Sunday, December 9, 2012

Lawyers code seeks sweeping changes


New rules for Cayman Islands attorneys that could lead to profound changes in the legal profession and other businesses that use lawyers have been put out for public discussion. The proposed Code of Professional Conduct is part of a raft of legislative changes released on 30 November, including a revised Legal Practitioners Bill and a set of regulations known as the Qualified Firm Overseas Practice Regulations, 2012.

The regulations seek to implement a registration fee for law firms that use non-Caymanian attorneys who perform some work for their Cayman Islands firms while residing overseas. Locally operating law firms that aren't registered under the regulations would essentially not be allowed to operate satellite offices hiring non-Caymanian attorneys.

"Some Caymanian attorneys have ... expressed concerns about the ability of some law firms to operate satellite offices abroad," Cayman Islands Premier McKeeva Bush said in a written statement released last week. "[They] are worried that one day, Cayman legal services could potentially be solely provided from other countries." According to the regulations: "A firm which desires to be recognised as a qualified firm shall apply in writing to the [Cayman Islands Bar] Council for such recognition."

The back entrance of the George Town main courthouse
The back entrance of the George Town main courthouse
The Cayman Islands Bar Council is an appointed body formed under the Legal Practitioners Bill, 2012, consisting of the chief justice [or a designate], the attorney general [or a designate], the director of public prosecutions [or a designate], another person appointed by the chief justice, another person appointed by the attorney general, a person appointed by the Cabinet and the director of the Truman Bodden Law School [or a designate].

A number of conditions in considering whether a law firm might become a "qualified overseas" practitioner are listed in the regulations. Some of the more than 40 qualifiers include: the number of Caymanian partners and associates in the firm; whether the firm provides articles for Caymanian law school graduates; whether the firm has in-house training available; and whether the firm has Caymanian partners who have advanced as the result of post-qualification training.

Most international law firms have teams practising Cayman law from overseas offices, for example, by providing for the use of Cayman vehicles such as funds or companies by foreign clients. Often this work will generate business that is going to be serviced from Cayman, in addition to the establishment work that is done in Cayman. Cayman Islands companies are, for example, popular vehicles for listings on the stock exchanges in Hong Kong and Taiwan.

The Caymanian Compass sought comment from all major groups representing the legal profession within the Cayman Islands on the bill prior to publishing any articles on the Legal Practitioners Bill and related rules and regulations.

The Cayman Islands Law Society provided the following response: "[The law society] has not been given the opportunity for a detailed review of the draft bill that has been circulated for consultation. [The law society] cannot support any bill that would undermine the independence of the profession, damage it by unnecessary regulation, increase the financial burden on practitioners or damage the interests of Caymanian attorneys. We cannot support provisions that would prove impractical in modern practice, thereby preventing the continued growth of the profession to the detriment of the economy and the stifling of opportunities that a robust economy would create for Caymanians.

"We are encouraged by and absolutely share with the premier his aim and objective of enacting an updated Legal Practitioners Law that will modernise this Law in line with international standards to the further success of our economy and community as well as promote and protect the interests of Caymanian attorneys-at-law."

During a Thursday media briefing, Cayman Islands Law Society President Alasdair Robertson referred to the practice of operating satellite or outpost offices in other countries as "insourcing", a practice that could lead to job creation in the Cayman Islands.

"If we don't have those offices, then other jurisdictions, in particular we think the British Virgin Islands, would be in a position to sell that jurisdiction much better than ours, to our detriment," Mr. Robertson said.

He also added the law society's view that some regulation was essential, since they wished to ensure "Cayman firms were in control" of overseas operations where such control did not exist at the moment.

The issue of outsourcing [or insourcing] in the funds industry has been something of a hot topic of late among offshore investment types.

Canover Watson, managing director of Admiral Administration, has said that globalisation is changing the approach of the law firms.

"Firms that historically were Cayman-centric, if you look at Walkers or Maples, firms that were integral to developing the products in Cayman, when they promoted themselves to the outside world, inherently they were promoting Cayman," Mr. Watson said in this week's issue of The Cayman Islands Journal. "Today they are global firms and they are promoting their products, and when they go out in the market place they are not necessarily focused on this is a Cayman product and this is the Cayman solution. They say this is a solution that we can provide globally wherever you are located.

