Author: Lawyer Zhang Jingxinyue, PRC-qualified Lawyer | Singapore Registered Foreign Lawyer
Editor’s note: The globalisation of Chinese enterprises will never stop. Exploring international markets, seeking global business growth, and investing in quality overseas assets remain key business and strategic priorities for many Chinese enterprises in recent years.
As an important financial, trade, services, shipping, and technology innovation hub in the Asia-Pacific, Singapore has attracted many foreign investors to establish companies here. At the same time, as a neutral international dispute resolution centre, Singapore has also gained recognition from the international community. Legal and business professionals across Asia hold Singapore in high regard and regard it as an ideal one-stop service centre for international commercial arbitration.
Many foreign legal service institutions regard Singapore as an important part of their overseas presence. In recent years, a number of large Chinese law firms have successively established branches in Singapore, including Yingke, Dentons, Jingsh, DHH, and King & Wood Mallesons. Several other major firms are also on the way and have expressed strong interest in the Singapore and Southeast Asian markets. This article outlines the types of licences for legal practice in Singapore, as well as Singapore’s policies and restrictive rules on foreign legal institutions, for reference.
01 Why Do Chinese Law Firms “Go Global”?
In light of the requirements of the central government and higher-level authorities concerning the development of the legal profession, as well as law firms’ medium- to long-term strategic development needs, some domestic law firms rely on the Belt and Road Initiative, align themselves with international practice, vigorously develop foreign-related work, establish overseas branches, or form various types of cooperation with foreign law firms.
The benefits of “going global” include:
- It helps drive the development of the firm’s foreign-related practice and enhances the firm’s brand visibility and influence;
- It helps open up international markets, export the advantages of the domestic head office, attract high-quality overseas clients, and achieve strong alliances and resource sharing;
- It helps broaden horizons and improve the firm’s overall management standards.
However, “going global” also has challenges and limitations. Firms should understand the policy attitudes and restrictive rules of the local judicial authorities, make contingency plans and response measures, and avoid unnecessary detours.
02 Singapore Legal Services Industry Rules and Classification
Singapore’s legal services sector is a prohibited or restricted industry for foreign investment. Foreign law firms that establish branches in Singapore are subject to strict restrictions in their areas of practice and must not exceed those restrictions. Under Singapore’s Legal Profession Act (Cap. 161), the Legal Profession (Law Practice Entities) Rules 2015, and other related subsidiary legislation, the types of licences and registrations for Singapore law entities include the following:
(1) Singapore Law Practice (“SLP” or “Singapore local law firm”). A Singapore local law firm may provide, in or from Singapore:
- Singapore law-related legal services in all areas of legal practice; and
- foreign law-related legal services in all areas of legal practice that the SLP is competent to provide.
Foreign lawyers may practise in a local law firm, but within a local law firm there are limits on the proportion of foreign lawyers who may practise in it or become its directors, partners or shareholders, or share in its profits. An SLP may take the form of a sole proprietorship, partnership, limited liability partnership, or company, and must apply for a law firm licence, limited liability partnership licence, or law corporation licence.
(2) Foreign Law Practice (“FLP”). Under section 172 of the Legal Profession Act (Cap. 161), an FLP may provide foreign law practice in or from Singapore, including:
- legal services in relation to foreign law in all areas of legal practice that it is competent to provide; and
- legal services in relation to Singapore law only in the limited areas of international commercial arbitration and the Singapore International Commercial Court (“SICC”), through certain types of registered lawyers.
(3) Qualifying Foreign Law Practice (“QFLP”). Under section 171 of the Legal Profession Act (Cap. 161), a foreign law firm holding a QFLP licence is allowed to provide, in or from Singapore:
- legal services in relation to foreign law in all areas of legal practice that it is competent to provide; and
- legal services in relation to Singapore law in the “permitted areas of legal practice” through certain types of registered lawyers. However, local litigation and general practice are excluded, for example retail conveyancing, family law and administrative law services provided through Singapore-qualified lawyers or foreign lawyers holding foreign practising certificates.
QFLP licences are issued after an application and a rigorous review and selection process. Currently, the QFLP scheme is closed, and there is no news on when the next round of applications will open.
(4) Joint Law Venture (“JLV”). This is a legal entity formed by a Singapore Law Practice (SLP) and a Foreign Law Practice (FLP) or Qualifying Foreign Law Practice (QFLP). A JLV is entitled to provide foreign law-related legal services in all areas of legal practice; and to provide Singapore law-related legal services in the “permitted areas of legal practice” through certain types of registered lawyers. However, it should be noted that after forming a JLV, the FLP/QFLP may practise in or from Singapore only through the JLV, not through the FLP/QFLP.
(5) Formal Law Alliance (“FLA”) is a structure in which a Singapore local law entity and a foreign law entity cooperate closely but remain independent in practice. FLA member firms may share office premises, resources and client information, as well as joint branding and permitted matters. However, member firms remain distinct legal entities and may only provide legal services that each firm and its lawyers are permitted to provide. In this context, foreign lawyers and foreign law practices (FLPs) will be allowed to share a greater proportion of profits and interests with Singapore law practices (SLPs).
(6) Group Practice (“GP”). A Singapore Group Practice is a collaboration between one or more Singapore law practices (“SLPs”), while a Foreign Group Practice is a collaboration between one or more FLPs and/or QFLPs. This cooperation structure enables two or more legal service entities to cooperate as separate legal entities, with the benefits of joint branding and shared office premises, resources and client information. However, member firms remain distinct legal entities and may only provide legal services that each firm and its lawyers are permitted to provide.
