Entry of foreign law firm in India has been a controversial matter. Lately there has been some development with initiatives by the government in a definite direction. Read on to get an overview of the great Indian Legal ride.
In a reply to a question asked in the Lok Sabha in the winter session of this Parliament, whether the government was going to allow entry of foreign law firms into the country, the Minister of Law Ravi Shankar Prasad replied that the matter was under consideration of the Government subject to the outcome of Special Leave Petition (Civil) No. 17150-1754 of 2012 titled as Bar Council of India vs. A. K. Balaji and Ors. pending before the Hon’ble Supreme Court of India.
On being further asked whether the Advocates Act bars people/firms from practicing law in India if they are not citizens of the country and if so, the manner in which the Government integrate foreign law firms and advocacy, the minister replied that as per Section 47 of the Advocates Act, 1961 persons other than citizens of India shall be recognised for the purpose of admission as an advocate under the Act on reciprocal basis.
The Section 47 of the Advocates Act, 1961 defines reciprocity as:
“47. Reciprocity: —
In terms of Section 47 (1) of the Act, where any country specified by the Central Government by notification prevents citizens of India practicing the profession of Law or subjects them to unfair discrimination in that country, no citizens of any such country shall be entitled to practice the profession of Law in India. In terms of Sub-Section (2) of Section 47, subject to the provision of Sub-Section (1), the Bar Council of India may prescribe conditions, if any, subject to which foreign qualifications in law obtained by persons other than citizens of India shall be recognized for the purpose of admission as an Advocate under the Act.
As per the statement of objects and reasons of the Advocates Act, it is a law enacted to provide one class of legal practitioners, specifying the academic and professional qualifications necessary for enrolling as a practitioner of Indian Law, and only Indian citizens with a Law Degree from a recognized Indian University could enrol as Advocates under the Act. The exceptions are provided under the proviso to Section 24(1)(a), Section 24(1)(c) (iv) and Section 47(2).
“Advocates Act is enacted to provide one class of legal practitioners, specifying the academic and professional qualifications necessary for enrolling as a practitioner of Indian Law, and only Indian citizens with a Law Degree from a recognized Indian University could enrol as Advocates under the Act. The exceptions are provided under the proviso to Section 24(1)(a), Section 24(1)(c) (iv) and Section 47(2).”
Entry of foreign law firm in India has been a controversial matter. Lately there has been some new development which might appear as softening of the stand of the government and the practioners. A news report published by news agency PTI in 2015 said that the Narendra Modi government was serious about pushing the legal liberalization agenda and had started talks with Bar Council of India (BCI) to that purpose.
In fact, since the Indian economy opened and the foreign companies started setting up their businesses in India, the case for the entry of foreign law firms into India was strongly made on account of it. But the question remains: Is India prepared for liberalization in the legal domain?
“There does not seem to be any focused approach on the part of either Government or the Bar Council of India regarding opening of legal services sector in India
Firstly the profession has to be liberalized internally – permit Indian Lawyers to have websites regarding lawyers’ work experience, expertise / specialization, details of the type of entity (whether solo practitioners, proprietary firms, partnership firms or LLPs). The rules governing LLPs need to be rationalized particularly with regard to taxation aspects. Rules regarding reciprocity have to be in place and most importantly legal education needs drastic reforms to improve the standards of law practice in India.
No steps have been taken with regard to the above issues. Various exercises have been undertaken by the Government such as setting up of high profile Inter Ministerial Group under Chairmanship of the Commerce Secretary followed by Ministry of Law and Justice initiative to discuss Draft Rules proposed by the Bar Council of India regarding entry of foreign lawyers in India without touching upon the issues listed above regarding internal reforms. These exercises were abandoned. The Bar Council of India has taken upon itself the responsibility of complete review of the Advocates Act inter alia to regulate Law Firms both domestic and international. No outcome is visible or discernible. Lately a notification has been issued by the Department of Commerce removing the curbs on law firms to establish their presence in Special Economic Zones. This has been seen as a device to enable foreign law firms to get a backdoor entry to India right away.
The ideal format to permit foreign lawyers to enter India is a rational phased – sequential entry and not a sudden unregulated entry. The phases are firstly the internal reforms as listed above and once these are in place the foreign law firms / lawyers should be allowed to practice laws of their home jurisdictions in India. This phase should be followed by permitting foreign lawyers to engage with and associate Indian lawyers in specified areas of practice. This would gradually lead to foreign lawyers / law firms getting the liberty to establish their own law – practice and run their establishments on their own – subject to the regulations and regulatory control of the Bar Council.
Legal profession in India particularly the Bar Association of India and Society of Indian Law Firms are in line with the thinking and approach of the Government to open up this sector to foreign lawyers. There is no objection to this approach. The profession in India has placed on record a roadmap for the phased entry of foreign lawyers.
We see no resistance from MNCs or Indian corporates to the entry of foreign lawyers in India. It would give a conducive business environment and lead to a healthy competition to Indian legal profession which is now fully equipped to meet the challenge from its foreign counterparts. There is a uniformity in approach to this issue on the part of the Bar Association of India and SILF – other private organizations are not representative of the profession.”
“We hold that in the facts of the present case, the RBI was not justified in granting permission to the foreign law firms to open liaison offices in India under Section 29 of the 1973 Act. We further hold that the expressions ‘ to practise the profession of law’ in section 29 of the 1961 Act is wide enough to cover the persons practising in litigious matters as well as persons practising in non-litigious matters and, therefore, to practise in non-litigious matters in India, the respondent Nos.12 to 14 were bound to follow the provisions contained in the 1961 Act. Supreme Court of India in Lawyer’s Collective V Bar Council of India”
Well, there are no easy answers to this. The question rakes up issue of sensitivity, security, strength and weaknesses. Are we ready to compete with the foreign law firms or their lawyers? Will it create an imbalance in the Indian legal practice?
