Vietnams legal service commitments in wto theory and practice experience from singapore and japan

Given its commitment in the Schedule of Specific Commitments of General Agreement on Trade in Services GATS and its ease of market access in Asia, the legal services sector in Vietnam ha

BACHELOR’S THESIS FORMAL EDUCATION TRAINING

COURSE 34 (2009 – 2013)

VIETNAM’S LEGAL SERVICE COMMITMENTS IN WTO

THEORY AND PRACTICE EXPERIENCE FROM SINGAPORE AND JAPAN

STUDENT: LƯƠNG THỊ NGỌC MỸ STUDENT CODE: 0955020283

ADVANCED CLASS- COURSE 34 SUPERVISOR: NGUYỄN THỊ LAN HƯƠNG, LL.M

HO CHI MINH CITY

2013

TABLE OF CONTENTS

INTRODUCTION 1

LIST OF ABBREVIATIONS 4

CHAPTER I- REGULATIONS OF WTO IN SERVICE TRADING 5

1.1 Overview Trade in Services 5

1.1.1 World Trade in Service 5

1.2.1 Definition of “Services” and “International Trade in Services” 6

1.2 Overview on the General Agreement on Trade in Services 7

1.2.1 GATS – a result of Uruguay Round Negotiation 7

1.2.2 Purposes 8

1.2.3 Scope and Objects 9

1.2.4 Trade Barriers in Trading Services 10

1.2.5 The General Obligations and Rules 11

1.3 Model of Trade Liberalization in Services Sector of WTO 13

1.3.1 Modes of service 13

1.3.2 Schedule of Specific Commitments 14

1.4 Overview of Legal Services Sector 16

1.4.1 Definition Legal services 16

1.4.2 Status of the legal service industry in the World Economy 18

CHAPTER 2 – COMMITMENTS OF VIETNAM IN LEGAL SERVICES 21

2.1 Status of the legal service industry in Vietnam 21

2.1.1 History of legal services in Vietnam 21

2.1.2 Status of legal services in Vietnam 23

2.2 Vietnam’s Commitments on Legal Services Sector 24

2.2.1 Horizontal Commitments 24

2.2.2 Sectoral Commitments 26

2.3 Implementation GATS in practice 28

2.3.1 Market Access Provisions 29

2.3.1 1 Scopes of practice 29

2.3.1 2 Forms of practice 37

2.3.2 National Treatment Provisions 42

2.3.2.1 Rights and obligations 42

2.3.2.2 Management 44

3 CHAPTER 3- LEARNED LESSONS FOR VIETNAM THROUGH EXPERIENCE OF SINGAPORE AND JAPAN IN THE LEGAL SERVICE SECTOR 49

3.1 Vietnam’s current status in the legal services sector and look forward for Vietnam’s legal market 49

3.1.1 Current status of Vietnam’s legal service market 49

3.1.2 Comparing to Japan’s and Singapore’s reforms for forecasting the future of the legal service sector in Vietnam 52

3.1.2.1 Japan 52

3.1.2.2 Singapore 54

3.2 Lessons learned for Vietnam through the experience of Japan and Singapore in their legal services reforms 61

3.2.1 Having comprehensive assessment Vietnam’s status in legal services sector 61

3.2.2 Upgrading effectiveness of managing agency 62

3.2.3 Reforming in legal education 62

3.2.4 Enhancing monitoring activities of FLs and FLOs 64

CONCLUSION 67 BIBLIOGRAPHY

Economic globalization has been rapidly evolving from the early twentieth century Nations are gradually opening its economies to integrate the pace of the global economy and to become an emerging economic power in region Vietnam is no exception, with its integration leading to significant changes By steadily strengthening its Foreign Direct Investment (FDI) index in the face of recession and in light of the overwhelmingly widespread presence of cross-border transactions, the demand for local legal practices and multinational legal practices has become necessary

Given its commitment in the Schedule of Specific Commitments of General Agreement on Trade in Services (GATS) and its ease of market access in Asia, the legal services sector in Vietnam has become an attractive arena for foreign law firms, especially for top-tiered international law firms such as Baker& Mackenzie, Allen & Overy and Freshfields Bruckhaus Deringer Domestic legal services have also seen remarkable achievements through the presence of local Vietnamese law firms that have the capacity to compete with its international competitors

However, in the nearly seven years of implementing its commitments, there have been

no formal discussion (whether in Vietnamese or English) over Vietnam’s implementation of its commitments in the legal services industry, despite numerous problems presenting as an obstacle to legal practice in both Vietnamese and foreign legal services suppliers Therefore, this paper comprises the first of its kind to research and analyse Vietnam’s implementation commitments in GATS

Having been faced with the imperative role of the legal service industry in

Vietnam’s national economy, “Vietnam’s Legal Service Commitments in WTO- Theory and Practice Experience from Singapore and Japan” has been chosen as a

topic of the thesis In this thesis, I will seek to analyse Vietnam’s undertaken commitments in market access and national treatment conditions to determine the problems that impact both local and foreign entities and provide plausible solutions based on the learning experience of Singapore and Japan

Value of the Research:

This paper is the first of its kind to review the Vietnam’s undertaken commitments in legal services under WTO’s regulations This paper will analyze the measures used by Vietnam to commit to the WTO’ rules particularly GATS, determine the problems with the model and finally evaluate its effectiveness The research will also review Vietnam’s progression in its legal services industry after entering WTO for more than five years Finally, this paper analyzes reforms in the legal services industry of Singapore and Japan to forecast a potential liberalized orientation of Vietnam in the future and subsequently, determining the country’s failing sand achievements to which

it can draw experience from Singapore and Japan

Methodology:

This thesis is written based on general knowledge of international trade law to review Vietnam’s implementation commitments under the GATS’ regulations To analyse Singapore’s and Japan’s relevant reforms, a comparison of the countries’ orientation and solutions for legal services were used Others methods used include an enumerative method, analytical method, synthetic method, and statistical method

Outline

Chapter I provides an overview on trade in services in the world by giving definition of services and trade in services The paper first introduces GATS, the legal framework for trading services in the WTO This section shall supply the logical basis for the next chapters Finally, the research focuses on legal services by giving a definition of legal services and analyzing the global legal services industry

