Oregon State Bar Bulletin MAY 2014
What's GATS Got to Do With
International Trade in Legal Services
By Helen Hierschbiel
National borders around the world are fading as our economies, cultures and environments become increasingly integrated and interdependent. As a result, lawyers cannot always assume that their practices will be contained by national borders. Given Oregon’s location on the Pacific Rim, Oregon lawyers in particular may be more likely to find themselves representing clients with interests, connections and needs that extend beyond national boundaries and crossing paths with foreign lawyers seeking to represent their clients’ interests in the United States.
Data recently compiled by the Business Roundtable shows the increasing importance of international trade to Oregon. International trade — exports and imports — supports nearly 490,000 Oregon jobs. Oregon exports tens of billions of dollars in goods and services annually. Customers in 203 countries around the world buy Oregon-grown and manufactured goods and services. Foreign-owned companies invest in Oregon and employ more than 40,000 Oregonians. Free trade agreements in particular have led to rapid export growth to partner countries. See www.brt.org/trade.
While many lawyers may be familiar with the General Agreement on Trade in Services (GATS) and the North American Free Trade Agreement (NAFTA) and their application to legal services, they may not know that the United States has negotiated 15 other international trade agreements that also apply to legal services. In her article, From GATS to APEC: The Impact of Trade Agreements on Legal Services, 43 Akron L Rev 875, 878 (2010), Penn State Dickinson School of Law Prof. Laurel S. Terry suggests that the routine inclusion of legal services in U.S. international trade agreements may be due to the significant role that such services play in the U.S. economy. She cites a 2009 U.S. International Trade Commission report that “described U.S. legal services as ‘very competitive in the global market,’ noting that they accounted for 54 percent of global revenue in 2007 and comprised 75 of the top 100 global firms ranked by revenue.” Id. at 880-881. Moreover, legal services facilitate other trade by, among other things, providing support for commercial transactions and buyer/seller relationships. Id. at 881.
But what do these trade agreements have to do with lawyer regulation? These treaties contain a common clause requiring that parties to the treaty consider establishing “any necessary disciplines” to ensure that domestic regulation measures do not create unnecessary barriers to trade. While GATS does not override the states’ authority to regulate the practice of law within its borders, under the federal enabling legislation, the federal government arguably could compel the states to change. Id. at 916-917. Thus, there is general consensus that reviewing regulations relating to the practice of law for “unnecessary barriers to trade” is a prudent undertaking.
To that end, in June 2013, the Oregon State Bar Board of Governors appointed a task force to study the impact of globalization, cross-border practice and lawyer mobility as it relates to international trade. The mission of the task force is to:
study the impact of international developments on the legal profession including, but not limited to, the effect of the General Agreement on Trade in Services (GATS), the North American Free Trade Agreement (NAFTA), other free trade agreements having an impact on delivery of legal services, changes in the regulation of the legal profession in foreign countries that may have local impact, and all other events affecting the delivery of legal services across international borders. It shall consider these matters from the perspective of both outbound legal services delivered in foreign countries by member lawyers and inbound delivery of legal services in this state by foreign lawyers.
During its meetings, the task force identified the following six areas of practice as potentially being impacted by the globalization of legal services: temporary transactional practice by foreign-licensed lawyers; foreign-licensed in-house counsel; permanent practice by foreign-licensed lawyers on their home country laws (e.g., foreign legal consultants); temporary in-court appearances by foreign-licensed lawyers (e.g., pro hac vice admission); full licensure of foreign-licensed lawyers in Oregon, and Oregon lawyers providing legal services in foreign jurisdictions.
With those areas of practice in mind, the task force has developed the following proposals for consideration by the OSB Board of Governors. Prior to making its recommendations, however, the task force would like to hear comments from the membership.
Temporary Transactional Practice by Foreign-licensed Lawyers
Oregon RPC 5.5(c) allows a lawyer admitted in another United States jurisdiction to provide transactional legal services on a temporary basis in Oregon if they are 1) undertaken in association with a lawyer who is admitted to practice in this jurisdiction and who actively participates in the matter; 2) arise out of or are reasonably related to the lawyer’s practice in a jurisdiction in which the lawyer is admitted to practice, or; 3) provided to the lawyer’s employer or its organizational affiliates and are not services for which the forum requires pro hac vice admission. This provision is more commonly known as the “fly in, fly out” provision or “FIFO” rule.
Notably, Oregon’s FIFO rule does not allow lawyers who are licensed only in a foreign jurisdiction to provide temporary transactional legal services to their clients in Oregon. The task force believes this barrier to the delivery of legal services across international borders is unnecessary. The task force proposes to amend RPC 5.5(c) to remove the requirement that the lawyer be admitted in another United States jurisdiction. The rule would read as follows: “A lawyer admitted in another
United States jurisdiction, and not disbarred or suspended from practice in any jurisdiction, may provide legal services on a temporary basis in this jurisdiction ….”
Oregon would not be the first state to contemplate such a change. Delaware, the District of Columbia, Florida, Georgia, New Hampshire, Pennsylvania, Virginia and Washington have amended their FIFO rules to allow the temporary practice by foreign lawyers within their jurisdictions. In addition, ABA Model Rule 5.5(d) provides for temporary transactional practice by foreign lawyers, albeit only to their employers or organizational affiliates.
