Bridges to Brazil

From The Practice September/October 2018
How foreign law firms connect with the Brazilian legal market

In previous issues of The Practice, we have explored the role of foreign law firms in the contexts of different emerging economies. First, we looked at the state of foreign firms in China and how their use of the “outpost office” strategy relates to the development of the Chinese legal profession. (For more on this, see “Foreign Firms in China.”) More recently, we examined how foreign firms operate in and around India while they remain prohibited from establishing offices in the country. (For more on this, see “Foreign Firms Prepare for Landing?”) As part of this ongoing series, we now turn our attention to foreign firms in Brazil.

The regulation of foreign lawyers in Brazil

As Jayanth K. Krishnan, Vitor M. Dias, and John E. Pence uncover in their history of Brazil’s corporate legal sector, foreign lawyers have been a fact of life in Brazil for more than a century. Before the 1960s, the regulation of foreign lawyers lacked focus and effect. By the close of the 20th century, both federal legislation and the Ordem dos Advogados do Brasil (OAB), which regulates the Brazilian legal profession, had enacted far stricter rules governing the activity on foreign lawyers. According to the OAB’s Provimento 91/2000, any lawyer working for a foreign firm—foreign firms being defined as those who have shares controlled by non-Brazilians—could act only as “legal consultants.” As such, lawyers working at foreign firms—even Brazilian lawyers who have passed the Brazilian bar—cannot litigate and cannot practice Brazilian law.

To earn that “consultant” designation, foreign lawyers must undergo a rigorous registration process with the OAB to consult on foreign law in Brazil. Their eligibility is contingent on:

  1. Residence—Registrants must prove they hold a residence visa in Brazil.
  2. Qualifications—They must have the ability to practice law in their home country (registered to a state bar, for example, in the United States).
  3. Character and fitness—They must produce a document attesting to their good conduct and upstanding reputation, affirmed by both their institution of origin (for example, their home bar association) in addition to three Brazilian lawyers registered with the OAB in the appropriate Sectional Council. Furthermore, registrants must submit any disciplinary records from any jurisdictions in which they are permitted to practice or submit a statement affirming they have never been disciplined for an infraction. Finally, they must prove they have not been convicted of a crime in their home jurisdiction as well as the Brazilian jurisdiction in which they intend to consult.
  4. Reciprocity—Registrants must provide proof of reciprocal treatment of Brazilian lawyers in their home jurisdiction.

The timing of these stricter regulations was no coincidence. In the 1990s and 2000s, as Brazil’s economy underwent a wave of liberalization, foreign firms began staking out claims to the Brazilian legal market. (For a broader historical view of the Brazilian legal profession and market landscape, see “The Brazilian Legal Profession” in this issue.) In 1997, per Análise Advocacia 500, a Brazilian legal publication that surveys and ranks law firms and lawyers within the country, Linklaters and White & Case were the first foreign firms to ride that wave so far as opening their own offices in Brazil. In the ensuing 15 years, more than 20 other foreign law firms would join them (see Figure 1).

Foreign lawyers have been a fact of life in Brazil for more than a century.

There are three broad ways to categorize how foreign firms moved to capitalize on the opening Brazilian market: loose affiliations through global networks, formal one-to-one associations between foreign and Brazilian firms, and, of course, foreign law firms’ offices located in Brazil. To map the typology of these international connections, we explore each in kind. To better understand what differentiates these typologies, we will compare them along three metrics: the types of lawyers they employ, the type of work they perform, and the degree to which foreign firms may influence their operations.

Loose affiliations through global networks

One route Brazilian firms take to forge and leverage international ties is joining networks of independent firms from across the globe. These networks—examples including Lex Mundi, World Law Group, Interlex, Multilaw, and World Services Group, among others—tout dozens (even hundreds) of member firms with tens of thousands of lawyers, often seeking international clients in need of legal services. More often than not, there is only one firm per country in each network. The World Law Group’s pitch on its website perhaps says it most succinctly: “All [member firms] provide the on-the-ground bench-strength, broad national/regional coverage and in-depth local-market knowledge and contacts that no branch office of a ‘global’ firm could hope to emulate.” Airline alliances offer a useful analogy for how these networks operate. For example, more than 25 independent airlines form Star Alliance. These airlines may collaborate on marketing, logistics, and even selling tickets to the same flights through code sharing (that’s how you buy a ticket through American Airlines and end up flying on a British Airways plane). Global networks of law firms offer clients a similar value proposition: a singular place to search for legal services no matter where in the world you are doing business, even if those services are provided by an amalgamation of different firms.