Chapter II gives an overview of legal services sector of Vietnam, taken from and modern viewpoint The next part focuses on Vietnam’s implementation commitments

in legal services through market access and national treatment conditions Finally, the chapter evaluates Vietnam’s implementation, concluding on the present problems with its model

Chapter III shifts the focus of analysis to the reform in legal services in Japan and Singapore The paper addresses the methods of these countries to find out relationships between legal services and the growth of the economy This chapter will also analyze Vietnam’s overall status with respect to legal services The research will draw a conclusion over whether Vietnam may apply the methods of Japan and Singapore, and propose possible solutions

CHAPTER I- REGULATIONS OF WTO IN SERVICE TRADING

1.1 Overview Trade in Services

1.1.1 World Trade in Service

From the 1980s to 1990s, developed countries saw services constitute approximately 50% to 60% of their Gross National Product, but with trade in services only accounting for 20% to 25% of world commerce Particularly, as a result of the shifting of manufactured goods to industrializing countries, developed nations took advantage of trade in services, especially in areas such as financial services, insurance, telecommunications, transportation, computing, and professional services (e.g., architecture, engineering, law) Services remained a key focus because of numerous reasons, the most influential being:

(i) The advancement of technology in areas such as telecommunications and transportation, which had created large trend in transactions in services as there was no longer a need for physical proximity between suppliers and consumer;

(ii) Following the post-war period, many countries applied a monopoly for some important industries such as telecommunications and transportation; however, reforms had progressively changed competition in nations and paved a new path towards freedom of trade by the renewed nations’ regulatory framework

(iii) The existence of services as an essential part of manufactured goods had created an explicit market;1 and

(iv) Environmental issues

1

Michael J Trebilcock and Robert Howse, “The Regulation of International Trade 3 rd Edition” (Những quy định trong thương mạiquốc tế tái bản lần 3), by Routledge (2005), page 349

1.2.1 Definition of “Services” and “International Trade in Services”

In the world, there is no an official and sufficient definition of services.2However, most scholars define services by making a distinction between goods and services

Trebilcock and Howse, authors of The Regulation of International Trade3 rd Edition (2005), believed that it was more important to look to the purpose of creating rules

surrounding trade on services to reduce and eliminate trade barriers This is also the view taken by the General Agreement on Trade in Services (GATS) in the WTO Other scholars have attempted to give multiple definitions of services such as that being intangible, not storable, and the fact that simultaneity of production and consumption would make it more challenging to obtain the essential meaning for the purpose of services, especially the GATS.3 GATS defines services based on the classification of modes of supply corresponding to its purpose under Article I.2

(GATS) Furthermore, “negotiators …opted for an open-ended classification of services proposed by what was then GATT Secretariat”4

2

Ho Chi Minh University of Law, “International Commercial Law- Part I Lecture” (Trường ĐạiHọc Luật

Thành Phố Hồ Chí Minh, Giáo Trình Luật Thương Mại Quốc Tế- Phần I), Hong Duc Establisher- Vietnam Bar Associtation (2012), page 233

Edited by AadityaMattoo, Robert M Stern, and Gianni Zanini (2008), Footnote 3, page 49

Box 2.1.Classification of Services Proposed by the then GATT Secretariat

8 Health-related and social services

9 Tourism and travel-related services

10 Recreational, cultural and sporting services

11 Transport services

12 Other services not elsewhere included

International trade in services, in a broad sense, mean the supply of services by one or

a group of suppliers in a territory for one or a group of service buyers in another territory (service consumption) Accordingly, the process of cross-border supply and manufacturing of services differs from goods, such that international trade in services

do not often require a need to cross borders (e.g., online learning services and commerce).5As a result of this convenience, international trade in services and investment in services are essential in global commerce Furthermore, according to researchers, services have been perceived as rapid growth components of the global economy, with trade and foreign direct investment (FDI) in services having rapidly increased in contrast to goods over the past 15 years However, international trade in services has been faced with policy barriers by many countries,6 particularly in foreign investment and the movement of service-providing individuals.7Therefore, the demand

e-of liberalization services trading is contemplated WTO Members unify in Uruguay Round to create GATS with purpose are creating free trade market for services by reducing and removing the barriers as well enhancing liberalization extent through periodical multi-negotiations

1.2 Overview on the General Agreement on Trade in Services

1.2.1 GATS – a result of Uruguay Round Negotiation

Until the 1980s, developed countries began to liberalize trade in services, primarily through bilateral and regional agreements In the Uruguay Negotiation Round, the liberalization of trade in services became one of the important topics of the

5

Ho Chi Minh University of Law (2009), Footnote 2, page 236 -237

6

In view of Ho Chi Minh University of Law (2009), Footnote 2, page 251-252, there is no definition of

barriers; however, it describes three types of barriers including: limited access market barrier, national regulations and others such as lacking of transparency, barriers in licensing, education diploma, experience, etc

7 Aaditya Mattoo, Robert M Stern (2008), Footnote 3, Overview Section

international community 8 This Negotiation saw the Marrakesh Agreement Establishing the World Trade Organization promulgated, thereby confirming that the agreements and associated legal instruments included in multilateral trade agreements (including GATS) comprised integral parts of the Marrakesh Agreement that was binding on all Members.9

In January 1995, GATS was entered into forced as a result of the Uruguay Negotiation Round providing an extension of multilateral trading systems to services.10

1.2.2 Purposes 11

The primary objective that Members of WTO have regarded to when negotiating and sign GATS is setting up a legal framework for the liberalization of trade in Specific objectives of GATS include:

i Setting up multilateral rules governing international trade in services

to broaden tertiary trading in transparent conditions and formulate a by-step liberalization, while respecting national sovereignty in determining and adjusting of national policies and rules with trade in services

step-ii Promoting services trade liberalization progressively through periodic negotiations The process of multilateral negotiations operates as a basis

for balancing between the rights and obligations of Members, as well as reducing policy gap sand oversights in trade measures that impact on national services trading

iii Creating favorable conditions for developing countries to become more involved in trade in services and to expand their exports by

strengthening local services, their effectiveness and their competitiveness

1.2.3 Scope and Objects

Measures affecting trade in services at all government levels:

