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BASL to discuss Chinese limited liability law firm here
The Bar Association of Sri Lanka (BASL) has called a special Executive Committee meeting this week to discuss the recent incorporation of a Chinese law firm as a limited liability company in Sri Lanka. The BASL is also consulting senior lawyers on a way forward, with legal experts insisting that the development is against Supreme Court rules as well as professional, moral and ethical guidelines.
The Chinese Baqian Law Group this month opened a regional office for the South Asian region in Colombo, according to media reports. It is the first time a foreign entity providing legal services has been incorporated here as a limited liability company. This is not even a practice among Sri Lankan law firms which are set up as partnerships.
A limited liability company is a corporate structure whereby the members of the company are not personally liable for the company’s debts or liabilities. Baqian Law Group Lanka (Pvt) Ltd is offering everything from notarial services, legal due diligence, international trade remedies and assistance on dispute resolution to advice on project financing, operations, taxation and financial compliance. The company has a local consultant, lawyer Sunil Abeyratne. He was not available for comment.
“We are not opposed to them giving expertise to their clients but we are against total outsiders coming and practising in the country without a licence from the Supreme Court,” said a senior lawyer and President’s Counsel. He did not wish to be named.
“At the moment law firms cannot practise in Sri Lanka under incorporation for the simple reason that, as a professional, you cannot limit your liability,” maintained Arittha Wikramanayake, the Precedent Partner of Nithya Partners. He chaired the Company Law Reform Advisory Commission. “As a professional, you cannot limit your liability. And if you practise in a company, it’s a limited liability, because it’s the company that provides the service.”
Some other countries provide for limited liability partnerships with local actors. There is no provision for this in Sri Lanka yet.
Mr. Wikramanayake highlighted another danger: That of non-lawyers practising law through a limited liability company. “If I have a lot of money, I set up a company and employ lawyers to work for me. The income that comes from the practise comes to me, the non-lawyer.”
This contravenes another professional rule that lawyers cannot share fees with third parties. You also do not know who is providing the services–the face behind, for instance, an agreement that is drafted. The public will, therefore, be exposed to danger.
“The first point of contact of a criminal is a remand officer or prison guard,” Mr Wikramanayake said. “A lot of them (police and prison officials) engage in touting. That is, they say go to this or that lawyer on the understanding that they share the reward. It’s not a secret, everybody knows. If you permit incorporation, they can set up companies.”
Lawyers are also concerned about foreigners forming companies because they could provide services by hiring lawyers locally, then funnelling the money out without ever acquiring a local law qualification. While competition was welcome, it must take place on an even playing field within a proper regulatory structure.
“I am regulated by the Supreme Court,” Mr Wikramanayake said. “A company is not. They can advertise. I cannot. In our profession, you can’t charge a success fee. A company can. So it’s different rules for different parties.”
Lawyers fear this will open the floodgates for anybody–foreigners or locals–to start practising law in Sri Lanka. The BASL expects to compare the legal positions of its senior members and release a detailed opinion on the matter after the executive committee meeting. The development, lawyers confessed, had taken them unawares.
“There might be a legal loophole being made use of to come and set up shop here,” said a senior member of the bar. “If you allow this, not only lawyers but other professionals–doctors and accountants–will also get affected.”
“International law firms setting up here will eventually happen, I think, but it can be systematically done so they share expertise with Sri Lankan firms ensuring we are equally benefited,” he continued. “Then, over a period of time, we can also set up law firms that can compete. The way it is now, they will take over our scope of work, with serious repercussions for our future.”