How to build impressive domestic law firms in Vietnam?

As a direct result of those milestones, the need to establish and develop Vietnamese corporations with a sizable scope, which can compete fairly with foreign corporations within the area, has become more necessary and urgent than ever, and the demand for legal services does not stray from such expectation.

Since 1987 until now, after almost 30 years of legal profession development with approximately 9,000 certified Vietnamese attorneys in the country, it is time for us to think about setting up Vietnamese law firms (“VLF”) comprising of hundreds of competent and experienced lawyers, diversified in their legal practices and providing domestic and foreign clients with full professional legal services.

In reality, if we look out into the world, it is easy to see large international law firms in developed countries. These famous law firm would operate like multinational corporations; they would hire several thousand lawyers in addition to a formidable backup team.

Head offices of those law firms are usually owned by the firms themselves or rented, situated in modern and luxurious office buildings in busy commercial districts or central business hubs. Their scope of operations is not limited to domestic territories where they have placed their head offices but extends worldwide to where hundreds of their other branches and subsidiaries can be found.

In other words, wherever business exists, there would be the presence of those global law firms. For additional reference, let’s look at some websites, which belong to those well-known multinational law firms that have opened their branches/subsidiaries in Vietnam: www.freshfields.com, www.duanemorris.com, www.bakermckenzie.com, www.allens.com.au.

Before discussing how to develop a few VLFs, we consider the reasons why, looking back on the formation and development of the Vietnamese legal profession over recent years, Vietnamese lawyers have been unable to create sustainable VLFs at a regional level as required by the demand of a developing market, when Vietnam has been a member of WTO for almost 10 years and has been rapidly integrated into the world economy.

Lawyers Organisation Ordinance

During the period starting from the time the nation was united, until late 1987, the legal profession was in fact, still not recognised by the Government.

Along with the issuance of Lawyers Organisation Ordinance on 18^th December 1987 (“Lawyers Organisation Ordinance”), the “legal profession” was officially recognised; however, the Lawyers Organisation Ordinance did not allow lawyers to practiceunless through a professional organisation, being a bar association established in provinces or cities under a central authority.

Therefore, up until September 2001, there were only 2,000 lawyers out of 80 million residents (approximately 1 lawyer/40,000 residents), among which there are onlya few hundred actual lawyers practicing law in reality, the remaining are retired officers and civil servants offering legal services. During that time, legal practice was usually carried out by individuals and was rudimentary in nature, and lawyers only participated in litigation at domestic courts.

Lawyers Ordinance

The Lawyers Ordinance (“Lawyers Ordinance”) issued on 25^th July 2001 and taking effect on 01 October 2001, has blown fresh air to the “legal profession” through two essential changes: (1) establishing professional lawyer organisations (law partnerships, lawyer’s offices); and (2) not accepting assumption of multiple positions at the same time as practicing law.

In addition, several other legal adjustments have had positive effects on the path of professionalisinga legal career, such as refuting the “equivalence of a degree from a law university”, as well as expanding the scope of legal services provided by lawyers (now able to take part in arbitration; represent clients as authorised representatives etc.).

Nevertheless, the Lawyers Ordinance did not clearly define the concept of “legal services”, thus “two sets of rules” were born (Law on Enterprise and Lawyers Ordinance) within one single legal services system.

Moreover, the distinction between lawyers in law partnerships (only allowed to provide legal consultancy) and lawyers in lawyer’s offices (allowed to provide both legal consultancy and litigation services) had caused the law practicesystem in Vietnam to develop in such a skewed, abnormal way in comparison to the general trend in the world.

Therefore, after 5 years of implementing the Lawyers Ordinance, until the Law on Lawyers taking effect on 01January 2007, the number of lawyers only rose from 2,000 to over 4,000 lawyers and with approximately just over 800 law practice organisations (including branches of law company and lawyer’s offices) that come into operation; this created a new network for the legislative system in Vietnam with no significant improvement in quality whereas the operations scale was rather small and undeveloped.

