Vietnam is to throw open the doors to its domestic legal market to foreign law firms, as the government unveiled new laws on 22 July.

The laws, effective from 21 August, replace current regulations that limit the development of foreign firms in the country and guarantee "non-discrimination' against international practices, as Vietnam continues its integration with the world economy.

The legislation will allow foreign firms to directly offer Vietnamese law advice by hiring locally-qualified lawyers and now permits cooperative arrangements between domestic and foreign firms. The changes will also make it mandatory for foreign firms to file six-monthly financial and business reports to the Ministry of Justice and to have local professional insurance.

It remains unclear, however, whether full mergers between domestic and foreign firms will yet be allowed. Locally-qualified lawyers who choose to join a foreign firm will have to relinquish their right to practice in national courts.

The government's move has been welcomed by the small contingent of foreign law firms still on the ground in Vietnam. These stalwart law firms include: Baker & McKenzie, Freehills; Freshfields and Phillips Fox; as well as Deacons; Gide Loyrette Nouel; Johnson Stokes & Master; Lovells; Lucy Wayne and Russin & Vecchi.

Although only Vietnamese lawyers are currently allowed to sign-off on advice, more than 30 foreign firms had established a presence in Vietnam by 1996. Since then, the legal services market contracted dramatically and only a handful of firms remained in Vietnam.

James Harris - a Singapore-based partner at Lovells - confirmed that times had been tough. 'As most firms did, we built a reasonable-sized presence in the early days in expectation of significant work on back of the lifting of the US embargo in 1993,' he said. 'But, like all players, over the long-haul things did not turn out as hoped.'

Mark Fraser - managing partner for Freehills in Vietnam - added: 'The enthusiasm of the mid-90s was the result of foreign investors. But cautious optimism is returning. We're seeing steady increases in trade volumes, though it remains to be seen how long it will take to top previous levels.'

Although prior to 21 August foreign firms were not permitted to sign-off on legal advice, in practice the "Chinese walls' separating a foreign firm from its domestic associate were, in some cases, nothing more than a door.

'From a legal perspective, they're completely independent,' pointed out one lawyer. 'But, from a reality perspective, every foreign law firm has Vietnamese lawyers who sign off on the work.'

The bulk of income for foreign firms remains with foreign investors or the civil sector. Many still expect the US-Vietnam Bilateral Trade Agreement (which came into effect in December 2001) to introduce more work, and for the economy surge on the back of the US and Chinese export markets, with Vietnam taking advantage of the lowering of US tariffs on Vietnamese manufactured exports and of China's growing import demands from southeast Asian countries.