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GATT, GATS, and WTO
Under the basic principles of the 1994 General Agreement on Tariffs and Trade (GATT), the General Agreement on Trade in Services (GATS), and the World Trade Organization (WTO), the present global trend and the long-term ambition of the global economy is to achieve, among other things, a truly free and liberal cross-border exchange of privatized professional services, which include legal services, subject to the formal reservations or exemptions that each member economy has officially registered with the world office of the WTO in Geneva, Switzerland in light of the specific limitations contained in the governing constitutions and the degree of development of each of the 130 member economies of the WTO. (See in general www.wto.org, the official website of the World Trade Organization [WTO])).
Recognizing the impact of regulatory measures relating to professional qualifications, technical standards and licensing on the expansion of trade in professional services and desiring to establish multilateral disciplines with a view to ensuring that, when specific commitments are undertaken, such regulatory measures do not constitute unnecessary barriers to the supply of professional services, the trade ministers of the member economies of the WTO have adopted a 1995 resolution which recommended to the WTO Council for Trade in Services that the following actions be taken by the Council:
1. The work programme foreseen in paragraph 4 of Article VI on Domestic Regulation should be put into effect immediately. To this end, a Working Party on Professional Services shall be established to examine and report, with recommendations, on the disciplines necessary to ensure that measures relating to qualification requirements and procedures, technical standards and licensing requirements in the field of professional services do not constitute unnecessary barriers to trade.
2. As a matter of priority, the Working Party shall make recommendations for the elaboration of multilateral disciplines in the accountancy sector, so as to give operational effect to specific commitments. In making these recommendations, the Working Party shall concentrate on:
(a) developing multilateral disciplines relating to market access so as to ensure that domestic regulatory requirements are: (i) based on objective and transparent criteria, such as competence and the ability to supply the service; (ii) not more burdensome than necessary to ensure the quality of the service, thereby facilitating the effective liberalization of accountancy services;
(b) the use of international standards and, in doing so, it shall encourage the cooperation with the relevant international organizations as defined under paragraph 5(b) of Article VI, so as to give full effect to paragraph 5 of Article VII;
(c) facilitating the effective application of paragraph 6 of Article VI of the Agreement by establishing guidelines for the recognition of qualifications.
In elaborating these disciplines, the Working Party shall take account of the importance of the governmental and non-governmental bodies regulating professional services@. (Id., WTO website).
American Multijurisdictional Practice
In November 2001 the ABA Commission on Multijurisdictional Practice submitted a formal report and recommendation to the ABA House of Delegates and Board of Governors for their study and approval, which discussed the major concerns facing the US legal profession as it entered the 21st century in relation to the multijurisdictional practice of law. American businesses have become transnational, if not global, in nature. As the nature of clients= business has changed, the practice of law has also become multijurisdictional. The multijurisdictional practice of law involves issues of legal ethics, bar admission, regulation of lawyers and the unauthorized practice of law.
The report outlined the Commission's work and its preliminary recommendations, which are reproduced below:
1. The ABA should affirm its support for the principle of state judicial licensing and regulation of lawyers.
2. The ABA should amend Rule 5.5(b) of the ABA Model Rules of Professional Conduct (Unauthorized Practice of Law) to provide that, as a general rule, it is not the unauthorized practice of law for a lawyer admitted in another United States jurisdiction to render legal services on a temporary basis in a jurisdiction in which the lawyer is not admitted if the lawyer=s services do not create an unreasonable risk to the interests of a lawyer’s client, the public or the courts.
3. The ABA should adopt proposed Rule 5.5(c) of the ABA Model Rules of Professional Conduct to identify "safe harbors" that embody specific applications of the general principle of Rule 5.5(b) above. These would include "safe harbors" relating to the following practice areas:
a) Work as co-counsel with a lawyer admitted to practice law in the jurisdiction.
b) Professional services that a non-lawyer is legally permitted to render.
c) Work ancillary to pending or prospective litigation or administrative agency proceedings.
d) Representation of clients in, or ancillary to, an alternative dispute resolution ("ADR") setting, such as arbitration and mediation.
e) Non-litigation work ancillary to the lawyer's representation of a client in the lawyer's "home state" (i.e., the jurisdiction in which the lawyer is licensed to practice law) or ancillary to the lawyer's work on a matter that is in the lawyer's home state.
f) Services involving primarily federal law, international law, the law of a foreign jurisdiction or the law of the lawyer's home state.
