The Brazilian Legal Profession

Volume 4 • Issue 6 • September/October 2018
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The Brazilian Legal Profession

Key Findings from Six Years of Research

Adapted from “Globalization, Lawyers, and Emerging Economies: The Case of Brazil” by Luciana Gross Cunha, Daniela Monteiro Gabbay, José Garcez Ghirardi, David M. Trubek, and David B. Wilkins in The Brazilian Legal Profession in the Age of Globalization: The Rise of the Corporate Legal Sector and Its Impact on Lawyers and Society (Cambridge University Press, 2018).

In the 1990s emerging economies went through major transformations. Closed economies were opened, foreign investment encouraged, and many state-owned enterprises privatized. In Brazil this “global transformation” had a major impact on its legal system, with the greatest degree of change taking place in the corporate legal profession. This sector includes all the institutions and actors that provide legal advice to corporations whether domestic or foreign, public or private. Global transformation brought about major changes in the national political economy, led to a flood of new laws governing corporate activity, and created a demand for new kinds of legal services to help companies manage the new legal environment. This led to rapid growth of the complex of institutions that provide corporate legal services and affected the way lawyering was practiced and organized. Many forces came together to give new shape to the professional identity of lawyers, the structures they work in, and the roles they play. The result was the creation of a new and powerful segment of the legal profession whose activities had profound impacts on the rest of the profession, the legal system, the operation of enterprises (both public and private), state policy, and global governance.

In 1988, after 24 years of military dictatorship and with the threat of hyperinflation, Brazil passed a new constitution that has influenced and shaped policy ever since.

In this issue of The Practice, we explore key aspects of the growth and development of the corporate legal sector in Brazil based on work recently published in a major volume titled The Brazilian Legal Profession in the Age of Globalization: The Rise of the Corporate Legal Sector and Its Impact on Lawyers and Society (Cambridge University Press, 2018). First, this lead story offers a broad overview of the corporate legal sector’s evolution in Brazil as well as some of the book’s major findings. Second, building on The Practice’s ongoing series on the role of foreign firms in emerging economies, “Bridges to Brazil” offers a typology of foreign firms in Brazil and compares this ecosystem to those found in India and China. Third, drawing on innovative research done by Fabio de Sá e Silva and David M. Trubek, “Calling All Corporate Lawyers” offers perspective on the role that corporate lawyers play in shaping emerging economies. In “A Brief History of Brazil’s Legal Profession,” we also hear from one of Brazil’s most distinguished lawyers—Ary Oswaldo Mattos Filho—on the Brazilian legal profession’s past, present, and future.

Globalization, Lawyers, and Emerging Economies

This research is part of a larger study of global transformation and its impact on the legal profession, which includes similar studies on India (Volume 4, Issue 2) and on China (Volume 2, Issue 6), both previously covered in The Practice. Launched by the Harvard Law School Center on the Legal Profession in 2010, the Globalization, Lawyers, and Emerging Economies (GLEE) Project is a multidisciplinary, multinational collaborative designed to examine how globalization is reshaping the market for legal services in important emerging economies such as India, Brazil, and China. GLEE studies how these developments are contributing to the transformation of the political economy in these countries, their connection to the broader world economy and institutions of global governance, North–South engagement and competition, evolving South-South collaboration, and the development of the increasingly globalized market for corporate legal services.

At present, GLEE has more than 50 scholars from a broad range of disciplines, including law, sociology, economics, political science, anthropology, area studies, and international relations, from leading institutions in the United States, China, India, Brazil, Singapore, and the United Kingdom, conducting original qualitative and quantitative research on the transformation of the market for legal services in India, Brazil, and China. In Brazil, GLEE’s research has been based at the law school of the Fundação Getulio Vargas (FGV) in São Paulo. GLEE is currently planning an expansion to Africa.

The transformation of Brazil: liberalization, privatization, internationalization, democratization

Brazil was late to industrialize. As the country broke free from Portuguese colonial power (1822) and abolished slavery (1888), coffee production became the driver of the first transformation in its economic structure. Capital accumulation funded by coffee exportation led to an incipient urban bourgeoisie, while government incumbents at the federal level emphasized investments in heavy infrastructure, particularly in railroads.

From the 1930s to the 1950s, stronger and more conscious industrialization efforts were put in place. In the wake of the crash of 1929, Brazil took a route that would later be known as import substitution. This included both protectionist trade policy and stronger state activism in the economy. Import tariffs were raised, local currency devalued, and commodity surpluses purchased by the state, thus creating resources that could be used for further industrial investments by domestic capitalists. Also, the state itself became an economic agent, whether by getting directly involved in basic industry—such as in metalwork via the state-owned enterprise (SOE) Volta Redonda and oil production and processing via SOE Petrobras—or by funding investment projects in heavy infrastructure via the national investment bank, BNDES. From 1930 until the end of the 1980s, economic policies basically consisted of state-led initiatives to promote import substitution, industrialization, and growth through the use of “economic law” tools, such as SOEs, economic planning, price control, sectorial regulatory and administrative authorities, and the use of tax and financial incentives.

Regulation could work only if Brazil could count on legal professionals who, working in both the public and private sectors, had the skills to respond to the needs of a global market.

Between 1988 and 2004, Brazil partially dismantled these structures and policies and shifted to more market-oriented approaches. In 1988, after 24 years of military dictatorship and with the threat of hyperinflation, Brazil passed a new constitution that has influenced and shaped policy ever since. The 1988 Constitution is a social-democratic document that includes civil, political, and social rights and a number of policy goals like building a free, just, and solidary society; fostering national development; acquiring technological autonomy; eradicating poverty and marginalization; and reducing other inequalities. Many of its provisions have a direct effect on government policy and budgetary allocations.

In 1989, immediately after the new constitution came into force, President Collor de Mello was elected. Adopting a rhetoric based on the need for “modernization,” Collor de Mello abruptly started a liberalization period that included drastic tariff reduction, privatization, as well as flawed attempts to control inflation. Under Itamar Franco, the vice president who replaced Collor de Mello after he was impeached, a stabilization plan (Plano Real) was successfully adopted and inflation controlled. New legislation on social assistance and welfare for the poor was passed. Franco’s minister of finance, Fernando Henrique Cardoso, known popularly as FHC, became the next president in 1994. During Cardoso’s eight years in office, Brazil continued to move away from the dirigiste policies of the “developmentalist” period, embracing many of the neoliberal prescriptions favored by the Washington Consensus.

