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Florida Bar officials thought they were doing the right thing earlier this year by proposing closer supervision over non-Florida lawyers representing clients in the state. They said they wanted to protect the public and hold lawyers more accountable for incompetence and misconduct. But arbitration lawyers, business groups, and elected officials, including Gov. Jeb Bush, charged that the Bar’s proposed rules governing out-of-state and foreign lawyers — which went well beyond those in any other jurisdiction — would destroy the state’s chances of becoming a major international center for arbitration of commercial disputes. Beyond that, they said, the new rules would imperil Miami’s hopes of becoming the headquarters location of the budding 34-nation Free Trade Area of the Americas. Bush and the arbitration lawyers pressed the Bar to abandon the rules. On Thursday, in a dramatic reversal, the Bar’s 17-member Multijurisdictional Practice Commission killed key elements of proposed rules governing international arbitrations that it had unanimously approved in March. The rules would have banned non-U.S. attorneys who are not licensed in Florida from representing clients in Florida arbitrations involving international disputes. They also would have set tough oversight, reporting and disclosure requirements. Instead, the commission essentially recommended that the Bar not get into the business of regulating international arbitration. In particular, non-U.S. attorneys, who long have represented clients in international arbitrations here but have done so in a gray area of Bar licensing rules, would be able to participate legally if the new set of rules are approved by the Florida Supreme Court. That’s a victory for the international arbitration community. The Bar has never had rules specifically regulating international arbitration. The Bar still faces pressure to dump other significant pieces of the regulations, including rules governing arbitrations involving only U.S. parties. On Thursday, the multijurisdictional commission rejected requests to drop the proposed rules for domestic arbitrations, arguing that they are important protection for individual consumers. But opponents vowed to take that fight directly to the Bar board of governors. In the face of frequent lawyer bashing by Gov. Bush and other Florida Republican leaders, as well as scandals involving incompetence and misconduct by Florida lawyers and judges, Bar leaders have faced increased pressure to police their ranks. A particular challenge is how to regulate the multijurisdictional, or cross-boundary, practice of law. The rise of multijurisdictional practice has challenged the traditional system of licensing, regulating and disciplining U.S. lawyers at the state level. “The fear is that lawyers come here and do unethical acts and improprieties and then leave and we can’t do anything,” said Edward R. Blumberg, a partner at Deutsch & Blumberg in Miami who served on the Florida MJP commission. But in trying to tighten oversight over arbitration and other cross-border practices, Bar leaders were shocked and dismayed to encounter aggressive opposition from powerful business, trade and legal interest groups that want to make it easier to operate across state and national lines. Remarkably, the Bar’s rulemaking earlier this year was carried out with little or no discussion of how the rules might effect international arbitration in Florida or Miami’s bid to win the FTAA secretariat. Some members of the Bar commission that approved the proposal told the Daily Business Review that they didn’t know anything about the FTAA when they voted on the rules in March. “These rules would have killed international arbitration in Florida,” said Jose I. Astigarraga, a partner at Astigarraga Davis Mullins & Grossman in Miami, the firm that spearheaded the effort to block them. Major commercial centers such as London, New York and Paris have little or no oversight of international arbitration. “We should be following the example of other major financial centers that conduct most of the important arbitrations in the world,” said Alia Faraj, a spokeswoman for Gov. Bush. TURBULENT YEAR The reversal by the Bar is the latest development in a turbulent year for the arbitration industry in Florida, which has been growing at a rapid pace. In February, the Florida Supreme Court threw arbitration into disarray when, in The Florida Bar v. Albert A. Rapoport, it upheld a Bar ruling disciplinary action that a lawyer who was licensed in Washington, D.C., but who was living and handling securities arbitration cases in Boca Raton, was engaged in the unlicensed practice of law. In the wake of that decision, many other attorneys not licensed in Florida wondered if they also were engaging in the unlicensed practice of law by representing clients in arbitrations in Florida. Then, in March, the Bar published its proposed rules governing arbitration as part of a broader set of new rules on multijurisdictional practice. The Florida Bar initiative came in response to new model rules on multijurisdictional practice issued last summer by the American Bar Association. Arbitration long has been an important way for companies operating internationally and domestically to resolve disputes without going to court. The practice has grown along with international commerce. For years, companies doing business internationally have installed clauses in contracts requiring parties to resolve disputes before arbitration panels rather than in foreign courts. Courts in other countries, particularly in Latin America and the Caribbean, are widely