New Law Firms in Town

The Implications of the Beginning of Organizational Advocacy Service in Ethiopia

The provision of organizational advocacy services established as law firms has a long history. Guinness World Records notes that Thomson Snell & Passmore law firm, established in 1570 in the United Kingdom, is the oldest continuously operating law firm. Similarly, the first law firm in the United States was established 12 years after independence from Great Britain. Rawle & Henderson LLP, a law firm headquartered in Philadelphia, Pennsylvania, is the oldest law firm in continuous practice there. Established in 1783, the firm is one of the leading practices in admiralty and maritime law.

Since those years, the growth of law firms in number, size, area of practice, and revenues has been growing tremendously. Accordingly, leading national and global law firms have been providing advocacy services with large number of attorneys, generating billions of dollars in revenues.

Baker McKenzie has been named as the world’s leading law firm brand for the 12th consecutive year in the latest Thomson Reuters Global Elite Law Firm Brand Index. According to the National Law Journal 2021, NLJ 500 ranking of law firms based on size, this law firm had 4,699 attorneys and ranked 1st in the United States with over USD3 billion in annual revenues—almost  Ethiopia’s total export earnings in 2019, for comparison. In the 2022 index, Baker McKenzie scored more than double the points of the firm’s nearest competitor, receiving an overall score of 100, which is 56 points ahead of the firm ranked in second place. This shows how systematically managed and regulated law firms generate large amounts of revenue from the provision of organizational legal services.

DLA Piper is another multinational London-based British law firm with offices in more than 40 countries throughout the Americas, Asia Pacific, Europe, Africa, and the Middle East with about 4,200 attorneys. For over a decade, the firm has partnered with Mehrteab Leul & Associates Law Office (MLA) to extend its services in Ethiopia. MLA is a leading full-service law office with over twenty years of experience advising and representing clients on a wide range of matters, primarily related to corporate law, finance, and investment in Ethiopia.

Such type of law firms have a large number of equity partners and employees. They represent famous individuals, very large corporates that have global influence. These firms have huge earnings, incomparable to what lawyers practicing solo make.

The development of corporate businesses, lack of confidence on solo practitioners for various reasons including death and other forms of incapacity, and liability problems have made legal service consumers more unsecured from time to time and there is a growing shift towards organizational legal service in many countries. Ethiopia is no exception.

The global trend of modern organizational legal service has also been felt in our legal service businesses a long time ago. Multinational companies, international charity organizations and other corporate entities, with the experience of working with law firms in their country of origin always request for the services of law firms in Ethiopia as they know what advantages that that entails. For decades, the legal framework, however, was not in place to allow the registration of law firms at the federal level.

To its credit, the State of Oromia has earlier put in place the necessary legal framework and clear requirements for the registration of law firms. But no law firm was registered until the federal government came up with the legal framework allowing the registration of advocacy firms. There is no study as to why practicing lawyers shied away from establishing law firms in Oromia, even though the law was in place. Informal discussions with professional peers, however, indicate that the fear of misunderstanding among partners, the fear of tax complications, the fear of liability suits against the firms, the fear of being exposed for unanticipated risks rank top in the list of reasons lawyers mention. As a beginner of organizational legal service, the lack of knowledge and experience on how the firm will actually operate are also quoted as a major reason.

Following the macro political economy reform introduced in Ethiopia with the coming of Prime Minister Abiy Ahmed in 2018, legal reform measures was one of the reform agendas for the government. Accordingly, a legal reform team tasked with the drafting of the law has successfully discharged its responsibilities and has come up with the new law: Federal Advocacy Service Licensing and Administration Proclamation No. 1249/2021. Among other important issues, two outstanding achievements are secured by this proclamation. One is the establishment of the federal advocates association as the first statutory association in Ethiopia and the second is the setting of the legal framework for the establishment of law firms as organizational advocacy service providers.