In relation to Article I.3 of GATS,

(a) "Measures by Members" mean measures taken by:

(i) Central, regional or local governments and authorities; and

(ii) Non-Governmental bodies in the exercise of powers delegated by central, regional or local governments or authorities

The subjects adjusted are the measures and policies of nations that affect services trading12 – particularly, all tertiary policies that government or authorized central or local state agencies issue This also includes policies or rules that directly govern this sector but also those that ensure the movement of international commerce service products such as information, investment, labor or entry and exit Additionally, under Article XXVIII (a) of:

“Measure” means any measure by a Member, whether in the form of a law, regulation, rule, procedure, decision, administrative action, or any other form;”

This means the concept of measures affecting trade in services is wider than at first glance.13Under the GATS framework, such measures will be controlled at two levels:

12

According to Footnote 8 in Ho Chi Minh University of Law (2012), page 244, GATS does not have the definition of “measures impact on service trading” This relies on an explanation of AB in EC- banana products (WT/DS27/AB/R)

13

Edited by AadityaMattoo, Robert M Stern and Gianni Zanini (2008), Footnote 3, page 51

(i) general obligations for all service sectors and (ii) vertical obligations following the Schedule of Specific Commitments of each country

Nevertheless, GATS’ scope is limited in that it does not apply to "a service supplied

in the exercise of governmental authority" (i.e., any service that is not supplied on a

commercial basis, nor in competition with one or more service suppliers) The definition of such services rests on two criteria: they are supplied neither on a commercial basis, nor in competition with one or more suppliers For example, fire protection and police and security services.14

1.2.4 Trade Barriers in Trading Services 15

Until now there is no official definition of trading barriers From the facts, though, Dispute Settlement Body usually seem trading barriers are all measures, regulation, policies that prevent or hinder the market access and the undertaking services supplement of foreign services suppliers and affect the competition in the market Within the GATS framework, there are three type of trading barriers which are Market Access Barriers, Domestic Regulations Barriers and Others Barriers

(i) Market Access Barriers: These barriers is prescribed in Article XVI and listed in

Article XVI.2 There are varied trading barriers but the commons are limitation in quotas, limitation investing forms and limitation in equity Be noted that GATS does not ban trading barriers Depending on the commitments of Members in Schedule of Specific Commitments (The SSC) to indentify whether that barrier is able to be remained Once, Members commit to open market access in a specific area they have to ensure not to remain and remove the barriers (except other regulations)

(ii)Domestic Regulations Barriers: Under Article VI- GATS, Members shall ensure

all measures are managed and controlled reasonably, objectively and equally Member shall not be allowed to set up or apply measures relating to granting licenses or technical standards This means Domestic Regulations of a country have

to satisfy conditions in Article VI.4 like transparency, reasonable criteria, less frills, etc

(iii) Others barriers: there are many other types of trading barriers such as not

transparent in regulations, not recognized certification, diploma or monopoly service providing, limitation in transferring cash and subsidiaries from government

1.2.5 The General Obligations and Rules

In trade system GATT/WTO established legal framework for international trade policies The foundation of legal framework is Non-discrimination principle demonstrated through Most Favoured- Nation Treatment (MFN) and National Treatment (NT) Non-discrimination principle creates economic beneficiaries for Nations when undertaking trade activities in multilateral trade system Besides Non- discrimination principles there are other principles that support for applying those referred principles effectively, include: Transparency, Proportionality, etc Similarly, GATS also have its own legal framework but have the same principles like GATT in Non- discrimination principles, Transparency On the other hand, GATS have its unique obligations which are Domestic Regulations and Market Access

Most-Favoured-Nation Treatment (MFN): According to Article II, a WTO

Member cannot discriminate among foreign service providers through less favourable treatment to service providers of any one country The objective of applying MFN is non-discrimination in treatment in trade relationship Members, however, are permitted to maintain existing measures which infringe the MFN

obligation, but any exceptions must be clearly stated in the Member's MFN exemption list (Annex Article II Exceptions)16

National Treatment (NT): NT principle prevents discrimination treatment between

local enterprises and enterprises from other Members NT is an imperative principle which assists opening market and liberalization whereby Members have responsibility to remain equal treatment betweens local and imported services17 Each Member shall accord to services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers (Article XVII) However, this principle does not apply all services and services suppliers It only applies for the committed areas with limited conditions by Members18 Any measure which violates the market access obligation must be clearly inscribed in the Member's Schedule of Specific Commitments.19

Market Access: each Member shall accord services and service suppliers of any

other Member treatment no less favourable than that provided for under the terms, limitations and conditions agreed and specified in its Schedule of Specific Commitments A Member cannot take measures which are defined in GATS as restricting market access Examples of measures which would restrict market access include: quotas, economic needs tests, requirements for certain types of legal entities, and maximum foreign shareholding limits Any measure which violates the market access obligation must be clearly inscribed in the Member’s commitments (Article XVI).20

16

Trade Policy Division, Department of Commerce- Government of India, A Consultation Paper On Legal Services Under GATS In Preparation For The On-Going Services Negotiations At The WTO (Tư vấn trong lĩnh vực dịch vụ pháp lý theo GATS trong bước chuẩn bị đàm phán tại WTO), Section II.3

[ http://commerce.nic.in/trade/consultation-paper-legal-services-GATS.pdf ],[Accessed on 12/05/2013], 17

Ho Chi Minh University of Law (2012), Footnote 2, page 127

18 Ho Chi Minh University of Law (2012), Footnote 2, page 130

Domestic Regulation: According to Article VI, each Member shall ensure that all

measures of general application affecting trade in services are administered in a reasonable, objective and impartial manner Qualifications and licensing requirements and technical standards must be based on objective and transparent criteria, and not more burdensome than necessary to ensure the quality of the service (Article VI)

Transparency: This is one of the most important principles of modern international

trade since it helps Members understand each other in mechanism Members shall make public all measures which pertain to GATS This means that Members have to set up an apparent and stable legal framework Any policies, regulations in trading area must be public and easy to access as well foreseeable21 The WTO must be notified of any relevant changes to government policies, regulations or administrative guidelines which significantly affect trade in services covered by the specific commitments under the Agreement Additionally, Members must establish

an enquiry point and promptly respond to requests for information on their regulatory regimes (Article XVI)22