In the Cardoso period, SOEs were privatized, direct subsidies for certain industries scaled back, areas of the economy deregulated, import barriers reduced, competition fostered and enforced, intellectual property rights tightened, efforts to attract foreign capital undertaken, and fiscal responsibility enhanced. The currency (real) was constantly kept overvalued, and monetary stability was pursued and attained. Foreign investment increased, and Brazilian firms were able to raise money in the international capital market. In place of direct state control of sectors like telecommunications and state ownership of major enterprises in steel, mining, and aircraft production, many SOEs were sold to private groups.

This process was accompanied by a veritable flood of new legislation, much of it new to the Brazilian scene. Independent regulatory agencies in the style of the United States were created to monitor and regulate the newly privatized sectors. Antitrust law was updated and enforcement strengthened. New laws governing capital markets were passed, and a vibrant capital market took hold.

These changes created whole new areas of law and generated new demands from corporate clients. Companies and governmental entities found themselves operating in a new, complex, transnationalized regulatory matrix. This created a huge demand for corporate legal services. Many of the new laws were both complex and unfamiliar to most Brazilian practitioners. The independent regulatory agencies, for example, were based on foreign models that were shoehorned into Brazilian legal categories. Lawyers had to deal with new clients and unfamiliar transactions. More and more Brazilian companies found themselves working with foreign corporations. Transactions rarely seen in Brazil, like transnational mergers and acquisitions and overseas bond and stock issues, were introduced. Moreover, some of the new legal rules were derived from international sources like the World Trade Organization (WTO), requiring Brazilian lawyers to master international texts and understand international institutions.

From 1930 until the end of the 1980s, economic policies basically consisted of state-led initiatives to promote import substitution, industrialization, and growth.

Such measures marked the beginning of a process that would ultimately lead to a substantial reform of the Brazilian state—a process that centered on fostering development within the new global reality by modernizing Brazilian society and its economy to strengthen Brazil’s position in the global market. The bulk of this process, which took place between 1990 and 2000, was carried out by means of amendments to the Constitution, substantial changes in legislation and institutions, and the creation of new regulatory agencies.

Whereas from a legislative standpoint, this new regulatory framework emerged as a result of intense political negotiation involving different social actors, its effectiveness required the existence of practicing lawyers in-country able to deal with this new reality. Regulation could work only if Brazil could count on legal professionals who, working in both the public and private sectors, had the skills to respond to the needs of a global market whose dynamics were often at odds with the country’s legal tradition and practices. Such a demand would profoundly reshape the legal profession in Brazil as it inevitably led, notably from the 1990s onwards, to the transformation of Brazilian law firms and to competition among them.

Redemocratization revives the rule of law and gives the legal profession a central role

While primarily economic forces were influencing change in the laws affecting business and creating new demands for legal services, political developments affected the nature and status of the Brazilian legal profession and strengthened its role in the country. During the military regime (1964–1985), the profession was somewhat marginalized as technocrats took over lawmaking and political repression limited lawyers’ role in civil affairs. But by the end of the 1970s, social movements, in which lawyers played a prominent role, had started the transition from a military regime toward democracy. A group of legal professionals, organized around a commitment to liberal values and the rule of law, emerged and gave the country’s legal elite a prominent role in the new Brazilian political and social scene. With the rule of law enshrined as a fundamental principle, this elite played a role in the development of the new environment, including the laws affecting business and the creation of the new corporate law sector.

The reemergence of the Brazilian legal elite during redemocratization was the result of actions by individual lawyers and the Ordem dos Advogados do Brasil—the Brazilian Bar Association, or OAB. They fought for human rights and defended political prisoners during the military regime. With democratization, they pushed for reforms to guarantee civil rights, protect social and economic rights, and improve access to justice. These efforts culminated in the Federal Constitution of 1988.

The 1988 Constitution ushered in other changes that strengthened the rule of law and thus increased the importance of legal professionals in the Brazilian economy, polity, and society. These included strengthening the Public Prosecutor’s Office and the Judiciary, which ensured greater scrutiny of executive and legislative adherence to the law and the Constitution. These measures enhanced the role of legal professionals as guardians of the new rule-of-law order. This capacity was used to defend clients of all types, from victims of civil rights violations to corporations, and ensured that lawyers would be in high demand as the economy grew.

The transformation of the corporate legal hemisphere, 1990–2014

The global shift deeply affected the Brazilian legal market. Apart from a boom of new practice areas (for example, capital markets, ADR, mergers and acquisitions, and antitrust, among others), there have been changes in the profile of clients, who became significantly more demanding in an increasingly competitive legal market.

A group of legal professionals, organized around a commitment to liberal values and the rule of law, emerged at the end of the 1970s and gave the country’s legal elite a prominent role in the new Brazilian political and social scene.

Prior to the global shift, the typical Brazilian law firm in the corporate sector was relatively small. A handful of lawyers joined together to form a firm. In many cases, they were led by a “notable,” a lawyer who had gained a reputation as one learned in the law. These legal notables combined intellectual and social capital built on family connections, academic positions, and publications of doctrinal texts. The firms were managed informally and developed clients through social contacts and the reputations of leading partners. The practice would be focused in the area of the lead lawyer’s expertise. There were some exceptions, particularly in that part of the sector that catered primarily to foreign clients. There, you could find larger firms offering a fuller range of services, more professional management, and an emphasis on the firm’s brand—not just that of an individual notable. In some cases, these firms were founded by expatriates with experience in large law firms in the United States who settled in Brazil or Brazilians with overseas experience. But even the largest of these firms in the pre-1990s period was small by global norms or today’s Brazilian standards.

