbitration cases to increase. And there will be a tremendous opportunity for high quality dispute resolution lawyers in Singapore .

3. Other Changes

15. Besides these changes, we are also making changes in other key areas. Earlier this year, we introduced a more progressive moneylending regime. In May, the Debt Repayment Scheme ( DRS ) was implemented. That will help wage-earning debtors with debts not exceeding $100,000 avoid bankruptcy if they adhere to their repayment plan. Looking ahead, we are planning to introduce a more effective insolvency regime, and modernise our Criminal Procedure Code ( CPC ).

4. Impact of the Changes

16. What is the impact of the changes? Let me start with the impact of QFLPs, and as I consider this I would like to make one point clear: The profession should avoid an “us” versus “them” approach, and it is certainly not the approach we take at the Ministry of Law. The various licences were given to the foreign law firms because we believe that that will make Singapore a more vibrant legal centre, increasing opportunities for everyone. Thus, we welcome them.

17. What I am seeking to do in this speech is to sketch out the nature of the increased competition and what may be the impact, on the traditional ways in which the profession had structured itself. The question as to how the QFLPs could affect the profession therefore focuses on their possible impact on the legal profession as it existed before the entry of the QFLPs. It is different from the question of what impact the QFLPs will have on the Singapore economy – as I said earlier, the QFLPs are expected to be positive for the economy.

18. With that clarification, let me look at how the QFLPs could affect the profession. The answer is that at the individual level, it will be good for many lawyers. There will be additional employment opportunities.

19. For the Singapore law firms, there will be additional competition. The QFLPs’ size and scale are quite different to that of Singapore law firms. Of the six firms which were awarded QFLP licences, four are ranked in the top 10 in the world, in terms of revenue. The other two are ranked in the top 60. In 2008, these firms’ gross revenue ranged from S$900 million to almost S$4 billion. They employed between 1,000 to 2,800 lawyers, and their revenue per lawyer ranged from S$900,000 to just over S$1.5 million.

20. In comparison, our four largest law firms have between 200 to 300 lawyers each. The turnover of local law firms is not public information. But, it cannot be a surprise that the numbers are much smaller.

21. As we look at the data and compare, I make no judgments as to whether the QFLPs or the local law firms are superior. My point is more basic: more law firms will mean more competition; and the new entrants have deeper pockets, are used to competition and have a bigger pool of lawyers worldwide. On the other hand, local law firms have their strengths as well – they have pools of lawyers with local knowledge and strong Singapore law expertise built over many years.

22. The main impact of the QFLPs will be on:
    1. Talent: both inflow and retention.
    2. Remuneration: comparisons will be made with what the QFLPs pay.
    3. Clients: the QFLPs will compete for blue chip clients.

23. Let me illustrate the point by reference to talent. In 2009, about two-thirds of the entire cohort were employed by the big four local firms and the legal service. Thus, about 100 lawyers or so were available for the rest of the profession. You take into account those who want to go in house, or not practise law and the number remaining is very modest. The QFLPs will seek to employ from the same pool, adding to the pressures on talent.

24. Supply will be increased by another 120 or so lawyers, as Singapore Management University students start graduating from 2011. We have also relaxed the rules on second lowers from foreign universities getting into the Bar. But even with this increased supply, firms, particularly the smaller firms, may still find it difficult to recruit young lawyers unless they are competitive: both in terms of work experience and remuneration.

25. Another challenge will be that it will be difficult to rely simply on traditional sources of work and fees: for example, conveyancing monies will soon not be held by law firms. Standard work including conveyancing has become commoditised, commanding lower fees. Civil litigation has become more complex, often requiring teams of specialist litigators.

26. In some ways medium sized firms may be particularly affected by the changes.
    1. Before the changes, they were aiming to grow bigger and do the top tier work.
    2. With the altered landscape, there will be pressures on:
       • Work – pressures from bigger firms doing broader range of work, and smaller firms seeking to expand.
       • They are in the middle and getting squeezed from both sides.
       • Talent: Difficulties of recruiting, paying competitively.

27. In addition to the QFLPs there is another avenue for foreign firms, in co-operation with Singapore firms to do a broad category of work:
    1. Joint Law Ventures (JLVs): These have been now enhanced. In many ways, the enhanced JLV can be an effective vehicle for co-operation between foreign and local firms. Foreign firms can leverage on Singapore firms to offer seamless advice covering both Singapore and international law aspects. An enhanced JLV can in fact cover more areas than permitted under the QFLP licences. The enhanced JLVs can therefore also be very competitive.
    2. In addition, there are also Formal Law Alliances (FLAs), which is a looser arrangement than a JLV, through which local and foreign firms can market their services.
    3. And of course foreign firms have also set up to purely international work.

5. The Consequences

28. It can be seen that the landscape has changed substantially. And it will continue to change quickly. The changes will bring about exciting possibilities. The growth in arbitration and international work will offer tremendous opportunities. The changes to the moneylending regime, the introduction of DRS , the new insolvency regime and the CPC amendments, will all add new dimensions to the practice of law. When the economy grows, the demand for legal services will increase. The QFLPs will also bring in new work which will require more legal services all round. The pie will grow. There is no doubt about that. The firms and lawyers that gear up for the changed environment could benefit tremendously. But, the changes will also pose intense challenges. The challenges might well be almost existential for law firms which do not gear up to operate in this new environment.

6. Changed Environment – the Law Society’s Role

29. What role can the Law Society play in the face of these changes which bring both opportunities and challenges? I will suggest three roles.

7. Embrace Changes

30. First, as we go forward the Law Society can help the profession embrace the changes.

31. The profession is diverse. Across the profession, the ability to deal with the changes that I have outlined, will vary considerably. Some may not even have given them much thought.