Many Brazilian firms opt to join these networks, including many firms ranked among the most admired law firms in Brazil, per the 2016 edition of Análise Advocacia 500. Demarest Advogados (ranked fifth most admired) is the sole Brazil member of both Lex Mundi and Interlex. TozziniFreire Advogados (ranked seventh most admired) is likewise the lone Brazil member of both the World Law Group and the Pacific Rim Advisory Council. Lobo de Rizzo Advogados (ninth) is a member of Multilaw, and Veirano Advogados (10th) is a member of the World Services Group. And these are just a few notable examples. In “Corporate Law Firms: The Brazilian Case,” Daniela Monteiro Gabbay, Luciana Ramos, and Ligia Pinto Sica document their interviews with a number of influential Brazilian law firm partners. They note, “The majority of our interviewees stated they were part of nonexclusive alliances that guarantee a firm’s independence.” They go on:

According to the 2012 edition of Análise Advocacia 500, of the 224 Brazilian law firms listed as the most prestigious, 70 percent said they either have considered, or would consider, some form of partnership with a foreign firm. If we look at the 65 firms the survey has consistently ranked as “elite,” 55 percent claim to have received a proposal from a foreign firm to enter into a formal partnership or alliance, or were actively pursuing such a partnership at the time of the publication. Of the thirteen firms we interviewed in 2014, however, none had a formal partnership with a foreign firm. The interviewees consistently said that when they do work with foreign firms, it is typically an on-demand, case-by-case basis.

More often than not, there is only one firm per country in each network.

Reflecting this trend, one of Gabbay, Ramos, and Sica’s interviewees, a founding partner in a full-service firm with more than 200 lawyers, said:

We have a very strong relationship with many foreign law firms, especially American ones, but also European, German, [and] Norwegian [firms]. But we do not have a specific partnership. We have always avoided that. To be a partner with one would close many doors for us. It makes no sense for the office to have a relationship with just one office.

It should be noted that the firms that operate within these global networks remain closely linked to the Brazilian market and are often utilizing these networks as a means for international referrals, both inbound (for example, for the inbound Brazil-based legal work of foreign companies doing business in Brazil) and outbound (for example, for the outbound international work of Brazilian companies doing business in other jurisdictions). For example, lawyers at these firms will primarily be OAB-barred and able to practice in Brazil. Moreover, it is important to stress the nonexclusive nature of global networks. In other words, unlike a formal cooperation agreement (see below), these networks allow Brazilian firms to both refer work to member firms and have work referred to them from other member firms in a nonexclusive manner. These global networks are therefore an attractive way to tap into the global legal market for many Brazilian firms in a way that impacts their larger strategies less.

Formal cooperation between firms

While loose affiliations through global networks are the most common method of engaging with foreign firms in Brazil, a few Brazilian firms do maintain formal ties with foreign firms. Prominent examples of these formal connections include Baker McKenzie and Brazilian firm Trench Rossi Watanabe (ranked eighth most admired per the 2016 edition of Análise Advocacia 500), DLA Piper and Brazilian firm Campos Mello Advogados, Mayer Brown and Brazilian firm Tauil & Chequer Advogados (ranked 18th most admired), and Dentons and Brazilian firm Vella Pugliese Buosi e Guidoni Advogados (ranked 27th most admired). It is important to note that these cooperation agreements are just that—cooperation agreements, not mergers. As such, the Brazilian firms are staffed with OAB-barred lawyers who are permitted to practice Brazilian law. They simply are entering into formal cooperation agreements with large international firms, whose lawyers are not OAB-barred. On a public level, all four Brazilian firms note the connections in similar terms—Trench Rossi calls it a “strategic cooperation,” Campos Mello refers to an “international cooperation agreement,” Tauil & Chequer describes an “association agreement,” and VPBG opts for the label “strategic alliance.” The manner in which they highlight these connections—and the ways in which the relationships are otherwise apparent—ranges.

One clear benefit across these exclusive ties appears to be the ability to leverage the full capabilities of the partner firm.