All that changed after 1990. Figure 1 shows the rapid rise of the corporate sector in the 1990s after the economy was opened and privatization began. In a two-decade span starting in 1991, more corporate law firms were added (194) than had been created in the entire period since 1900 (136). Not only did the number of firms grow rapidly after 1991, there was an increase in the size of law firms driven in part by the emergence of new practice areas such that by 2014 there were 10 firms with more than 300 lawyers and many with more than 100.

Figure 1: Number of law firms by decade

This chart shows the number of firms added in Brazil each decade from 1900 to 2014. The number of firms each decade are as follows: 1900-1910, 3; 1911-1920, 1; 1921-1930, 2; 1931-1940, 7; 1941-1950, 9; 1951-1960, 15; 1961-1970, 15; 1971-1980, 25; 1981-1990, 59; 1991-2000, 92; 2001-2010, 102; 2011-2014, 17; No information, 20.

Source: “Globalization, Lawyers, and Emerging Economies: The Case of Brazil” in The Brazilian Legal Profession in the Age of Globalization (Cambridge University Press, 2018)

The privatization drive and other changes created whole new areas of law affecting business. Take, as an example, telecommunications. In the 1990s the sector, which had previously been a state monopoly, was privatized, opened to foreign firms, and subjected to new forms of regulation including the creation of a U.S.-style regulatory agency, ANATEL. All of a sudden, corporations were faced with a legal regime that had no precedent in the country. This created a big demand for lawyers who had both knowledge of the new telecoms laws and international expertise. Similar events transpired in other legal fields. As demand increased and the economy grew, mergers became more common, spinoffs emerged, and associations formed between law firms and new firms were created. The old “gentleman’s agreement” against poaching lawyers from other firms eroded as the market became more competitive.

With the election of Luiz Inácio Lula da Silva, ideas of developmentalism returned and increased attention shifted to industrial policy.

Although many firms grew substantially and began to resemble global full-service firms to one degree or another, these two decades also saw the rise of “boutique” firms claiming a high level of specialized expertise. Many firms referred to themselves as “boutiques” to achieve greater prestige and to differentiate themselves from generalist law firms, which are sometimes associated with somewhat impersonal services.

In addition to the growth of corporate law firms, in-house offices also grew in size, sophistication, and importance within corporations. Since the expansion of legal departments in Brazil, which gained strength in the 1990s with the privatization of companies and further opening of the Brazilian market to foreign capital, the profiles and the careers of legal directors have undergone several transformations, culminating in more value and more prestige being given to those professionals inside companies. These transformations have a series of implications for the corporate legal sector, ranging from changing the criteria for hiring professionals to creating new demands for more sophisticated legal services.

The rise of the new developmental state and its impact on lawyering

In the heyday of neoliberalism, it might have seemed that the era of the developmental state was over and industrial policy was a thing of the past. But Brazil never fully accepted neoliberal reforms, and the role of the state remained robust even under Cardoso. With the election of Luiz Inácio Lula da Silva, ideas of developmentalism returned and increased attention shifted to industrial policy. This trend accelerated in Lula’s second administration and was further deepened under the subsequent presidency of Dilma Rousseff with the enactment of the Brasil Maior (Greater Brazil) plan. While the Lula-Dilma developmental state maintained elements of past forays into industrial policy, there was no effort to reprivatize major industries like minerals giant Vale or the recently privatized telecoms sector. Rather, this new developmentalism operated more like a public-private partnership with various incentives provided to firms that contributed to industrial policy goals. The new political economy of development affected lawyering in various ways, including creating a need for new skills and negotiating tactics as corporate lawyers found themselves dealing with state agencies of various types that sought to shape investment and output. These policies seemed to work well for a time, but with the end of the commodity boom, the Brazilian economy went into decline. Efforts to deepen state engagement to keep up the pace of growth may have done more harm than good, and the country fell into a steep recession. In 2016, Dilma was impeached and Michel Temer assumed the presidency, resulting in the formation of a conservative government. Although this government has pledged to reduce the role of the state in the economy, relatively little has changed since 2015 and many of the forces affecting lawyering remain in place. Indeed, by many accounts the political and economic turmoil facing the country has only grown, including the 2018 jailing of former president Lula for corruption (see “Operation Car Wash”). In October 2018 Brazilians go to the polls in what promises to be a monumental general election.

The scope of the study

The GLEE Brazil Project seeks to identify the globalization process and its impact by asking a set of questions regarding the corporate legal environment in Brazil, including its structures, organizations, and actors:

  1. What impact has globalization had on law firms serving corporate clients in Brazil? Has a new model of law firm arisen and what does it look like?
  2. How have in-house legal departments responded to new business needs, including the new international dimensions of Brazilian companies? What major changes have in-house legal departments undergone as a result of such changes?
  3. What role has the corporate legal sector played in the creation of new legal regimes designed to manage Brazil’s role following the global shift?
  4. What skills do lawyers working in new models of law firms and new in-house offices require? Where do they secure the requisite skills and knowledge? How has the rise of the corporate sector affected Brazil’s many law schools?
  5. To what extent are the changes in law, lawyering, and law office organization influenced by foreign—especially U.S.—models? What tensions has that created?
  6. How did the regulation of the legal profession—including that of law offices—respond to globalization, both in general and to the internationalization of legal services in particular?
  7. How has the corporate law sector responded to calls for corporate social responsibility and pro bono services, and how has the rest of the profession reacted?
  8. What is the structure of the new mass-litigation law offices? How do they work and how do they affect access to justice?
  9. How have new kinds of law offices in the corporate and mass-litigation areas impacted gender issues?
  10. How has Brazil responded to the need to prepare lawyers to handle trade-related litigation, including WTO cases as well as antidumping and other trade remedies?
  11. How has the reemergence of industrial policy under Lula and Dilma affected corporate legal practice?

