U.S. Lawyers Push to Work in Japan

An American diplomat, a veteran of years of economic negotiations with Tokyo officials, compares dealing with Japan to “playing Space Invaders without ammunition.”

That impression was reinforced when U.S. negotiators got up recently from the latest round of the so far fruitless talks aimed at making it possible for American lawyers to work in Japan. No foreign lawyers have been admitted to the bar in Japan since 1955, when a law was passed making the legal profession an exclusive Japanese preserve.

For 12 years, foreign lawyers, mostly Americans, carried on talks with the Japanese Federation of Bar Assns. in the hope of being admitted to the lucrative field of international commercial law here. The discussions led nowhere, the Americans took their case to Washington, and the U.S. Trade Representative’s office has been negotiating on their behalf since 1982.

The timing of the negotiations is critical because many of the 100 or so foreign lawyers now working in Japan are associates of about a dozen older American lawyers who were admitted to the bar before 1955. When the last members of the pre-1955 group retire, all that will be left for American lawyers here will be employment as trainees in Japanese law offices, and trainees are not well paid.

“There remain fundamental differences between us, and we are not confident that these can be resolved,” an American official said after 18 hours of talks over three days with Japanese counterparts.

Under the latest Japanese proposal, the federation would permit American lawyers to work in Japan only if they agree not to display the sign of a foreign law firm, not to call themselves by the Japanese word for lawyer, not to form partnerships with Japanese lawyers, not to hire Japanese lawyers and not to advise on Japanese law.

And there is more. The American lawyers would have to join a Japanese bar association and submit to its disciplinary measures, though they would not be admitted as full members. The Federation of Bar Assns. also demands that foreign lawyers must practice law in their own countries for five years before coming to Japan. Japanese fear that U.S. law firms, which they regard as wealthy and powerful, would hire the best Japanese lawyers and obtain a competitive advantage over Japanese firms if they are allowed to operate in Japan without restrictions.

The federation’s offer is subject to the condition that Japanese lawyers be allowed to practice in what a spokesman described as a “considerable number of U.S. states.” Although the federation first indicated that “considerable” meant 25 of the 50 states, an official now says that perhaps five or six key states, along with Washington, D.C., might be acceptable.

Only New York and Michigan now allow foreigners to practice law. California, Hawaii and Washington, D.C., are considering similar arrangements.

U.S.-Japan friction in the field of aviation, which like the lawyers’ dispute dates to the early 1970s, also appears to be no closer to resolution even though Japan has withdrawn its objection to United Airlines’ taking over Pan American’s Pacific routes. United’s flights began this week, and two new Japanese airlines are expected to begin flying the Pacific later this year.

Fundamental disputes, however, continue in negotiations aimed at producing a new bilateral aviation agreement.

In 1985, officials of the U.S. Department of Transportation said publicly that they were looking forward to final agreement on a new U.S.-Japan aviation pact by last September. Now, an American official here said: “We hope to finish by the end of 1986.”

The official, who requested anonymity, listed as impediments to a new agreement disputes over new routes, passenger capacity, “beyond rights” to fly beyond cities in each country to third countries, pricing and the degree of flexibility given airlines to conduct their business.

Philosophical conflict between an American desire for free competition and a Japanese desire to control and regulate competition seems to be at the root of the trouble. Japanese government officials and executives of Japan Air Lines regularly portray the current aviation agreement, signed in 1952, as an unfair remnant of Japan’s defeat in World War II, foisted upon an occupied country by the victorious power.

The Tokyo Stock Exchange has now been opened to foreign brokers, but American complaints on the overall question of access to Japanese financial markets remain unresolved. Two young American traders representing Merrill Lynch Securities became the first foreigners to appear on the floor of the exchange. The faces of the Americans were televised nationally, and Japanese reporters commented breathlessly that the Americans conducted all their transactions in the Japanese language.

Merrill Lynch executives were pleased, too. Tetsundo Iwakuni, chairman of Merrill Lynch Japan, said: “We will now be able to offer 24 hours’ continuous trading. While New York and London are asleep, Tokyo will be awake.” Merrill Lynch is also to get a seat on the London exchange when it is opened to foreign traders in October.

Iwakuni emphasized that, while a corporate seat on the Tokyo exchange may seem expensive--$5 million, compared to $480,000 for an individual seat on the New York Stock Exchange--Merrill Lynch hopes to recover the money within two or three years. As an exchange member, it will no longer have to pay commissions to Japanese traders.

Goldman, Sachs; Morgan Stanley, and three British securities firms will all begin trading on the Tokyo exchange in the next few months.

Still, David C. Mulford, U.S. assistant Treasury secretary for international affairs, made it clear during a visit to Tokyo that Japan has a long way to go to complete the opening of its financial markets.

Mulford said the addition of foreign firms to the Tokyo exchange is a sign of “real progress in accepting foreign financial institutions more fully into the Japanese economy.” But he expressed disappointment at the lack of progress in establishing a “free, liquid and deep market” in yen bonds, issued either by Japanese banks in Europe or by the Japanese government here.