The agreement between Tauil & Chequer and Mayer Brown dates back to 2009 and, judging from public information, the connection between the two firms appears to be a close one. Mayer Brown is listed as the first and predominate name on Tauil & Chequer’s website. And, on Mayer Brown’s website, Tauil & Chequer is featured as the latter’s Brazil presence (in the same way that it lists their China, London, and Bangkok offices). In fact, Tauil & Chequer’s lawyers can be searched right on Mayer Brown’s website and even have Mayer Brown e-mail addresses. The message to the client: Tauil & Chequer lawyers will offer the authentic Mayer Brown experience.

A screenshot from the Mayer Brown Tauil Chequer website.

Campos Mello and DLA Piper have an agreement that goes back to 2010. On the latter’s website, underneath the banner heading of “Campos Mello Advogados” reads, “in cooperation with DLA Piper.” When searching locations on DLA Piper’s website, Campos Mello’s Rio de Janeiro and São Paulo locations are listed as “Cooperation Firm” offices—the only two locations listed as such. Moreover, as was the case with Tauil & Chequer, the Brazilian lawyers’ contact information (which includes only a Campos Mello e-mail address) can all be found right there on DLA Piper’s website without having to move to the Brazilian firm’s website. When one does go to the Campos Mello’s website under the “Global Reach” section, the firm details DLA Piper’s global numbers (such as being located in more than 40 countries and maintaining more than 90 offices worldwide). Like Tauil & Chequer and Mayer Brown, the two firms outwardly leverage the respective foothold of the other to communicate to clients that, taken together, they offer legal services both in Brazil and across the globe.

VPBG and Dentons have the youngest alliance of the four pairs, which was announced in October 2017. There is no prominently explicit mention of Dentons on VPBG’s website; however, like Tauil & Chequer–Mayer Brown and Trench Rossi–Baker McKenzie (see below), the aesthetic design is virtually indistinguishable from the larger firm’s website—including everything from the color scheme to the way the websites are organized. The likely intended effect of this coordination, to the client, is that it all feels like one seamless experience whether looking for legal services in Brazil or elsewhere. Put differently, VPBG-Dentons is presented as being one unified brand. Dentons’ website lists VPBG’s Brasília and São Paulo offices as “our offices” and its lawyers as “our professionals” before noting the relationship with the Brazilian firm, though it is worth noting that VPBG lawyers do not appear to have Dentons e-mail addresses. On the other end, VPBG presents Dentons’ global network under the “About VPBG” section of its website. One clear benefit across these exclusive ties appears to be the ability to leverage the full capabilities of the partner firm.

As Brazil continues to attract foreign investment and as multinational corporations continue to expand worldwide, we at Trench Rossi have a lot to gain from a partnership with Baker McKenzie because they have been doing many of these things for a very long time.

Simone Dias Musa, senior partner of Trench Rossi and chair of global tax practice at Baker McKenzie

The cooperation between Trench Rossi and Baker McKenzie, which stretches back all the way to 1959, deviates from Tauil & Chequer–Mayer Brown, Campos Mello–DLA Piper, and VPBG-Dentons on a number of these points. Apart from a mention of the Brazilian firm’s cooperation with Baker McKenzie in its “About” section, there is no conspicuous sign of the connection on the website to Baker McKenzie at all—save for the matching aesthetic. On Baker McKenzie’s website, Trench Rossi’s locations (Brasília, Porto Alegre, Rio de Janeiro, and São Paulo) are listed along with its own locations (albeit with an asterisk) similar to the other exclusive partnerships. However, instead of linking to another Baker McKenzie page, the user is sent to the separate Trench Rossi’s website, where Trench Rossi lawyers offer Trench Rossi e-mail addresses. Baker McKenzie does, however, include the Brazil-based lawyers in their internal activities, such as the inclusion of a Trench Rossi partner on its Innovation Committee, and includes Trench Rossi lawyers in the otherwise Baker McKenzie–specific press releases, such as the announcement of promotions. Indeed, Simone Dias Musa, a senior partner of Trench Rossi and a member of its management committee, serves as the chair of Baker McKenzie’s global tax practice.