Major findings

The GLEE Brazil book offers a detailed overview of the Brazilian corporate legal sector and the transformations it has undergone since the 1990s. Although chapters in the book cover a wide range of topics (see “The scope of the study”), a complex overall picture emerges. As Maria da Gloria Bonelli and Camila de Pieri Benedito note in their study, discourses on globalization and professions should always use both terms in the plural, not the singular. Professional globalization is not a one-way street, in which the North exports expertise to professionals in the South, who, in turn, merely absorb and implement the technological advances generated abroad. And legal professions are not monoliths. The GLEE research suggests a multidirectional movement and a complex interplay between foreign models and Brazilian institutions and practice. We highlight nine of the book’s most important findings:

  1. The rise of the corporate legal sector has transformed an important sector of the Brazilian legal profession.

Since the 1990s, the landscape encountered by the legal profession has changed substantially, especially in the Southeast region, where most of the corporate headquarters and corporate lawyers are located. Changes can be found in all dimensions including the laws themselves, legal institutions, lawyering practices, the profession’s hierarchical structures, and the political dynamics of actors in the legal field. They are the result of the interaction of various actors in the profession, including traditional elites and newcomers, domestic and foreign lawyers, in-house legal directors and outside law firm management, local bar officials and national OAB leadership, as well as government agencies such as the Ministerio Público.

  1. These changes have been driven by a boom in new laws that were in part created by corporate lawyers.

With the opening of the economy, privatization of state-owned enterprises, and increasing flow of foreign investment, new laws had to be produced to structure changes and govern new forms of economic activity. Corporate lawyers played a role in the making of this boom, which then created new demands for their services.

  1. Many developments have been influenced by a diffusion of global models and styles, but there have been resistances.

Global processes of diffusion have had an influence, but the impact has varied from area to area. In some areas, Brazil has followed global trends. The role of in-house counsel is an example: Brazilian corporations, following global models, have raised the stature of the general counsel (GC) within the company, increased the sophistication of the company’s legal staff, expanded the size of in-house offices, and changed the relationship between the in-house offices and outside firms. Even with respect to in-house counsel, however, there continues to be important differences between Brazilian practices and the in-house counsel movement in the United States. In other areas, global actors, models, and processes have encountered resistance. Imported laws and legal institutions have not always worked as expected, and hybrids have emerged. While the global law firm model, based largely on the U.S. approach, has influenced the growth of the corporate law firm sector, it has also met resistance from the rest of the profession and there is tension between the U.S.-influenced corporate firm’s operation and the regulatory structure governing law offices.

  1. The organized bar has been a source of resistance.

In some cases, diffusion has led to direct conflict. A lot of resistance has come from the OAB. The bar has adopted a conservative stance, seeking to protect existing markets against innovations like pro bono; limit the role of foreign firms in the country; and police alliances between Brazilian and foreign law firms. Thus, the effort by elite corporate firms to follow global models for pro bono was initially blocked by the OAB, forcing the firms to seek creative ways to maintain programs that are important for their relationship with major clients, and to their image as world-class firms. The OAB has also placed strict limits on the role of foreign law firms established in Brazil, although the firms have found ways to circumvent the restrictions. Finally, efforts by some Brazilian firms to create formal, visible, and permanent alliances with foreign firms met with stiff resistance by the bar, which essentially outlawed such relationships.

  1. The new legal services market has demanded a new type of lawyer.

The growth of the corporate sector and the internationalization of corporate law practice created a demand for a new kind of lawyer. To succeed in this new environment, lawyers must not only have basic legal skills and knowledge of the Brazilian system, but also have knowledge of advanced and specialized disciplines like international economic law, understand business practice, and be familiar with global lawyering styles.

  1. Women have found employment opportunities in the globalizing sectors but still face gender inequality.

In two sectors affected by globalization—large corporate firms and mass-litigation outsourcing firms—women have found new job opportunities. More than half the associates in large corporate firms in São Paulo are female as are 65 percent of the lawyers in JPM Advogados, the leading mass-litigation firm. But women lag behind men in the senior ranks of the large corporate firms, and most jobs in mass litigation are low-paying, routine, and low-quality. A similar story can be told with respect to in-house legal departments. While women constitute a significant percentage of the lawyers employed by these departments, there are far fewer women GCs—although, as in the United States, their percentage in these positions is increasing and is still greater than it is in equivalent positions in leading law firms.

  1. Diffusion and resistance has led to hybridization.

The overall process of diffusion and resistance has led to the creation of hybrids in many areas as global models interact with Brazilian tradition, custom, practice, and law. Such hybrids can be found in law firms, in-house legal departments, legal education, pro bono, and gender relations. For example, the clash between corporate lawyers wishing to develop U.S.-style pro bono efforts and resistance by the organized bar led to a hybrid pro bono practice unique to Brazil. Other examples include the bar’s restriction on the foreign law firms, which has led to new strategies and relations between local and foreign law firms that ensure they are effectively inserted in global networks and international operations. However, even such small changes are still largely absent in the educational area, where for the most part law schools have resisted change and kept traditional curricula and methodologies untouched.

  1. Brazilian law schools have failed to prepare lawyers for global practice.

GLEE studies the ways that Brazilian lawyers developed the capacities needed for global lawyering. We found that law schools have been very slow to respond to the need for such training. To secure the essential skills and experiences, Brazilian lawyers have relied more on continuing legal education, study abroad, and training in law firms and GC offices than on formal legal education.

  1. The rise of the “new developmental state” has created new challenges for corporate lawyers.

Finally, the reemergence of the developmental state had an effect on the corporate law sector. GLEE observed these effects in two areas. In the field of telecommunications, corporate lawyers are seeking to cope with a series of demands from the state inspired by new developmental state industrial and social policy. This has changed the nature of advocacy in this sphere. Another major impact of the new developmental state on the profession can be seen in the area of international trade law. In the early 2000s, the Brazilian government and the private sector worked together to create a cadre of lawyers who could handle WTO cases. However, as WTO litigation declined, demand for this kind of work declined and there was an oversupply of trade law experts. The return of industrial policy changed the situation. Concerned with the impact of imports on domestic manufacturers, the government strengthened domestic antidumping laws, thus creating a new market for lawyers with trade expertise.

A glance inside the book

The studies in The Brazilian Legal Profession in the Age of Globalization provide the first comprehensive analysis of globalization’s impact on the Brazilian legal profession. Employing original data from nine empirical studies, the book details how Brazil’s need to restructure its economy and manage its global relationships contributed to the emergence of a new corporate legal sector—a sector marked by increasingly large and sophisticated law firms and in-house legal departments. This corporate legal sector in turned helped to reshape other parts of the Brazilian legal profession, including legal education, pro bono practices, the regulation of legal services, and the state’s legal capacity in international economic law. Below we highlight some of the most significant findings from the volume.

