Marshall Islands Attorneys: Who Can Practice in the Courts of the Marshall Islands?

All counsel appearing before the Marshall Islands courts are subject to the Marshall Islands Rules for Admission to the Practice of Law and for the Practice of Law (2007) (the “Rules”). The term “counsel” means both attorneys and trial assistants. To be admitted as a Marshall Islands attorney, one must complete a comprehensive application process, pass a written bar examination, meet morals and character requirements, and graduate from an approved law school. An “approved law school” is any law school approved by the American Bar Association, a law school in a nation other than the United States, which uses the common law as a background for study and which is an accredited institution in that country, or any other law school approved by the Supreme Court.

Trial assistants are citizens of the Marshall Islands, who may be admitted without passing the bar examination and without graduating from an approved law school, however, they may only serve as counsel for and give advice regarding limited civil and criminal matters. Trial assistants may be admitted to practice law in Marshall Islands courts, when there is a shortage of attorneys.

All counsel admitted to practice must be familiar with the Constitution of the Republic of the Marshall Islands, the Acts of the Marshall Islands Nitijela, published rules of procedure of the Marshall Islands courts, and case decisions of the Supreme Court (particularly those relating to the customs and traditions of the Marshallese people). All Marshall Islands attorneys and trial assistants must stay current in their knowledge of the statutes, legal decisions, and treaties, which apply to the Marshall Islands, directly or indirectly. Also, all attorneys and trial assistants must be aware of new developments in Marshall Islands law generally.

All Marshall Islands attorneys and trial assistants are bound by the American Bar Association Model Rules of Professional Conduct and must abide by them or potentially face disciplinary action, including suspension from practice, or disbarment.

Lastly, to practice law in the Marshall Islands, all attorneys and trial assistants must show their continued commitment to the Marshall Islands by either residing or maintaining an active practice in the Marshall Islands, as defined in the Rules. If this requirement is not met, such counsel may not be admitted or, if admitted, be placed on an “Inactive List.”

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Case Brief: Shareholder Derivative Suit – DryShips, Inc.

In its October 5, 2011 opinion, the Marshall Islands Supreme Court affirmed the decision of the Marshall Islands High Court in a derivative suit whereby the Plaintiff, shareholder of DryShips, Inc. (a Marshall Islands corporation headquartered in Athens, Greece), sued the Board of Directors dismissing Plaintiff’s amended complaint. Plaintiff alleged that Defendants breached their fiduciary duty of good faith, committed waste by approving transactions that were not the product of good faith business judgment, and were unjustly enriched at DryShips’ expense. Plaintiff, however, did not make a demand on the DryShips Board before instituting the action against Defendants.

In the amended complaint, Plaintiff asserted that any such demand would have been “futile and useless … because the Board is incapable of making an independent and disinterested decision to institute and vigorously prosecute this action.” Absent a demand on the Board, Defendants moved the High Court to dismiss the amended complaint. The High Court agreed with Defendants and dismissed the amended complaint, concluding that it did “not contain particularized allegations that raise a reasonable doubt that at the time the lawsuit was filed a majority of the directors were disinterested and independent or that the challenged transactions were the product of a valid exercise of business judgment.” Although Plaintiff was permitted to move for leave to amend the amended complaint, he chose to appeal the High Court’s decision.

Applying Delaware law as required by the Marshall Islands Revised Code (52 MIRC, Part I, § 13), the Supreme Court affirmed dismissal of the amended complaint concluding that Plaintiff did not meet the two-part test for demand futility set forth in Aronson v. Lewis, 473 A.2d 805 (Del. 1984), overruled in part on other grounds by Brehm v. Eisner, 746 A.3d 244 (Del. 2000). Under that test, courts “must decide whether, under the particularized facts alleged, a reasonable doubt is created that: (1) the directors are disinterested and independent and (2) the challenged transaction was otherwise the product of a valid exercise of business judgment.” Aronson, 473 A.2d at 814.

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