In the event that a Member fails to carry out its obligations or specific commitments under GATS, other Members have recourse to the WTO's dispute settlement mechanism.23

1.3 Model of Trade Liberalization in Services Sector of WTO 24

Trade Policy Division, Department of Commerce- Government of India, Footnote 16, Section II.3

24Ho Chi Minh University of Law (2012), Footnote 2, page 262-263

Rather than providing a definition of trade in services, GATS only specifies border flows of services According to Article I.2 of GATS covers all four modes of services:

cross-Cross border supply (Mode 1): from the territory of one Member into the territory

of any other Member Under this mode, both supplier and consumer of services need not move across border, with only the service products (object of the transaction) be moved from territory to territory This means they interact across distance (e.g., by post or telecommunications)

Consumption abroad (Mode 2): in the territory of one Member to the service

consumer of any other Member Under this mode, the service consumers shall move from a territory to the service suppliers’ territory For example, in the tourism service, service consumers will travel to the service supplier’s territory so as to use the tourism service package

Commercial presence (Mode 3): by a service supplier of one Member, through

commercial presence in the territory of any other Member Under this mode, foreign service suppliers shall set up its subsidiaries or branches to provide their services for local customers For instance, a law firm in America would establish its subsidiaries

in Vietnam by establishing a 100% foreign-owned limited liability company

Movement of natural persons (Mode 4): by a service supplier of one Member,

through the presence of natural persons of a Member in the territory of any other Member Under this mode, natural persons shall move to another territory to supply services by themselves or shall be employed for a company in a period of time (e.g., for lawyers and professors)

1.3.2 Schedule of Specific Commitments 25

25

[ http://www.wto.org/english/tratop_e/serv_e/gatsqa_e.htm ][Accessed on 20/05/2013]

Each WTO Member is required to have a Schedule of Specific Commitments that identifies the services for which the Member guarantees market access and national treatment and any limitations that may be attached The Schedule may also be used to assume additional commitments regarding, for example, the implementation of specified standards or regulatory principles Commitments are undertaken with respect

to each of the four different modes of service supply Most Schedules consist of Sectoral and Horizontal sections:

General commitment (Horizontal Section): contains entries that apply across all

sectors subsequently listed in the Schedule of Specific Commitments Horizontal limitations often refer to a particular mode of supply, notably commercial presence and the presence of natural persons.26 This type of commitment demonstrates the legal regime that nations shall apply in all service sectors listed in the Schedule, regardless of whether that sector would be brought into the specific commitment framework.27

Specific commitments (Sector-Specific Sections): contain entries that apply only to a

particular service Members shall commit to the Schedule of Specific Commitments under all twelve service sectors as mentioned above and four modes of service

Modification of Schedule of Specific Commitments: According to Article XXI of

GATS, each Member shall have the right to withdraw or modify any commitment in the Schedule, at any time after three years have elapsed from the date on which that commitment enters into force In that case, the Member shall notify their intent to the Council for Trade in Services no later than three months before implementation

of the modification or withdrawal The modifying Member may attend negotiations

if the modification would affect other Members’ benefit If compensation is required, the Member will compensate while endeavoring to maintain a general level of mutually advantageous commitments not less favorable to trade than that provided for in the Schedule of Specific Commitments prior to such negotiations Provided that the negotiations cannot be concluded amicably, the affected Members would

bring the matter to arbitration

1.4 Overview of Legal Services Sector

1.4.1 Definition Legal services

The broad definition of legal services can be divided into distinct areas: advisory, representation services and all the activities relating to the administration of justice (e.g., judges, court clerks, public prosecutors and state advocates) There is, however,

no universal and official definition of the international market for legal services because there is no distinction made between traded and non-traded legal market.28

As a result, categorizing legal professional practice is a common method used around the world There are two ways: the first one belongs to the United Nations Provisional Central Product Classification of 1991 (UN CPC), and the second is based on the legal jurisdiction under which Foreign Lawyers (FLs) can practice

In the WTO "Services Sectoral Classification List" (document MTN.GNS/W/120),

"legal services" are listed as a sub-sector of "(1) business services" and "(A) professional services", which fits with CPC number 861 in the UN CPC In this classification, the entry of "legal services" is to distinguish between three main areas:

legal advisory, representative services and legal documentation and certification

28

Alison Hook, “Sectoral Study on the Impact of Domestic Regulation on Trade in Legal Services” (Nghiên

cứu theo chiều dọc về sự tác động của quy định trong nước đối với Thương Mại Dịch Vụ), Sixth Services

Experts Meeting Domestic Regulation and Trade in Professional Services (OECD- The World Bank), page

5 [ http://www.oecd.org/site/tadstri/40778871.pdf ][Accessed on 5/6/2013]

services Legal advisory and representative services are classified by legal fields, such as criminal law, other fields of law, statutory procedures of quasi-judicial tribunals and boards, etc The activities in different fields of law are the same for legal advisory, defense of clients before judicial body, pleading cases, research and other works for preparation of a case Legal documentation and certification services include activities such as preparation, drawing up and legal certification services.29

Alternatively, another means of defining legal services is classification based on a legal system that foreign lawyers may practice in the host country

(a) Host country law (advisory/representation);

(b) Home country law and/or third country law (advisory/representation);

(c) International law (advisory/representation);

(d) Legal documentation and certification services; and

(e) Other advisory and information services.30

Unlike the method of distinguishing legal services based on their respective fields, this method classifies the sector based on the scope and legal system that FLs may practice This approach is preferred by almost 60 Members of WTO Under this classification, a Member may allow foreign professionals to practice its domestic law, international law and the law of his home country or of a third country Moreover, depending on the commitments of a country, FLs may practice in some areas of legal services such as advisory and consultancy services.31 Both methods are suitable for different circumstances Members can combine both approaches in

the SSC of GATS.32 Vietnam is a specific example that combines both approaches

to build the SSC

1.4.2 Status of the legal service industry in the World Economy

The widening and deepening of international trade and investment links, combined with strong economic growth in many developing countries have increased worldwide demand for legal services, and encouraged the establishment of foreign affiliates in fast-growing emerging markets like the Asia-Pacific Additionally, for expanding business activities in areas such as corporate restructuring, cross-border mergers and acquisitions, intellectual property rights, new financial instruments and competition law, there are two important elements should be considered: the increasing use of alternative business-to-business dispute resolution and outsourcing.33Accordingly, it can be concluded that the legal services industry is a bridge that helps broaden cross-border business and also plays a vital role in promoting liberalization of the global economy