1. Globalization, Lawyers, and Emerging Economies:   The Case of Brazil by   Luciana Gross Cunha, Daniela Monteiro Gabbay, José Garcez Ghirardi, David M. Trubek, and David B. Wilkins 2. Corporate Law Firms:   The Brazilian Case by   Daniela Monteiro Gabbay, Luciana Ramos, and Ligia Pinto Sica 3. In-House Counsels in Brazil:   Careers, Professional Profiles, and New Roles by   Fabiana Luci de Oliveira and Luciana Ramos 4. South by Southeast:   Comparing the Development of In-House   Legal Departments in Brazil and India   by David B. Wilkins and Vikramaditya S. Khanna 5. Globalizing Processes for São Paulo Attorneys:   Gender Stratification in Law Firms and Law-Related Businesses   by Maria da Gloria Bonelli and Camila de Pieri Benedito 6. The Ordem dos Advogados do Brasil   and the Politics of Professional Regulation in Brasil   by Frederico de Almeida and Paulo André Nassar 7. Doing Well and Doing Good in an Emerging Economy:  The Social Organization of Pro Bono among   Corporate Lawyers and Law Firms in São Paulo, Brazil by   Fabio de Sa e Silva 8. Legal Education in Brazil:   The Challenges and Opportunities of a Changing Context by   Luciana Gross Cunha and José Garcez Ghirardi 9. Transforming Legal Capacity in Brazil:   International Trade Law and the Myth of a Booming Practice by   Rubens Glezer, Vitor M. Dias, Adriane Sanctis de Brito, and Rafael A. F. Zanatta 10. Lawyering in New Developmentalism:   Legal Professionals and the Construction of   the Telecom Sector in Emerging Brazil (1980s–2010s)by Fabio de Sa e Silva and David M. Trubek

The table of contents from The Brazilian Legal Profession in the Age of Globalization: The Rise of the Corporate Legal Sector and Its Impact on Lawyers and Society (Cambridge University Press, 2018)

Rapid growth of corporate law firms

As Gabbay, Ramos, and Sica argue in chapter 2 of the volume, in the 25 years since 1990, the corporate law firm sector in Brazil has grown substantially, with the number of firms more than doubling and firm sizes increasing dramatically. At the same time, firms have changed their methods of operation, recruitment, and management. Until 1990, the sector was small and largely focused on serving local clients. Today it includes many large firms as well as numerous specialized “boutiques” serving both domestic and foreign corporations. Many of these firms have instituted management systems, hired professional managers, and employed technology to control operations and maintain communication. The firms have paid attention to branding, marketing themselves as collective entities with stress on the firm’s capabilities, not those of an individual notable. They have established career ladders and regular performance reviews. Brazilian firms have sought foreign as well as domestic clients and have looked for ways to work with foreign law firms in the growing number of transactions with transnational elements.

Employing original data from nine empirical studies, the book details how Brazil’s need to restructure its economy and manage its global relationships contributed to the emergence of a new corporate legal sector.

Starting in the late 1990s, foreign law firms also began establishing themselves in Brazil. In 2013, 23 such law firms operated in Brazil. Under OAB rules, these firms can serve only as consultants on foreign law and cannot advise on Brazilian law or appear in court. But they have found ways to get around some of these restrictions and to build alliances with Brazilian law firms (see “Bridges to Brazil”).

The changing nature of the Brazilian corporate law firms is the product of rising overall demand for business law services as well as new client requirements. The arrival of more foreign corporations, and the increased importance and sophistication of the in-house offices in both foreign and domestic companies, has led to demands for great sophistication in the services performed by outside firms as well as new lawyering styles and skills.

The rise of the corporate sector also created tension between an emerging model of professional organization and practice and the traditions of the Brazilian legal profession, including OAB regulations. This has sometimes been manifested in a certain distance between what people say about how lawyers can and should operate and what is actually going on. Thus, while the bar imposes minimum-fee schedules and prohibits advertising, the new-model corporate firms compete actively for business and have engaged in various methods to market their brands. Similarly, while the bar has sought to impose restrictions on alliances between domestic and foreign law firms and limit the activities of foreign firms established in Brazil, the largest Brazilian law firms are inserted in global networks of international operations, and foreign firms operating in Brazil find ways to get around the restrictions on their practice. Finally, while corporate law firms are not “companies” under Brazilian law and thus are not supposed to be “entrepreneurial,” and the bar prohibits law firms with “mercantile forms or characteristics,” the new-model corporate law firms operate like business entities as they respond to market demand and adopt corporate management technologies. The result is that there is often a gap between rhetoric and reality in the corporate law sector, as well as the development of hybrid organizational forms, as the new-model law firms seek to adopt global forms and practices to Brazilian culture and regulation.

The in-house counsel movement takes hold—to a degree

By almost any measure, one of the most significant developments in the corporate legal services market in the United States over the past 30 years has been the growth in the size, stature, and influence of internal legal counsel. This “in-house counsel movement,” as the American legal scholar Robert Eli Rosen aptly labeled this transformation, has been based on three interrelated arguments: economic value (for example, handling legal work internally is more efficient than hiring outside law firms), substantive expertise (for example, because of their proximity to the business, in-house lawyers can give better advice than outside counsel), and professional independence (for example, because GCs are better able to understand and protect the company’s long-term interests and reputation than law firm partners, they are more likely to uphold the legal profession’s traditional ideal of the “lawyer statesman” who counsels clients to conform their conduct to the public purposes of the legal system). Two chapters in this volume examine the degree to which this movement has come to Brazil and how developments in that country compare with the evolution of internal lawyering in India, where the GLEE project is also conducting research.

Starting in the late 1990s, foreign law firms also began establishing themselves in Brazil. In 2013, 23 such law firms operated in Brazil.

