September 27, 2010 4:04 PM

Brazil Bar Concludes Foreign Law Firm Associations Break Rules

Posted by Brian Baxter

UPDATE: 9/30/10, 5:32 p.m. Brazil might be wary about letting foreign firms practice on its soil, but the country itself no problem turning to them for outside counsel. Legal Week reports the Brazilian government has retained British firm Hammonds, which announced in late August it was in merger talks with Squire, Sanders & Dempsey, to represent it before the WTO.

International firms allied with local Brazilian shops could see those relationships come under renewed scrutiny as the São Paulo Bar Association has concluded that the tie-ups could breach local practice rules, Legal Week reports.

The legal market in Brazil has been particularly active in recent months. Milbank, Tweed, Hadley & McCloy hired the head of Shearman & Sterling's São Paulo office in April, only a few months after both Gibson, Dunn & Crutcher and Simpson Thacher & Bartlett announced they were opening offices in the city.

Legal Week notes that the recent opinion by an ethical and disciplinary panel of the São Paulo Bar illustrates the mounting tension over the influx of foreign firms into one of the world's fastest-growing economies. While the opinion is only advisory, Legal Week reports it is an indication of where a more formal ruling would fall should a case be brought against one of the major U.S. firms operating in Brazil in alliance with a local firm.

Mayer Brown announced in December that it had replaced Thompson & Knight in a partnership with Brazilian firm Tauil & Chequer. And in March, DLA Piper formalized its relationship with new affiliate Campos Mello. Over the past year, Legal Week reports that both firms have stirred up the market by recruiting partners from independent Brazilian firms Machado Meyer Sendacz & Opice and Tozzini Freire Teixeira & Silva.

Brazilian Bar rules prevent foreign firms from practicing local law, so many of the 20 or so foreign firms that have opened in the country in recent years operate as consultants. (That differs from other developing markets like India, which has banned foreign firms from all forms of practice.) Those foreign firms were among the first to be disappointed in the opinion issued by the São Paulo Bar.

"At the end of the day it's bad for clients," one partner at a major international law firm told Legal Week. Brazil's booming economy has provided an abundance of corporate work for foreign firms while European and U.S. markets faltered.

But Tozzini Freire founding partner Jose Luis Freire told Legal Week that while Brazilian firms are prepared for international competition, "what we're not prepared for is unfair competition where the local workforce market is disturbed."

On Friday, over 150 leaders from Brazil's public and private sector gathered at the São Paulo office of Skadden, Arps, Slate, Meagher & Flom to proclaim a new financial future for the country.

 

NOTE: The upcoming October issue of The American Lawyer looks at the growing number of Am Law 100 and Magic Circle firms that have set up shop in Brazil. Go to www.americanlawyer.com on October 1 to read this feature.

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