Each legal practice organisation was registered with just only a few lawyers who practiced independently and were only responsible for the general basic operation costs of the legal practice organisation. Overall, the legal services were  to take part in the litigation in courts at different levels and carry out nonessential administrative services.

Moreover, among a total of 4,000 lawyers, only about 1% possessed the general knowledge about international law and were able to support the companies in international commercial transactions, and the number of lawyers who were certified “barristers” and qualified under international standards did not exceed the number 20. Under those circumstances, it is safe to say that Vietnam was not able to establish professional and strong VLFs in that period.

Law on Lawyers

The National Assembly issued the Law on Lawyers taking effect on 01 January 2007 (“Law on Lawyers”). This marked a significant turning point on the road to professionalise the legal profession in Vietnam.

Accordingly: (1) the Law on Lawyers has regulated the legal services market by integration, so there was no longer two conflicting sets of rules. Anyone wanting to provide legal services must be a lawyer, and law practicemust be governed by the Law on Lawyers and rules of professional ethnic and behaviour of Vietnamese lawyers; (2) the nature of law practice organisations were recognizsed as business enterprises, and the legal profession was firstly considered as a service industry (similar to how the world would acknowledge the legal profession); and (3) lawyers would no longer be controlled because of their permanent residential address when entering the bar association.

It is worth noticing that the expansion in operations scale law practice organisation (limited liability law companies, law partnerships, lawyer’s offices, ip lawyer) created various opportunities for lawyers to assert themselves in many legal service areas that did not exist in Vietnam before.

Law on Lawyers (amended, supplemented)

The laws amending the Law on Lawyers took effect on 01 July 2013, devised on the basis of improving the quality of lawyers and reasonably raising the number of legal practice organisations. With regard to the mergering, acquisition and entity conversion of law practice organisations, the laws have been amended and changed to allowa lawyer’s office to change into a law company; One member limited liability law firm into a two or more members limited liability law firm and vice versa; limited liability law firm into law partnerships and vice versa.

Besides, the Laws amending and supplementing the Law on Lawyers, it also require lawyers to improve their legal profession quality by attending the mandatory professional training courses and the law also extends the legal training period from 6 months to 12 months, while shortening the probation/internship period from 18 months to 12 months.

Strategy to increase the number of Vietnamese lawyerfor the upcoming years

Pursuant to Decision No. 1072/QD-TTgdated 05/7/2011 of the Prime Minister approving the “Strategy for the development of the legal profession by 2020”; Decision No. 2320/QD-BTP dated 13/08/2012 of the Ministry of Justice promulgating the Master plan on the implementation of a developmental strategy for law practice by 2020 as well as to implement Resolution No. 49-NQ/TW of the Politburoon the strategy for judicial reform (JR) by2020, the Ministry of Justice along with other ministries and the Association of enterprises devise a strategy for developing the legal profession envisioning changes and development from 2020 up until the year 2030. Accordingly, by 2020, the strategic target would be around 18 – 20 thousand lawyers to ensure that the ratio will be 1 lawyer/10 – 12 thousand residents and increase the number of well-trained lawyers with practical skills and professional knowledge in litigation and getting at least 150 lawyers and 30 organisations meeting highly qualified international standards.

The domination of multinational law firms

Although, there are nearly 9,000 registered lawyers practicing law across the country, the legal services market designated for large-scale enterprises in Vietnam, as in foreign invested enterprises, representative offices, branches or subsidiaries of foreign enterprises in Vietnam etc. is largely dominated by foreign law firms having branches or subsidiaries in Vietnam.

The unreasonable thing is that the size and scope of those law firmsare not really that big in Vietnam, with only around 20 to 50 lawyers and personnel; and the majority of them are Vietnamese lawyers hired to work for those firms. A few notable examples are Allens Arthur Robinson, Baker & McKenzie, Duane Morris LLP, Freshfields Bruckhaus Deringer, Mayer Brown JSMLovells, Gide LoyretteNouel Co., Tilleke&Gibbins, PricewaterhouseCoopers Legal and Russin&Vecchi.