viewed as biased, inefficient and corrupt. From a business perspective, arbitration has many advantages. It can be staged in a hotel meeting room or a law firm office. The proceedings are governed by the contract between the parties, can apply any law and be conducted in any jurisdiction agreed on by the parties. Another incentive to arbitrate rather than litigate is that disputes can be resolved secretly, without making news headlines. In arbitrations, parties usually do not have to file any public documents with a court or governmental agency. The overall flexibility is appealing. “Arbitrations don’t even have to require lawyers,” said Carlos Loumiet, a partner at Hunton & Williams in Miami. Since 1985, when the Florida Legislature passed the Florida International Arbitration Act, this state has tried to position itself as the venue of choice for arbitrations involving U.S. and foreign companies doing business in Latin America. Miami recently has made strides as a hub for arbitration due to its location and multilingual culture. According to the American Arbitration Association, Miami now ranks second behind New York City for the number of international arbitrations held in the United States. Year to year, Miami is showing strong growth. Last year, AAA arbitrators presided over 55 international cases in Miami; through the first six months of this year, they handled 43 cases. In February, the AAA and the Washington, D.C.-based Inter-American Bar Association signed an agreement designating Florida as the preferred location for international arbitrations. This year, Florida launched its campaign to make Miami the home of the FTAA, potentially the world’s largest free trade bloc, which is slated to begin in 2005. Having the group’s permanent secretariat in Miami would be a huge boon to international arbitration here and would help the struggling city’s economy. Miami is competing with Atlanta; Panama City, Panama; and Puebla, Mexico, for the designation. ‘CATCH UP WITH REALITY’ Meanwhile, over the past year, The Florida Bar has been debating sweeping new rules governing out-of-state and foreign attorneys who practice in Florida. In August of last year, then-Bar president Tod Aronovitz appointed 17 lawyers to the Bar’s special commission on the multijurisdictional practice of law. The commission was formed in response to the ABA’s approval of suggested rules for state bar organizations governing lawyers who practice in jurisdictions where they are not licensed. The ABA model rules resulted from a two-year study ordered by ABA President Martha Barnett in July 2000. Barnett, a partner at Holland & Knight in Tallahassee, commissioned the study because of a 1998 California Supreme Court decision, Birbrower, et al. v. Superior Court of Santa Clara County. That ruling held that out-of-state lawyers assisting a California client in a California arbitration under California law were engaged in the unlicensed practice of law. For decades, there have been persistent questions about how state bars should address the issue of attorneys who regularly practice nationally and internationally. Alan T. Dimond, a partner at Greenberg Traurig in Miami who served on the ABA commission, said that he sees lots of South Florida lawyers practicing commercial law in other places, such as New York. “The rules don’t allow a lawyer to practice law in New York without a license,” he said. “So do we want the rules to catch up with reality?” Florida Bar officials say the state’s rules on multijurisdictional practice and arbitration badly need updating. Lori Holcomb, staff counsel to the Bar’s MJP commission, said, for example, that under Florida licensing rules, attorneys from foreign nations are still not supposed to represent clients in Florida arbitrations. In reality, however, non-U.S. lawyers regularly participate in arbitrations here. Harold E. Patricoff Jr., a partner at Shutts & Bowen in Miami who works on international arbitrations, said there is a pressing need for a Florida rule change to clear up any doubt that non-U.S. attorneys are allowed to participate in Florida arbitrations. “Foreign attorneys [risk] being hit with unlicensed practice of law,” he said. The Florida MJP commission, chaired by John Yanchunis of James Hoyer Newcomer & Smiljanich in Tampa, first met last September. It held four meetings before publishing its proposed rules on multijurisdictional practice in March. The proposed rules cover transactional and litigation practice as well as arbitration. The proposed rules, as originally presented by Yanchunis’ commission, sought to reduce the number of lawyers not licensed in Florida who handle Florida arbitrations or make court appearances here. They would cap appearances by non-Florida lawyers in court and arbitration cases at three during any one-year period. Currently, U.S. lawyers from other states can make an unlimited number of court appearances as long as a judge grants approval through a procedure known as pro hac vice. Judges would not have that discretion under the proposed new system. Under the proposed rules, all U.S. and non-U.S. lawyers who are not licensed in Florida and who participate in a court or arbitration case in Florida would have to file a notice of appearance with the Bar and pay a $250 filing fee. Revenues from that fee would have been used to fund disciplinary actions and compensate defrauded clients. In addition, the proposed rules would require that out-of-state attorneys disclose all Florida arbitrations in which they’ve participated during the past five years. That was fiercely opposed by business groups and arbitration lawyers on the grounds that it would have