I hate it when I have to get all philosophical, but since China Tax Insights has thrown down the gauntlet, I feel I must. What is an international lawyer and what exactly do international lawyers do and what exactly should international lawyers do. Please bear with me here as I swear this post is going to be very relevant to more than just navel gazers and lawyers.
Matthew McKee over at China Tax Insights did a post, entitled, What is an International Tax Lawyer? [link no longer exists] His post was actually a riff on a post I did about a year ago where I stated the following about international tax:
Nobody should dabble in international tax. It is hugely complicated, and should be handled only by attorneys and accountants who specialize in it. Incredibly few do.
Go ahead and read this, but do NOT act without first hunting down and consulting with a legitimate international tax lawyer or international tax accountant familiar with the tax laws of your home country and China and the interaction between those laws.
I am always amazed when lay people think they can do what I and the other international lawyers do at my firm, but I am always even more amazed when lay people think they can do what other lawyers do even though I know that despite all of my training and experience, I would not do those things even if paid.
Matthew, who is himself an international tax lawyer, then says he agrees with what I said above. Matthew then complains of a comment left on my post that seems to say that I should have been talking about “tax specialists” who focus on off-shore trusts.
Matthew then provides an excellent definition of what constitutes international tax, which only slightly modified, also defines what I see as constituting international law:
In defining the concept of international tax, I can’t go past Michael Graetz (probably the foremost expert on international tax policy) who said that the ‘basic task of international tax rules is to resolve the competing claims of residence and source nations’.  Accordingly, international tax laws are those rules that delineate a country’s taxation of cross jurisdictional income. This includes transfer pricing provisions, thin capitalization issues, tax residency questions, income source etc.
Accordingly, I consider an international tax lawyer to be a lawyer who regularly gives advice on such rules. Whether that lawyer is an expert in another country’s tax laws is not relevant. Just as with international trade lawyers, who don’t have a detailed understanding of the trade rules of each country, international tax lawyers don’t know the tax rules of each country back to front.
However, international tax rules, as with trade laws, are sufficiently similar that, for example, a US tax lawyer with expertise in international tax (a US international tax lawyer) will know what the issues will be and know when such issues are sufficiently complex such that questions need to be asked from appropriate professionals in other jurisdictions. That is, ultimately, all one can ask.
I love it. I particularly love it because a few weeks ago, I was asked by a client whether my law firm was the right firm for a particular task and it took me some thought and some discussion in the firm to decide that we were not. More on that decision and how it relates to this post in a minute.
Matthew then talks about how the bulk of his business involves cross-border business and the tax issues spawned from that and how he rarely gives advice on off-shore trusts. He then talks about where accounting principles (raised in the comment Matthew did not like) fit in with international tax law:
Further, given that the client [the one who sent me the China-US tax treaty article] was referring to an article on the US-China DTA, I can’t see how the interaction between two sets of accounting principles was the relevant the issue. Before we worry about accounting principles, which assist in determining the requisite amount of taxable income, the first issue is to establish liability.
In terms of Chinese investing in the US, the first point to start is to look at both the domestic tax laws of the respective countries to determine how they treat the income and then to look to the DTA to see whether it alters the standard position. In many cases, the DTA will prevent one country from exercising its taxing rights over certain income. Domestic tax specialists have little experience in interpreting international tax provisions of domestic tax laws and DTAs hence why Dan was right to discuss tax lawyers with experience in international tax issues. Once it is established that there is liability for taxation in the US for a Chinese company, then the issue of the interaction between accounting principles will become relevant.
I like Matthew’s definitions because they so much apply to how I see in terms of what my law firm does and does not do.
However, rather than give an overarching definition, I will give the following as examples.
1. US domestic family lawyer calls us because he needs proof of a divorce from Santiago, Spain. Our in-house Spain licensed lawyer uses her Spain lawyer network to get certified Spanish court documents proving the divorce. She then does a declaration in English for the US Court, explaining how she obtained the documents, what they say, and why they matter.
2. Long-time Eastern European client gets sued for divorce in the United States and comes to me and tells me to handle it. I know little to nothing about divorce law and so I bring in a top US divorce attorney to handle the US side and my client gets an Eastern European divorce lawyer to handle the Eastern European side. I formulate the idea of filing a motion before the US Court to get the entire U.S. divorce proceedings moved to Eastern Europe and then I assist the US divorce attorney in drafting the motion, which motion is granted by the US court.
3. Someone calls me to help them with their estate planning involving properties in China and in the United States. I refer them to an estate planning lawyer with experience in international estate planning.
4. A client asks my law firm to draft terms and conditions for their internet product sales. This company will be selling product all over the world, but not in massive quantities. We talk about how we can draft separate terms and conditions tailored for the top twenty or so countries in which it sells products and how we might need to consult with lawyers from some of those twenty countries. We also talk about how my law firm can draft one set of terms and conditions to apply everywhere. Because these terms and conditions will not be country specific, some of them may be invalid in some places. Client chooses the one set for all countries approach and we draft it, no problem.
5. Client is owed money by a Japanese company. My firm has a lot of experience with Japan and with Japanese lawyers and a number of our attorneys speak Japanese. We take on the case for the American company and hire appropriate Japanese counsel to help us pursue the case. We work with the Japanese lawyers on the case until settlement.
6. Company calls us to assist in collecting on money owed by a company in Egypt. Because my firm has no meaningful experience with either the Egyptian legal system or with Egyptian lawyers, we decline the case. As a favor, however, we tap our network of international dispute resolution attorneys and give the company the names of Egyptian attorneys recommended to us.
7. Company asks my law firm to assist them with their software licensing agreements in Russia. This is the tough one I mentioned above. I think long and hard on this one because we have substantial experience in drafting contracts with Russia, we have in-house Russian law expertise, and we have done many software licensing agreements. In the end, however, we decline the work because software licensing agreements are so country specific and we are not expert in Russian law relating to software licensing. This company has its own in-house lawyer and I figured he could oversee the Russian lawyers himself, without need for us. If this company did not have its own in-house lawyer, I probably would have suggested we handle the US side for this.
8. Client calls wanting my law firm’s help on a technology licensing agreement with an Indian company. My firm has done probably hundreds of international technology licensing agreements, but since we have no expertise with India, we refer it out. We have since then worked on a number of these and so we now accept these.
9. Client calls wanting our help with a product sales agreement involving the purchase of product from India. We handle it.
10. Client calls wanting our help on a technology licensing agreement with a Spanish company. We handle it because we have a Spanish licensed attorney and a tons of experience with international technology licensing agreements.
11. Client calls wanting our help in reorganizing its ten international companies, seven of which are in countries we know well, and three are in countries we know less well. We take it on.
12. We draft a China distribution agreement for a pharma company. Upon concluding that, the client asks us to do something similar for Brazil. We say yes and bring on a Brazilian attorney to help. Had this company called us first for Brazil, we would likely have said no, but because we had just spent weeks learning what the client wanted on their international distribution both the client and us believed that we could save them money by handling the Brazil portion as well, and that was borne out in the end.
I would guess Matthew does a similar analysis on deciding what tax matters to take or not.