Oliveira and Ramos begin this analysis in chapter 3. Using quantitative data on a large cross section of Brazilian companies, as well as qualitative interviews of legal directors from prominent Brazilian firms, the authors investigate whether Brazil’s legal departments exhibit six characteristics that have come to define the growth in status and influence of GCs in the United States and other jurisdictions in the Global North (see “The Changing Role of the Global General Counsel”):

  1. Size of the in-house department
  2. Credentials and demographics of the lawyers working inside the department
  3. Relationship to, and degree of control over, outside counsel
  4. Internal standing, jurisdiction, and authority of in-house lawyers within their organizations
  5. Professional standing of internal counsel in the profession as a whole
  6. Participation and influence of GC in public policy debates

On the basis of this data, the authors conclude that since the expansion of legal departments in Brazil, which began during the 1990s, coinciding with the increased privatization of companies and the opening of the Brazilian market to foreign capital, the profiles and careers of legal directors have undergone several transformations, culminating in more value and prestige being given to these professionals within their companies. Prior to this period, few domestic Brazilian companies had in-house legal departments. By the end of the 1990s, however, with growing globalization and the arrival of more foreign capital in Brazil, it became increasingly necessary for legal professionals working in the corporate world to have a more complete background, including knowledge of corporate law disciplines, as well as of business, accounting, and international law. Legal departments therefore increased in size, and the legal directors operating these departments became increasingly sophisticated and influential. These transformations, in turn, generated a series of implications for the country’s corporate legal market, changing the criteria for hiring in-house lawyers, including foreign law firms, which GCs now view as an important part of the Brazilian legal market.

Although the authors conclude that important aspects of the in-house counsel movement have indeed come to Brazil, they also document how the structure and functioning of internal legal departments in Brazilian companies continue to differ from the U.S. model. Thus, while many legal directors are moving from solely occupying the role of “cop,” perceived as a necessary evil involved in managing the business’s legal risks, to the role of “counselor,” balancing legal risk management, compliance, and business recommendation, few have made the transition to an “entrepreneur” role where they play a key role in the company’s strategic decision making. The stature and prestige of legal directors promised by the in-house counsel movement in the United States and other countries is therefore still a work in progress in Brazil. Nevertheless, the trajectory toward greater importance for the role is strong, and further changes in this direction are likely in the coming years.

Wilkins and Khanna, in chapter 4, extend this analysis by examining how Brazil’s internal legal departments compare to those in India, the first country explored in the GLEE project (see “The Indian Legal Profession” and The Indian Legal Profession in the Age of Globalization: The Rise of the Corporate Legal Sector and Its Impact on Lawyers and Society (Cambridge University Press, 2017)). Given the similarities between these two rising powers, it is not surprising that some version of the in-house counsel movement has come to both jurisdictions. Like Brazil, India also underwent a global shift in the 1990s, when the country moved from a closed socialist economy to one that is now more or less open, creating the kind of foreign direct investment and privatization that fuels the demand for sophisticated internal counsel. Notwithstanding these broad similarities, however, there are important differences in the economic structure, proximity to the West (particularly the United States), and the state of the legal profession in Brazil and India that plausibly impact how the in-house counsel movement develops in each country.

The legal budgets of companies in Brazil are far larger than those in India, particularly with respect to foreign multinationals operating in the two jurisdictions.

To explore these potential similarities and differences, Wilkins and Khanna present the results of a comprehensive survey of GCs in Brazil and India. The samples in each jurisdiction are broadly representative of large companies, including foreign multinationals (FMNCs) and domestic companies, and capture a significant percentage of Brazil’s and India’s market capitalization, and an even greater percentage of the respective economic activity. As a result, Wilkins and Khanna can not only chart the growth in the size, sophistication, and impact of GC offices in each jurisdiction but also examine differences between FMNCs and domestic companies within each country’s corporate counsel sector.

As predicted, the survey demonstrates that important aspects of the in-house counsel movement have come to each country. Legal departments in both jurisdictions have grown larger, and GCs more sophisticated, across all company types. Consistent with the core tenets of the in-house counsel movement, GCs in both countries exercise primary control over the company’s legal function, including putting together the list of “preferred providers” who handle the company’s outside legal work. Notwithstanding these changes, however, legal departments in both jurisdictions continue to spend more than half of their budgets on outside counsel and other legal service providers, with half of their overall budgets going to routine legal work. And while Brazilian and Indian GCs spend more time on public policy matters than they have in the past—and expect to spend even more time on these matters in the future—in neither country are these issues as important a part of the GC’s job as they are in the United States and other more developed legal markets.

In addition to these core similarities, however, the survey results also underscore important differences, both between Brazil and India, and between domestic and FMNCs. The legal budgets of companies in Brazil are far larger than those in India, particularly with respect to FMNCs operating in the two jurisdictions. GCs in Brazil also appear to be more integrated into the company’s senior management and business decision-making than their Indian counterparts, with the former being more likely to advise the board, participate in senior leadership discussions, and counsel the CEO than GCs in India. Brazilian legal departments also tend to keep a greater percentage of the company’s “high value” work in-house than similarly situated departments in India, while sending more “routine” work to outside providers. These differences, which are similar across both domestic and foreign companies in both jurisdictions, are consistent with the hypothesis that Brazil’s more open economy and proximity to the United State has led to greater diffusion of the American model of internal lawyering, where law is integral to business and where GCs are considered both important members of the senior leadership team and capable of handling more sophisticated legal work. And while GCs in both countries report that they terminate important law firm relationships infrequently—significantly less frequently than GCs in the United Sates—Brazilian legal directors are more likely to do so than GCs in India. Once again, this difference underscores that the shift in power between inside and outside lawyers that has been at the core of the in-house counsel movement in the United States is currently more firmly established in Brazil than it is in India.

Taken together, these two studies provide ample support for the hypothesis that the U.S. model of internal lawyering is diffusing through the Global South, led by FMNCs who are looking for the same levels of support and function from their legal departments in countries like Brazil and India that they receive in their home jurisdiction. But while this aspect of the “American mode of the production of law” appears to be more firmly entrenched in Brazil than in India, neither country has yet to achieve the level of transformation on the six indicators identified by Wilkins as characterizing GC offices in the United States. Moreover, given the potential for “disruptive innovation” to transform the way that companies produce and consume legal services, it is far from clear that the evolution of internal lawyering will follow the established tenets of the in-house counsel movement in these and other rapidly changing emerging economies—particularly as law is increasingly absorbed into broader “business solutions” that may not need to be handled by specialized legal departments.

