The Cayman Islands Legal Practitioners Association says the country will face a severe economic crisis if it continues to fail to properly regulate its “single biggest export”, legal services.
“The damage will include the permanent shrinking of our financial industry, and a reduction in available jobs in our economy,” the association said in a memorandum introducing the consultation draft of the Legal Services Bill that is being circulated among industry professionals.
Previous attempts to amend the Legal Practitioners Law have been unsuccessful over the years as the issue of regulating industry practitioners became something of a political football, torn between the desire to protect Caymanian lawyers as well as Cayman-based law firms and the competitive realities of delivering legal services in a globalised financial market through multiple offices worldwide.
In previous iterations, reform attempts were ambitious in scope, making them unable to strike a balance between the different objectives and interest groups within the legal industry.
The Legal Services Bill is a renewed attempt to get the balance right.
CILPA highlighted that the bill focusses on controlling the quality of legal services, enabling effective sales channels to provide legal services to international clients, and ensuring the sustainability of these services by creating a level playing field for Caymanian sole practitioners and small local firms.
The Legal Practitioners Association said the current failure to regulate the professional conduct of attorneys and compliance with anti-money laundering rules means that Cayman “falls far short of international standards”, resulting in reputational damage.
“This situation is untenable,” the association wrote. “Comprehensive legal services reform is the only means of preventing this economic damage.”
The draft Legal Services Bill would create a new regulatory framework through the adoption of a mandatory code of conduct, a disciplinary regime and the risk-based anti-money laundering supervision of attorneys.
The proposed framework would be established and funded through a new practising certificate regime. Under the system, CILPA would issue practising certificates to attorneys practising law both in Cayman and overseas. This would bring all attorneys practising Cayman law worldwide under the code of conduct and disciplinary regime and make sure that the disciplinary process and anti-money laundering supervision are funded in line with international standards, the association wrote to stakeholders.
Maintaining overseas presence
The practising certificate regime would also ensure that Cayman firms can maintain an overseas presence that meets the needs of international clients, while the practice of Cayman Islands law overseas is controlled from within Cayman.
Approximately 38% of entities on the Cayman Islands register of companies are incorporated by overseas offices of Cayman Islands law firms and other service providers outside of Cayman, the memorandum noted.
The association defended the ability of firms to carry out this work from abroad in the time zones and in the native language of clients, stating, “Cayman has become a global financial services leader as a direct result of our ability to sell and service the demand for Cayman legal services overseas.”
Failure to ensure this would result in competing jurisdictions taking market share from Cayman in key product areas, CILPA said.
Supporting local services
However, this must be balanced by supporting the growth of legal services provision locally in Cayman.
The association said the bill achieves this balance through the introduction of the practising certificate regime. “The PC Regime ensures that the size and shape of the overseas practice of Cayman Islands law is controlled from within Cayman by (a) providing for the issuance of practising certificates to attorneys in affiliate overseas on application by the law firm in Cayman, and (b) providing defined criteria that must be met within the Islands as a condition to the issuance of practising certificates to attorneys in affiliates overseas.”
Among other factors, one condition is how many practising certificates are already issued to attorneys practising Cayman law in another jurisdiction with affiliates of the same law firm.
According to CILPA, the bill would also lower the cost for sole practitioners and small firms, who must have greater technical expertise and face stricter compliance demands than ever before.
The development and progression of Caymanian attorneys, meanwhile, is becoming a central responsibility of law firms.
The bill makes a comprehensive training regime mandatory and sets out new requirements for law firms to provide scholarships, training opportunities, articles of clerkship, mentorship, business development opportunities, overseas experience and promotion opportunities for Caymanian attorneys.