4. The ABA should adopt proposed Rule 5.5(d) of the ABA Model Rules of Professional Conduct to identify "safe harbors" relating to work by a lawyer who is an employee of a client or its commonly owned organizational affiliates and work in a "host state" (i.e., a jurisdiction in which the lawyer is not licensed to practice law) that the lawyer is authorized by federal law, state law or court order to render.
5. The ABA should adopt proposed Rule 5.5(e) of the ABA Model Rules of Professional Conduct to prohibit a lawyer from establishing an office, maintaining a continuous presence, or holding himself or herself out as authorized to practice law in a jurisdiction in which the lawyer is not admitted, unless permitted to do so by law or Model Rule 5.5.
6. With regard to a lawyer seeking to establish a law practice on a permanent basis in a jurisdiction in which the lawyer is not licensed to practice law, the ABA should endorse a model "admission on motion" rule consistent with the rule proposed by the ABA Section of Legal Education and Admissions to the Bar to facilitate the licensing of a lawyer by a host state if the lawyer has been engaged in active law practice in other United States jurisdictions for a significant period of time.
7. The ABA should encourage jurisdictions that have not adopted a foreign legal consultant rule to do so consistent with ABA policy.
8. With regard to lawyers admitted to practice law outside the United States, the ABA should amend either the Model Rule for the Licensing of Legal Consultants or Rule 5.5 of the ABA Model Rules of Professional Conduct to identify circumstances where it is not the unauthorized practice of law for a lawyer admitted in a non-United States jurisdiction to perform legal services for a client in a United States jurisdiction.
9. The ABA should endorse a model pro hac vice rule consistent with the one under development by the ABA Section of Litigation, the ABA Section of Torts and Insurance Practice and the International Association of Defense Counsel, to govern the admission of lawyers to practice law before state courts and government agencies pro hac vice in jurisdictions in which the lawyer is not licensed.
10. With regard to pro hac vice admission in federal district court, the ABA should reaffirm its support, in accordance with ABA policy adopted in 1995, for "efforts to lower barriers to practice before U.S. District Courts based on state bar membership by eliminating state bar membership requirements in cases in U.S. District Courts, through amendment of the Federal Rules of Civil and Criminal Procedure to prohibit such local rules."
11. The ABA should amend Rule 8.5 of the Model Rules of Professional Conduct (Disciplinary Authority; Choice of Law), and adopt and promote other measures to enhance professional regulation and disciplinary enforcement with respect to lawyers who, pursuant to the above recommendations, practice law in jurisdictions other than those in which they are licensed.
12. The ABA should amend Rule 8.5 of the ABA Model Rules of Professional Conduct in order to better address multijurisdictional law practice.
13. The ABA should amend Rules 6 and 22 of the ABA Model Rules for Lawyer Disciplinary Enforcement to promote effective disciplinary enforcement when lawyers engage in multijurisdictional practice of law and should renew efforts to encourage states to adopt Rule 22, which provides for reciprocal discipline.
14. The ABA should take steps to promote interstate disciplinary enforcement mechanisms.
15. The ABA should establish a Coordinating Committee on Multijurisdictional Practice to monitor changes in law practice and the impact of regulatory reform, and to identify additional reform that may be needed. [id.].
State Licensing and Jurisdictional Restrictions
Lawyers in the United States are not licensed to practice law on a national basis, but are licensed by a state judiciary to practice law within the particular state. In general, state admissions processes are intended to protect the public by ensuring that those who are licensed to practice law in the state have the requisite knowledge of that state=s laws and the general fitness and character to practice law. (Id).
The traditional route to bar admission includes graduating from an accredited law school, passing the admitting state's bar examination, and satisfying the state's bar examiners that the applicant possesses the requisite character to practice law. There is some state variation, however, in the process for licensing lawyers. For example, Wisconsin recognizes a "diploma privilege" whereby graduates of either of that state's law schools may be admitted to practice law without taking the state's bar examination. California and a few other states do not require, as most states do, that applicants to the bar be graduates of law schools that are accredited by the ABA. (Id.).
