SE Asia: Measures coincide with improving Indonesian economy and reduced corruption

UK law firms are to be granted access to the potentially lucrative Indonesian legal market after extensive lobbying by the Law Society in the UK, the British embassy in Jakarta and trade promotion agency UK Trade & Investment.


Under the deal, foreign lawyers will be allowed to establish a commercial presence through a representative office or a joint venture with Indonesian lawyers.


At present, foreign lawyers may only practise in the country through a secondment to a local firm, and are not permitted to own a stake in the firm.


Herbert Smith, Clifford Chance and Baker & McKenzie currently make use of this arrangement, while other City and US firms such as Latham & Watkins and Milbank Tweed Hadley & McCloy run strong Indonesian practices from Singapore.


Under the Indonesian government's proposal - which is currently being put before the World Trade Organisation (WTO) - the new regime will allow foreign lawyers to own up to 49% of the capital share in a joint venture, which will take the form of a limited liability enterprise. Only directors, managers and technical experts or advisers will be allowed to work for the joint venture, with a maximum stay of two years, subject to a one-year extension.


If approved by the WTO, the new regime could be written into domestic legislation and come into force within two years.


David Dawborn, a Herbert Smith partner on full-time secondment to Indonesian firm Hiswara Bunjamin & Tandjung in Jakarta, said: 'This is a very interesting development, and I would imagine that some of the big firms may want to put someone here. Indonesia had been one of the big Asian tigers before the economic crisis, and it is now in an upswing phase again. There is a lot of work in the minerals and oil and gas sector here - China and Japan are very reliant on this part of the world for their energy.'


He added: 'This development is actually contrary to the general flavour here. A new law was recently introduced that expressly prohibits foreign law firms having offices or joint ventures.


'But there is a positive atmosphere, with the new government focusing much more on important decisions. It is taking measures to reduce corruption and improve the court system, and the judiciary is being monitored more closely.'


Asian practices enjoyed a boom in the mid-1990s before the economy dipped in 2001. Many City firms cut back on their Asian presence, with City firm Denton Wilde Sapte closing its offices in Beijing, Hong Kong, Singapore and Tokyo in 2004.