RBI cannot allow foreign law cos under Fema: SC

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Jul 5 2012, 06:51am hrs
The Supreme Court on Wednesday asked the RBI not to give permission to foreign law firms to open liaison offices in India under foreign exchange (Fema) laws till the court takes a final call on the issue.

While refusing to stay the Madras High Court judgment, an apex court bench headed by justice RM Lodha sought reply from AK Balaji (the petitioner in the HC), the ministries of law, home, finance and external affairs, income tax department, RBI, and 31 foreign law firms, Integreon, an LPO, and others.

Besides, the court clarified that the foreign law firms should follow Advocates Act,1961, which covers both litigious and non-litigious work.

Earlier in 1994, RBI had allowed three foreign law firms White & Case LLP, Ashurst LLP and Chadbourne & Parke LLP to open liaison offices with the condition that these firms would not earn any income in India.

The lawyers involved in the matter feel that the apex court has in effect barred any kind of legal practice by foreign law firms including advisory work in India till the disposal of the matter.

The Bar Council of India (BCI) has challenged the Madras HC's February 21 judgment that held that foreign law firms or foreign lawyers cannot practice the profession of law in India either on the litigation or non-litigation side, unless they fulfill the requirement of the Advocates Act, 1961 and the BCI rules. However, the HC had stated that there is no bar either in the Advocates Act or the BCI Rules for foreign law firms or foreign lawyers to visit India for a temporary period on a fly in and fly out basis, for the purpose of giving legal advise on foreign law to their clients in India. The HC also held that foreign lawyers cannot be debarred from coming to India and conducting arbitration proceedings in disputes involving international commercial arbitration.

BCI has challenged the Madras HC order on the ground that these foreign law firms are allegedly violating provisions of the 1961 Act by providing legal services in India.

The petition also stated that only lawyers and law firms from those countries that offer similar opportunity to Indian lawyers and law firms should be entitled to practice in India.

Alleging that most foreign law firms exist in India through the Legal Process Outsourcing (LPO) outfits, the council said that most foreign law firms have their back end offices in India, which not only does their back end activities, but also provides legal services in India.

Chennai lawyer Balaji had moved the HC just few months after the Bombay High Court had passed a landmark judgment which practically denied foreign law firms entry into India on the basis of the existing laws.