JOB(05)/210
Page 1

JOB(05)/21026 September 2005

Council for Trade in Services

Special Session

LEGal Services

Information Note by the Secretariat[1]

I.INTRODUCTION

  1. Among all professional services, legal services have generated the most contributions from Members in the current negotiations, both in terms of negotiating proposals and discussion time in the Special Session of the Council for Trade in Services and the Committee on Specific Commitments.
  2. Despite the increasing internationalization of markets particularly in business law, the legal profession is largely divided along national lines, reflecting the national character of legal regimes and education. In addition, it has been observed that the legal profession, or aspects thereof, carry a public function in many Members. In addition to general market access issues, the negotiating proposals and discussions by Members have addressed these particularities of the profession.

II.CLASSIFICATION ISSUES

  1. The "Services Sectoral Classification List", MTN.GNS/W/120 ("W/120"), refers under heading "1.A.a. Legal Services" to CPC 861, which sub-divides the entry “Legal services” into “Legal advisory and representation services concerning criminal law” (86111), “Legal advisory and representation services in judicial procedures concerning other fields of law” (86119), “Legal advisory and representation services in statutory procedures of quasi-judicial tribunals, boards, etc.” (86120), “Legal documentation and certification services” (86130) and “Other legal and advisory information” (8619). The revision of the UN CPC also includes as a subclass of legal services “Arbitration and conciliation services,” which CPC Provisional classifies as part of services related to management consulting (86602).
  2. A large number of Membersare of the view that the disaggregation of CPC 861 fails to accommodate the practical nature of international trade in legal services.[2]
  3. Classification proposals tabled at earlier stages of the negotiations endorsedtwo principal approaches to classification: Australiaenvisaged an expansion of W/120 into twelve categories, combining different types of law (i.e. host-country, home-country, third-country, and international law) with either advisory or representation services, and adding categories on international commercial arbitration services; other alternative dispute resolution services; preparation and certification of legal documents; and other legal advisory or consultancy services.[3]
  4. The European Communitiesstated that CPC 861, with the addition of arbitration and conciliation services, would provide comprehensive coverage, and suggested the use of a sector entry as follows: "Legal services (CPC 861 + arbitration and conciliation services)." An explanatory footnote would specify, inter alia, that the provision of legal services was only authorised in respect of public international law and the law of any jurisdiction where the service supplier or its personnel was qualified to practice as a lawyer; and that that licensing requirements and procedures of the Member undertaking the commitment were applicable, including requirements on compliance with codes of ethics, use of home title, insurance requirements, registration with the host country Bar or a simplified admission to the host country Bar through an aptitude test, etc. The footnote would further note that full admission to the Bar in the Member undertaking the commitment might be necessary for representation before courts and other competent authorities in that Member.
  5. Anegotiating proposal from the United States suggested that the classification of legal services in W/120 be understood to include provision of legal advice or legal representation in such capacities as counselling in business transactions, participation in the governance of business organizations, mediation, arbitration, and similar non-judicial dispute resolution services, public advocacy, and lobbying.[4]
  6. A classification proposal tabled in 2000 by Japan envisaged a division of legal services into services relating to host country and international law in force in the jurisdiction of the host country, and foreign legal consultancy services on the law of the jurisdiction in which the service supplier is qualified (excluding host country law and international law in force in the host country).[5]
  7. A proposal from the Republic ofKorea on the definitions of "international law" and "consultancy" suggested that the former term be understood to cover only laws that did not form part of the domestic law of any particular country. The term "foreign legal consultancy" should be understood to exclude representation and certification services.[6]
  8. The Joint Statement on Legal Services, whose co-sponsors include all proponents of earlier classification and negotiating proposals, does not prescribe a specific classification for legal services. It rather states that, if "the nature and scope of Members' commitments were made clear by the use of well-defined and understood terminology, the lack of uniformity in approaches to scheduling commitments should not, in and of itself, undermine the value of GATS commitments on legal services." The joint statement addresses classification and scheduling issues without specifying the column of the schedule in which such issues should be addressed. It offers definitions of (i) legal advisory services, (ii) legal representational services, (iii) legal arbitration and conciliation/mediation services, and (iv)legal services. In cases where the levels of liberalization differ for the practice of host country and international and/or foreign law, the joint statement further suggests the use of specific terminology to qualify the scope of commitments in the sectoral column and/or to list specific limitations in the market access and/or national treatment columns. It also provides definitions of (i)domestic law (host country law), (ii) foreign law,and (iii) international law.

III.SCHEDULING ISSUES

  1. Members expressed different views as to whether the differentiation of commitments along the lines of host, home, third country and international law should be expressed in the sector column, or be scheduled under market access/national treatment. The joint statement is neutral in this regard.
  2. Potentially relevant issues:

(a)To what extent does the choice of classification affect the scheduling of limitations in the market access and/or national treatment columns. In particular, if the scope of a commitment is confined to home country and international law, where should limitations on association with, and/or employment of, host country lawyers be scheduled, if at all?