Furthermore, it has been reported that the global legal services market had a total revenue of $623.3 billion in 2011, representing a compound annual growth rate (CAGR) of 2.3% between 2007 and 2011 The total number of legal professionals also increased with a CAGR of 1.3% between 2007-2011, and was expected to reach

a total of 3.8 million in 2011.34These figures demonstrate that although the world economy has suffered through recessions, the legal services sector still rapidly grew from 2007 to 2011, both in revenue and workforce In line with this report, they also anticipate that this industry would continue to progress, represented by a CAGR of 5.5% for2011 – 2016, which is expected to drive the market to a value of $814

billion by the end of 2016.35 As a result, the legal service industry is anticipated to make great contributions to the global economy

However, the legal services industry is assessed as a sector with high risk sensitivity

in finance, operation and reputation, being assessed at a rank of 66% (the highest rank) In addition to strong internal resistance, this explains the legal service industry’s slow takeoff in offshoring relative to other industries According to PriceWaterHouseCooper’s report, legal services require a high level of specialized knowledge and skills, making up 62% Despite of this fact, the client interaction demand of legal service providers is still high, 50% of which made up from services

of larger established law firms from developed countries (e.g., USA and UK) that are looking for a cheaper market in developing countries.36As a result, these larger law firms choose developing countries as investment destinations because of available cheap labor and the potential to broaden their market and narrow the geographical gap distance with their clients

In summary, legal services are an essential and potential sector in the global economy Moreover, a new investment tendency by the big law firms from the UK and USA in developing countries has seen the legal services sector to flourish in those countries, particularly in Asia (including Vietnam)

35

[ http://www.reportlinker.com/p0171679-summary/Global-Legal-Services.html ][Access on 01/06/2013] 36

Pricewaterhouse Cooper, “The ever changing global service- provider industry- Key findings for 2010” (Sự

thay đổi qua từng thời kỳ của nhà cung cấp dịch vụ toàn cầu - những phát kiến mới 2010) [http://www.pwc.com/us/en/increasing-it-effectiveness/assets/the-ever-changing-global-service-provider- industry.pdf][Access on 31/05/2013]

CONCLUSION:

Chapter- I provides an overview of trading services in the global economy Thanks

to the innovation of science and technology, especially information technology, trading services have become a new trend for international trade Thanks to the inherent benefits from trade in services, many countries are concentrating on investing in this “non-smoke industry” General Trade Agreement in Services is one

of the most successful outcomes in the Negotiation Uruguay Round It created a legal framework for trade in service activities which encouraged Members to reduce and remove trade barriers on services to promote the progression of trading services The Schedule of Specific Commitments is a result of liberalization negotiations It is

an integral part of GATS Whereby Members shall commit all services but the openness market extent in each sector depend on their negotiation processes

The next Chapter will discuss the legal services sector as a developing industry and its important role in promoting other economic sectors Chapter II will analyse the status of legal services around the world, and in, Vietnam After that, evaluating implementation commitments of Vietnam based on the critical basis of Chapter- I

CHAPTER 2 – COMMITMENTS OF VIETNAM IN LEGAL SERVICES

2.1 Status of the legal service industry in Vietnam

2.1.1 History of legal services in Vietnam

The legal profession was first portrayed through the image of lawyers in the nineteenth century Only during the colonial period, when France imbued their legal system into the Indochina Region, did the legal profession became known in Vietnam At that time, only French lawyers were permitted to practice Afterwards, following the passing of numerous ordinances in the 1930s, the French gradually widened the scope of entities that may practice in the profession and the scope of clients The French allowed Vietnamese Lawyers (VLs) to participate in the legal profession and Vietnamese people may hire lawyers to protect them in the courts Hence, Vietnam saw the roots of its legal profession originating from the French, whom comprised the first FLs of Vietnam.37

After the Cach Mang Thang Tam (August Revolution), President Ho Chi Minh, signed and issued Ordinance Number 46 (Regulation on Bar Association) According to this ordinance, only Vietnamese people were permitted to practice as lawyers It was only after more than 40 years of war and political challenges, in

1986, Vietnam progressed with new policies to open its economy – known as the Doi Moi Reform of 1986 Vietnam’s economy had developed and the legal profession was focused in creating a legal framework that supported the national economy – endeavoured by the enactment of the Ordinance of Lawyers (1987) (Ordinance1987) However, in the course of reform to integrate with the world economy, there was an emerging request to open all investment areas, trade and the legal profession

To officially recognise the participation of FLOs38, which the Ordinance of Lawyers (1987) had not expressly mentioned, Vietnam issued regulations consulting the practice of FLOs in Vietnam together with Decree 42/CP dated 08 July 1995 (Decree 42) This was a positive sign that earmarked Vietnam’s readiness to open up its market access Decree 42 was later amended and supplemented by Decree 92/1998/ND-CP (Decree 42) to tighten controls over the presence of FLOs in Vietnam

The Ordinance of Lawyers (1987) was also replaced by Ordinance UBTVQH10, which codified regulations to amend, supplement and expand the practicing conditions of FLs.39To specifically stipulate the practice of FLOs and FLs, the Vietnamese government issued Decree 87/2003/NĐ-CP in 22 July 2003 to This tackled the limited points of Decree 42 and Decree 92 by simplifying the conditions

No.37/2001/PL-of practice in Vietnam for FLOs and FLs, diversifying forms No.37/2001/PL-of practice (e.g., branches and partnership between Vietnamese and foreign law firms and foreign law firm), and overall widening the scope of practice of FLOs and FLs Accordingly, Decree 87/2003/NDCP aimed to strongly promote many FLOs presented in Vietnam, especially joint-venture law firms between local and foreign law firms, such as AGZI LCT Limited, a joint venture between LCT Lawyers (Vietnamese office), Allen & Gledhill LLP (Singapore) and Zaid Ibrahim &Co (Malaysia)

Immediately after Vietnam’s entrance into the WTO, the country promulgated the Law on Lawyers No 65/2006/QH11 (2006) to maintain its commitments under the

38

"Foreign Lawyers Organization" is an organization of practicing lawyers established in any commercial corporate form in a foreign country (including firms, companies, corporations, etc.) by one or more foreign lawyers or law firms, Footnote 3, Vietnam’s Schedule of Specific Commitment.

