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Last September we wrote about predictions that the Japanese government would loosen restrictions on foreign lawyers practicing there. The question then: Would the changes be grand or merely incremental? Now that we have an answer, Japan-watchers are disappointed. The rules that were announced in November, which go to the Japanese Diet (parliament) in the spring and will take effect in 2004, will liberalize Japan’s protectionist system only slightly. Under the existing laws, foreign firms in Tokyo are permitted to counsel clients on Japanese law only through carefully configured joint ventures with local lawyers, or bengoshi. Foreigners are barred from working on purely domestic matters. Under the new regulations, foreign firms will be able to market their law capabilities directly to clients and work more closely on domestic issues with Japanese lawyers within joint ventures. Charles Stevens, who recently retired as managing partner of Freshfields’s Tokyo office and as the head of the Foreign Lawyers Association of Japan, says that the new rules are encouraging, at least as a signal that the reform-minded members of the Japanese Ministry are gaining influence. Stevens points out, however, that the rules fail to reverse the biggest roadblock to foreigners in Japan: the current bar against bengoshi from becoming equity partners in foreign firms. “For international law firms in Tokyo, their future is in having great bengoshi as partners,” says Stevens. Breaching the lateral-hiring wall would have helped the Western firms with Japanese footholds grow much more quickly, and would have invited in more firms as Japanese businesses seek the most sophisticated legal help in restructuring their battered economy. Now, even cheerleaders like Robert Grondine, White & Case’s senior representative in the firm’s 65-lawyer Tokyo branch, White & Case LLP Kandabashi Law Offices, says that few if any new U.S. firms are likely to plant their flags in Japan. “The [new rules] still leave a lot of confusion about what can be integrated with what,” says Grondine. There is a Japanese saying, tatemae/honne, which translated literally, means “the facade versus the real situation.” In this case, it means that foreign lawyers in Tokyo will keep the champagne corked.

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