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Exporting expertise

Feature Articles

Cite as: (2007) 81(12) LIJ, p. 74

Considerable efforts are underway to improve overseas access for Australian legal services.

By Andrew Hudson

Considerable efforts are underway to improve overseas access for Australian legal services.
By Andrew Hudson

The overwhelming majority of people reading the LIJ are involved in the services industry. Notwithstanding the attention of the world’s press and politicians on trade in agriculture and manufactured products, the trade in services represents the majority of the world’s trade. Legal services is an important part of the world services market.

Why does this matter?

Progress in expanding the world market for services matters for a number of reasons for all legal firms.

Australian legal services exports represent a significant contribution to Australian services exports. According to a news release by the federal Attorney-General Philip Ruddock on 20 September 2007, a survey undertaken by the International Legal Services Advisory Council (ILSAC) showed $543.2 million in legal export and cross-border activity for the 2004/05 financial year. Given that it is generally accepted that figures relating to services are heavily under-estimated and given that there has been growth in legal services since that date, the current value of legal services exports could now be significantly larger.

Many Australian legal firms are looking to export their legal services, whether to follow their clients trading overseas, by associations with international legal groups through joint ventures or establishing their own offices overseas.

Individual Australian lawyers regularly seek to travel and work overseas as lawyers in other jurisdictions.

Accordingly, increasing liberalisation in the market for legal services (whether for firms or individuals) overseas is of benefit to all legal practitioners and to state and federal governments. So, we should all care.

The world services market

During June 2007, I was fortunate to represent the Australian Services Roundtable at the World Services Congress (WSC) in Bogota, Colombia. Putting to one side the delights of transit through the US and the gentle attention of US and Colombian border authorities, the WSC represented an eye-opener to the services market.

Some background and items of interest are as follows.

  • Statistics do not fully capture the value of the services market. However, the best estimate is that services represent between 70 and 80 per cent of world gross domestic product (GDP).
  • The Australian services sector accounts for 78 per cent of GDP, 78 per cent of gross industry value added and 60 per cent of investment, making it close to 80 per cent of economy. Services industries employ 85 per cent of Australians and 82 per cent of Australian firms are services firms, most being small and medium sized and only 3 per cent of them export services.
  • The multi-lateral agreement for the provision of services is conducted under the General Agreement on Trade in Services (GATS). Countries are intended to make “offers” of increased market access and trade improvements through the GATS. Australia has made an excellent offer pursuant to the GATS, but it has not been taken up or met by other countries.
  • The current round of World Trade Organisation (WTO) negotiations have been close to collapse for some time. Even worse for services, the focus has been on trade in agriculture and manufactured goods. At a June meeting of the “G4” (being the US and EU on behalf of the developed world and India and Brazil on behalf of the developing world), negotiations on improved market access for agriculture and manufactured goods broke down without resolution.

The G4 did not even address the issue of improvement in services. It had been intended to seek a breakthrough in negotiations for the WTO. Subsequently, the WTO issued draft texts for comment and adoption. Those texts addressed agriculture and manufactured goods.

The recent round of negotiations in Geneva relating to services as part of the Doha round of meetings led to suggestions that there was movement on this front. However, the reality is that only a very few nations actually engaged in the negotiations and even then the level of ambition was extremely low and not likely to deliver significant improvements to the markets for services internationally (including legal services).

Australia continues to push for enhanced attention to services. The Director General of the WTO has subsequently made a number of public statements in which he has called for services to be afforded attention equal to negotiations in other sectors. In late September, WTO members authorised commencement of drafting of a new text on services. However, even if WTO negotiations do proceed, the reality is that the majority of those negotiations will focus on trade in agriculture and manufactured products rather than services.

  • The problems with improving market access under GATS and the WTO round have caused many nations to seek improvements in their trade by way of negotiating bilateral and regional Free Trade Agreements (FTAs). However, under these FTAs services have received less focus and achieved less liberalisation when compared to trade in goods and manufacturing products.
  • A Parliamentary report into the services industry released on 18 June 2007 recognised that the federal government needs to pay more attention to the services industry and make more of an effort to support it. This could include the creation of a portfolio of Minister for Services (similar to that created by the opposition in its shadow cabinet).
  • There have also been other calls for significant reform and assistance for the services industry. For example, the Business Council of Australia issued a discussion paper titled Under-serviced: Why Australia’s services economy deserves more attention in July 2007. This suggested that the services sector is missing out on nearly $10 billion of exports due to a lack of government understanding. Further, the Committee for Economic Development of Australia commissioned and issued a paper encouraging more investment in the sector.

Our free trade agenda and consequences for the services industry

The recent APEC ministerial meetings in Sydney created interest in Australia’s various free trade negotiations. Many will be aware that we have completed FTAs with New Zealand, the US, Singapore and Thailand, all of which are subject to regular review by various mechanisms. However, those under consideration have been subject to recent announcements.

Negotiations are continuing in relation to proposed FTAs with China, Malaysia and the ASEAN nations, albeit somewhat slowly. The tenth round of negotiations with China took place in October.

The proposal for FTAs with Mexico and the United Arab Emirates appears to have ended with decisions not to proceed at the moment. However, on 15 December 2006 the Australian government announced that Australia and the Gulf Co-operation Council would commence negotiations for a comprehensive FTA. Negotiations have commenced with an understandable focus on improving the market for the Australian automotive industry. However, one aim should be to improve the market for legal services, given that the significant presence of UK firms in the region gives them an advantage over Australian firms.

Based on a joint study into the feasibility of an FTA between Japan and Australia, both countries announced on 13 December 2006 that they were to commence negotiations for an FTA. These negotiations have commenced, with two rounds of negotiations and some optimism as to a speedy resolution.