VLFsonthe structuring and developing process

Nevertheless, in recent times, VLFs find themselves at a rapid stage of development. Many VLFs are recognised as having the potential to compete fairly with international law firms operating in Vietnam, such as Vilaf, YKVN, Phuoc & Associates, Indochine Counsel, LCT Lawyers, Pham & Associates, etc. In fact, each VLF has its own distinctive strength in providing legal services, hiring 20 to 40 lawyers and staff with head offices in Hanoi and Ho Chi Minh City; not only that, there are a few VLFs that boldly explore the legal market in the Central region by opening a branch in Da Nang City. The founding and managing partners of these VLFs are mostly Vietnamese, having previous experience from working for other international law firms in Vietnam, some of them working for companies providing investment consultancy services, or returning to practice law in Vietnam after studying in Western, Eastern Europe and the former Soviet Union.

The distinguished development trends in recent times of those VLFs are, for the most part, splitting or dividing themselves in order to assert power over each other rather than merging or consolidating for the purpose of mutual expansion. This could be understood as a general trend when the legal services market is still beginningand growing. Many VLFsthat are formed as a result of suchdivision and split have proven themselves in the last few years with medium operations scale in the aspects of infrastructure (legal office, equipment), information technology (websites, specialized software) and human elements (hiring foreign lawyers and lawyers who studied abroad); examples of those firms are LuatViet, Phuoc & Partners, LCT Lawyers, LNT & Partners etc.

Recently, there are someVLFs trying to cooperate with well-known foreign law firms in the regionsuch as LCT Lawyers Rajah &Tann (Singapore), but the result of such partnership still remains to be seen for the long run.

Rapidly growing market

The fact that Vietnam became a WTO member,is a member of the AEC and may become a member of the TPP at the beginning of 2016 will create a lot of new opportunities and challenges for VLFs. Using legal consulting services in business becomes something more essential than just being a passing “fad” of some Vietnam enterprises like before. As many foreign companies continue to seek investment opportunities in Vietnam, Vietnamese companies preparing to “go public” for the first time and small or medium enterprises trying to restructure to adapt to the new conditions and improve themselves, they all need legal consultation from lawyers to ensure business operations always comply with the laws, to sustain development or to resolve disputes. Looking back at the development stage of the market, we can say that at the present time and at least in the next 20 years, “the pie constituting the legal services market” is still big enough for VLFs.

Necessary and sufficient conditions created, why don’t we have VLFs in Vietnam?

Among myriad reasons known, we could sum them up into five main reasons below:

1. “Mismatched” legal knowledge.

The objective historical circumstances and political lives in Vietnam had many noticeable changes in the 20^th Century, which create some “mismatched” viewpoints of legal knowledgeamong Vietnamese lawyers. Some are overseas students in nations that belonged to the old Soviet Union; they were trained in a socialist law system. Some went abroad to capitalist European nations, the others were trained domestically before or after the liberation of the nation (30^th April 1975) or before the “economically and politically open” or “open” period (1986) and the remaining are the young 7x, 8x and 9x generations trained after the “open” period (trained under a socialist legal system with market-oriented characteristics) or studying aboard in developed European nations. The cooperation among these lawyers continues to face many obstacles because of the lawyers’ difference in methodology, mentality, perspective, legal awareness and approach.

2. “Vietnamese personalities”.

Vietnam – a country with “the fusion of personalities from three regions”. The geographical conditions, society and environment have shaped people from three regions to bear distinguishable personality traits and characteristics. The personalities of people of each “regional character” sometimes would cause differences that could not be settled when forming alliance. Some cases of VLFs’ separation or division arise from the clash of those seemingly irreconcilable characters.