What, then, leads Brazilian firms and foreign firms to come together and collaborate in this way apart from the benefits of a unified brand? The Practice recently sat down with Trench Rossi’s Musa to discuss how firms navigate these relationships and what they aim to achieve. To Musa, who spent part of her early career at Baker McKenzie after earning an LLM at the University of Pennsylvania Law School, the advantages of working with Baker McKenzie are clear. “Why do we partner with Baker McKenzie? It’s about enhancing knowledge and expertise in sophisticated international transactions,” Musa says. She explains:

A firm like Baker McKenzie has a strong background working with a lot of different types of legal matters, whether that’s cross-border transactions, mergers and acquisitions, or whatever it might be. As Brazil continues to attract foreign investment and as multinational corporations continue to expand worldwide, we at Trench Rossi have a lot to gain from a partnership with Baker McKenzie because they have been doing many of these things for a very long time. Meanwhile, we provide them with insight from our success operating in Brazil and our on-the-ground knowledge. We both get a lot out of the cooperation, and that is part of why it has lasted so long.

These ties notwithstanding, the Brazilian firms in these more formal cooperation agreements remain Brazilian firms. Their lawyers are OAB-barred just as any other Brazilian firm, though as Musa notes, they may be more likely to have a greater degree of international experience and expertise. Likewise, while these firms are often capable of taking on both domestic and international work, they may be more likely to build strategies around international work as they leverage the knowledge and experience that comes through their agreements to service multinational corporations and other global clients. Finally, on the autonomous-exclusive continuum in regard to foreign firms, these Brazilian firms are somewhat closer to exclusivity with foreign firms than those in the types of global networks described above. Nevertheless, it is important to emphasize that these agreements do not necessarily indicate an exclusive relationship. As Musa is careful to point out, Trench Rossi can and does work with other foreign firms—the fact that the roots of their relationship with Baker McKenzie run so deep means that often the benefits of working with the latter outweigh those of other possibilities.

Foreign firms in Brazil

The third instance in which the international legal profession intersects with the Brazilian legal market is through international firms opening offices in Brazil. While Brazilian regulations prevent the lawyers in the officers of these firms from practicing Brazilian law (see above), the firms are putting pins in the map anyway. Of the foreign firms with offices in Brazil noted by Frederico de Almeida and Paulo André Nassar in the graph below using 2011 and 2013 data (see Figure 1), 20 continue to maintain offices in Brazil (including Norton Rose Fulbright, which has since absorbed Chadbourne & Parke).

A chart that indicates the number of foreign law firms in Brazil from 1997-2013. It increases every year by 1-2 until 2012 when it goes from 21 to 20, then back up to 23 in 2013.
Figure 1: Análise Advocacia 500 (2011 and 2013) via Frederico de Almeida and Paulo André Nassar

According to lawyer data available through these firms’ websites, international firms tend to have only one office in Brazil (the vast majority are located in the commercial hub of São Paulo) with an average of 5.6 lawyers per office. Fewer than half of these Brazil-based lawyers are partners (43.75 percent), only slightly more than half of whom are located exclusively in Brazil, while the rest also list other locations such as New York or London (53.06 percent). This differs significantly from the foreign firms’ other Brazil-based lawyers (which include associates, counsel, and other titles), the vast majority of which are located exclusively in Brazil (88.89 percent). If one considers only associates, that figure rises to 95.56 percent.

These offices are the most literal manifestation of foreign firms in Brazil, and the metrics of comparison reflect the restrictions imposed on foreign firms according to OAB regulation and Brazilian law. The lawyers, by and large, are not OAB-barred—of course, they could be, but it is a moot point because they cannot practice Brazilian law as lawyers in foreign firms. These offices can only really handle international work. Since their lawyers are registered as “legal consultants,” they have the capacity to advise on only specific aspects of legal work and must tread lightly when the conversation moves toward navigating Brazilian law. On the autonomous-exclusive continuum, these offices are squarely on the exclusive pole since we are talking about the foreign firms themselves. In other words, there is no meaningful separation whatsoever between the interests of the office versus the interests of the foreign firm.

As Gabbay, Ramos, and Sica conclude, debates over the impact of foreign firms in Brazil reflects a dissonance between regulation and reality.

