The debate over the entry of foreign law firms into India is back in the news, with the Narendra Modi-led government initiating talks with the Bar Council of India (BCI) for opening up the legal sector. In fact, the commerce ministry is giving “finishing touches” to the proposal to liberalise transactional legal services and international arbitration. The proposal could lead to the phased entry of foreign law firms into the country.
The Supreme Court is expected to decide in April whether foreign law firms can fly in and fly out, in order to give advice to their clients on a temporary basis on foreign law. Earlier, in 2012, the Supreme Court had asked RBI not to give further permission to foreign law firms to open liaison offices in India under the FEMA laws until it took a final call on the issue. In 1994, RBI had allowed three foreign law firms—White & Case LLP, Ashurst LLP and Chadbourne & Parke LLP—to open liaison offices on the condition that these firms would not earn any income in India. In 2009, the Bombay High Court decided against three foreign law firms for having illegal representative offices in India.
A similar petition was filed by Chennai-based advocate AK Balaji in the Madras High Court, which in February 2012 held that there was no bar on foreign law firms or lawyers visiting India for short periods and giving legal advise to clients. The Court had also exempted BPOs from the purview of the BCI rules and the Advocates Act, which only allow Indian citizens with domestic law degrees to enrol as lawyers. This judgment is under review before the top court.
The liberalisation debate in India has been raging as foreign law firms have been lobbying hard to enter India for decades now.
The Indian legal fraternity led by the BCI has also been opposing the globalisation of the R700-crore legal services industry, fearing that they would not be able to compete with their foreign counterparts. The BCI is vehemently opposed to the entry of foreign lawyers and law firms in any form unless it’s on a reciprocal basis. The ammunition used for such opposition is the provisions of the Advocates Act, which say that only advocates enrolled in India are entitled to practice law here.
Opposing this view are law firms from the UK, the US, Canada, Australia and Singapore, along with some MNC BPOs. At least six foreign law firms—Clifford Chance, Linklaters, Ashurst, Bird & Bird, Eversheds and Clyde & Co—have opposed the BCI appeal, saying that neither the Advocates Act, 1961, nor the Bar Council Rules govern the practice of foreign law. There is no statutory prohibition barring foreign lawyers from appearing in international commercial arbitration proceedings conducted in India, they told the Supreme Court.
According to foreign firms, lawyers/partners of their firms enter the country to handhold clients and to advise them only on non-Indian law in their transactions in view of the globalised economy, and not to appear before any local court or tribunal. Besides, “this issue also would affect a growing Indian economy if foreign direct investment is restricted for lack of confidence from corporates and multinationals trying to invest here.”
The Society of Indian Law Firms (SILF), which has been opposed to opening up the sector on the grounds that such tampering with our justice delivery system may lead to serious consequences, has diluted its stand lately. Lalit Bhasin, president, SILF, and managing partner, Bhasin & Co, says that Indian law firms are now much better equipped to face the challenge from foreign law firms than these were 20 years ago. The permission should be given “in a phased, sequential manner” over a period of five to seven years. “If the Indian legal profession has to remain relevant, not only in India but also globally, we have to face these issues,” he said.
While there seems to be tremendous pressure from foreign countries, especially the UK, experts feel that if the liberalisation of the legal service sector is unavoidable, it should be done in a gradual and phased manner. “We can’t open the sector blindly. Before allowing foreign lawyers, one has to have proper regulations in place, keeping in view the nature of our economy and our country’s requirements. Besides, the BCI needs to look into the area where foreign lawyers could be allowed. We can start with allowing them transactional advice with no right to address the court. What is needed is a bar exam, which can judge them on the basic rudimentary and elementary education of our system, only then they should be allowed to carry out corporate tasks,” said a top lawyer.
However, some sections of lawyers have favoured entry of foreign firms. Speaking at various forums, Som Mandal of FoxMandal Little has been quite optimistic about allowing foreign firms. He believes that in a growing economy such as India, there can be plenty of work for everyone. Hence, the choice will depend on the tremendous need of foreign law firms, with the size of the average Indian foreign acquisition rising tenfold to $315 million in recent years, an article on the firm’s website states, adding that “it is only fair and in the interest of reciprocity that foreign firms be allowed to practice in India…”
indu.bhan@expressindia.com