Forming Partnerships With Foreign Lawyers

You have a practice in Chicago that concentrates in customs and international trade law, and over the years have developed a relationship with a law firm in a foreign country that has a similar concentration.  To strengthen this relationship and to better serve your clients, you are considering establishing a partnership with that foreign law firm.

What legal ethics issues should you consider if you decide to form a partnership with the foreign law firm?

Analysis

ABA Formal Opinion 01-423 (2001)

In 2001 The ABA Standing Committee on Ethics and Professional Responsibility issued Formal Opinion 01-423 Forming Partnerships With Foreign Lawyers.  The headnote to this opinion states:

It is permissible under the Model Rules for U.S. lawyers to form partnerships or other entities to practice law in which foreign lawyers are partners or owners, as long as the foreign lawyers are members of a recognized legal profession in a foreign jurisdiction and the arrangement is in compliance with the law of jurisdictions where the firm practices. Members of a profession that is not recognized as a legal profession by the foreign jurisdiction would, however, be deemed "nonlawyers" such that admitting them to partnership would violate Rule 5.4 (Professional Independence of Lawyer). Before accepting a foreign lawyer as a partner, the responsible lawyers in a U.S. law firm have an ethical obligation to take reasonable steps to ensure that the foreign lawyer qualifies under this standard and that the arrangement is in compliance with the law of the jurisdictions where the firm practices. The responsible lawyers in a U.S. law firm also have ethical obligations to take reasonable steps to ensure that matters in their U.S. offices involving representation in a foreign jurisdiction are managed in accordance with applicable ethical rules, and that all lawyers in the firm comply with other applicable ethical rules.

The Committee centered its analysis of this issue on whether foreign lawyers could  be viewed as lawyers under Rule 5.4 Professional Independence of a Lawyer of the ABA Model Rules of Professional Conduct.  Rule 5.4 prohibits lawyers from sharing legal fees with non-lawyers and from “forming a partnership with a nonlawyer if any of the activities of the partnership consists of the practice of law”.  The theory behind the rule is that if a lawyer were to form a partnership with a nonlawyer who is not bound by the rules of professional conduct, the nonlawyer might be in a position to pressure the lawyer into engaging in certain types of conduct that would be inconsistent with the lawyer’s professional ethical obligations.  The Committee explained how Rule 5.4 achieves this purpose and stated that foreign lawyers who are members of a recognized legal profession are qualified to extend the protections of Rule 5.4 to the clients of the U.S. firm:

. . . Rule 5.4 accomplishes this purpose by requiring that lawyers, to the exclusion of nonlawyers, own and control law practices, which thus helps assure that clients are accorded the protections of the professional standards lawyers must maintain. The Committee believes that foreign lawyers who are members of a recognized legal profession are qualified to accord these same protections to clients of U.S. law firms in which they become partners. Therefore, those foreign lawyers should be considered lawyers rather than nonlawyers for purposes of Rule 5.4.

The Committee found support for this conclusion under subpart (b) of Rule 7.5 Firm Names and Letterhead

. . . because that rule recognizes that there may be associations in law practice with lawyers not admitted in the jurisdiction, and requires only that the firm indicate "the jurisdictional limitations on those not licensed to practice in the jurisdiction where the office is located." [FN8] When the Model Rules were adopted, some U.S. law firms had foreign lawyers as partners; hence, any intent to render the practice a rules violation needed to be clearly stated. Yet nothing in this or any other Model Rule, or in the legislative history of the Model Rules, suggests that the term "jurisdiction" as used in Rule 7.5(b) excludes jurisdictions outside the United States.

Under the Committee’s analysis as to whether a foreign lawyer should be considered to be a lawyer under Rule 5.4, a key question is the extent to which the foreign lawyer is a member of a recognized legal profession in the foreign jurisdiction.  The Committee provided some guidance as to how to make this determination:

In order to qualify as a foreign lawyer for purposes of Rule 5.4, a person must be a member of a recognized legal profession in a foreign jurisdiction. The term "profession" itself generally connotes the attributes of education and formal training, licensure to practice, standards, and a system of sanctions for violations of the standards. [FN14] There nevertheless is no arbitrary definition of "lawyer" or "legal profession" that must be applied to determine whether a person in a foreign jurisdiction is a lawyer. The determination essentially is factual, requiring consideration of the jurisdiction's legal structure as well as the nature of the services customarily performed by the persons in question.