39

National Assembly Standing Committee- Legislative Institutions (2012), Footnote 37, page 6-7

GATS However, five years after its promulgation, the Law on Lawyers proved inconsistent with GATS’ regulations and contained numerous statutory issues Therefore, the Government amended and supplemented the Law on Lawyers (Law 2006) with the recent Law on Lawyers No.20/2012/QH13 (called Law 2013) This new Law on Lawyers was perceived as a positive step towards judicial reform in Vietnam Accordingly, the steps demonstrates Vietnam’s recognition of the importance of legal services to its national economy, paving way for a more open market access

2.1.2 Status of legal services in Vietnam

The legal service industry in Vietnam has been perceived as a fledgling industry – not only because it is a “young industry”, but also due to its lack of qualified lawyers to satisfy market demand, particularly in this period of booming international trade The legal profession in Vietnam, however, turned a new page after USA relaxed its embargo and after Vietnam promulgated Decree 42 to allow FLOs to operate in Vietnam At that time, a series of top-tier law firms from USA, the UK and Australia started to operate in Vietnam, including Freshfields Bruckhaus Deringer (1994),40 Allens (1993)41and Baker & McKenzie (1993).42 At the beginning, these firms were so dominant in the market that local law firms found it difficult to compete against them However, these top-tier firms reinvigorated the Vietnamese legal services industry by boosting the legal profession in Vietnam as become dynamic market and creating qualified lawyers According to a report on the organization and operation of the Vietnam Bar Ferderation (VBF), in the past three years, Vietnam currently has 56 FLOs with 200 FLs This figure comprises just 7%

of the 800 local legal firms.43These figures demonstrate that the demand of legal services in Vietnam is aggressively intensifying, especially after the country’s entrance into the WTO This saw the legal services industry receive more benefits in attracting larger law firms to Vietnam as it created a more fertile market for local and foreign investors

2.2 Vietnam’s Commitments on Legal Services Sector

2.2.1 Horizontal Commitments

In Vietnam’s horizontal commitments, it illustrates trade regulations related to Mode 3(Commercial Presence) and Mode 4(Presence of Natural Person).Vietnam’s commitment in Mode 3 is as follows44

(3) None, except:

- Unless otherwise specified in each specific sector or sub-sector of this Schedule, foreign enterprises are permitted to set up commercial presence in Vietnam in form of business co-operation contract joint venture enterprise, 100% foreign-invested enterprise This is the business forms that foreign investor are permitted to set up in Vietnam

- Representative offices of foreign service suppliers are permitted to be established in Vietnam, but they shall not engage in any direct profit-making activities

- The establishment of branches is unbounded unless otherwise specified in each specific sector or sub-sector of this Schedule Branches are limited business forms in Vietnam so, depending on the number of services, branches can be set up

- Licensing, land leasing and making capital contribution matters

Mode 4 is more restrictive than Mode 3 in terms of market access by an unbounded45 commitment, except measures relating to entry and temporary stay of natural persons who fall in one of the following categories:

a) Intra-corporate transferees:

Managers, executives and specialists46 but they have to be an employee of at least one year of a foreign enterprise which establishes a commercial presence in Vietnamese territory and shall be granted entry and a stay permit for an initial period

of times However, they must ensure that at least 20% of the total number of managers, executives and specialists are Vietnamese nationals, although a minimum

of 3 non-Vietnamese managers, executives and specialists is permitted

This is the most common form that FLs engage their legal practices in Vietnam With strict working conditions for foreigners, Vietnam expects that a Vietnamese workforce would be used for most positions in enterprises, especially in foreign firms that could train advanced skills, technique and knowledge to Vietnamese employees

(b) Other personnel:

Managers, executives and specialists, as defined in (a) above, who cannot be substituted by Vietnamese individuals and who are employed outside Vietnamese territory by a foreign enterprise which has established a commercial presence in Vietnam with a view to participate in the foreign enterprise's activities shall be

45

“Unbound” means that the government has reserved the right to apply different policies to foreign providers

in this mode, compared to domestic providers (such policies may already be in place, but their detail is not available in the GATS schedule when commitments are made in this manner, and an additional research effort is required to uncover the detail of the policy actually applied)

Edited by Aaditya Mattoo, Robert M Stern, and Gianni Zanini (2008 ), Footnote3 , page 363

granted entry and a stay permit in conformity with the term of the concerned employment contract or for an initial period of time

Under this provision, unless the foreign company establishing a commercial presence in Vietnam is able to recruit qualified Vietnamese managers, executives and specialists, the foreign company will be able to employ these people from other countries This is one method that Vietnam has adopted to restrict foreign workforce flow to enter Vietnam

(c) Service sales persons:

These are persons not based Vietnam and receiving no remuneration from a source located within Vietnam, and who are engaged in activities related to representing a service provider for the purpose of negotiating for the sale of the services

(d) Persons responsible for setting up a commercial presence:

These include managers and executives (as defined in (a) above) within a juridical person, who are responsible for the setting up a commercial presence of a service provider of a Member in Vietnam when (i) these people are not engaged in making direct sales or supplying services; and (ii) the service provider has its principal place

of business in the territory of a WTO Member other than Viet Nam and has no other commercial presence in Viet Nam

(e) Contractual service suppliers (CSS):

Natural persons who are employees of a foreign enterprise having no commercial presence in Vietnam may enter and stay in Vietnam for a period of 90 days or for the duration of the contract

2.2.2 Sectoral Commitments

In the sector–subsector column, which provides general commitments of the legal services sector, whereby Vietnam does not commit to open market in litigation activities in courts of Vietnam, legal documentation and certification services of the

laws of Viet Nam Hence, FLs and FLOs may not practice in these fields of legal services