(b)If a commitment does not extend to host country law, what would be the purpose of a specific limitation on "representation" services?

(c)Would requirements for foreign lawyers to have practiced abroad for at least x years have to be scheduled in the market access or national treatment column? Would the mode of supply to which the restriction applies, be of importance in this regard?

(d)In light of Article I:3(a), would measures taken by Bar or similar associations need to be scheduled, if they substantively constituted a restriction in the sense of Article XVI or XVII?

IV.ISSUES RELATING TO ARTICLES XVI AND XVII

  1. Two negotiating proposals on legal services set out courses of action to enhance market access and national treatment.
  2. One proposal emphasizes liberalization of mode 3 (commercial presence, including citizenship and residency requirements for licensing, scope of practice, and association of foreignqualified lawyers with local lawyers and association of foreignpartner law firms with local law firms). Discussions should include other relevant modes of supply, including mode 4 (presence of personnel).[7]
  3. Another proposal stipulates six guiding principles to achieve liberalization of trade in legal services.[8] These include formal recognition of the right: (i) to practise home-country law, international law, and where qualified, third-country law without the imposition of additional or different practice limitations by the host country (e.g., a minimum number of years of professional experience or a refusal to recognise concurrent practice rights where the foreign lawyer's home country is a federal jurisdiction); (ii) of foreign law firms to establish a commercial presence without quota or other limitations concerning professional and other staff, location, number and forms of commercial presence, and the name of the firm; (iii) of foreign law firms and lawyers to enter freely into fee-sharing arrangements or other forms of professional or commercial association, including partnerships with international and local law firms and lawyers; (iv) to practise local law to be granted on the basis of knowledge, ability and professional fitness only, and this to be determined objectively and fairly through a transparent process; (v) of a foreign law firm to employ local lawyers and other staff; (vi) to prepare and appear in international commercial arbitration.
  4. A summary provided by the Chairman of the Council for Trade in Services (Special Session) of the review of the Council's progress notes that three delegations provided a detailed assessment on legal services. They expressed the expectation that the following barriers be addressedin the negotiations: citizenship requirements, partnership/association restrictions, restrictions on employment of locally qualified lawyers, prior residency requirements, and lack of Mode 1 and 2 commitments. The absence of any commitments/offers by some Members was noted by the three delegations, as was the observation that the offers submitted did not provide effective market access.[9]

V.REGULATORY ISSUES (INCL. PROPOSALS RELATING TO ARTICLE XVIII)

  1. A number of proposals on regulatory issues have been submitted. The delegation of Australia proposed adoption of the "limited licensing concept," a regulatory approach that permits foreign legal practitioners and foreign law firms topractice the law in which they are qualified in a host country without having to satisfy the requirements necessary to practice host country law.[10] Essential features of the concept include the right of foreign legal practitioners/law firms to enter into partnerships or other forms of voluntary commercial association with other (foreign or host-country) practitioners without being subjected to limitations on the number and type of such associations.
  2. A further submission from Australia refers to the development of disciplines on domestic regulation for legal services.[11] The objective of the proposed disciplines is to facilitate trade in legal services by ensuring that relevant domestic regulations meet the requirements of Article VI:4 of the GATS. The draft disciplines are considered to be informed by the Accountancy Disciplines[12] and various proposals for horizontal disciplines. They stipulate, inter alia, that Members' competent authorities make available information on regulation of the profession, licensing and qualification requirements, and technical standards. The draft disciplines also provide definitions of the terms "licensing" and "qualification", and set out elements upon which a "limited licence" would be granted (where the concept exists). Members are encouraged to employ less trade restrictive means than residency requirements (where these are not subject to scheduling), and to ensure that the terms for mandatory membership in professional associations are reasonable and do not include conditions unrelated to the fulfilment of legitimate objectives. The disciplines further addressthe use of firm names (not to be restricted, save for a legitimate objective), professional indemnity insurance (to take into account existing coverage), and licensing fees (to reflect administrative costs). Licensing procedures must not constitute in themselves a restriction to trade, and equivalent qualification obtained abroad is to be recognized. The draft disciplines further address qualification procedures and technical standards, including ethical rules and rules on professional conduct.
  3. The United Statesraised the idea of a Reference Paper to address problems faced by lawyers and law firms in serving clients internationally.[13] The objectives of such a reference paper would be similar to what Australia sought to achieve with the "limited licensing" concept.[14]
  4. Potentially relevant issue:

(a)If the scope of commitments excludes host country law, how could foreign lawyers be licensed, if not through a type of limited licensing system?