That is the challenge that [the Cayman Islands Monetary Authority] and the government are going to have: How do you now sit with those firms that have a global focus?"

Mr. Watson said in the Journal report that, as a service centre in general, it is an issue whether Cayman has the infrastructure to meet the demands of the hedge fund industry. Lower labour costs and better access to skilled labour are now provided in other jurisdictions such as Canada and Ireland, he said.

"And certainly we are seeing much more of an outsource solution where administrators may contract the funds in Cayman, but outsource certain aspects of the services of that fund to places as far as India."

This trend is going to continue, he predicted, simply because Cayman does not have a sufficient number of people to meet the demands of the industry. Post-2008 there has been a trend toward more transparency and reporting, for example, with a transition from a monthly to a daily reporting structure, making the industry more labour intensive.

"Cayman does not have the labour force to support that," Mr. Watson said, putting into question the physical presence of the industry in Cayman going forward.

Growth of the fund administration industry has taken place elsewhere in the world, but not in Cayman, Mr. Watson said, referring to the largest fund administrator CITCO, which created 2,000 jobs in Toronto and 1,000 jobs in Nova Scotia.

A move seeking a certain amount of free work – called pro bono publico service – from attorneys practicing in the Cayman Islands has been written into the draft Code of Professional Conduct put out for public comment this week.

According to rule 6.1 of the proposed code: "Every attorney-at-law has a professional responsibility to provide legal services to those unable to pay. An attorney-at-law should aspire to render at least 10 hours of pro bono publico legal services per year."

The code proposes that a substantial majority of the free work be granted to "persons of limited means" or to various charitable organisations or church groups. It also advises that delivery of legal services for individuals or groups seeking to secure or protect civil rights should be done at a "substantially reduced" fee.

"In addition, an attorney-at-law should voluntarily contribute financial support to organisations that provide legal services to persons of limited means," the draft code states.

The proposal to require Cayman Islands attorneys to contribute either their time or their money was set out in a draft of the Legal Aid Bill earlier this year. However, that proposal has not come to the Legislative Assembly. According to a summary of the proposal, every attorney-at-law in Cayman to whom a practicing certificate has been issued "shall render pro bono legal services to persons in accordance with this legislation", or face discipline under the territory's Legal Practitioners Law.

Attorneys can have their requirement for pro bono services discharged by annually providing at least 25 free work hours at the request of the court system's director of legal aid services or by paying an annual fee of $2,500.

Right now, legal aid services – providing attorneys to poor and/or indigent defendants; mainly in criminal cases – costs the Cayman Islands roughly $1.8 million per year. The money is controlled by the Ministry of Finance under the law, but the courts administration office handles the assignment of legal aid cases. Private practice lawyers undertake legal aid and are paid a set fee of $135 per hour for their work.

The Cayman Islands Defence Bar Association, in a statement sent to the Caymanian Compass in May, decried this particular provision of the draft Legal Aid Bill.

"The underlying proposition that attorneys should be responsible for the funding of the legal aid system is fundamentally misconceived," the defence bar opined. "Will doctors be required to work for free if there is a funding shortage for public health care?"

The proposed Code of Professional Conduct also sets out specific instances in which attorneys are allowed to make public statements regarding matters before the court.

In general, the section of "trial publicity" for attorneys states: "An attorney-at-law who is participating or has participated in the investigation or litigation of a matter shall not make an extrajudicial statement that the attorney-at-law knows or reasonably should know will be disseminated by means of public communication and will have a substantial likelihood of materially prejudicing an adjudicative proceeding in the matter."

Some exceptions to this rule are set out in the code of conduct.

They included statements involving the claim, offence or defence involved and the identity of parties involved, except where that information is prohibited from release by law; any information contained in a public record; confirmation that an investigation of a matter is in progress; the schedule for or result of any step in litigation; requests for assistance in obtaining evidence; a warning of danger concerning the behaviour of a person involved when there is reason to believe that substantial harm to the public interest is likely.

The code generally sets out that attorneys may make reasonable statements "required to protect a client from the substantial undue prejudicial effect of recent publicity not initiated by the attorney-at-law or the attorney-at-law's client. A statement made pursuant to this paragraph shall be limited to such information as is necessary to mitigate the recent adverse publicity".

Government attorneys are to be bound by the same rules, according to the code.

By Brent Fuller, brent@cfp.ky

Source: The Caymanian Compass

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