Keynote address by Senior Minister of State for Law and Finance Ms Indranee Rajah SC
Mr Gregory Vijayendran, President, Law Society of Singapore, distinguished guests, ladies and gentlemen,
Introduction
I am delighted to join all of you here today at the sixth edition of the International Conference of Legal Regulators.
Let me begin by first extending a warm welcome to each of you to Singapore.
Singapore’s journey with the International Conference of Legal Regulators 2017 first started at the inaugural ICLR in London in 2012, which was attended by representatives from my Ministry. They were soon joined by representatives from the Law Society of Singapore for the 2014 and 2016 sessions. More recently, in 2016, representatives from the Supreme Court of Singapore also attended.
Looking back, our attendance at the International Conference of Legal Regulators over the last 5 years has been invaluable. We have built strong connections and have learnt from other jurisdictions in this very important but specialised area. We have also had the opportunity to share with others our own lessons and successes, in the hope that they may be of use to other regulators grappling with similar matters.
The International Conference of Legal Regulators is unique in that it remains the only platform for legal services regulators of its kind to date. Having benefited from the experience, we were keen to give our support to widening the network and make it more accessible to others, especially our peers in the Asia Pacific region.
My Ministry and the Law Society of Singapore therefore proposed to extend the reach of the network by hosting the Conference in Asia and in Singapore and we were heartened to receive the support and agreement of members of the ICLR network last year in Washington D.C. It is for this reason that the Organising Committee settled upon this Conference’s theme: “Legal Regulation in a Borderless World: Building Networks”.
We are grateful to each of you for making the journey here (for some of you, this has been an incredibly long journey) and we hope that you will find the next two days of discussions extremely fulfilling.
I am happy to note, that the ICLR has successfully extended its reach to new jurisdictions. For the first time, we have representatives from 8 new jurisdictions, namely, Guam, Kenya, Malaysia, Myanmar, Nigeria, Qatar, United Arab Emirates and Vietnam. We also have broader representation from several countries and are pleased to welcome new representative institutions from Australia, Germany, New Zealand and the United Kingdom.
Singapore’s philosophy and approach towards legal services regulation
Singapore’s framework for legal services regulation has a tripartite structure and each of these regulators have been represented in the organisation of this Conference – the Law Society of Singapore; the Supreme Court of Singapore (which co-hosted the welcome reception yesterday evening) and the Legal Services Regulatory Authority (“LSRA”) (a department under my Ministry). There is a strong culture of collaboration, cooperation and partnership between these three bodies, based on mutual respect and shared objectives and values.
Our current tripartite regulatory regime was introduced in November 2015, following a comprehensive review of our regulatory structure for legal services. I would like to take a few moments to share what we did and some of the thinking behind this.
Prior to our reforms, Singapore had a bifurcated system for Singapore and foreign-qualified lawyers. Singapore lawyers came under a disciplinary regime that was administered by the Law Society and which was subject to the ultimate oversight of the Supreme Court, while foreign-qualified lawyers came under the oversight and discipline of the Attorney-General. This regulatory approach served its purpose for a season.
As Singapore’s legal market matured and the legal profession became increasingly cosmopolitan in nature, the traditional lines between members of the Singapore Bar and foreign Bars were increasingly blurred.
With the growth and evolution of law firms, we also observed that the management’s role in law practices was of increasing importance. Although we still have many firms which are traditional sole proprietorships and small partnerships, the larger law firms of today adopt more sophisticated entity structures through which they provide their legal services. These include limited liability partnerships and law corporations. It was therefore timely to introduce a more holistic regulatory framework for all law practices at the entity level in addition to regulation of the individual lawyer. With entity level regulation, we added flexibility to accommodate new developments and trends in the profession and the legal services market.
In 2015, we therefore implemented a number of changes. First, we looked at unifying our professional disciplinary regime and refining the architecture of our Legal Profession (Professional Conduct) Rules. The disciplinary framework for individual lawyers was streamlined to cover all Singapore and foreign-qualified lawyers under the same processes administered by the Law Society under the ultimate oversight of the Supreme Court.
