For the past few weeks, I have been toying with the idea of a foolproof device/system that could streamline communication and eliminate unnecessary debates or miscommunication – a world where language and law can be understood by a single interpretation.
Yesterday, 19th March 2022, while attending the 76th Annual General Meeting (“AGM“) of the Malaysian Bar, I chanced upon two intriguing debates that provided a context in which such exercise could be put to test: – 1) The GLP debate; and 2) The Minimum Wage debate.
1) The ‘Group Law Practice’ (“GLP”) Debate
The GLP debate questioned whether the current restriction on the number of lawyers/law firms in a GLP should be removed.
As a brief background, the GLP ruling allows a group of small law firms to unite and operate under a single brand. Firms under a GLP share the same premises and facilities while remaining as separate entities.
According to the Bar Council’s Small Firm Practice Committee back in July 2018, the objective of GLP was to help small firms “reduce operating costs, increase skill sets, and maximize their marketability and competitiveness in an increasingly competitive legal environment”.
Nevertheless, the GLP ruling which was approved in Malaysia on 25th June 2018, allowed a single GLP entity to comprise of only 2 to 5 member firms, with each member firm limited to a maximum capacity of 5 lawyers (“the Limitation“), as follows:
Thus in the recent AGM, a motion was tabled to (1) remove the Limitation; and alternatively (2) to relax the Limitation by increasing the maximum number of (a) member firms in a GLP to 10 firms; and (b) lawyers in each member firm to 10 lawyers.
KEY ARGUMENTS
The key arguments for and against the motion were as follows:-
| Arguments for | Arguments against |
| The Financial argument. That the Limitation restricts firms from expanding; and forces GLP firms that have exceeded the 5 lawyer limit to leave behind their reputation and financial investment in the group practice in pursuit of firm expansion. | The Fair Competition Argument. That the rationale of GLP is to assist small firms to compete at a level playing field with bigger law firms in the sense that through the GLP, small firms will be able to (i) start up or maintain a firm with lower capital and operating cost; and (ii) to ride on an umbrella brand that could increase exposure and marketability. |
| The Rights-based argument. That the Limitation is against the Freedom of Association under Article 10(1)(c) of the Federal Constitution and is discriminatory against “small firms” who may have just a little over 5 lawyers. | The Utilitarianistic Argument. That the current GLP ruling would benefit more law firms in Malaysia than not (considering that 88% of law firms at the material time consisted of less than 5 lawyers). And therefore it is acceptable to harm the interests of the minority. |
DECONSTRUCTION
There appears to be only one overarching issue to the GLP debate:
“What is the objective of the GLP?”
“ASSISTING SMALL FIRMS”
If the objective of the GLP is to assist small law firms, then the key questions that need to be answered are: –
(a) whether the GLP is aimed at assisting all small-sized firms (i.e. including those law firm proprietors who although can afford to go big, choose to remain small due to perhaps personal commitments or interests); or is the GLP aimed at assisting only small (weak) firms in the sense that these firms lack financial leverage to compete as a business despite having all the right skill sets to succeed as a law firm proprietor;
(b) what is considered “small firm” i.e. <5 lawyers or <10 lawyers?
MEANING OF “SMALL FIRM”
By analogy, the SME Corporation Malaysia whose mission is to promote the development of competitive, innovative and resilient SMEs measures “small”, “medium” and “micro” enterprises based on either (1) sales turnover or (2) number of full-time employees, as follows:-
As can be seen, the SME Corp categorizes a service provider as being “small” if the business comprises of between 5 to 30 employees or between RM300,000 to RM3 million in revenue. Service providers with less than 5 employees are considered “micro” businesses instead.
APPLICATION
These criteria for determining SME size on an “EITHER-OR” basis and measured by ‘sales turnover‘ or ‘number of full-time employees‘ can be attractive if incorporated into the GLP dilemma, which currently only measures firm size based on number of lawyers: –
| If Firm Size is determined by Sales Turnover only | If Firm Size is determined by Number of Full Time Employees only |
| Under this criterion, if the firm’s sales exceeds a certain threshold, it should not be allowed to operate under a GLP. (It assumes that GLP actually enhances marketability of individual small firms; and assumes that high sales = high profit) | Under this criterion, if the firm’s employee (or lawyer) headcount exceeds a certain threshold, it should not be allowed to operate under a GLP. (It assumes that the firm does not need competitive help because it is able to justify higher overhead cost) |
ASSUMPTIONS
Of course, all this is assuming that:
– GLP actually enhances marketability & profitability of individual small firms;
– Allowing the “big players” (large and capital backed firms) to operate under a GLP will dilute the benefits of GLP to small firms who may require leverage in terms of capital, manpower, marketability and bargaining power.
“FAIR COMPETITION”
and if the objective of GLP was to ensure fair competition between members of the Bar: –
(c) whether in protecting competition, the GLP ruling considers the interest of non-proprietor members of the Bar i.e. individual, employee lawyers whose bread & butter in practice are directly affected by regulations on market competition;
(d) the economic question/Market Dominance analysis: whether increasing the number of law firms/lawyers in a GLP actually promote or hinder fair competition;
(e) the moral-legal question/Profession vs Business debate: whether the Bar should uphold freedom to practise or take a more active role in regulating inequality i.e. regulate competition in the legal industry.
Conclusion
In my view, the recent GLP conflict can be said to be a symptom of the delayed enforcement of Limited Liability Partnerships (LLP) for law firms in Malaysia. I have cast my vote whether or not 5 minutes was enough time to deliberate the same. In any case, I maintain the view that although law is an art, the legal industry is a business (as mentioned in earlier article). Thus the sooner we accept that we do not live in isolation from our clients and other businesses, the faster we are able to crack down on the real issues and progress together (e.g. LLP) as a professional body.