LEGAL SERVICES AND ASEAN FREE TRADE AREA (AFTA) 2015 (Case Study in Indonesia) By: Harry Ponto *)

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1 LEGAL SERVICES AND ASEAN FREE TRADE AREA (AFTA) 2015 (Case Study in Indonesia) By: Harry Ponto *) ASEAN member countries have committed to establish the ASEAN Economic Community (AEC) by the end of This is a strategic moment as AEC will transform ASEAN into a single market and production base. Through the establishment of AEC, ASEAN Member Countries intent to have a sustainable economic, trade, and investment growth in the ASEAN region. To support such an intention, the availability of adequate transnational legal services covering the laws of multiple jurisdictions shall play an essential role. In providing such transnational legal services, host country (local) lawyers and foreign lawyers are expected to work together to provide such services. As the consequences of necessity to have the involvement of foreign lawyers, subject to a host country regulation, qualified foreign lawyers should be permitted to provide transnational commercial and business legal services. Introduction to Regulation of Foreign Lawyers in Indonesia The status and roles of foreign lawyers in Indonesia is regulated under Law No. 18 of 2003 concerning Advocates 1 (Advocates Law) and some other implementing regulations. In principle, Indonesia allowes foreign lawyers to practice in its jurisdition, but certain conditions and limitations imposed on the scope of practice of law by foreign lawyers. For instance, foreign lawyers are not allowed to set up representative office in Indonesia and may not litigate in court. The setting up of rules and regulations can ensure the rights and *) Paper prepared for 12 TH GENERAL ASSEMBLY 2015 ASEAN LAW ASSOCIATION, February 2015, Makati Shangri-La, Manila, Philippines 1 Accessible from Indonesian Peradi s website 1

2 responsibilities of foreign lawyers who are practicing law in Indonesian jusrisdiction. The Regulations At the level of regulation, the presence of foreign lawyers in Indonesia is regulated in the Advocates Law. Article 23 of Law No. 18 of 2003 concerning Advocates (Advocates Law) regulates that: (1) Foreign Lawyers are prohibited to practice in court, practicing (Indonesian law) and/or opening legal services office or representative office in Indonesia. (2) [Indonesian] Advocate Office may employ foreign lawyers as employee or legal expert in the field of foreign laws upon receiving Government permission with the recommendation from the Advocates Organization. Elucidation of Article 23 Paragraph (2) clarify that foreign laws means the laws of foreign lawyers home jurisdictions or international law in business and arbitration. Pursuant to the above provision, Indonesia allows foreign lawyers to provide legal services, but limited to providing advisory services on foreign and/or international laws (limited licensing). In other words, foreign lawyers are not permitted to represent clients before local courts or to provide domestic legal services. Recognition of an entitlement by foreign lawyers to practice foreign or international laws is on the basis of their right to practise law in their home jurisdictions. In order to provide such services, a foreign lawyer may only join a local firm as an employee. Foreign lawyer is not allowed to establish an office. Any foreign law firm is also not allowed to have representative office in Indonesia. 2

3 Furthermore, Article 23 paragraph (3) states that foreign lawyers are obliged to provide probono work for a certain number of hours per year dedicated to education and/or legal research, and Article 23 paragraph (4) states that the provisions on the requirements and procedures for hiring foreign lawyers and legal obligation to provide probono work to the education and/or legal research shall be further regulated by ministerial decree. Regulations of foreign lawyers are transparent as the regulations are clear and publicly available. The detail provisions on employing foreign lawyers are regulated under the Minister of Law and Human Rights Decree No. M.11- HT of 2004 concerning the Requirements and Procedures of Employing Foreign Lawyers and the Obligations of Contributing Free Legal Services to Legal Education and Reseach 2 (Minister of Law Decree). Once foreign lawyers are granted with the license, they are subjected to local ethical and disciplinary standards that also applied to domestic lawyers. Article 24 of Advocates Law rules that foreign lawyers are bound by the Code of Ethics of Indonesian Advocates. The Requirements and Procedures An Indonesian law office that intends to employ a foreign lawyer must first seek a recommendation from the Indonesian integrated bar, namely Indonesian Advocates Association (Peradi) 3. This recommendation is one of the key requirements to apply for an approval from the Minister of Law and Human Rights. Before issuing the recommendation, Peradi requires foreign lawyers to take examination on the Code of Ethics. A working permit for a foreign lawyer shall be issued by the Ministry of Manpower and Transmigration after the issuance the Minister of Law and 2 Minister of Law Decree is accessible from the website of the Ministry of Law and Human Rights 3 Art. 23 paragraph (2) of Advocates Law and Art. 3 Para (2) a. of Minister of Law Decree 3