Second, a new Professional Conduct Council, which was chaired by the Chief Justice, was established to oversee the rules relating to professional conduct matters. The current rules apply to both Singapore lawyers and foreign-qualified lawyers and comprise: universally accepted principles of professional conduct that apply to all lawyers in Singapore; and specific rules that are relevant to the practice of Singapore law which will only apply to Singapore lawyers and foreign lawyers who practise Singapore law.
In addition, the rules also bring the management of law practices into the fold to ensure that lawyers involved in the management of a law practice have responsibility for maintaining adequate systems in three important areas of legal practice: maintaining and handling client money and accounts; dealing with conflicts of interest; and lawyer-client confidentiality.
Third, to put in place entity regulation, we created a new office of the Director of Legal Services (“DLS”), a statutory appointment under the Legal Profession Act. To support the work of the DLS, the LSRA was established as a new department under the Ministry of Law. The DLS regulates and licenses all law practice entities and registers foreign lawyers, as well as Singapore solicitors practising in foreign law practices, the latter being functions which were previously performed by the Attorney-General. The DLS also regulates the business criteria applicable to law practices, such as foreign ownership, profit-sharing and the names of law practices.
This new regime has enabled us to be more flexible and responsive to change. For example, non-lawyer employees of law practices can now apply to the LSRA to be partners, directors or shareholders in, or to share in the profits of Singapore law practices, up to certain prescribed limits. This gives law practices greater flexibility to attract and retain non-lawyer talent, such as those with strong finance or management expertise, who can bring added value to a law practice.
The DLS is supported by a multi-disciplinary team of officers. Many of you in the audience are well acquainted with Singapore’s first DLS, Ms Joan Janssen, and our Registrar, Ms Gloria Lim.
Fourth, we moved from a paper-based licensing and registration regime to a fully paperless regime. Applications received by the LSRA are submitted through an online e-Services portal. We also provided for back-end data interface between the three legal regulators in Singapore and this has enhanced the user’s experience. For example, with one click, a member of the public is able to use the integrated search function to search for all law practices and collaborations registered with the LSRA, as well as lawyers practising in Singapore by their name, firm or practice area.
These strides have helped to modernise the regulatory framework for the profession in Singapore and ultimately, encourage the continued growth and development of the industry.
The digitisation of our services will also enable the collection of valuable data, without which a regulator is operating in the dark. A data-driven regulator is able to make decisions and craft policies more accurately, rationally, in an evidence-based manner. We are in the early days of this transformation, and I am heartened to note that this Conference is spending valuable time discussing how data can be collected, used and employed by legal service regulators.
Importance of legal services regulation – building trust in the legal system, particularly in Asia
Economic activity is growing in Asia at an unprecedented pace. Southeast Asia alone boasts 600 million people and a US$2.4 trillion GDP. Many new commercial activities and investments are taking place in this part of the world. Legal work follows business activity and we have seen significant growth in the legal services sector over the past decade.
Take Singapore as an example. Even though legal services account for a very small proportion of our GDP, Singapore’s legal industry has grown steadily over the years. The nominal value added by the legal services sector to our economy has grown from S$1.5 billion in 2008 to an estimated S$2.2 billion in 2016. Over the same period, the value of legal services exported from Singapore more than doubled, increasing by about 110%.
Although global growth rates have slowed in the last two years, economies in Asia are displaying enormous growth potential. Both international and Asian law firms are spreading their wings in the region. To give you a sense of the numbers, there are about 150 foreign firms with a presence in Southeast Asia. Of the 30 largest foreign firms with a presence in Southeast Asia, almost two-thirds are present in more than one jurisdiction and about half of these have a base in three or more countries.
The total number of lawyers in the 100 largest firms in Asia grew by 15% from about 39,000 in 2015 to more than 44,000 today. This is largely driven by the law firms’ opening of new offices outside of their home jurisdictions.
What does all this mean for legal services regulators today? Apart from reflecting the strategic importance of the legal sector to the economy, the legal sector also plays an important role in facilitating the administration of justice and advancing the rule of law. As many of you in the room will no doubt attest to, this is not just aspirational – legal services regulation is necessary to uphold trust in the legal system, and to protect the interests of the public.