jeopardized the complete confidentiality of arbitration proceedings. Bar officials downplay that concern. “The notice requirement would give us a count so we could know how many out-of-state attorneys are working in Florida,” said the Bar’s Holcomb, who noted that California has a registration requirement. In addition, the information provided to the Bar would not be public information and presumably would not be subject to discovery. Finally, the original version of the rules would have completely excluded non-U.S. attorneys from arbitrations in Florida. The MJP commission said the rules were needed to bring out-of-state lawyers practicing in Florida under the rules of the Bar for the work they do here. “There must be a mechanism to bind the lawyer to Florida’s Code of Professional Responsibility and to discipline the out-of-state lawyer for ethical breaches,” the commission wrote in its MJP report. “If we are not careful, we could end up with the situation where lawyers target the state as a place to do business without being monitored by the professional association,” explained Marvin Gutter, a partner at Tescher Gutter Chaves Josepher Rubin & Forman in Boca Raton who served on the MJP commission. But critics of the Bar’s proposed rules argued that there was no systematic evidence of lawyers from outside Florida causing problems either in arbitration or court proceedings. When asked for specific examples of problems, Bar officials couldn’t point to any. They said they couldn’t identify specific problems because there is no notice requirement that allows them to count how many non-Florida lawyers participate in arbitrations or are admitted pro hac vice in Florida court cases. “There was not a documented problem of out-of-state attorneys coming in here,” Holcomb said. “The reason The Florida Bar was looking at it was because the ABA was looking at it.” The proposed Bar rules differed in significant ways from the ABA model rules on multijurisdictional practice. The ABA’s suggested rules do not prohibit non-U.S. attorneys from participating in arbitrations in U.S. jurisdictions. They also say nothing about limiting appearances to a set number per year, and they do not recommend that attorneys disclose to the state bar all arbitration proceedings in which they’ve participated. Indeed, the ABA model rules express skepticism about the need for arbitration attorneys to be licensed in the state where the arbitration is taking place. “Admission to practice law in the jurisdiction in which the proceeding takes place may be relatively unimportant, in part, because the jurisdiction may have no relation to the law governing the proceeding or to the dispute,” the ABA report said. ‘UNDER OUR RADAR’ After the Bar published its proposed rules in March, they went largely unnoticed and were on their way to becoming law. In May, the rules cleared a first-read before the Bar board of governors. They were slated for a second and final read by the governors in August, before being sent to the Florida Supreme Court for final approval. But in the midst of a routine June 12 conference call of the Bar’s international litigation and arbitration committee, a lawyer on the call asked if anyone was familiar with the proposed rules on multijurisdictional practice. “No one in the international arbitration community knew anything about new rules,” said Edward H. Davis, chair of the Bar’s international litigation and arbitration committee and a partner at Astigarraga Davis, who organized the conference call. “This whole rulemaking process was flying under our radar.” When they learned the specifics, members of the committee came to the conclusion that the rules would have serious adverse effects on international arbitration in Florida. They vehemently objected to limiting U.S. lawyers not licensed in Florida to three arbitrations per year in Florida. That might prompt companies to move arbitrations elsewhere for fear of having their top attorneys max out in the middle of an arbitration case, they warned. Disclosure of past arbitrations also might prompt companies to move arbitrations elsewhere because it lessens confidentiality. In addition, it could create a bind for arbitration attorneys, who typically sign confidentiality agreements pledging not to disclose any information about an arbitration. “The idea of an attorney giving any notice would be really contrary to the ethos of confidentiality for arbitrations,” said Stephen R. Bond, former secretary general of the International Court of Arbitration of the International Chamber of Commerce in Paris. “It would be certainly be a negative factor in deciding on Florida.” Other critics also raised concerns about the impact of the proposed Florida rules on the arbitration industry here. While more than a dozen states charge a filing fee for appearances by out-of-state attorneys in court, no significant arbitration jurisdiction in the country places any limitation on the number of arbitrations that out-of-state attorneys can handle. Of particular concern is that Georgia, which is competing with Florida to win the nod as headquarters of the FTAA, already has approved multijurisdictional practice rules that contain no arbitration limitations like those proposed in Florida. ‘CALL TO ARMS’ After learning the details of the proposed Bar rules, the group of prominent international arbitration lawyers formed an ad hoc committee to stave off adoption of the proposed rules. “It was sort of like a call to arms,” said George Mencio Jr., a partner at Holland & Knight in Miami. The committee was made up of about two-dozen attorneys, including Astigarraga, Davis, Jose Antonio Santos of Concepcion