Feb 03, 2019

SC halts Chinese law firm from offering legal services Featured

The Supreme Court has barred a Chinese law firm from working in Sri Lanka until the end of a fundamental rights case challenging the Registrar of Companies’ (RoC) decision to incorporate a limited liability company claiming to provide legal services in the country.

Nayantha Wijesundara, attorney-at-law, filed a petition in the Supreme Court on January 16 naming Baqian Law Group Lanka (Pvt) Ltd, the RoC and the Attorney General as respondents. The Court on Thursday granted him leave to proceed and issued an interim order restraining the firm from engaging in any legal professional work in Sri Lanka until the conclusion of the case.

The case was supported before Justices Priyantha Jayawardena, PC, L T B Dehideniya and S Thurairajah, PC. The petitioner submitted that legal professional services could be provided only by natural persons who, by virtue of being members of a noble profession, are personally liable for their services. However, companies, who are juristic persons, have limited liability only.

In these circumstances, the petitioner is denied equal protection by the law in terms of Article 12(1) of the Constitution. By incorporating a private liability company, the RoC violated his right to freely engage in a lawful profession guaranteed by Article 14(1)(g) of the Constitution.

The Chinese Baqian Law Group last month opened a South Asian regional office in Colombo. It was the first time a foreign entity providing legal services was incorporated here as a limited liability company. This is not even a practice among Sri Lankan law firms which are set up as partnerships.

A limited liability company is a corporate structure whereby the members of the company are not personally liable for the company’s debts or liabilities. Baqian Law Group Lanka (Pvt) Ltd offered everything from notarial services, legal due diligence, international trade remedies and assistance on dispute resolution to advice on project financing, operations, taxation and financial compliance.

Mr Wijesundara in his petition pointed out that the objects clause in the Articles of Association of Baqian Law Group Lanka said it will provide “investment advisory services and consultations”. Given the company calls itself a “law group”, this term must be interpreted to mean legal advisory services.

This involves providing legal advice on the Sri Lankan law on foreign direct investments, employment law and competition law for potential investors, and will also include the conducting of legal due diligence among other legal services. The petitioner contended that these were, essentially, legal professional services that only attorneys-at-law licensed by the Supreme Court are allowed to provide.

The RoC had a legal duty under the Companies Act to take action against the incorporation of companies for unlawful purposes, the petition submitted. It had the added duty to investigate companies engaged in unlawful activities. According to law, limited liability companies cannot provide legal services. The Baqian Law Group Lanka was formed for “an unlawful purpose” and the RoC had failed in his duties, thereby leading to the violation of the petitioner’s fundamental rights.

The RoC had also violated the rights of the entire legal community, the petition said. The legal profession is a necessary aspect of a well-ordered society based on the rule of law, and citizens of Sri Lanka have the right to expect the services of competent professionals of good repute, and that is why there is a stringent code of ethics for legal practitioners to ensure high quality service.

However, as companies only have a limited liability and as the individuals who run companies are not personally responsible for the actions of the company, such high standards cannot be expected, and as such, the incorporation of a limited liability company to provide legal services violate the rights of the entire citizenry.

Counsel for the respondents argued that the petitioner could have first complained to the RoC if he thought that the company was engaged in any activities prohibited by law. The petitioner argued that the RoC should have initiated an investigation of its own volition as it was its statutory duty.

Mr Wijesundara appeared in person. Additional Solicitor General Sanjay Rajaratnam, PC, appeared for the RoC and AG. Sunil Abeyratne appeared for Baqian Law Group Lanka. The case is to be taken up for hearing on October 24, 2019.

Meanwhile, the Bar Association of Sri Lanka (BASL) at a special Executive Committee meeting also resolved that limited liability companies cannot engage in the legal profession and that only lawyers licensed by the Supreme Court could practise. The Association will study Mr Wijesundara’s petition and decide whether it should intervene. It is consulting experts and senior lawyers on a way forward and has written to Baqian for clarification on the services it intends to offer.