Gender in the profession

Globalization has also had important impacts on gender relations in the Brazilian legal profession. Bonelli and Benedito argue in chapter 5 that traditional Brazilian law firms tended to be male dominated, and if women were hired, they rarely made partner. Globalization has changed this situation not only in the elite corporate law firm sector but also in mass-litigation firms that began emerging in the 1990s to handle a litigation explosion.

Historically, the OAB was dominated by two groups: a traditional elite of prestigious lawyers and the OAB’s organizational elite of elected leaders.

Starting in the 1990s, corporations in Brazil began to outsource mass litigation to specialized firms set up for this purpose. Like the elite corporate firms noted above, these mass litigation firms represented a major break with the traditional law firm patterns by employing business methods to handle the thousands of small-scale, routine cases. This had important impacts on gender dynamics. Thus, in a study of JBM Advogados, the largest mass-litigation firm in Brazil, as well as a sample of “new” corporate law firms in São Paulo, Bonelli and Benedito found that as these firms “globalized,” they became more likely to hire and promote women than in the traditional law firm sector. In the corporate law firm sector, half the associates and up to a quarter of the partners are women. While women lag behind men in gaining partnership, they do better than in traditional firms. Women also made up the majority (65 percent) of lawyers at JBM Advogados, which hires hundreds of low-paid lawyers to handle routine tasks. Moreover, women equaled or outnumbered men in managerial positions. Based on this research, there is evidence to suggest that globalization has created more opportunities for women at both the top-end corporate firms as well as in the lower-complexity mass litigation end of the profession. That being said, gender hierarchies still remain: men are more likely to make partner in the corporate sector, and most of the jobs in the women-dominated mass-litigation sector are low-wage, low-complexity, involving routine work under close supervision in assembly line conditions.

Regulation meets globalization

The rise of the corporate law sector has presented regulatory challenges for the OAB, which has had to deal with new forms of organization, employment, and lawyering styles; new kinds of practice; as well the presence of foreign firms. OAB regulations played an important role in the growth of the corporate law firm sector. In chapter 6, which focuses on how regulation has responded to globalization, Almedia and Nassar argue that as Brazilian lawyers began to adopt corporate law firm models from the United States and other developed countries, the OAB was faced with an entirely new entity that operated differently than the traditional Brazilian law firm. These “new model” firms were large, highly specialized, organized in a hierarchical fashion, and often profit-seeking. Although there were concerns that this “commercialized” approach to law practice was at odds with principles of professionalism, the OAB created a regulatory framework that accommodated the new model, allowing the corporate sector to grow substantially in the 1990s and early 2000s.

The rise of the corporate sector had direct impacts within the OAB. Historically, the OAB was dominated by two groups: a traditional elite of prestigious lawyers who had long held significant influence and the OAB’s organizational elite of elected leaders who occupied important posts within the group and were responsive to mass of members. With the rise of the corporate law firms, a third elite made up of business lawyers from large law firms entered the picture. These three group struggled as the OAB dealt with two issues that arose as a result of globalization and the rise of the corporate sector. Two of the most significant debates were around the rules governing pro bono practice and the regulation of foreign law firms. The struggles took place within the complex federal structure of the OAB with various actors seeking to secure rulings at levels most favorable to their claims. This meant that some issues remained at state level while others ended up in the OAB’s Federal Council.

Many of the large firms favored strict restrictions on alliances between foreign law firms and local firms and supported actions of the São Paulo Bar that punished several firms for establishing alliances.

The debate arose as corporate law firms, influenced by global trends, wanted to create pro bono programs. However, they quickly ran into opposition from the São Paulo State Bar Association, which voted to ban the practice to protect the solo practitioners and small law firms that constitute the bulk of the bar’s membership and that often took on such cases. Business lawyers, joined by prestigious representatives of the traditional legal elite, challenged the ruling. Bar leaders, however, fought to maintain the ban on pro bono, which their constituency feared threatened a lucrative legal and market for lawyers under São Paulo’s judiciary system. After considerable debate, the alliance of traditional and business lawyers struck a compromise with the São Paulo Bar Association under which pro bono was allowed but only for nongovernmental organizations without resources to hire lawyers. This compromise lasted for more than a decade until the Federal Prosecutor’s Office challenged the ban on pro bono for individuals. Faced with a possible constitutional proceeding, the Federal Council of the OAB weighed in and suspended the São Paulo ban on individual pro bono and announced that it would allow this practice in the future.

In the second debate, some among the new corporate elite wanted the OAB to outlaw alliances between foreign law firms and local firms. The controversy arose after a few Brazilian corporate law firms had created formal alliances with foreign firms, including some that were licensed to practice foreign law in Brazil and others operating outside the country. Once again the issue erupted in São Paulo, home of most of the large law firms. Many of the large firms favored strict restrictions on such alliances and supported actions of the São Paulo Bar that punished several firms for establishing alliances. Large firms, benefiting from this practice, disagreed and sought a ruling from the Federal Council. With the São Paulo business law elite split and the traditional elite not in favor of all the proposed restrictions, the issue could not be contained at the state level and gravitated to the Federal Council. In the face of strong opinions on all sides of the issue, the Federal Council issued a general opinion stating that permanent and visible alliances with foreign firms licensed to operate in Brazil were not permitted, but left room for other kinds of relations both within Brazil and with firms outside the country.

Pro bono in Brazil

In the context of the regulatory debates, in chapter 7, Sá e Silva offers a comprehensive examination of how globalization has influenced the development of pro bono in Brazil. By the time the global shift take place, pro bono—defined as free legal services for the poor—was a core institutional feature of U.S. corporate law firms and access-to-justice practices. Building off this trend, although pro bono in Brazil found some local support, the practice had less of a chance to grow among Brazilian corporate lawyers and law firms given the regulatory challenges. Indeed, competing interests and institutions at the local level, along with diverse interactions across the North/South border, produced a unique meaning for pro bono in São Paulo.