4 Human Rights approval 4. The approval from the Minister of Law and Human Rights is valid for the period of one year, and may be extended on yearly basis 5. In order to get a working permit for a foreign lawyer, the sponsoring advocate office (law firm) should prepare and submit inter alia the following documents: a. a curriculum vitae signed by the foreign lawyer; b. a letter of statement from the Indonesian advocate office stating that the foreign lawyer will work as an employee of the said advocate office; c. a certified true copy of the foreign lawyer law degree; d. a letter of statement from the foreign (home) bar association verifying the foreign lawyer status as an active lawyer and in good standing; e. a letter of statement from the foreign lawyer that he/she agrees to submit to Indonesian rules and regulations, Indonesian Advocates Code of Ethics, and Peradi s regulations. The number of foreign lawyers to be employed in an Indonesian law firm is limited. An Indonesian law firm can hire only one foreign legal expert for every four Indonesian lawyers in the firm, but not more than five foreign legal experts can be employed by an Indonesian law firm 6. Nevertheless, an Indonesian firm with three local lawyers might be allowed to employ one foreign lawyer 7. A foreign lawyer working in Indonesia is allowed to move to another Indonesian law firm with a condition that there have to be a letter of statement from the previous law firm stating its non-objection of the said transfer. 4 Article 2 paragraph (1) and (2) of Minister of Law Decree 5 Article 4 paragraph (4) of Minister of Law Decree 6 Article 6 paragraph (1) of Minister of Law Decree 7 Article 6 paragraph (2) of Minister of Law Decree 4

5 Indonesian National Board of Arbitration (BANI) and the Role of Foreign Lawyers in Arbitration Case There are several regulations related to the Indonesian National Board of Arbitration (BANI) namely: Law No. 30 of 1999 corcerning Arbitration and Alternative Dispute Resolution (Arvitration Law); Rules of Arbitral Procedure of the Indonesia National Board Of Arbitration (BANI Rules); Regulation of the Supreme Court of the Republic of Indonesia (PERMA) No. 1 of 1990 on the Procedures for the Implementation of Foreign Arbitral Awards; and Decree of the President of the Republic of Indonesia (Presidential Decree) No. 34 of 1981 dated August 5, 1981 on the Ratification of the "Convention on the Recognition and Enforcement of Foreign arbitral awards" (New York Convention 1958). Currently there are 47 foreign arbitrators registered at BANI 8. It means foreigners, including foreign lawyers, can be appointed as arbitrators when the parties agree to use BANI Rules to adjudicate their dispute. As to the role of advocates or legal counsels stipulated in the Arbitration Law, Article 29 paragraph (2), states that the parties to the dispute may be represented by lawyer pursuant to special power of attorney. Furthermore, Article 5 paragraph (1) of the BANI Rules states that the Parties may be represented in the arbitration by an individual or individuals chosen by them. If a party is represented by a foreign advisor or a foreign legal advisor in an arbitration case relating to dispute that abides by the Indonesian law, the foreign advisor or the foreign legal advisor may attend only if he/she is accompanied by an Indonesian advisor or legal advisor Article 5 paragraph (2) of the BANI Rules 5

6 International Bar Association (IBA) Statement of General Principles As an international organization for international legal practitioners, bar associations, and law societies, the International Bar Association (IBA) has adopted the IBA Statement of General Principles for the Establishment and Regulation of Foreign Lawyers in 1998 as the general principles on which regulation of cross-border establishment of lawyers should be based. There are two approaches adopted in this IBA Statement of General Principles, namely Full Licensing Approach and Limited Licensing Approach. If a host country adopts the full licensing approach, foreign lawyers will be allowed to become fully licensed to practice the law of the host jurisdiction through examination or otherwise; whilst if the limited licensing approach is adopted, there will be regulation of foreign lawyers as practitioners of foreign law for the limited purpose of permitting them to practice the law of their home jurisdiction in the host jurisdiction without examination of full admission to the host bar. The IBA Statement of Genereal Principles furhter elaborate that should a host jurisdiction adopts the limited licensing approach, the said host jurisdcition may impose conditions and limitations, such as: (i) foreign lawyers may be prohibited from appearing or pleading in courts or other judicial tribunals in the host jurisdiction; and (ii) foreign lawyers may be prohibited from rendering advice on the law of the host jurisdiction or other jurisdictions where the foreign lawyers are not fully qualified and licensed. Pursuant to the Advocates Law, it is clear that Indonesia has adopted the limited licensing approach. Certain conditions and limitations imposed on the scope of practice of law by foreign lawyers is in line with the IBA Statement of General Principles. 6

7 Conclusions and Recommendations The importance of transnational legal services that facilitating trade and investment across national borders has been long recognised by Indonesia. Under Indonesian laws and regulations, foreign lawyers are allowed to provide legal services to serve such needs. In fact, foreign lawyers have been allowed to work in Indonesia since early 1970s, although at that time the regulation was in the form of Minister of Justice Decree (currently Minister of Law and Human Rights). Based on Peradi s record in 2014, there were around 64 foreign lawyers currently working at 29 law firms in Indonesia. Majority of them came from Australia and the United States of America, and small number came from ASEAN member countries, such as Malaysia, Singapore and Philippines. Although it is not significant, the number of foreign lawyers working in Indonesia is increasing over the years. Although Indonesian approach is in line with the IBA General Principles, there is a constant pressure to liberalize more on the legal services sector such as allowing foreign law firms to open their representative offices in Indonesia. As roles of foreign lawyers are regulated in the Advocates Law, such proposed changes must be incorporated in the Advocates Law. The problem is amending a law is not an easy thing to do as it must involve not only the government, but also the parliament. To accommodate other needs so long as within the framework of Advocates Law, the Supreme Court of Indonesia can take a role in bringing the stakeholders, such as the Ministry of Law and Human Rights and Peradi, to seat together and resolve the issues. 7