The driving theory behind allowing the provision of temporary legal services by foreign lawyers is that it does not pose an unreasonable risk to the interests of the clients, the public or the courts. See ABA Model Rule Comment (5). The goals of consumer protection and integrity of the courts are protected when the provision of legal services is overseen by either an Oregon lawyer or by an employer. With respect to the last category of temporary practice — services that “arise out of or are reasonably related to the lawyer’s practice” in the lawyer’s home jurisdiction — lawyers are expected to be operating within their distinct area of expertise, interpreting the laws of their home jurisdiction or providing services to clients within their home jurisdiction. Again, under these circumstances, the reasoning goes, client protection goals are met.
Foreign-licensed In-house Counsel
Oregon Admission Rule 16.05 allows an attorney employed by a business entity that is authorized to do business in Oregon, who has been admitted to practice law in another state, federal territory or commonwealth, or the District of Columbia, to become licensed as house counsel in Oregon under certain conditions. To apply for admission under this rule, the lawyer must: 1) graduate from an ABA approved law school or satisfy the requirements of Admission Rule 3.05; 2) pass a bar examination in the jurisdiction in which the applicant is admitted to practice law; and 3) provide verification of employment as house counsel by a business entity authorized to do business in Oregon, and disclosure of the limitation of the lawyer’s license to that entity. In addition, the lawyer must take and pass the professional responsibility exam and pass character and fitness requirements. Once admitted, the lawyer may provide legal services only for the business entity identified in the application or through a certified pro bono program.
This rule presents two significant barriers to foreign lawyers’ admission as house counsel. The first is that the lawyer must be admitted to practice law in at least one U.S. jurisdiction. A lawyer who is admitted only in a foreign jurisdiction is not eligible to apply for admission under this rule. Second, even foreign lawyers who are licensed in a U.S. jurisdiction must also either have graduated from an ABA approved law school or, if not, bear the burden of showing that: 1) the requirements for admission to practice law in the foreign jurisdiction are substantially equivalent to Oregon’s; 2) the foreign jurisdiction in which the applicant is licensed is one where the Common Law of England exists as the basis of its jurisprudence; and 3) the foreign law school from which the applicant graduated is the “equivalent” to an ABA approved law school. See Oregon Supreme Court Admission Rule 3.05.
The task force believes these barriers to the provision of legal services by foreign lawyers in Oregon are unnecessary and therefore proposes to change the House Counsel Admission Rule to one similar to the rule adopted in Washington State. The first recommendation is to remove the requirement that a lawyer be licensed in a U.S. jurisdiction and allow lawyers who are only licensed in a foreign jurisdiction to apply for admission as house counsel. Second, the task force proposes eliminating the requirement that the applicant have graduated from an ABA-accredited law school or otherwise satisfy the requirements of Admission Rule 3.05. Instead, the foreign-licensed lawyer would have to show current good standing in all jurisdictions in which the attorney is admitted to practice law. Finally, the task force proposes eliminating the requirement of passage of a bar exam, other than the professional responsibility exam.
Outbound Delivery of Legal Services by Oregon Lawyers
Oregon lawyers are increasingly called upon to handle matters for their clients that involve multiple jurisdictions, some of which may be overseas. These lawyers face difficult choice of law questions when confronting ethics issues, particular those involving conflicts of interest. Oregon RPC 8.5 governs the disciplinary authority of the Oregon Supreme Court over lawyers involved in a multijurisdictional practice. Under RPC 8.5(a), Oregon has disciplinary authority over: 1) a lawyer admitted to practice in Oregon, regardless of where the conduct occurs; and 2) a lawyer not admitted to practice in Oregon, if the lawyer provides or offers to provide legal services in Oregon. Oregon RPC 8.5(b) sets forth what professional responsibility law should be applied to the lawyer in question. When the conduct occurs before a tribunal, “the rules of the jurisdiction in which the tribunal sits” govern the lawyer’s conduct. This means that a lawyer practicing before a tribunal in a jurisdiction outside of Oregon should become familiar with the rules of professional conduct for the outside jurisdiction.
For conduct that is not in connection with a matter pending before a tribunal, RPC 8.5(b)(2) provides that 1) the rule of the jurisdiction in which the conduct occurred will apply, unless 2) the lawyer’s conduct has its “predominant effect” in a different jurisdiction. Determining where a lawyer’s conduct has its “predominant effect” is particularly challenging for the lawyer with a multijurisdictional practice. In order to make this assessment somewhat easier, the task force recommends adopting a formal ethics opinion that would essentially adopt the solution proposed by the ABA Commission on Ethics 20/20, which was to add commentary to the ABA Model Rule 8.5 indicating that in assessing a lawyer’s reasonable belief as to the predominant effect of the lawyer’s conduct, a written agreement regarding the locus of predominant effect (obtained with the client’s informed consent) may be considered, but only for conflict of interest purposes. Because Oregon does not have commentary for its rules of professional conduct, adoption of a formal ethics opinion is recommended instead.
What Do You Think?
At this juncture, the task force does not have any proposals for substantive changes to the rules relating to pro hac vice admission, full licensure of foreign lawyers in Oregon, or the practice of foreign legal consultants. However, it will recommend that the Board of Governors continue to monitor these issues by, among other things, collecting data on how often foreign lawyers use or seek to use these avenues to engage in the practice of law in Oregon. For now, however, the task force seeks your input. What is your experience with the “international trade in legal services?” What do you think of the changes proposed by the task force? Let me know by email at email@example.com.
ABOUT THE AUTHOR
Helen Hierschbiel is general counsel for the Oregon State Bar. She can be reached at (503) 620-0222, or toll-free in Oregon at (800) 452-8260, ext. 361, or by email at firstname.lastname@example.org.
© 2014 Helen Hierschbiel