As a practical matter, a lawyer who seeks to engage in a national law practice cannot presently gain admission to the bar of every state. States generally require out-of-state lawyers to pass the state's bar examination to be licensed. Bar examinations generally differ from state to state, although the degree of difference has narrowed over the years, as states have come to rely increasingly on a standardized examination. Being a member in good standing of another state's bar generally does not qualify a lawyer for "reciprocal" admission, although many states do allow lawyers to be admitted on motion upon a showing of good standing and a demonstrated record of active law practice elsewhere for a specific period. (Id.).
Under the jurisdiction of the judicial branch, states establish rules to govern the professional conduct of lawyers. Lawyers are required to represent clients competently and to refrain from undertaking work that they are not qualified to handle. State courts oversee disciplinary agencies that enforce the rules of professional conduct through disciplinary proceedings. Lawyers may be reprimanded, suspended, disbarred or otherwise sanctioned for misconduct. Disciplinary mechanisms are designed to encourage proper conduct, discourage misconduct and provide for appropriate sanctions when misconduct occurs. Enforcement of professional norms is also promoted through various indirect means, including civil lawsuits for malpractice. (Id.).
Over the years, many states have supplemented and improved their regulatory processes. For example, to promote professional competence and familiarity with state ethics rules, many states now require ongoing Continuing Legal Education ("CLE"). Many require their lawyers to contribute to a client protection fund for the benefit of clients in the state who suffer financial loss because of a lawyer's dishonesty. One state, Oregon, mandates malpractice insurance for bar members. (Id.).
States sanction members of their own bar for misconduct occurring outside the jurisdiction, and some states also bring disciplinary proceedings predicated on misconduct committed in the state by a lawyer who is licensed elsewhere. Consistent with ABA policy, ABA Model Rules for Lawyer Disciplinary Enforcement Rule 22, most states give reciprocity to disciplinary decisions of other jurisdictions. To assist them in doing so, the ABA operates the National Lawyer Regulatory Data Bank, which collects and disseminates information about lawyer discipline. (Id.).
Today, no state categorically excludes out-of-state lawyers and there is general agreement that, as a practical matter, lawyers cannot serve clients effectively unless accommodations are made for multijurisdictional law practice, at least on a temporary or occasional basis. For example, every jurisdiction permits pro hac vice admission of out-of-state lawyers appearing before a tribunal, although the processes and standards for pro hac vice admission differ. (Id.).
For transactional and counseling practices, and other work outside court or agency proceedings, there is no counterpart to pro hac vice admission, but, as discussed below, multijurisdictional law practice is common for certain types of practitioners. The laws of two states, Michigan and Virginia, specifically authorize occasional or incidental practice by out-of-state lawyers. Michigan=s UPL statute provides that it does not apply to an out-of-state lawyer who is "temporarily in [Michigan] and engaged in a particular matter." The Virginia rules permit an out-of-state lawyer occasionally to provide legal advice or services in Virginia "incidental to representation of a client whom the attorney represents elsewhere." As noted earlier, California now specifically authorizes out-of-state lawyers to represent clients in arbitrations. Some state courts have identified similar "safe harbors" in judicial decisions. (Id.).
Some states also accommodate certain out-of-state lawyers who seek to establish a law office in the state or to practice law in the state on a regular basis. For example, states have adopted provisions permitting in-house corporate lawyers, or lawyers employed generally by organizational clients, to provide legal services on behalf of the organization from an office located in a state where the lawyer is not licensed. Typically, the lawyer is required to register and to submit to the state's regulatory authority. (Id.).
With respect to foreign lawyers, many states, beginning with New York in 1974, have adopted "foreign legal consultant" provisions, which allow members of the legal professions of foreign jurisdictions to be licensed without examination to engage in the practice of law in the state on a restricted basis. In 1993, the ABA adopted a resolution recommending that all states adopt such a provision and approved a Model Rule for the Licensing of Legal Consultants. (Id.).
