India’s decision to allow foreign lawyers to operate in the local market will boost competition and fees, according to the managing partner at one of the nation’s biggest law firms. Reversing a decades-long stance, the Bar Council of India this week permitted firms from certain countries to register in India, open offices and advise local clients on international law in non-litigious matters. Cyril Shroff of Mumbai-based Cyril Amarchand Mangaldas likened the move to throwing a big stone in a pond. “It causes ripples but the pond will calm down soon,” he said in a phone interview Wednesday.
Does the move significantly enhance access for foreign law firms, given the many restrictions?
It does give them a lot of opportunity. The restrictions are on practicing Indian law and that is a small portion of transaction work. Majority of transaction work nowadays is legal system agnostic, till you come to the governing law clause in any agreement. That is the only piece which is exclusively Indian law.
How will the division of local law and foreign law be regulated?
I’m sure the BCI will have regulatory mechanisms. Singapore has over 150 foreign law firms and a very vigilant regulator that watches like a hawk. They examine time sheets, do surprise visits to the office.
What impact will it have on the competitive landscape in India?
Given the ownership restrictions, I don’t expect any conventional consolidation in the industry. There will be more coopetition between foreign firms and Indian firms. It is much easier to build relationships with a local neighborhood firm than one sitting half way across the world. It will result in more referrals.
Some smaller Indian law firms will see this as an opportunity to create exclusive alliances with foreign firms in India. They may want to do best friend relationships to sign off on the Indian opinion side. The larger Indian firms will retain their identity and work with multiple foreign firms. Some Indian firms that were largely dependent on foreign referrals for their Indian business might be adversely affected.
Do you foresee challenges to pricing and talent retention?
There will be significant fee increases even for domestic Indian law work. Whilst more competition would ordinarily mean lower prices, in legal markets it tends to work the other way round. The more ambitious firms will substantially increase their prices. That will have less to do with market forces and more to do with internal imperatives such as talent preservation, technology investment. A rich firm can pay its people better. The rate differences are astronomical. For the same work, international firms charge 5-6 times more. So either they will have to charge Indian rates, which will not happen, or we charge the same as foreign firm rates.
Whilst there will be some talent movements, these will eventually flow both ways. There is almost always a honeymoon period after which the migrant talent largely lands back to their original place. What is underestimated in the beginning is the expectation of targets and performance which becomes quite daunting in some cases. It’s not a one way street at all.
What other outcomes do you expect?
This will result in modernization of business services and investment in high end technology by Indian firms. You cannot go to a gunfight with knives in your hand. Also, history has shown that whenever markets open up to foreign competition the national champion in any sector lands up doing even better than before.