Rojas and Santos in Coral Gables, Eduardo Palmer of Steel Hector & Davis, and Edward M. Mullins of Astigarraga Davis. “Our strategy was not to be combative and polarize certain aspects of the Bar,” Mencio said. “We wanted to be educational and enlighten.” The insurrection gained strength at the Bar’s annual meeting in Orlando in late June. The group persuaded the Bar’s business law and international law sections to oppose the proposed rules. Members of the ad hoc committee also lobbied newly installed Bar president Miles A. McGrane III, a partner at McGrane & Nosich in Coral Gables. They asked that the rules be reconsidered and that a new commission be appointed. Realizing the high political stakes, McGrane quickly moved to have the rules tabled. But he refused to appoint a new commission. Instead, he ordered the commission on multijurisdictional practice to meet again and reconsider the proposal. The ad hoc committee of arbitration lawyers also lobbied Gov. Bush. That effort paid off. McGrane told the Daily Business Review that when he informed Bush about the Bar’s proposed arbitration rules, the governor responded that he wanted them changed. On July 23, a subcommittee of the Bar commission, headed by Ruth Barnes Kinsolving, a partner at Carlton Fields in Tampa, listened to a presentation by Davis, Mullins and Craig E. Stein, a solo practitioner in North Miami Beach. At the conclusion of the meeting, while not addressing the issue of registering out-of-state lawyers, the subcommittee unanimously voted to exempt lawyers involved in international arbitration from the proposed rules. The panel, however, left the proposed rules in place for arbitration involving only U.S. parties. International cases involve at least one non-U.S. party or a non-U.S. issue. Domestic arbitrations are those involving only U.S. parties. “It’s basically two parallel universes,” Astigarraga said. “International arbitration is a specialized practice and does not tend to bleed over to the world of domestic operations. For example, international arbitrations do not involve consumers.” In late August, the Bar subcommittee sent its amended set of proposed rules — exempting international arbitration from any regulation — to the full commission. “We acted quickly because the concerns were quite legitimate,” said commission member Marvin Gutter. He noted that the governor’s voice was particularly influential. Bush had expressed concern that the rules would end Florida’s chances of becoming a major international arbitration center and becoming the home of the FTAA. “Anytime the governor’s office involves itself in this type of process, we are duty-bound to listen,” Gutter said. Then, on Thursday, the 17-member MJP commission meeting in Tampa voted unanimously to adopt all the recommendations of the subcommittee. Commission chair Yanchunis said that his commission had “quite frankly not considered the issue of international arbitration.” At the meeting, Louis T.M. Conti, a partner at Holland & Knight in Orlando who’s a member of the Bar’s business law section, asked the commission to consider not regulating lawyers representing clients in domestic arbitrations. But Yanchunis said that issue had been fully considered previously and wouldn’t be taken up again. “I’m not going to open that up unless some member of the commission wants to do that.” Now, more lobbying is under way to roll back the proposed Bar rules governing domestic arbitrations. James B. Murphy Jr., a partner at Shook Hardy & Bacon in Tampa and chair of the Bar’s business law section, said critics of the remaining arbitration rules plan to make their case directly to the Bar’s board of governors rather than seek a change by the MJP commission. “The rules restrict a client’s [freedom] to pick lawyers of their choosing,” Murphy complained. But some observers predict that it will be harder to convince Bar officials to dump the proposal rules on domestic arbitrations. That’s because many individual consumers are bound by arbitration agreements in insurance and brokerage contracts. Those individuals are heavily dependent on having competent, honest counsel at arbitration proceedings. If the out-of-state lawyer proves to be incompetent or dishonest, the Bar would have limited ability to discipline the lawyer. In an interview, Yanchunis said he opposed the effort to undo the rules on domestic arbitrations. “International arbitrations come to Florida only out of convenience, whereas in domestic arbitrations there is a need to protect the public,” he said. Some arbitration lawyers disagree. “It does not make sense that you would have a carve-out for international arbitration and not domestic arbitration,” said Merrick L. Gross, an executive committee member of the Bar’s business law section and partner at Akerman Senterfitt in Miami. Other observers are cynical about the Bar’s motives in crafting any restrictions on out-of-state lawyers. Joseph P. Klock Jr., chairman of Steel Hector & Davis in Miami, said that while the avowed goal of greater attorney accountability is laudable, the proposed rules have “the unseemly odor of anti-competition.” Others contend, however, that the Bar’s action and subsequent reversal on international arbitration had more to do with ignorance than avarice. That was tacitly acknowledged by David P. Milian, a member of the Bar’s MJP commission and a partner at Kozyak Tropin & Throckmorton in Miami. “While looking at the broad spectrum of rules governing professional responsibility, this unique corner of the world was not something we had in mind when we first looked at it,” Milian said.

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