32. In times like these, the profession needs the Law Society to be a thought leader, which will:
    1. analyse the changes;
    2. identify what adaptations are needed; and
    3. find practical ways to help the profession incorporate the adaptations.

33. There is a lot that can be done, and needs to be done. I would hope that Law Society has given this much serious thought and will be able to play a meaningful role, in helping the profession.

8. Arbiter of Values

34. Second as these changes take place, it is important that Law Society continues to help maintain standards in the profession. It must have the moral standing to play the role of an arbiter of standards and professional values. The Law Society has traditionally had the role of managing self regulation. But, some issues arose about this in 2007. Justice V K Rajah’s Committee found that the average time taken by Disciplinary Committees to complete their cases doubled from 7.5 months in 2002 to 15.4 months in 2006.

35. As a result, there was a request that the Government step in. In general, the less the Government has to step in, the better, because that means things need to be set right. Changes recommended by the Committee were then implemented through legislation earlier this year. At the Law Society’s request, we agreed that the Disciplinary tribunal will be a two-person panel, rather than the one-man tribunal recommended by the Committee. The Law Society has in turn promised that it will keep to a timeline of nine months for completion of disciplinary hearings.

36. In addition to dealing with disciplinary cases, the Law Society also has a broader role. It has to provide leadership in matters relating to the profession.

37. Let me illustrate what I mean, by reference to the issue of solicitors holding conveyancing monies. In the public mind, the scandals involving lawyers running away with clients’ monies, have left an indelible impression, about lawyers. Take Zulkifli Amin, who absconded with $6 million. One of his clients was a bankrupt. She sold her property to pay off her creditors and get out of bankruptcy. Unfortunately she entrusted the sales proceeds of $200,000 to the wrong lawyer. Thus, she still remains a bankrupt, her creditors have not been paid, and she has lost her property.

38. These sorts of cases were obviously unacceptable and a blot on the profession. The previous and current Chief Justices expressed their views quite firmly about this.

39. In issues like this, there is scope for the Law Society acting decisively in the best interests of the profession and the public and exercising leadership. If it can do that, it will help with public perception of the profession. That is important, even as the profession faces up to major challenges and changes.

9. Effective Representative of the profession

40. Let me now turn to the third role. The Law Society can be an effective representative of the profession in dealing with the Government on issues relating to the profession.

41. Over several years we have had a constructive relationship with the Law Society. In the last year, at our invitation, the Criminal Law Practice Sub-Committee participated in our CPC Working Group, together with the Association of Criminal Lawyers of Singapore, other practitioners, academics and government agencies. The engagement was meaningful, and added to a more robust CPC Bill.

42. Another area was our Safeguarding Conveyancing Monies Implementation Committee. We invited the Vice-President of the Law Society, Wong Meng Meng SC, to chair that Committee. It was a very effective Committee, working with legal practitioners and multiple stakeholders and affected agencies such as the Association of Banks, Central Provident Fund Board, Inland Revenue Authority of Singapore, Housing Development Board and various banks.

43. Our International Arbitration (Amendment) Bill also benefited from the hard work of the Dispute Resolution Sub-Committee, which we appreciated.

44. The Law Society has also dealt with us on myriad other issues, ranging from funding/financing requests to issues of specific professional interest. As we go forward, I see the contact points increasing.

45. For the relationship to work well, however, it is important that there be mutual trust.

46. That has been so over several years. Let me deal with the point made by Mr Michael Hwang, on S38 of the Legal Profession Act (LPA), in that context. Mr Hwang would like S38 to be amended, although he says it is not a problem in practice.

47. The Government amended S38 in 1986. It made its stand clear and explained the rationale for the move. That position has been maintained consistently over the years. Most recently, in July last year, the position was publicly restated, in clear terms in response to Michael.

48. I have to say to Michael: Are we likely to have changed our minds in the last 12 months? And in the context of the points I have outlined earlier, S38 may not be the most pressing issue now on Law Society’s plate.

49. The reasons for the Government’s position on S38 have been stated clearly:
    1. In 1986, S38 was amended to make clear that where the section says that the Law Society is “to assist the Government in all matters affecting legislation” – that refers to legislation “submitted to it”. That was restoring the wording to what it had been before.
    2. The Act was amended because the then Law Society was using it for broader political purposes – relying on the then wording of s38. The mutual trust between the Government and the Law Society was ruptured. As Michael says, trust has been built up again over the last 20 years. But if S38 is now to worded broadly again, then another Council could decide to act as in 1986. The powers of a Council must be set out in law and should not depend on how it chooses to act.
    3. There are good reasons why Council members should not, get involved in politics, qua Council members:-
       1. The fact that they are elected to the Council does not ipso facto give them the additional right or power to use the Law Society’s funds and banner to argue their own personal, political views.
       2. Any such views may well not represent the consensus opinion of the members of the Law Society.
    4. This was recognised by the previous President of the Law Society, Mr Philip Jeyaretnam SC As Mr Jeyaretnam noted, in the October 2007 issue of the Law Gazette, the profession is quite divided on its views on civil and constitutional issues. Absent a degree of consensus, he felt that such opinions should be made in a personal capacity. That approach makes sense. It will be difficult for Council members to suggest that their personal views on political matters, would be the consensus view of the profession.

50. In practice we consult the Law Society on a broad array of issues and:
    1. We have given it our strong moral and financial support.
    2. We have tried to assist the Law Society on various issues it has faced, and
    3. We have treated the Law Society as a credible partner.

51. In conclusion, I see the Law Society as being well placed to offer leadership to the profession. As someone from the profession, I want the profession to succeed and be held in the highest regard by the public. I hope the Law Society can play its unique role in that process.

52. Thank you and good night.

Last updated on 26 Nov 2012