Pro bono in Brazil is at a crossroads.

Initially, pressures from clients seeking to advance corporate social responsibility projects and support from traditional elite lawyers allowed pro bono to grow. But struggles for shares of the legal market at both the top and the bottom of the bar’s structure constrained its institutionalization among corporate lawyers and law firms. To mediate these conflicts, the bar enacted regulations allowing pro bono services to be offered only to nongovernmental organizations and in transactional matters only. Although law firms initially resisted these restrictions, over time a compromise with the bar leadership was reached as part of a wider bargain that also restricted the entry of foreign law firms into the Brazilian legal market. As a result, pro bono promoters responded by not only reinforcing the “traditional” roots of pro bono but also developing strong alliances with public defenders, litigation-oriented NGOs, and human rights advocacy groups. The result is a very different profile for pro bono in Brazil than what exists in the United States and other jurisdictions, where this practice focuses primarily on individual representation. However, as indicated above, the Office of the Federal Prosecutors’ recent threat to challenge the ban on individual representation has led the OAB to void the restrictions. This leaves pro bono in Brazil at a crossroads.

Challenges to traditional models of legal education

The transformation of the corporate law sector created demands for new skills. Thus, in chapter 8, which explores changes in legal education in Brazil, Cunha and Ghirardi explore how law schools have attempted to adapt to the new types of lawyering brought on by globalization and liberalization. In this light, as globalization and liberalization took hold, corporate law firms and in-house legal departments increasingly sought lawyers with new types of legal skills—for example, knowledge of advanced areas of corporate and international economic law, familiarity with global lawyering styles, and a grasp of business fundamentals. With minor exceptions, Brazilian law schools failed to respond to this demand, remaining largely doctrinal in focus. Although a wave of new law schools was created, often by profit-seeking institutions, these new entrants concentrated on low-level, mass legal education, replicating traditional curricula and focusing on preparation for the bar exam. Although a few law schools in Rio and São Paulo have introduced innovative undergraduate law programs and addressed global issues, most law schools failed to respond to the new needs.

As a result, aspiring corporate lawyers had to seek alternative paths to gain the capacities required by the new market. These paths included continuing legal education programs, which have proliferated; study abroad, principally in the United States; internships in foreign law firms; and in-house training. Some of the institutions that created new, internationally oriented law undergraduate courses have also started offering master’s programs and high-level continuing education courses. They therefore meet a substantial portion of the local market demand for lawyers with new skills and knowledge. Although continuing education has helped provide knowledge of advanced legal subjects, it rarely, if ever, offers training in business fundamentals or global lawyering styles. These capabilities are best found through foreign degrees and internships as well as training programs directly offered in-house or financed by law firms, including a growing number of executive education programs in the United States and United Kingdom that cater to a global clientele. Many students, having finished the undergraduate course in Brazil and often doing some work in corporate firms, have gone abroad for LLMs and internships, and many law firms now offer substantial in-house training.

International legal capacity—the WTO

In chapter 9, Glezer, Dias, Brito, and Zanatta describe how Brazil’s entry into the WTO created a demand for lawyers who could understand the organization’s rules and defend Brazil’s interests in the organization’s dispute-resolution system. In short, lawyers were needed who could use WTO law to support Brazilian exporters seeking access to foreign markets and protect domestic policy against complaints in the WTO. To meet this need, the Brazilian Ministry of Foreign Affairs, working with the private sector, created a program in Geneva to train lawyers from the public and private sectors in WTO law. This project created a cadre of lawyers familiar with the mechanics of foreign trade and WTO law and procedure. An elite group, trained in the Geneva program and through study and work abroad, emerged, with most finding work in large full-service law firms.

Put together, this volume offers the first comprehensive analysis of globalization’s impact on the Brazilian legal profession.

Although the initial idea behind capacity building was to create a cadre of lawyers who could work in the WTO itself, the decline of WTO cases involving Brazil and the need for legal expertise in other areas of trade law, including antidumping and customs law, has changed the profile of the trade law bar and the work its members do. Indeed, the initial capacity-building efforts created an oversupply of trade law experts. However, when state industrial policies led to a tougher antidumping law, legal capacity that had been developed for WTO litigation was adapted and deployed in trade remedy litigation and foreign trade consulting. Demands by Brazilian and foreign clients for representation in antidumping actions grew. WTO-trained lawyers became active in the Brazilian trade remedy system and set themselves up as consultants offering economic and business as well as legal analysis. Stimulated by this new demand, work increased and new organizational models for legal practice emerged. The trade law bar increased participation in global consulting networks, created “foreign desks” in large-scale law firms, went to work for firms specializing in government relations, and lobbied government agencies. These moves have ensured employment for the trade law elite, helping to absorb the oversupply. A few lawyers are added to the field from time to time, largely through in-house training. But most trade lawyers do not predict major growth in the future.

Corporate lawyers and state development

Much of the GLEE study explores how changes in economic policy led to legal changes, which in turn generated demand for new kinds of lawyering. But there is another side to the story. As Sá e Silva and Trubek argue in chapter 10, corporate lawyers did not sit back passively waiting for technocrats and legislators to create the postglobal transformation legal regime: they actively participated in the creation of the new laws, procedures, and institutions. To explore this issue, GLEE studied one important area: telecommunications. “Calling All Corporate Lawyers,” which appears in this issue of The Practice, offers an analysis of the major story lines and findings in the analysis.

Moving forward

Put together, this volume offers the first comprehensive analysis of globalization’s impact on the Brazilian legal profession. The book will be of interest to academics, lawyers, and policymakers concerned with the role that a rapidly globalizing legal profession is playing in the development of key emerging economies and how these countries are integrating into the global market for legal services. As indicated at the outset, the GLEE project’s primary goal is to open a new field of study in Brazil and other emerging economies, as opposed to resolving the complex questions raised by our research regarding the evolving relationship between the emergence of a new and increasingly defined corporate legal hemisphere and broader issues of economic, political, and social development. We hope that Brazilian and international scholars will be inspired by the work we have done here to pursue these questions.

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The Brazilian Legal Profession Volume 4 • Issue 6 • September/October 2018

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