Based on this new legal framework, the first law firm to get an operating license was Habesha Legal Advocates LP (HLA) on April 6, 2022. HLA is comprised of qualified and licensed lawyers with varying expertise in different areas of law. The second registered law firm which launched its official establishment on July 5, 2022 was Mehrteab & Getu Advocates LLP (MLA). These law firms pioneered the organizational advocacy service provision in Ethiopia and hence deserve due recognition and appreciation. Hopefully more firms will follow in their footsteps. However, to avoid frustration and encourage others towards more organizational service provision, every support should be provided from the critical institutions that have stakes in the success of the firms. Such institutions that should provide the critical supportive environment include the Ministry of Justice, the Federal Advocates Association, and the Ministry of Revenues to manage possible tax controversies which is always the elephant in the room as far as establishing advocate firms is concerned.

Other issues related with the employment of lawyers and attorneys, including incentive provisions to buy duty free cars, as well as many other administrative issues are serious concerns that have surfaced after the firms started their operations. In fact, more requirements are expected to be identified as upcoming concerns as they engage more into the practice. As a new type of partnership, such concerns are naturally expected and should not be frustrating. The usual mode of leaving every hassle to resolve themselves shouldn’t be allowed to happen. Synergized efforts should be exerted from the institutions mentioned above, starting from curiously collecting information about their challenges every time and then solving their problems and addressing concerns on time with due diligence.

The proclamation mentioned above defines a law firm as an organization established to provide advocacy services such as legal document drafting and submission on behalf of the client as well as negotiation on civil matters and representing clients and litigating before courts of law, administrative tribunals, quasi-judicial institutions, arbitral bodies, and other alternative dispute resolution forums. At least two or more advocates, who have a valid advocacy service license issued under the provisions of this proclamation, may jointly establish a law firm. Therefore a single advocate can’t establish a law firm contrary to how a single person is able to establish a company as per the newly amended commercial code.

The main objective of a law firm is to provide advocacy and render services related with advocacy service. The law has left the details of the related services to be regulated by a directive to be issued by the ministry of justice. Authentication and affidavit services may be some of the related services, though not confirmed. Even though the directive is not yet issued, hopefully the related services will entitle law firms to have a wider scope of engagement in the advocacy service provision compared with the private practitioners. This may encourage the registration of more law firms and ensure the modernization of the advocacy service. Issuing the directive as early as possible is critically important as the establishment of more and more law firms has a lot of advantages in terms of tax revenue for the government, creating a more efficient and transparent advocacy and related services provision for those requiring legal service, and being an enabler for modern businesses and investors.

The organizational structure of a law firm shall be a limited partnership and as a legal entity it can make contracts, own property, sue and be sued on its own name, and has rights and obligations which other juridical persons have. Liability is one of the most important legal features of a law firm. Accordingly, the liability of partners in a law firm to third parties shall be limited to the share each partner has in the firm. The law firm shall continue to exist despite changes on the membership of the firm. Concerning the usual question of whether advocacy service is a business or not, the law clearly states that the provision of advocacy service by a law firm does not make the service a business or investment as defined under the Ethiopian Commercial Code and the Investment Law.

The members of a law firm may choose any name for the firm subject to approval based on the conditions mentioned in the proclamation. To indicate the advocacy service, however, the firm name shall be followed by the words “Limited Partnership” or the abbreviation “LP which is also a similar experience in other legal jurisdictions.

Regarding administration, a law firm shall be managed by one or more managers appointed by the partners’ decision. The manager of the law firm shall be elected from among partners of the law firm and shall administer, represent, defend the interests, discharge obligations, and represent the firm. And, on behalf of the firm, the manager may sue, defend, contest, and give power of attorney to an advocate or a third party. The manager and the firm shall be jointly and severally liable for the damages caused to third parties by the actions of the manager while performing duty with the view to get personal gain. The law firm shall be relieved from liability where the injured party knew of the fact that the manager who caused the damage did not have the power to carry out the undertaking.

Liability is one of the most important legal features of a law firm. Accordingly, the law firm shall be liable to clients and other third parties for damages caused—in the normal course of services—by advocates and support staff unless the advocates and support staff, contrary to the partnership agreement, committed an unacceptable act on the cases at their hand or failed to discharge their respective duties or committed cheating or deliberately caused damages.

10th Year •July 2022 • No. 109