Cases on Multijurisdictional Practice
In Spivak vs. Saks, 16 N.Y. 2d 162, 211 NE 2d 329 (NY 1965), 263 N.Y. 2d 953 (N.Y. 10/21/65), Saks was the defendant in a divorce action. Sullivan & Cromwell represented her husband. The divorce action was filed in Connecticut. After her husband had gained custody of one of the children, she was asked to consider a property settlement that would not have been in her interest. She called upon a social acquaintance, a California lawyer, Spivak, and asked him to come to New York to advise her. Significantly, he told her that he was not a member of the New York bar, and that the most he could do was to advise her and recommend other New York lawyers. Spivak spent 14 days in New York reviewing the case, drafts of settlement agreements proposed by her Connecticut lawyer, discussing various financial arrangements, and jurisdictional and custody questions.
She subsequently refused to pay his bill. When he sued, New York's highest court denied him relief on the grounds that his activities in New York constituted the unauthorized practice of law. (Nancy J. Marshall, "Lurking Perils of Multi-Jurisdictional Practice", at http://www.abanet.org/legalservices/lpladvsp01.html).
The second, and more recent case, is Birbrower, Montalbano, Condon & Frank, P.C. vs. The Superior Court of Santa Clara County, 17 Cal. 4th 119; 949 P. 2d 1; 1998 Cal. Lexis 2; 70 Cal. Rep. 2d 304 (Cal. 01/05/98) (NO. S057125). In that case, the California courts determined that the New York law firm could not recover its fee for giving advice on a contract dispute governed by California law to a California resident client, ESQ. The Birbrower firm had represented the ESQ.-NY, and its sole shareholder, Sandhu, since 1986. In 1990, they had reviewed the proposed software development and marketing agreement between ESQ.-NY and Tandem which had worldwide distribution rights for ESQ's software. Thereafter, a second corporation ESQ.-CAL was incorporated in California, run by another member of the Sandhu family. In 1991, ESQ.-CAL consulted Birbrower lawyers concerning Tandem's performance under the agreement, and in 1992, retained them to represent them in the dispute.
The client and the Birbrower attorney negotiated and executed a fee agreement in New York for the representation of the California corporation, ESQ.-CAL in the dispute with Tandem.
The New York lawyers traveled to California met with the ESQ. in California, made recommendations there and met with the ESQ Tandem. The New York lawyers then requested arbitration in California, and while interviewing possible arbitrators in California, meet with Tandem to discuss settlement. They gave ESQ advice during this trip regarding the proposed settlement. Ultimately the matter was settled prior to arbitration. The court found that the above-described actions constituted the practice of law in California, without a finding of inadequately performed work. The Court distinguished practice in several other areas that are exempted from the California statute on unauthorized practice of law. (Id.).
In Formal Opinion 01-423, September 22, 2001, entitled Forming Partnerships With Foreign Lawyers, the ABA rendered the following ethics opinion declaring as ethical and permissible the formation by US lawyers of partnerships or other entities in which foreign lawyers are partners or owners, subject to certain standards and conditions, thus:
It is permissible under the Model Rules for U.S. lawyers to form partnerships or other entities to practice law in which foreign lawyers are partners or owners, as long as the foreign lawyers are members of a recognized legal profession in a foreign jurisdiction and the arrangement is in compliance with the law of jurisdictions where the firm practices. Members of a profession that is not recognized as a legal profession by the foreign jurisdiction would, however, be deemed "nonlawyers" such that admitting them to partnership would violate Rule 5.4 (Professional Independence of Lawyer). Before accepting a foreign lawyer as a partner, the responsible lawyers in a U.S. law firm have an ethical obligation to take reasonable steps to ensure that the foreign lawyer qualifies under this standard and that the arrangement is in compliance with the law of the jurisdictions where the firm practices. The responsible lawyers in a U.S. law firm also have ethical obligations to take reasonable steps to ensure that matters in their U.S. offices involving representation in a foreign jurisdiction are managed in accordance with applicable ethical rules, and that all lawyers in the firm comply with other applicable ethical rules. (http://www.abanet.org/cpr/ethicopinions.html)
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Note: Excerpts from my 2000 LL.M. thesis, for research purposes.