Generally speaking, a person who is specially trained to provide advice on the laws of the foreign jurisdiction and to represent clients in its legal system, and is licensed by the jurisdiction to do so, will qualify as a foreign lawyer. Before accepting a foreign lawyer as a partner, the responsible lawyers of a U.S. law firm must take reasonable steps to ensure that the foreign lawyer is a member of a recognized legal profession authorized to engage in the practice of law in the foreign jurisdiction and that the arrangement complies with the law of the jurisdictions where the firm practices. [FN15] For example, foreign lawyers admitted to practice in Sweden, Japan, Great Britain and other European Union countries would satisfy these requirements and have been found by bar association ethics committees to qualify for partnership in U.S. law firms. [FN16].

The Committee noted further that to the extent that the ethics standards such as those concerning client confidentiality in other countries differ from those in the United States, the lawyer working in the United States would have an obligation under Rules 1.4 Communication and 1.6 Confidentiality of Information to inform the client of the risks that the diminished standards may pose.

The Committee also found support for its position by virtue of the ABA’s adoption of the Model Rule for the Licensing and Practice of Foreign Legal Consultants Model Rule for the Licensing and Practice of Foreign Legal Consultants.  This Model Rule permits licensed foreign legal consultants who are resident in the United States to be partners in U.S. law firms.  Many states have adopted similar rules.  Links to individual state rules and charts comparing the state rules with the ABA Model Rule are available here.

See Also the ABA Model Rule for Temporary Practice by Foreign Lawyers was proposed by the ABA Commission on Multijurisdictional Practice and adopted by the House of Delegates at the 2002 Annual Meeting.  This Rule identifies the circumstances under which a foreign lawyer can perform legal services in the United States on a temporary basis.  The MJP Commission considered a number of issues relating mainly to multijurisdictional practice in the United States, and issued its final reports and recommendations after the issuance of Formal Opinion 01-423.  The MJP Web site, which includes a bibliography and links to state versions of the MJP amendments to the ABA Model Rules, is located here:

For a detailed analysis of Opinion 01-423 and the general topic of partnerships between U.S. and foreign lawyers, See, Mark I. Harrison and Mary Gray Davidson, The Ethical Implications of Partnerships and other Associations Involving American and Foreign Lawyers, 22 Penn. St. Int’l L. Rev. 639 (2004).

State Bar Opinions

There have been several opinions issued by the New York State Bar Association on the topic of partnerships with foreign lawyers. Generally, these opinions state that New York lawyers can form partnerships with foreign lawyers so long as the foreign jurisdiction’s educational requirements and ethical standards are similar to those of the New York lawyer.  In the most recent opinion 806 (2007), the New York Committee considered whether a New York firm could share fees with an Italian law firm it was affiliated with that had referred a matter to it in New York.  While the opinion did not specifically address forming partnerships with foreign law firms, some of the issues it discusses are pertinent to the general question.  The Committee stated:

In N.Y. State 542, this committee observed that a lawyer admitted to practice law in any jurisdiction of the United States is not a “non-lawyer” for the purposes of DR3-103(A) (citing N.Y. State 175 (1970) and N.Y. State 144 (1970)).  With respect to persons recognized as lawyers in non-U.S. jurisdictions, our committee adopted an analysis that compares the educational requirements for admission to practice, and standards of professional conduct and discipline, of the non-U.S. jurisdiction with those of New York State in order to determine whether “to consider such persons beyond the traditional proscription against lay partnerships.” [5]

Accordingly, if the Italian legal system is determined upon inquiry to provide persons admitted or licensed to practice law with education, training and ethical standards comparable to those of American lawyers, Italian lawyers may be considered “lawyers” within the meaning of DR2-107(A).  Although, as noted above, we have in the past made such a determination with respect to the legal systems of several other nations, we decline to do so here or in the future, as we believe it is not necessary or appropriate for this Committee to continue to do so.