There are some who believe there should be no presence of foreign lawyers independently practicing in India. Interestingly and quite shockingly, Bar Council of India chief Manan Kumar Mishra at an event this month told the Chief Justice of India, JS Khehar, that based on an ongoing verification drive by the BCI almost half of India’s lawyers are fake. If this is the ground reality and the state of affairs, is it advisable to go for reforms and opening up?
In 1994, the Reserve Bank of India (RBI) gave permission to two New York-based and one London-based law firm to begin liaison office activities in India to advise and assist non-Indian clients in connection with their activities in India and outside India. The three law firms, White & Case (NY), Chadbourne & Parke (NY) and Ashurst Morris Crisp (UK) were granted permission under the Foreign Exchange Regulation Act (FERA) to start liaison activities. However, in 1995, Lawyers’ Collective, a public interest trust set up by lawyers to provide legal aid, moved Bombay HC challenging the right of foreign law firms to practice in India. The Bombay High Court held: “we hold that in the facts of the present case, the RBI was not justified in granting permission to the foreign law firms to open liaison offices in India under Section 29 of the 1973 Act. We further hold that the expressions ‘to practise the profession of law’ in section 29 of the 1961 Act is wide enough to cover the persons practising in litigious matters as well as persons practising in non-litigious matters and, therefore, to practise in non-litigious matters in India, the respondent Nos.12 to 14 were bound to follow the provisions contained in the 1961 Act.”
However, when Chennai advocate A.K. Balaji filed a writ petition in the Madras high court against 31 foreign firms, claiming they were practising illegally in India, Madras High court in A.K. Balaji vs The Government Of India on 21 February, 2012, observed:
“63. After giving our anxious consideration to the matter, both on facts and on law, we come to the following conclusion:-
“According to media reports, top lawyers believe that in the era of global integration, legal services should not remain closed for foreign lawyers. The government has begun consultations on a gradual opening up of the legal services sector to foreign players with the safeguard that litigation services will remain the exclusive domain of Indian lawyers. Senior lawyers like Rajeev Dhavan, P P Rao and C A Sunderam has endorsed the Centre’s initiative towards opening up of legal sector saying it is in national interest and would bring more competition and professionalism.”
However, BCI appealed to the Supreme Court where the case is pending. The Society of Indian Law Firms (SILF) represented by Lalit Bhasin, a leading lawyer in India, now believes that foreign law firms should be allowed to practice in India in a phased manner. According to reports in the public domain, he has already made presentation to the government in this regard. According to media reports, top lawyers in India believe that in the era of global integration, legal services should not remain closed for foreign lawyers. The government has begun consultations with the BCI with the view that litigation services should remain the exclusive domain of Indian lawyers. According to media reports, senior lawyers like Rajeev Dhavan, P P Rao and C A Sunderam has endorsed the Centre’s initiative towards opening up of legal sector saying it is in national interest and would bring more competition and professionalism.
The Supreme Court in Balaji case had observed that “since there may be several transactions in which an Indian company or a person of Indian origin may enter into transaction with a foreign company, and the laws applicable to such transaction are the laws of the said foreign country. There may be a necessity to seek legal advice on the manner in which the foreign law would be applied to the said transaction, for which purpose if a lawyer from a foreign law firm is permitted to fly into India and fly out advising their client on the foreign law, it cannot be stated to be prohibited. The corollary would be that such foreign law firm shall not be entitled to do any form of practice of Indian Law either directly or indirectly.”
Generally, there is a greater unanimity today among the lawyers that the entry of foreign law firms would not create any adverse impact on the Indian lawyers or law firms. They believe that foreign law firms would be normally interested in the transactional matters and not litigation.
But many lawyers in India believe there should be no sudden entry and there should be some level playing fields for the Indian law firms. According Berjis Desai, who was speaking in a discussion on TV last year, safeguards FDI in law firms and multidisciplinary practice should be kept in mind while allowing the law firms to India. Another aspect relates to advertising of the law firms and limitation on the partners which must be sorted out before allowing the foreign law firms into India. In India, legal profession is considered as a noble profession, intended to serve the society, and not treated as a business venture. The lawyers in India are prohibited from advertising, canvassing and soliciting work.
“But the lawyers in India believe there should no sudden entry and there should be some level playing fields for the Indian law firms. According Berjis Desai, who was speaking in a discussion on TV last year, safeguards like LLP aspect and no FDI in law firms and no multidisciplinary practice should be kept in mind while allowing the law firms to India. Another aspect relates to advertising of the law firms and limitation on the partners which must be sorted out before allowing the foreign law firms into India. In India, legal profession is considered as a noble profession, intended to serve the society, and not treated as a business venture.”
According to Bhasin, “lately a notification has been issued by the Department of Commerce removing the curbs on law firms to establish their presence in Special Economic Zones. This has been seen as a device to enable foreign law firms to get a backdoor entry to India right away”. According to the latest report, the BCI has written to the government for keeping the legal fraternity into confidence before taking any decision on the entry of foreign law firms into India. They have said that it is only the Apex Court and the entire body of lawyers and its elected members who have the capacity to comprehend the effects and full import of new rules and changes. They have written that the BCI is of the view that it is legally prudent and obligatory to await the decision of the Supreme Court in Bar Council of India vs Balaji and also to await the amendments to the Advocates Act.
The lawyers in India believe that the phased entry of foreign law firms would lead to healthy competition and the foreign law firms will bring with them a greater professionalism, competence and expertise that will do immense good to Indian legal world. So, it is time India opened up its legal space for the foreign law firms.
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