(7) Representative Office (“RO”). An RO is established by a law practice outside Singapore and only carries out liaison or promotional work in or from Singapore. An RO is not permitted to provide any legal services or conduct any commercial activity in Singapore. In particular, it must not provide legal advice, enter into contracts, or open or negotiate any letter of credit.
03 Foreign Law Firms Establishing Branches in Singapore: Current Situation
According to data from the Singapore Law Centre, there are 1,169 registered Singapore law practices (SLPs), of which 1,000 are active; 157 Singapore foreign law practices (FLPs), of which 128 are active; and 9 Qualifying Foreign Law Practices (QFLPs). In addition, there are 10 Joint Law Ventures, of which 8 are active; 14 Representative Offices; and 14 Formal Law Alliances, of which 11 are active. Practising lawyers include 5,537 Singapore lawyers and 1,141 registered foreign lawyers.
Eight of the world’s top ten law firms by revenue have branches in Singapore, including Allen & Overy, Baker McKenzie, Clifford Chance and Latham & Watkins.
According to public information, Chinese law firms including Dentons, King & Wood Mallesons, DHH, Jingsh, Guangxi Wanyi, Yingke, Han Kun and AllBright have established or plan to establish Singapore branches. However, none of these Chinese law firms has yet obtained a QFLP licence. Interested parties may visit the websites of the Singapore Law Centre and the respective law firms for more information.
Singapore’s Minister for Culture, Community and Youth and Second Minister for Law, Edwin Tong, said that around 120 foreign law firms currently have a presence in Singapore, but he does not want the number of international lawyers to increase merely for the sake of increase. Law firms must provide services relevant to international clients and the economy. That said, he also stated that a strong legal services market and the rule of law are key to attracting businesses to Singapore. He said: “Legal services’ contribution to Singapore’s GDP is relatively small, but we believe its contribution to other sectors is very significant. If Singapore did not have a strong legal system, many other industries would not choose Singapore.”
04 Singapore Qualifying Foreign Law Practice (QFLP) Licence Scheme and Implementation
Singapore’s legal services sector has implemented a series of liberalisation and opening measures since 2007, and the QFLP scheme was launched in 2008. Previously, foreign law firms were only allowed to practise Singapore law through joint ventures with Singapore law firms.
The QFLP licence scheme grants licences to foreign law firms to practise in certain areas of Singapore law, mainly in commercial and corporate areas, to support the growth of key economic sectors in Singapore, help develop Singapore’s legal industry, and provide more opportunities for Singapore lawyers.
In 2008 and 2013, the Singapore government issued Qualifying Foreign Law Practice (QFLP) licences to nine foreign law firms in two batches. In the second application window, 23 foreign law firms submitted applications, and only 6 were approved. On 29 December 2020, the government conducted a centralised review and renewed the licences of all nine Qualifying Foreign Law Practices practising locally, with a five-year validity period.
The foreign law firms approved to practise locally under the QFLP scheme have made significant contributions to the growth of the local legal sector, generating more than S$3.07 billion in offshore revenue. These foreign firms have employed around 200 local Singapore lawyers.
05 QFLP Licence Application and Renewal Criteria
The following factors will be considered in a foreign law firm’s QFLP licence application:
- The number of lawyers working in the applicant’s (FLP’s) Singapore office;
- The areas of legal practice that the Singapore office will provide, preferably innovative practice areas that can bring employment and benefits to Singapore;
- The extent to which the Singapore office will treat Singapore as its headquarters;
- The volume of offshore work that the Singapore office will undertake; and
- The FLP’s track record.
As for the renewal of the QFLP licences of the nine Qualifying Foreign Law Practices practising in Singapore on 29 December 2020, the Singapore government took into account requirements including quantitative and qualitative targets (which I understand to be an assessment of the implementation of the business plans established at the time of application).
In summary, the scope of practice of foreign law firms in Singapore is restricted. If a foreign firm wants to expand its scope and operate independently with a QFLP licence, it must obtain a QFLP licence from Singapore’s Ministry of Law. If it has not obtained a QFLP licence but wishes to provide Singapore law services, then the foreign law firm (FLP) must cooperate with a Singapore local law firm by establishing a Joint Law Venture (JLV) or Formal Law Alliance (FLA); otherwise, it may only provide corresponding foreign law services and cannot carry on work involving Singapore law.
For Chinese law firms planning to enter the Singapore legal services market, they may first establish an FLP, because whether the intended form is a QFLP, a Joint Law Venture (JLV) or a Formal Law Alliance (FLA), the prerequisite is to first set up an FLP.
06 Conclusion
As Chinese law firms’ international service capabilities continue to strengthen, their influence and voice in the global legal services market are increasing. In the long run, Chinese law firms will have a larger overseas footprint and will provide the world with Chinese legal services, Chinese legal brands, Chinese legal technology, Chinese legal standards and Chinese legal culture.
Our team can provide Chinese law firms intending to expand overseas with services including the establishment, operation and maintenance, and compliance of Singapore branch offices. For further information, please contact a professional consultant at China-Singapore Legal News.
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This article is for informational reference only and does not constitute formal legal advice.
This article is general information and not legal advice. Specific matters require assessment by appropriately qualified professionals.