Malaysia’s House of Representatives passed the Legal Profession (Amendment) Bill 2012 on the 13th June 2012, in a move aimed at boosting capacity of the local Islamic finance industry. The bill, which was first tabled in 2008, allows for foreign law firms to open offices and foreign lawyers to practice in Malaysia.
However, industry players remain doubtful on the impact the new law will have on the domestic Islamic finance industry; noting that local legal firms have already become experienced in advising on world-class Islamic finance structures.
“Malaysia as a country is a leading Islamic finance center, and certain law firms and/or lawyers in Malaysia have worked on ground-breaking Islamic finance structures that were first initiated or implemented in Malaysia – so to say that international law firms have the edge in expertise/experience specifically in Islamic finance over and above Malaysian law firms would not be accurate,” noted Megat Hizaini Hassan, the head of Islamic finance at legal firm Lee Hishammuddin Allen & Gledhill.
“The international law firms’ main edge would actually be their experience/capability in advising on conventional finance and cross-border transactions, and not expertise in Islamic finance per se.”
He pointed out however that Islamic finance may not be the only sector affected by the new bill; noting that while the development of the industry is mentioned as one of the aims of the amendment, the permitted practice areas to be liberalized for foreign participation remain to be determined.
While uncertainty remains over the impact of the amended bill, the move towards liberalization has been lauded.
“If liberalization does lead to international law firms and/or lawyers being licensed to practise Islamic finance in Malaysia, then the industry would certainly be affected, with the impact being seen probably on legal work in respect of cross-border Islamic finance transactions,” said Megat.
However Jal Othman, a senior partner at law firm Shook Lin & Bok, cautioned that liberalization must be a focused and regulated exercise to ensure to ensure only the highest quality lawyers and law firms emerge.
Furthermore, he said that the potential benefits of the liberalization of the legal sector can only be observed over time; with the transfer of knowledge and any improvement in quality of service only able to be determined once the foreign players have arrived.
“We all know that liberalization is inevitable…The benefits on paper cannot be denied. Competition is good but this must be healthy competition.
This will also be the impetus for us to migrate from village champ to global leaders of the industry.
“What remains, however, is for all stakeholders, i.e. members of the profession, the government and the sectors of the economy, to cooperate to ensure that the benefits on paper get translated into tangible returns for everyone. Supervision and enforcement must be the order of the day,” he said. — LR