On 6 December 2006 Australia and South Korea announced their intention to conduct a joint study into a potential FTA to be conducted by private research institutions and with research to be completed by the end of 2007. However, the announcement of the FTA between the US and South Korea has placed pressure on Australia to accelerate its negotiations.

On 8 December 2006 Australia and Chile announced their agreement, in principle, to commence bilateral negotiations with a view to developing a comprehensive FTA. While trade in goods between the two countries is not significant, there is a sense that Australia wants an FTA with a South American country. There is also significant Australian investment in Chile, especially in the mining industry. Further, as both Australia and Chile have completed recent FTAs with the US, it is hoped that they could form a template for a reasonably rapid FTA between Australia and Chile. Negotiations commenced in August.

Together with New Zealand, Australia is negotiating for an FTA with the ASEAN group of nations. A tenth round of negotiations took place in the last week of July 2007. Following the ASEAN-CR Trade Minister’s meeting in Manila, the federal Minister for Trade, Warren Truss, issued a media release on 27 August 2007 confirming good progress in negotiations on this FTA and expressing hope of concluding negotiations in the middle of 2008 to sign the FTA at the next ASEAN-CR consultations in August 2008.

On 12 June 2007, Australia announced that it would commence negotiations for a proposed FTA with the Pacific Islands Forum.

Australia has commenced a feasibility study into a potential FTA with Indonesia and the Law Institute of Victoria (LIV) has already met with the Department of Foreign Affairs and Trade (DFAT) to press for liberalisation in legal services as a precursor to an FTA.

On 31 August 2007, the federal government announced that Australia and India had agreed to undertake a joint feasibility study into the merits of an FTA between the two countries. The feasibility study is to commence later this year and is expected to be completed in 2009.

The new agenda reflects, in part, a reaction by Australia to the plethora of FTAs being negotiated by our important trading partners. There is a very real concern that if our trading partners enter into FTAs with other countries, the trade and investment which would normally flow to Australia will be diverted to the countries with which our trading partners have concluded FTAs. Accordingly, while there are definite economic merits to our new FTA negotiations, they can also be seen as defensive action against trade diversion away from Australia.

Progress with services negotiations under the Australian free trade agenda

The increased attention to the services industry has translated to efforts to improve the export market for Australian services. Within that market is the market for legal services. Some efforts to promote the position of Australian lawyers and Australian law firms include the following.

  • The LIV’s International Law Section has regularly engaged with DFAT on FTA negotiations. This engagement has included written submissions to DFAT on the FTA negotiations and ongoing meetings in person with DFAT negotiators. One of the key aspects to this engagement has been to make DFAT aware of barriers to Australian lawyers and law firms practising overseas as well as lobbying for the liberalisation of the export market for Australian legal services.
  • The LIV has engaged with the Victorian government (through the Department of Industry Innovation and Regional Development) to advance the interests of the legal services sector. This includes representation of the LIV at the Services Export Advisory Committee conducted by the Victorian government at which representatives of associations for those in the services industry meet with representatives of the federal and Victorian governments (including DFAT and Austrade) to assess the market for the export of services from Victoria and how the interests of service providers may be improved. With assistance from the Victorian government, the LIV has engaged in outbound and inbound legal services missions with Chinese practitioners. This has led to the LIV signing Memoranda of Understanding with the Shanghai Bar Association and the Beijing Municipal Lawyers Association.
  • The Law Council of Australia (LCA) has been actively engaged in negotiations here and overseas, whether linked to FTA negotiations or through a variety of other forums. One example of achievements includes the expansion of rights of Australian firms to establish “joint venture firms” in Singapore. Another example is the work with the US states of Georgia and Delaware to secure some form of mutual recognition of Australian legal practitioners. On 26 October 2007, by a joint media release from Minister for Trade, Warren Truss and federal Attorney-General Philip Ruddock, the federal government announced a decision by the Delaware Supreme Court in the US to allow Australian lawyers to practise Australian and foreign law in its jurisdiction for the first time. Delaware had not previously allowed foreign lawyers (including Australian lawyers) to offer legal services in that state. The decision by the Delaware Supreme Court will include adoption of a “Foreign Legal Consultant” rule. The Court will also amend existing rules to make possible the temporary practice of foreign law (on a “fly-in, fly-out” basis) without needing to register. This is significant as Delaware is the legal residence for over 500,000 corporate entities and is the centre of corporate law in the US. Further, the US Conference of Chief Justices has passed a resolution encouraging US regulatory authorities to recognise Australian legal practitioners.
  • In August 2007, the federal Attorney-General announced that ILSAC would be made a permanent body. ILSAC is an advisory council established in 1990 to help promote Australian legal services exports.
  • Services are a significant focus of negotiations with China for our proposed FTA. Australian firms already have a limited right to practise in China and a number of firms hold licences. Efforts are being made to expand those rights in a number of different ways through the negotiations. For example, ILSAC has convened a China Working Group, comprising legal practitioners dealing in China, to provide input into DFAT’s negotiating position. However, progress of negotiations will be limited by the progress of negotiations on the FTA as a whole.

The LIV and the LCA will continue to advance the interests of practitioners. However, it is in the interests of all legal firms and all practitioners to support the work of the LIV, the LCA and related associations to ensure that there are continued efforts to advance negotiations for the liberalisation of the export of legal services.

ANDREW HUDSON is a partner with Hunt & Hunt, chair of the LIV’s International Law Section and a member of the LCA’s International Law Section Executive. He currently represents the LIV on the Services Export Advisory Committee and the China Working Group mentioned in the article.


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