The OAB has made a clear effort to draw clean lines separating what foreign firms can and cannot do in Brazil. For some Brazilian firms, the bar has succeeded. In the words of one founding partner of a more-than-300-lawyer Brazilian firm, per Gabbay, Ramos, and Sica, “There is nothing to complain about. We coexist very well with those who respect the law. They always work in partnership with several Brazilian firms.” Others, however, feel that the rules are not applied as they are written. The founding partner of a more-than-200-lawyer Brazilian firm voiced the complaints of many in the Brazilian legal profession competing with foreign firms:

They are not allowed to compete, but they compete anyway. In fact, most of the foreign law firms work with Brazilian law, if indirectly. Some are obvious—even open. Others are a bit more discreet, servicing only part of the process and afterward going to a Brazilian firm to give an opinion. But they really did all the work . . . because not all the work is necessarily law practice. It is the work that is behind the opinion. So, they do all the work, charge by the hour, and in the end only ask [a Brazilian firm] for counsel. [Foreign firms] really do get the bulk of the work.

As Gabbay, Ramos, and Sica conclude, this debate reflects a dissonance between regulation and reality. However clear the regulation was written, foreign firms still appear capable of commanding a significant chunk of the legal market in Brazil. This issue is likely to take on renewed significance and urgency as Brazil’s economy slows. What effect this will have on cooperation between Brazilian and foreign firms—and what this means for future regulation—remains unclear.

Globalization, Lawyers, and Emerging Economies

Taking a step back, while Brazil’s foreign law firm landscape is in many ways unique, it also echoes the development of other countries’ ecosystems of legal service providers. As the cases of Brazil, China, and India all attest, foreign law firms are standard players in the legal markets of emerging economies. The precise manner in which foreign firms are allowed to operate in each of these three examples varies, however, adding nuance to the understanding of how global legal services penetrate recently opened economies under different conditions.

Brazil, China, and India all underwent processes of liberalization around the same time starting in the late 1980s and early 1990s, though they contrast in how and to what extent these markets “opened.”  There was, of course, one other notable commonality: each country’s legal profession remained largely closed to foreign lawyers insofar as they were restricted from practicing domestic law. What it means to practice law in each case may vary—and there are often debates within each country along these lines—but certain aspects, such as litigation, remain off-limits to foreign lawyers.

The physical presence of foreign firms also looks different in each of the three countries. In India, foreign firms are prohibited from setting up shop—full stop. This does not mean, however, that foreign lawyers are altogether absent. Rather, foreign lawyers are forced to fly in to meet with clients and fly out once their business is concluded. In Brazil and China, foreign firms can set up their own offices, but these contexts do eventually diverge at a different point. Brazil, as we have explored in this article, has strict regulations regarding how foreign firms can interact with Brazilian firms and, more to the point, what they can and cannot do. Although regulations also remain in place with respect to foreign firms in China, the enforcement of those regulations is often much more lax—leading some to observe the status quo as “de facto liberalization” where it may not appear that way on paper.

The continuing development of domestic firms will—and is—impacting the role of foreign firms in these jurisdictions.

One could imagine a spectrum of how emerging economies allow foreign firms and foreign lawyers to operate within their jurisdictions. On the one end, India is a particularly difficult place for foreign firms, as they cannot set up offices in the country, let alone practice Indian law. Toward the other end, China is relatively accommodating to foreign firms, if not officially, then by failing to translate strict regulation into strict enforcement. Brazil lies somewhere between the two. It is neither entirely prohibitive—foreign firms are permitted to set up offices—nor is it entirely welcoming—the lawyers of foreign firms may register only as consultants on legal matters and cannot advise on Brazilian law. Time, however, can change what is possible for foreign firms in any or all of these countries.

Overarching all this is the development of domestic firms and their ability to compete globally. While India and Brazil have seen the development of sophisticated domestic players, such as Pinheiro Neto in Brazil and Amarchand & Mangaldas in India, only China has thus far developed what might be considered truly global players—for instance, KWM and Dacheng-Dentons. The continuing development of domestic firms will—and is—impacting the role of foreign firms in these jurisdictions.

Where is this all headed?

The role of foreign firms in Brazil remains a source of contention. Regulations continue to limit what foreign firms can—and cannot—do in the legal marketplace. However, as noted above, there is an active debate as to whether or not these regulations are effective in limiting foreign firms to practicing only international law in Brazil. It is also noteworthy that Brazilian firms continue to develop in their own right and are increasingly challenging foreign firms for high-end, international work. In that sense, the fortunes of Brazilian firms may well rest on their ability to expand their focus and appeal to more global clients, just as global firms have done with clients in Brazil. “One thing we do at Trench Rossi that separates us from other Brazilian firms today is we value international experience,” says Musa. “We want our lawyers to have that expertise, and we are willing to invest in order for them to have it. We believe that will continue to set us apart.”