Challenges facing legal regulators
Finally, let me say something about the environment which legal services regulators operate in today. It is a time of increasing complexity in the world – there are a number of drivers of change in the regulatory landscape, some of which will be explored in extensive detail in the sessions during the Conference. I would like to highlight three of these drivers.
First, the emergence of alternative legal service models and financing. The legal profession is undergoing significant transformation. The business models of yesteryear are no longer viable – cost pressures have driven law practices to diverge from the traditional model of billable hours towards fixed, blended or capped fees. Many law practices have embraced alternative billing models to respond to criticisms of inefficiency and excess and are recognising that they need to make changes to their BigLaw business models to enhance transparency and offer clients greater flexibility and value. These are positives for consumers. In some jurisdictions, law practices have adapted with innovative business models, establishing multi-disciplinary practices and virtual law practices. Some law firms have merged to position themselves better in the face of rising competition, or entered into new collaborations.
Regulation has to adapt and respond to these changes. As regulators, you will be well aware of the perennial issue of change outpacing regulation. New models bring with it new regulatory considerations and issues. You will no doubt be familiar with how the injection of capital by external financial investors into law practices can help further the growth potential of law practices, but at the same time, raises concerns about potential negative implications on the law practice’s fundamental obligations to their clients. Investors such as third party funders are also offering law firms funding in ever more inventive forms, such as buying interests in entire portfolios of disputes. In navigating these waters, regulators are, shall we say, the last bastion. Regulators have the difficult but necessary task of safeguarding and protecting the public interest and at the same time, not standing in the way of innovation and competition, which also benefits consumers. This is a delicate balance, and there are no easy answers. Nor is there a “one size fits all” solution that can be applied across jurisdictions. But we can and should certainly learn from each other.
Second, technological disruption. Technology is hard at work disrupting every aspect of our lives and the law is no exception. Today, the company with the largest number of visitor accommodation doesn’t own a single hotel – that is Air BnB. Could it be that tomorrow, the largest legal services provider in the world will not have a single human lawyer? We cannot rule it out.
Businesses that see the opportunity in this space are reinventing and re-engineering the delivery of legal services and some law practices are responding. Those with the resources are working with IT and artificial intelligence companies to innovate and use technology to their own advantage. These firms recognise that embracing developments such as the rise of artificial intelligence can offer a prime opportunity to radically reform their delivery of legal services. Software companies, recognising the opportunity, have also developed expert systems to allow firms to build custom applications that can provide on-demand guidance to clients at a lower cost. Increasingly, we see that the work of lawyers is no longer confined to legal professionals – it is not uncommon for law practices to outsource work to external vendors based outside their jurisdiction. Legal outsourcing, both onshore and offshore, has transformed the practice of law as we know it, as law practices compete to stay ahead of the curve. With this, issues such as client confidentiality and data protection come to the fore and regulators have to rethink their current frameworks in the face of these technological developments.
Third, globalisation. It is apt that the theme for this year’s Conference is “Legal Regulation in a Borderless World: Building Networks”. The practice of law is indeed increasingly borderless. Domestic law practices are expanding across borders, collaborating with foreign law practices and forming inter-continental mergers, erasing traditional boundaries on the geographic scope of legal practice. At the same time, clients are also increasingly internationalising, with business arms cutting across multiple jurisdictions. Regulation, which is premised traditionally on the geographic scope of the practice of law, needs to be re-engineered. Regulators need to find ways to collaborate and to ensure that they are able to fulfil their mandate and functions. This, we feel, will be instrumental in helping legal service regulators adapt to the ever-changing legal landscape.
Conclusion
I hope that this Conference will continue to promote deeper dialogue on these issues which I have mentioned and many more. The ICLR network allows you to exchange views on these emerging trends in a safe space and to share best practices – I urge you to build on these collaborative networks, which will collectively strengthen our respective regulatory and enforcement agencies.
I wish you a fruitful Conference, and a wonderful stay in Singapore. I hope you will take the opportunity to explore Singapore, visit some of our attractions, sample our cuisine and make new and lasting connections.
Thank you very much.
5 October 2017