Cambodia today is one of Asia’s fastest-growing economies, averaging 7.9 percent growth from 2000 to 2015, according to data from the Asian Development Bank (ADB). And this is expected to grow even further, with the ADB predicting that industries like garments, footwear, construction and services will continue to propel more economic development this year.
This progress is also mirrored in Cambodia’s legal industry. When the Bar Association of the Kingdom of Cambodia (BAKC), was established in 1995, there were only 30 lawyers in the entire country, which had a population of over 10 million at the time. Nearly two decades later, the number of practising lawyers had gone up to 698, according to the 2014 Cambodian Directory of Lawyers.
Key players in the legal market today include local outfits like Bun & Associates, as well as branches of regional firms like Bangkok-headquartered Tilleke & Gibbins, Rajah & Tann and ZICO Law. The market “continues to grow in terms of volume and quality,” said Bun Youdy, partner at Bun & Associates. He added, however, that it is still not as extensive as those in other ASEAN countries, partly “because of the size of the economy, under-developed legal framework and challenging judicial system.”
Sok Siphana, managing partner of ZICO Law-affiliated Sok Siphana & Associates, also sees the Cambodian legal market as small. He also observes that the availability of quality legal talent is “poor in terms of commercial and corporate knowledge,” making it “very difficult to find commercial lawyers with experiences in sophisticated commercial transactions.”
Nevertheless, “market entry-related transactions, acquisitions and financing work, in particular offshore financing” are on the rise, according to Bun. And in the wake of the recently approved Telecommunications Law, he expects compliance work to pile up as well.
Another thriving sector in Cambodia is intellectual property, noted John E. King, partner at Tilleke & Gibbins. “Investors need to protect their valuable IP assets, so we help them do that through our team of Khmer advisors. Trademark has always been a strong practice for us in Cambodia, and we’re seeing increased interest in patent services as the Cambodian government takes steps to improve its registration process in this area – with one example being a recent MOU allowing re-registration of Singaporean patents,” he explained.
King also said added that market activity in real estate, construction and franchising have increased. “As more investors flow into the country, legal professionals can expect more work in these areas, along with mergers and acquisitions and joint ventures,” he said.
BARRIERS TO ENTRY
Foreign law firms trying to enter the market will find it about as protected as a number of other Asian economies. Firms from overseas can establish a presence and practice law in Cambodia only “in commercial association with Cambodian law firm and may not directly represent clients before the courts,” according to Siphana. The term “commercial association”, he said, “is understood to mean any commercial arrangement and does not require it to be in any juridical form.” This requirement, however, is not applicable “if legal services are provided on foreign law and international law.”
Siphana added that a foreign law firm is defined as “a firm of lawyers licensed to practice laws in its home country or its country of origin.” Such a firm is allowed to open a branch or office in Cambodia, but it must first seek approval from the Law on the Bar (LoB), which governs the Cambodian legal profession, and register with relevant government authorities in accordance with local laws. Other foreign players, including commercial companies as well as individual law graduates or lawyers who set up an investment, commercial, accounting, tax or legal consulting company in Cambodia, are not authorised to provide legal advisory services in Cambodia, even if they have registered with the Cambodian Ministry of Commerce, the Council for the Development of Cambodia or any other government agencies.
The potential stemming from the ASEAN Economic Community (AEC) has resulted in a more active legal market, according to Siphana. “There are more steady flows of trade and investment delegations from the neighbouring countries, interestingly enough comprising of SME firms. Large foreign firms are also coming [to] the ASEAN region, either formalising their existing representative offices or expanding their operations,” he shared.
Bun, who leads the corporate, banking & finance and commercial litigation practices at his firm, also cites that the government has recently introduced reforms and regulations and is expected to adopt these measures in the near future. As such, “it is anticipated that more works will be increased in the regulatory/compliance area,” he continued.
King added that market activity in real estate, construction and franchising have increased. “As more investors flow into the country, legal professionals can expect more work in these areas, along with mergers and acquisitions and joint ventures,” he said.
In 2018, the country is slated to hold a general election, but this political development isn’t expected to affect the Cambodian legal industry. As Bun pointed out, “The upcoming election in 2018 will be an important event. Some major investors may take the wait-and-see approach, but so far we do not see signs of the slowing down of legal work.”
While Cambodia’s GDP is expected to grow at around 7 percent in the next two years, its government still has to address some possible roadblocks, particularly to investment. As King shared, “Compared to its ASEAN neighbors, Cambodia has fewer legal restrictions on foreign direct investment, which should theoretically generate more economic activity and the legal work that accompanies it. But the reality is that investors feel there is a lack of transparency in some aspects of the investment environment, and this makes Cambodia a less attractive investment destination than some other regional players.”
He also notes that positive anti-corruption steps taken by certain agencies, such as the Ministry of Commerce and Department of Intellectual Property Rights, help in highlighting how moves toward transparency are gaining ground.
Initiatives outside the ASEAN may also benefit Cambodia. “Currently, the geopolitical positioning of China’s One Belt One Road will affect, in a very positive way, the prospect of large Chinese firms coming to invest in major infrastructure projects in Cambodia. Japan’s regional influence will also bring more and more manufacturing industries into the country,” Siphana said.