Thus, if (1) lawyers admitted or licensed to practice law in Italy meet the standard set forth above, (2)the New York firm fully discloses to the client the firm’s intent in a matter to share its fees with the Italian firm and has obtained the client’s consent to such arrangement pursuant to DR2-107(A)(1), (3) the total fee in the matter will not exceed reasonable compensation for all legal services rendered to the client (DR2-107(A)(3)), (4) the Italian law firm takes joint responsibility for the matter or the portion of the fee it earns is in proportion to the services it performs, and (5) the Italian law firm’s work on, or taking joint responsibility for, the matter is not otherwise barred, [6] we find no Code prohibition on the New York firm’s sharing a percentage of its legal fees with the Italian firm.  In particular, under DR2-107(A)(2), which permits the sharing of fees where a firm takes joint responsibility for the matter, if the criteria set forth above are met, we find no impediment to a foreign lawyer or law firm assuming such joint responsibility.

NewYork State bar Opinion 762 (2003) addressed the obligations of lawyers in New York to ensure that the foreign lawyer’s compliance with the rules of the foreign jurisdiction does not compromise the New York Lawyer’s compliance with the New York Code:

Even where forming a partnership with lawyers licensed in foreign countries is ethically permissible, in carrying out its supervisory obligations under DR 1-104(C) the law firm may need to take steps to ensure that particular actions of the foreign lawyers do not compromise the New York lawyer’s ethical responsibilities. Cf. EC 1-8 ("A law firm should adopt measures giving reasonable assurance that all lawyers in the firm conform to the Disciplinary Rules and that the conduct of non-lawyers employed by the firm is compatible with the professional obligations of the lawyers in the firm.") Suppose, for example, that the ethical rules of Country X generally comport with the New York confidentiality rules but require a lawyer to reveal a client’s past fraud. Because a New York attorney is prohibited from revealing a client confidence or secret in that situation (DR 7-102[B][1]; DR 4-101), the firm must take reasonable steps to ensure compliance with the New York Code (for example, by ensuring that such confidential information is unavailable to the lawyer licensed in Country X).10 To ensure that adherence to the disciplinary rules of a foreign country by a foreign lawyer does not expose the New York firm or its New York lawyers to a violation of the New York Code, supervision of the lawyer licensed in the foreign country by the firm should be by a lawyer (or lawyers) familiar with the New York Code.

A New York lawyer can form a partnership with Japanese Bengoshi, since the educational requirements for admission to practice law appear to be no less rigorous in Japan than in the United States and moreover, the standards of professional conduct and discipline in Japan appear to be sufficiently similar in relevant respects.

An earlier New York State Bar Ethics Opinion 542 (1982) had considered whether it was appropriate for a New York lawyer to form a partnership with solicitors from the U.K. The opinion indicated that it was permissible, since both the U.K. and U.S. lawyers had similar educational requirements for admission to practice, and both were subject to similar standards of professional conduct and discipline. New York opinions 658 and 646 clarify opinion 542, since 542 seemed to indicate that U.S. lawyers can only form partnerships with lawyers who come from a similar common law background.

Other state bar opinions have also addressed this issue.  See, Alabama Opinion RO-02-02 (2002) (An Alabama lawyer can establish formal relations with foreign lawyers who are members of a recognized legal profession in their home jurisdiction); Iowa Opinion 97-25 (Iowa lawyers may form partnership with English Solicitors in England and Wales.); Utah Opinion 96-14 (1996) Stated:

For purposes of the Utah Rules, a Utah lawyer may associate with any person who is authorized to engage in generalized and substantial conduct within another country that would otherwise be viewed as the practice of law if conducted within Utah or within the United States.  Thus, a Utah attorney would be free, for instance, to form a partnership with a British solicitor, barrister or attorney, or persons similarly trained and authorized under the applicable standards of a foreign country to engage in the practice of law within that country's jurisdiction.

Compare Virginia Legal Ethics Op. 1743 (2000) improper for a Virginia lawyer to form partnership with a foreign lawyer who is admitted to practice in a foreign jurisdiction and who is licensed as a foreign legal consultant in another state; the foreign lawyer would be considered to be a "non-lawyer" for purposes of Virginia’s Unauthorized Practice of Law Rules.)

As the legal world’s boundaries grow ever more permeable and faint, the ethical issues as they relate to partnerships between U.S. and foreign lawyers are likely to be the subject of continued exploration and development in ethics opinions issued by the organized bar.

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