The global crisis should ordinarily present challenges for the Commercial lawyer and expectedly it should present a gloomy picture for the future. However for those who are opportune to have the necessary skills and background, there could never be a better time to practise in the commercial world. It is indeed an extremely exciting period. We liken it to a war situation which is obviously a crisis. Suppliers of arms and basic commodities often find it extremely rewarding provided risk is identified and measured. Lawyers with a deep understanding of financial instruments such as mortgage backed securities, covered bonds, credit derivatives, options are in high demand across the world if only to explain and provide opinions on the nature of the current crisis to allow for a better understanding amongst regulators and stakeholders. The current crises require studied analysis not only for the purpose of finding solutions but to assist entities restructure their affairs in compliance with the present realities.
It is important to explain further the nature of the situation and challenges that a contemporary commercial lawyer will ordinarily have to grapple with. The traditional commercial lawyer would be engaged in transactions dealing with syndicated loans, secured credits, guarantees, pledges and the entire rights attendant to security issues. However, today his commercial world has moved one step ahead. Whereas in the past he had to deal with rights emanating directly from an asset, the contemporary lawyer is now having to deal with financial instruments that derive their value not only from the intrinsic nature of the instrument but also from the value of the underlying asset.(What may more appropriately be described as the law of derivatives).
A bank has risk assets on its books and some of these assets were financed by their foreign counterparts who are directly exposed to the financial crises. Many of these foreign institutions can no longer meet their commitments or where they are able to do so it is at a prohibitive cost. (The credit crunch). An attempt to pass this on to the ultimate consumer leads inevitably to defaults. As a result there will have to be a sophisticated and ingenious attempt to trade these risk assets. However, in the absence of any institutionalized market for such assets to be traded, financial institutions will have to deal with the situation by developing new financial instruments and products to allow others share in that risk asset. Any such new instruments or product will require new considerations as to the legal risk it entails and decisions taken to minimise such risk are likely to flow into counterparty risk and transaction risk. Only the skilled commercial lawyer can provide such service.
All these may sound rather complex but the first step is to appreciate that there is a gap in our knowledge and once we appreciate that, we must then begin to re-train ourselves and perhaps ensure that the curriculum in our universities and the Law school are altered to take account of modern commercial practices and perhaps more importantly the future. This is not to suggest that contract and tort or the other core subjects are irrelevant. However their application is more relevant to abstract economic rights in the present commercial world.
The concept of self development and the need to re-retrain ourselves dovetails into a burning issue, which is the question of whether we should open our doors to foreign lawyers. Today Banks are the institutions that drive the economy, introducing new financial instruments and products that are not within traditional practice areas. It stands to reason that they will inevitably have to use foreign lawyers. It is all about risk management. If a client finds out that using foreign lawyers is more likely to minimise the risk in any transaction, they will inevitably use a foreign lawyer. The question then is: Where does that leave the Nigerian commercial lawyer?
We believe that our doors will only be closed for a short time, therefore within that time there has to be aggressive education in these practise areas and an expansion of the curriculum both in our universities and the Law school to take account of the new areas. If the Nigerian lawyer is in a position to provide the same quality of service in a specialised area, this will advance the argument to continue to keep out foreign lawyers. We must not leave room for such a persuasive argument. Today because the lawyers who can provide this service are few and far between there appears to be an inevitable desire to use the foreign lawyer.
The excitement for commercial lawyers is even more revealing in the developed world. Besides the myriads of litigations, with almost every financial institution filing civil action against the other, there remains an active role for those in insolvency, mergers and acquisitions. As far as insolvency is concerned, the need to put in place documentation which gives appropriate protection cannot be overemphasised. Beyond insolvency, there is yet still a place for the structural lawyer. The Federal Reserve has pumped into the American economy a little more than $7 bn. (With indications that Barack Obama will be spending more). For these monies to achieve its objectives there has to be structured expenditure. Some of this money will have to be used to redeem notes that have matured. Some to acquire equities in companies so they do not go under. Some to create and restructure regulatory agencies to control the market and finally to pay consultants to understudy and explain what and how it all went wrong. For these reasons we say it could not have been a better time for the specialized commercial lawyer.
In Nigeria we need to equip ourselves for the challenges that modern commercial practise presents particularly learning from the mistakes that were made in the developed world. This is the time the regulators should be working with lawyers to create an enabling environment to expand the economy. For instance, the dearth of residential mortgages is startling and without an effective mortgage backed securities or covered bonds we are not likely to see any significant improvements. What had happened with mortgage backed securities in America was a total abuse of the system where institutions failed to follow basic underwriting standards. Our advice is that we create a sense of urgency and get more lawyers trained in contemporary commercial fields/ areas so as to assist the economy. In the absence of a structured and systemic training programme, lawyers who are experienced in this area will continue to flourish without any real contributions to the growth of law or the economy. This responsibility I would imagine falls on us all but most especially the more senior members of the Bar.
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