The next two columns are the commitments in the Limitations on Market Access and Limitations National Treatment Regarding Vietnam’s SSC, there is no limitation to Mode 1 and Mode 2 This means that legal services supply in the Mode

of Cross Border and Consumption Abroad have no restrictions For example, Baker

& McKenzie, a US-based law firm, can provide legal services for clients in Vietnam without physical proximity across the border (e.g., through the internet) or Vietnamese clients can go to the US to use the US-based legal services without any limitation On the contrary, under the Commercial Presence Mode, Vietnam makes a list of forms of business that FLOs are permitted to establish in Vietnam They include:

- Branches of foreign lawyers organizations;

- Subsidiaries of foreign lawyer organizations;

- Foreign law firms; and

- Partnerships between foreign lawyer organizations and Vietnam's law partnerships

Under Mode 4, by reference to the Horizontal section of Members' schedules (Presence of Natural Person), being the mode with the most restrictions,47it should

be kept in mind that specific commitments for the movement of natural persons are governed with few exceptions Given this same trend, Vietnam does not have a Sectoral Commitment for Mode 4 in legal services, instead of referring to Horizontal Commitments as discussed in the previous Chapter

Finally, for limitations on National Treatment, Vietnam has no restrictions with Mode1, Mode 2 and Mode 3 Under Mode 4, Vietnam is unbounded, except as

47

Council for Trade in Services- World Trade Organization (2010), Foot note 29, page 14

indicated in the Horizontal section Moreover, and Vietnam has no Additional Commitments for legal services

According to specialists, the extent of an open market in Vietnam for the legal services industry is highly ranked in comparison with many Asia countries.48 Indeed, when comparing with other countries, Vietnam’s has committed to open market access to almost all of forms, whereas some countries have limited this area or prohibited the establishment of branches, subsidiaries and partnership (e.g., in Korea, Malaysia, Indonesia and India).49 However, like many countries, Vietnam restricts the scope of profession practice in litigation before local courts and consultancy or giving legal opinions in the law of host countries Vietnam has attempted to integrate world trade into its legal services industry By combining the demand of legal services in Vietnam with the trend of foreign investors exploiting Asia’s legal services market, as well as the great extent of open market access, the legal services industry in Vietnam has appealed to many foreign investors

For an accurate evaluation, this thesis will review how Vietnam undertakes its commitments by analyzing the measures used during the country’s implementation

2.3 Implementation GATS in practice

To assess Vietnam’s implementation of its commitment in GATS, this thesis will compare the country’s conduct in its commitments under the SSC and subsequently determine the problems and evaluate how Vietnam may practically resolve these problems This thesis will then draw a conclusion on Vietnam’s implementation of the GATS’ regulations

This thesis focuses on the influence of Vietnam’s undertaken commitments in market access and its national treatment of both Vietnamese and foreign entities The analysis is based on legal documents governing the legal profession, including Law on Lawyers 2006 No 65/2006/QH11(Law on Lawyers 2006), Law Amending and Supplementing a Number of Articles of the Law on Lawyers in 2006 No 20/2012/QH13 (Law on Lawyers 2013), Vietnam’s SSC and other relevant legislation

2.3.1 Market Access Provisions

2.3.1 1 Scopes of practice

First, in the litigation area, Rouse Legal’s case is a typical example The branch of

this FLO was granted a professional practice license in various fields such as intellectual property, civil procedure, corporation and commerce, finance and banking and employment A client requested this FLO to engage in a civil procedure – namely, court representation.50 Under Article 70 of the Law on Lawyers (2006), Rouse Legal would have had the right to allow its lawyer to become barrister in this case

“Article 70.-Scope of professional practice by foreign law-practicing organizations

Branches and foreign law firms practicing law in Vietnam…may not nominate foreign lawyers to participate in legal proceedings in the capacity of defense

counsels or defenders of interests of involved parties, representatives or defenders

of legitimate rights and interests of involved parties before Vietnamese legal

proceeding-conducting agencies; may nominate Vietnamese lawyers in their

organizations to advise on Vietnamese law or participate in legal proceedings in the

50

National Assembly Standing Committee- legislative institutions (2012), Footnote 37, page 12

capacity of representatives or defenders of legitimate rights and interests of their clients before Vietnamese courts in cases or affairs in which branches or foreign law firms provide legal consultancy, except for criminal case.” 51

In line with this provision, VLs in FLOs would participate in the legal proceeding as representatives of the client’s legitimate rights and interests in Vietnamese legal proceedings, except for criminal case However, an existing provision in Section 2

of the National Assembly’s Resolution No 71/2006/QH11 dated 29 November 2006 ratifying the protocol of accession on of Socialist Republic Of Vietnam to the Agreement establishment the WTO (hereinafter Resolution 71) accession to the agreement establishment the WTO, which amended Article 70 of the Law on Lawyers (2006), provides that lawyers of FLOs are not allowed to participate in legal procedures as representatives and advocates for litigants

While Resolution No 71/2006/QH11 has greater authority over the Law on Lawyers (2006),52 the Resolution will be applicable However, there is a legislative conflict, which sets out an inconsistent precedent and of which confuses foreign investors To ensure consistency in the legislation, Vietnam enacted the Law on Lawyers (2013), which came into force on 1 July 2013 Sub-section 27 of this new law amended and supplemented Article 70, whereby:

“Branches or foreign legal firms, practicing in Vietnam … may not nominate foreign lawyers to participate in legal proceedings in the capacity of defense

51

The copyright of www.luatVietnam.vn

52 Law on Lawyers (2006) and Resolution No 71/2006/QH11were both enacted by the Parliament, but Resolution No 71/2006/QH11 issued after Law on Lawyers (2006) so Resolution No 71/2006/QH11 will

be applied (Article 83(3) of the Law on Promulgation Legal Documents No 17/2008/QH12

counsels or defenders of interests of involved parties, representatives or defenders

of legitimate rights and interests of involved parties before Vietnamese court.” 53

