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December 2005 -- The latest amendment to the Foreign Lawyers Law took effect this past April, allowing foreign and Japanese law firms to form official partnerships and practice in a more integrated way.  As a result, more Japanese firms not already working with foreign firms are looking to form alliances as the demand for cross-border legal services grows.  Larger firms already providing international services anticipate expanding opportunities corresponding with shifts in the Japanese economy.

In addition to allowing firms to integrate formally, the amendment allows foreign law firms to directly hire local lawyers qualified in Japanese law, or bengoshi.  Foreign firms working with Japanese firms can also share in revenue earned from services pertaining to both international and domestic law—before, foreign law firms were not able to share revenue earned from working with Japanese lawyers on Japanese legal matters.

These changes do not greatly affect larger firms that already work closely with their Japanese counterparts—for example, although Paul Hastings formally integrated its practice with Taiyo Law Office in October, the two firms had long worked closely together—but it has opened the door to a wave of smaller Japanese law firms looking to partner with foreign firms to meet a growing demand from Japanese businesses for cross-border legal services. 

Hendrik Gordenker, partner at White & Case in Tokyo, observes that one of the big changes since the amendment was a shift in mentality among lawyers in Japan, especially those of medium-sized firms.  “A greater number of Japanese lawyers have come to the view that the best way to develop a first-rate practice is to join up with a foreign law firm." said Gordenker.  "Japan is gradually internationalizing in various ways, and more of the medium law firms are trying to get a piece of that cross-border work.”  In September, Morgan Lewis & Bockius LLP of the United States and TMI Associates of Japan were the first to form an equitable legal partnership made possible by the new amendment.

Larger firms like Morrison and Foerster already working closely with Japanese lawyers have experienced significant expansion over the past five years.  The number of attorneys at the firm’s Tokyo location has grown from 25 in 2000 to 70 today, 25 of which are bengoshi.  “That’s pretty strong growth over that period relative to global growth in the law firm,” said Ken Siegel, managing partner of Morrison and Foerster’s Tokyo office.