3. “Income” – unprofessional distribution

The mishandled distribution of income among lawyers within a law firm is one of the main reasons leading to the dissolution and separation of VLFs. Because the nature of the legal profession is that the rewards for lawyers depend on their own time and efforts, the accumulation of experiences, reliability andclientele, if applied to income distribution by means of distributing dividend according to capital or shares contribution in a joint stock company or limited liability company commonly, it would not accurately, fairly and sufficiently reflect each lawyer’s contribution. This would only lead to otherwise avoidable conflict. Other methods of dividend distribution have also been considered; nonetheless, because of the complexity in their implementation, VLFs have chosen not to favor them. Moreover, the billing software that codifies Vietnamese language is used to bill client and distribute lawyer’s income is too expensiveor not readily available in the local market or is unsuitable for Vietnamese users.Therefore, the distribution oflawyer’s income in VLFs faces noticeable difficulties.

4. “Independent” conducts of lawyers.

Being independent, honest and honoring the objectivity of facts are the main principles of law practice. On the foundation of those values, many lawyers still retain the thoughts that while practicing law they should act independently not only of the courts or State authority but also of their own colleagues and other lawyers as well. Thus, lawyers usually prefer employing independent “fighting tactics” over collaborating with other lawyers when providing legal services to clients. There are times when the requests for legal support which clients receive  falls beyond their areas of expertise; still, the lawyers would rather silently solve the problems on their own with the motto “working while learning along the way” than seeking professional opinions from fellow lawyers or introducing clients to other lawyers in fear of losing face, negative feedback or loss of clientele. For such reason, the exchange and update in professional knowledge and experience among colleague lawyers are usually very limited.

5. Lawyer career has not been recognised as a service business industry.

Law practice is regulated in a way that it is regarded as a means to protect justice, social fairness and promote a socialist juridical system. Therefore, lawyers are discouraged to do business and actively make profits to enrich themselves like other professions. This outlook, in some ways, creates hindrances for lawyers to cooperate with others in establishing VLFs within the region.

What should we do to make our great expectation come true?

In order to fulfill this vision, Vietnam has to create mid and long-term strategies, which could include the following stages:

1. The VLFs may consider cooperating with one another following three steps (first, to partner up; next, to cooperate; then finally, to merge/consolidate) to gain a gradualbut deep understanding of each other. Recently, some law companies at regional level have found ways to unite and mutually develop in accordance with the steps mentioned above (for instance, Mayer Brown to form Hong Kong Alliance with China’s Jingtian).

2. In order to develop VLFs, Vietnamese lawyers need to reinforce their patriotism by way of ignoring their “individual egos” and cooperating with other lawyers who have expertise in other fields.

3. Need a real recognition of the Government and society with regard to the nature of thelegal service industry.

4. Need support of the Government via administrative instruments such as exemption or reduction of corporate income tax; providing scholarships for lawyers to approach the legal system of affluent countries; promoting new and positive perspectives on the legal profession as well as changing the means and methods of teaching during legal professional training.

5. A proper income distribution structure needs to be discussed and devised to ensure the economic benefits of lawyers.

6. Each lawyer has to improve his/her knowledge in several aspects such as accounting and finance in order to successfully run a huge law firm like a corporation/economic group at a regional level.

If the entirety or some parts of the above stages are implemented efficiently and adequately, it is hopeful that in the near future, Vietnam shall witness various consolidations and mergers of top-level VLFs with hundreds of qualified and competent Vietnamese barrister and Vietnamese solicitors in several legal service fields (such as IP lawyer, labour and employment lawyers)  to emerge and thrive forward, competing with international law companies on our own playing field and as a result, step by step integrating into regional and international playing fields, with a higher position each time. Let’s us join hands to build stable and powerful Vietnamese international law firms, keeping in mind the belief that [please select one] “one tall tree cannot make a forest, unless other trees join forces to make a large grove.”/ “one tree cannot make a forest”/ “together we can change the world”.