When we consider reform of the judicial system, one topic we should
consider is allowing law firms to become corporations. The justice system
could become more user friendly if one office could manage diversified
issues, collaborating with other professionals.
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I think that it might become mandatory in the future for a law
practice to provide diversified services by collaborating with different
professions. However, there are problems when you expand an office. The
biggest problem is that there could be a conflict of interest in a joint
firm. In an extreme case, say for instance, your client went bankrupt,
while on the other hand, the bank which provided the loan might also be your
client.
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It would be difficult for you to seek protection under the Stock
Company Reorganization and Rehabilitation Act, wouldn't it?
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A dilemma arises when an office expands since it attracts more
powerful people, which in turn creates more conflicts. How do you try to
resolve these? If you ask Americans working in a giant law firm how they
manage, they would answer to the effect that although the firm may employ a
thousand lawyers, it does not necessarily mean they are all in New York.
They are located all over the world. It is assumed that there are "fire
walls" to separate them if they do not belong to the same branch. The
other solution is to enter into a contract on a case-by-case basis instead
of maintaining a continuous counsel-client contract. Nevertheless, if you
do a good job, it is more likely you would continue to represent your
client. The only reason giant law firms exist in the U.S. is that they can
sustain themselves if they have one big case such as a M&A or an antitrust
case. In comparison, Japanese corporations do not allocate much of a budget
for legal affairs.
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In the West, law firms actively participate in the development of
financial instruments or M&A. Would it be possible, in Japan, to maintain
an office devoted to lawsuits arising out of such matters?
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I don't think it's possible. Although many are questioning to what
extent certified accountants can be responsible for auditing accounts, with
the current limited budgets spent on these, it is almost impossible to see
everything in a window dressing settlement. Supposedly, Citicorp of
America's auditing expenditures on annual basis is more than one billion,
in yen terms. Therefore, it depends on whether management considers
expenditures on audit and legal affairs appropriate for their company.
Instead, in Japan, we are seeing in-house legal departments becoming
target for restructuring. Nonetheless, I cannot deny that there are
companies which are starting to place emphasis on their in-house legal
departments.
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You mean that Japanese companies have been hesitant to set aside more
money for legal affairs rather than rely on the usual "entertainment fee"
and "collusive prior consultation practice?"
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I welcome the fact that there is a debate about the future prospects
of law firms, but I hope that reform would include research into financial
side of legal issues as well. In addition to the legal aid system, if we
could cover everyone as we do with medical insurance by creating an
insurance system for the of protection of individual rights and a policy
covering legal fees, the problem would be quickly resolved. Japan thereby
could become a society which would make decisions based on law. This, in
turn, would provide an incentive for potential candidates to study harder
and endeavor to become better lawyers in view of the increased potential
money making opportunities. This should create a good cyclical trend.
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