Essentially, Vietnam had reconfirmed that FLs and VLs in FLOs are not permitted

to take part in litigation procedures in Vietnamese courts This is a revealing point in Vietnam’s effort to commit to the GATS’ regulations In practice, however, FLOs still allow its FLs to participate in consulting Vietnamese law, prepare petitions, join negotiations, etc., these FLOs hire VLs to become a sub-contractor to present before the court.54 This arises because of a lack of mechanisms by the authorities to monitor and manage this conduct Hence, Vietnam will need to have tighter management in this issue; otherwise local legal firms “would be defeated” in competition with foreign legal firms

In the field of arbitration, Vietnam does not recognise FLs and FLOs to practice in this area, although it is not excluded in Vietnam’s SSC According to CPC 861in the United Nations Provisional Central Product Classification of 1991, legal services sector have inclusion CPC 86602 – arbitration and dispute resolution services On the other hand, Vietnam’s commitments do not exclude this field This infers that FLs/FLOs may practice in arbitration and conciliation, despite the Law on Lawyers (2013) not addressing it in the context of FLs and FLOs’ scope of practice Accordingly, FLs/FLOs are allowed to participate in arbitration and dispute resolution services

Hence, at the first glance, Article 70 and Article 76 supposedly infringe the GATS’ regulations, particularly Article XVI.1 of the GATS Under Article XVI.1, the

treatment of Members are no less favourable than that provided for under the terms, limitations and conditions agreed and specified in its SSC However, this article is not a general concept, but a well-defined set of quantitative restrictions as listed in paragraph 2,55 whereby it complements paragraph 1 by exhausting the type of market restrictions that are banned in paragraph 1.56With respect to paragraph 1, the

scope of “market access” comprises measures only specified in the Schedule which

hinders foreign services suppliers from other Members to access the market Therefore, the primary role of this paragraph is to formulate an introduction to the limitations described in Article XVI.2 On the other hand, Article XVI.2itemizes the measures prohibited under Article XVI and broadly covers quantitative measures.57

The failure of the Law on Lawyer (2013) to address the ability to practice in arbitration, however, is not covered under Article XVI because it does not belong to any measures listed in Article XVI.2 related to quantitative limitation As a result, Vietnam’s regulations do not violate its market access obligation However, it may cause confusion for FLOs and FLs over whether they can practice in arbitration In fact, FLs and FLOs have practiced in this field for years, and some have even been successful in this area Therefore, Vietnam should supplement this rule into its Law

Panagiotis Delimatsis and Martin Molinuevo , “Article XVI - Market Access”( Điều XVI – Tiếp cận thị

trường), page 2 [ http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1280219 ] [Access on 5/6/2013]

56

Panagiotis Delimatsis and Martin Molinuevo, Footnote 55, page 18

See US – Gambling, WT/DS285/R, para 6.298

57

Panagiotis Delimatsis and Martin Molinuevo, Footnote 55, page 18

In Article 70, Vietnam does not specify in detail what legislation FLs and FLOs may advise on However, it is likely that, inferring from Article 70 and Article 76, VLs and FLs in FLOs may advise on Vietnamese law in even that they satisfy all requirements as VLs.60 Moreover, FLs are also permitted to advise on foreign law and international law In brief, FLOs and qualified FLs may consult on Vietnamese law, foreign law and international law

Another problem concerns the ability of FLs in providing advice on Vietnamese law Under the Law on Lawyers (2006), foreign practitioners may advise on Vietnamese

law when they satisfy all requirements of VLs The term, to “satisfy” requirements

of VLs,61 is not specific and causes confusion To clarify the meaning, reference should be made to the requirements for VLs under Vietnamese law First, under the Law on Lawyers (2006), the criteria of VLs are:

“Vietnamese citizens who are loyal to the Fatherland, observe the Constitution and law, have good moral qualities, possess a law bachelor diploma, have been trained

in legal profession, have gone through the probation of legal profession and have good health for law practice may become lawyers.” 62

Applying these mandatory conditions for FLs who would like to advise on Vietnamese law is not suitable and is, in fact, impossible because FLs may belong to

a country that does not accept dual citizenship In addition, graduating from a Vietnamese law college is also a necessary condition.63These barriers make it difficult for FLs to launch a legal career in Vietnam like VLs Since the regulations

do not precisely illustrate which qualification a foreign practitioner needs (e.g., for those with a bachelor of laws in their country, whether they will need to take the course again in Vietnam or whether they may undertake a master degree)? These qualification requirements hinder FLs to be qualified like VLs such that it would enable them to provide advice on Vietnamese law

Under Article VI.4 of Domestic Regulations of GATS, Members shall ensure that measures related to qualification requirements and procedure technical standards and licensing requirements do not constitute unnecessary barriers to trade in services Also, these measures shall satisfy the disciplines listed as 1) transparent; 2) objective;3) not more burdensome than necessary to ensure the quality of the service; and 4) not themselves a restriction on the supply of service (in the case of licensing

procedures) Hence, from a de jure perspective, Vietnam creates opportunity for FLs

to participate in the legal market but in de facto, FLs cannot exercise this

opportunity (i.e., to practice like Vietnamese practitioners, particularly in consulting

on Vietnamese law) Moreover, in line with the ongoing negotiations of the WTO

on domestic regulations disciplines in legal services, which discusses the required criteria for stipulating domestic regulations like they passed the discipline of Accountancy sector The negotiators recognize that when Members attempt to respect market access and national treatment obligations such measures might nevertheless act as a barrier to trade in services A lack of objective and transparent criteria, on the basis of which authorities would grant a qualification, may give rise

to hidden protectionism by such authorities.64 Therefore, the urging from WTO Members is to extend provisions of the Accountancy Disciplines to the legal profession.65As a result, Working Party on Professional Services was introduced by WTO Council for Trade in Services to develop Disciplines for profession Services.66In light of this article, the qualification requirements under Article VI.4 include the substantive requirements that a lawyer would have to fulfill in order to

be licensed such as education, examination, etc To be covered under Article VI.4 These measures shall have to be qualified that not covered under Market Access and National Treatment provisions as well as another provision in GATS Examples of measures that covered under Article VI.4 include good moral character requirements, citizenship required, etc.67Those qualification requirements Vietnam set out that FLs should satisfy to practice like VLs fit all findings that criticize to be covered under Article XV.4 of GATS