VI.OTHER RELEVANT ISSUES AND QUESTIONS RAISED IN NEGOTIATING PROPOSALS

  1. To the knowledge of the Secretariat, no issues or questions specific to legal services have been raised.

ANNEX 1

List of Documents Used

Council for Trade in Services - Special Session

  • S/CSS/W/28, Legal Services, Communication from the United States, 18December2000.
  • S/CSS/W/67, Negotiating Proposal for Legal Services, Communication from Australia, 23March2000.
  • S/CSS/W/67/Suppl.1/Rev.1, Negotiating Proposal for Legal Services, Communication from Australia, 10 July 2001 (Limited Licensing Concept).
  • S/CSS/W/67/Suppl. 2, Negotiating Proposal: Legal Services Classification; Communication from Australia, 10 March 2002.
  • TN/S/W/37; Joint Statement on Legal Services; Communication from Australia, Canada, Chile, the European Communities, Japan, Korea, New Zealand, Singapore, Switzerland, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, and the United States, 24February 2005.
  • TN/S/W/20; Report by the Chairman to the Trade Negotiations Committee, 11 July 2005

Committee on Specific Commitments

  • Job 3186, Legal services – Proposed Classification, Communication from Japan, 23May2000.
  • Job 4977, Points for discussion concerning the definition of foreign legal consultancy services, Communication from the Republic of Korea, 9 August 2000.
  • S/CSC/W/32, Negotiating Proposal: Legal Services Classification; Communication from Australia, 10 March 2002.
  • S/CSC/W/39, Classification of Legal Services, Communication from the European Communities; 24 March 2003.
  • S/CSC/W/46; Joint Statement on Legal Services; Communication from Australia, Canada, Chile, the European Communities, Japan, Korea, New Zealand, Singapore, Switzerland, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, and the United States, 24February 2005

Working Party on Domestic Regulation

  • S/WPDR/W/34, Development of Disciplines on Domestic Regulation for the Legal and Engineering Sectors, Communication from Australia, 6 September 2005.

Quoted reports of meetings: Council for Trade in Services - Special Session

  • S/CSS/M/9, Council for Trade in Services – Special Session, Report of the Meeting held on 14 to 17 May 2001, Note by the Secretariat.
  • S/CSS/M/13, Council for Trade in Services – Special Session, Report of the Meeting held on 3 to 6 December 2001, Note by the Secretariat.

Annex 2

List of directly relevant documents prepared by Other International Organizations

  • TD/TC/WP(2003)40/FINAL; Managing Request-Offer Negotiations under the GATS: The case of Legal Services; Organization for Economic Co-operation and Development; (distributed as JOB(04)/77 on 17 June 2004)

______

[1]This note has been prepared upon a request by Members at the meeting of the Special Session of the Council for Trade in Services held on 1 July 2005. Its aim is to assist delegations and capital-based officials in their assessment and consideration of sector- and mode-specific issues raised in the negotiations. It has been agreed that the scope of the note should exclude analysis of existing commitments and of offers submitted in current negotiations, nor should it contain additional information from external sources or from the Secretariat. The content should not be used in dispute settlement proceedings.

The document has been prepared under the Secretariat's own responsibility and without prejudice to the positions of Members and to their rights and obligations under the WTO.

[2] Communication from Australia, Canada, Chile, the European Communities, Japan, Korea, New Zealand, Singapore, Switzerland, the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu, and the United States; TN/S/W/37; S/CSC/W/46.

[3]Negotiating Proposal: Legal Services Classification; Communication from Australia; S/CSS/W/67/Suppl. 2; S/CSC/W/32, paragraph 6.

[4]Legal Services, United States, S/CSS/W/28, paragraph 5.

[5] Legal services – Proposed Classification, Communication from Japan, Job 3186, 23 May 2000.

[6] Points for discussion concerning the definition of foreign legal consultancy services; Communication from the Republic of Korea; Job 4977; 9 August 2000.

[7] Communication from the United States; S/CSS/W/28; paragraph 6.

[8] Communication from Australia; S/CSS/W/67; paragraph 6.

[9]Report by the Chairman to the Trade Negotiations Committee, TN/S/W/20, 11 July 2005, paragraphs23-24.

[10] Communication from Australia; S/CSS/W/67/Suppl.1/Rev.1; paragraph 2.

[11] Communication from Australia; S/WPDR/W/34; 6 September 2005.

[12]Disciplines on Domestic Regulation in the Accountancy Sector, adopted by the Council for Trade in Services on 14 December 1998, S/L/64.

[13] Communication from the United States, S/CSS/W/28; paragraph 7;

Council for Trade in Services – Special Session, Report of the Meeting held on 14 to 17 May 2001, S/CSS/M/9,Note by the Secretariat.

[14]Council for Trade in Services – Special Session, Report of the Meeting held on 3 to 6December2001, S/CSS/M/13, Note by the Secretariat.