Brazilian flag (Photo: Shutterstock.com)

The Brazilian bar association says it will take a closer look at how foreign law firms are conducting themselves in the country following multiple complaints that global firms are providing services that only local firms may provide.

Ary Raghiant Neto, deputy secretary-general of the Order of Brazilian Attorneys, said in a statement last week that the order "will not tolerate" foreign firms overstepping their bounds by providing advice on Brazilian law.

The order allows non-Brazilian firms to advise on legal matters in their home countries but expressly forbids foreign law firms from consulting on Brazilian law even if they do so in conjunction with Brazilian members of the bar association.

"We do not want to restrict the Brazilian market, far from it," said Raghiant Neto, while cautioning that foreign firms must comply with the bar's provision dictating the parameters of their service.

Brazil is an integral piece of many Latin American law practices. Its $1.8 trillion economy is the largest in the region and this year, a series of planned asset sales and other market liberalizations are expected to generate lots of corporate work for global firms.

The Brazilian bar association authorizes foreign firms on a discretionary basis to conduct business in the country. But some services, such as big ticket matters like internal investigations and due diligence, could fall into a gray area.

Raghiant Neto also sent a letter dated January 21 to the president of Brazilian development bank BNDES asking for more detail on the hiring of New York-based Cleary Gottlieb Steen & Hamilton, together with Brazilian firm Levy & Salomão Advogados, to conduct an internal audit for BNDES.

He asked for an explanation of the role played by Cleary Gottlieb lawyers, emphasizing that foreigners and foreign economic groups are "prohibited" from practicing law in Brazil. The contract was reportedly worth the equivalent of more than $11 million.

In a statement to Law.com International, Cleary Gottlieb said that it "conducts all of its activities in Brazil in accordance with applicable laws."

Cleary Gottlieb is a top-billing international firm with a dozen lawyers in Brazil. It has been counsel on over $100 billion in capital markets offerings by Brazilian issuers since 2000 and on nearly $60 billion in Brazil-related mergers and acquisitions during the same period. 

The firm opened its São Paulo office in 2011 after more than 40 years of serving clients located in Brazil or doing business there.

The Order of Brazilian Attorneys grants global firms like Cleary Gottlieb licenses to operate as foreign legal consultants in Brazil with the understanding that their lawyers will not advise on matters of Brazilian law — even if they have bar admissions in Brazil.

The BNDES investigation, which involved probing allegations of bribery related to transactions with meatpacker JBS and pulp maker Eldorado, is one of several investigations that Cleary Gottlieb has worked on in Brazil.

The firm assisted a special committee of the board of M. Dias Branco, a Brazilian foodstuff company, in connection with an independent investigation of allegations of bribery. It also helped miners BHP Billiton, Vale, and Samarco with an investigation of the collapse of the Fundão tailings dam in the Minas Gerais region of Brazil.

Compared with local firms, large global law firms may have more expertise, manpower and technology tools they can apply to arduous revisions of voluminous emails and other documents that could point to corruption within companies.

Sometimes, investigations relate directly to dispelling concerns of U.S. authorities. For instance, Cleary Gottlieb aided a special committee of the board of directors of Brazilian airline GOL with investigations into potential violations of the Foreign Corrupt Practices Act being conducted by the U.S. Department of Justice and the U.S. Securities and Exchange Commission.

"When you say that foreign law firms can only practice foreign law, sometimes that's not easy to distinguish," said Allen Moreland, a partner at New York-based Robinson Brog who is also registered as a foreign legal advisor with the Brazilian bar association.