The entry of foreign law firms into India is one of the most debated issues in the legal world (now a days). We take a look at the reasons behind the ongoing resistance … issues involved and apprehensions voiced…
In India, practice of law is considered as a noble profession and is thus cited as the main reason for opposing entry of foreign law firms. Whereas those who favour their entry support the same by advocating that legal profession should be treated as any other commercial service and law firms as a commercial entity. While the issue of allowing foreign law firms is still debatable, it cannot be denied that most law firms, specialising in commercial laws or IPRs behave like any other professional service providers. They engage talented law graduates, paying them hefty amount and also compete for clients. In India as well, many top lawyers charge the clients on an hourly basis. Other than this, clients are also billed heavily on the basis of per appearance, like in US and UK. Many law firms in India, like those of USA and UK are structured as a business organisation where lawyers switch from one law firm to rival law firm and at times take along with them their clients as well as their colleagues.
For opposing the entry of foreign lawyers, Rule 36 of the Advocates Act, 1961 is quoted to result in negation of the level playfield for Indian lawyers which does not permit advertising by lawyers whereas, there is no such restraint on foreign law firms thus giving them an undue advantage over the Indian firms. This rule has been recently amended to allow lawyers to advertise on websites and provide information about themselves within the permitted limits of the amended rule. Such fears are still not unfounded but there is hope that amendments like that to Rule 36 could help in highlighting other such disparities, which once addressed would help in providing level playing field to the Indian law firms.
Another reason advocated against entry of foreign law firms by corporate lawyers is that they are not ready for international competition as regulatory restrictions limit law firms to have maximum 20 partners. This impediment too has been removed by the Limited Liability Partnership (LLP) Act, 2008, which has removed this limit and opened doors for foreign professionals to provide services in India. As per the LLP Act, chartered accountants, company secretaries and advocates are permitted to form multi-disciplinary firms, but respective Institutes or Bar Council are yet to come up with a notification or circular in this regard allowing its members to form an LLP. Foreign LLP or even domestic LLP with a non-resident partner can be permitted only after amendment in the Advocates Act, 1961 and the Bar Council of India Rules.
Government of India, before opening Indian legal realm, should resolve issues pertaining to tax, reciprocity of rights in other jurisdictions, disciplinary procedures applicable to foreign lawyers and their professional responsibilities and fee-sharing strategy between lawyers besides removing regulatory restrictions.”
Advocate Diljeet Titus, Partner, Titus & Co. adds, “Law firms in countries such as the USA and UK are allowed to advertise, print brochures and have their names entered in law directories. Also, these law firms are allowed to be formed as an LLP or LLC which has significantly contributed to the growth of many foreign law firms into huge multinational entities. If foreign law firms are allowed to immediately enter India, it will result in a situation of skewed and unfair competition, placing the Indian law firms at a great disadvantage. On the other hand, foreign law firms will be able to aggressively advertise and market their India related competencies in countries outside India. Also the wide disparity between Indian law firms and many dominant foreign law firms in terms of financial strength and sheer size will preclude Indian law firms from ever achieving a level playing field.”
In Indian legal realm, foreign law firms are not absent in totality. Foreign law firms have tie-ups and associate offices in India with whom they continue to work. Though they have not set up offices in India, they have liaison offices or India departments that competently execute work. For instance, the London-based Clifford Chance and Baker & McKenzie have lawyers each for India-related practice and are also recruiting lawyers from Indian law firms. They handle in-bound and outbound investments and write securities offering documents and that too through recruiting lawyers trained in Indian law. Their Indian team is based in London or in other East Asian cities from where they conduct transaction work.
According to Karnika Seth, Attorney at law & Partner, Seth Associates, “Legal practice is now ‘Corporate’ unlike earlier times. Competing with foreign law firms will certainly have a deep impact on the functioning of Indian law firms but its effect on litigation lawyers may not be so significant. Although, overall corporate law practice may suffer a set back as foreign clients may be more comfortable with International law firms with base in India than hiring the services of an Indian law firm.”
Weighing the advantages against the disadvantages of entry of foreign law firms is a contentious issue but the truth is that their entry is only a matter of time.
The subject of entry of foreign law firms into India has become too politicized, while nobody is asking what firms fall under the gamut of foreign law firms. The Advocates Act or The Bar Council Regulations do not carry any provision relating to formation, conduct and regulations of a law firm in India, unlike the Chartered Accountants Act and Regulations which are controlled under the rules and regulations relating to the firm of Chartered Accountants. This requires attention on priority. For the first time, the Union Finance Minister has differentiated in Finance (No.2) Bill, 2009 in the levy of service tax where it is proposed to levy service tax on a business entity in relation to advice, consultancy or assistance in any branch of law, in any manner. Through a proviso, however, services by way of appearance before any court, tribunal or authority has been excluded from the levy of service tax. Broadly and rather loosely, therefore, a distinction has been made between a law firm and a lawyer practicing as an individual. In my view this development is sufficient provocation for an objective look at the profession of law in its modern and present form, keeping in mind the quality of legal services in India and the absence of the requirement to clear a Bar Exam or attain certain level of legal education before licensing a lawyer to practice or qualify for para-legal services in India.
“Right to practice law in India” is strictly regulated by the provisions of the Advocates Act, 1961, and the Rules made in this regard by Bar Council of India. The Advocate Act does not provide for practice of the profession of law in India by any foreign national who is not enrolled as an advocate under the Act.
Foreign lawyers, other than those covered by the ‘Rule Of Reciprocity’ as contemplated under Section 24 of the Advocates Act,1961 cannot be enrolled as advocates and are not permitted to practice law in India. In any case permitting foreign lawyers’ to practice law in India will require suitable amendments in the Advocates Act, 1961.
The concept and globalization of legal profession in tune with ‘GATS’ can well be accepted by Indian legal fraternity so long as we can make necessary provisions to regulate the affairs in order to ensure that the legal profession is not treated at par with any other trade or business and globalization is not perceived as commercialization of this ‘Noble Profession’. Certainly Indian lawyers are not afraid of any possible challenge or competition from lawyers from any other country as they are confident about their own competence.
Commitments under General Agreement on Trade in Services (GATS), an agreement which is a part of World Trade Organization, to which India is a signatory, mandates liberalization of the legal services sector in India. However Advocate Raja Sujith, Partner, Majmudar & Co. International Lawyers suggests otherwise and states, “India or for that matter, any other member State of GATS has not made any specific commitment under GATS to open up its legal services sector. In absence of such a specific commitment, India is not obliged to open its legal services sector to foreign law firms or foreign legal consultants.”
He further opines, “Opening up the legal sector will be beneficial for India. It will help enhancing professionalism in the legal industry and in developing expertise in nascent areas of law. However, it will have to be coupled with significant improvements in the quality of legal education.”
The Bar Council of India (BCI) earlier opposed the entry of foreign law firms debating that it would adversely affect Indian lawyers, but there is a buzz that now BCI is considering allowing the entry of foreign law firms on the basis of reciprocity. Law firms of UK, US, New Zealand and Australia have shown interest in entering the Indian legal services sector. Indian lawyers too have started developing a positive view towards opening of the legal services sector.
Opening of Indian legal realm would provide a transparent and competitive recruitment process for lawyers offering opportunities based on their merit. They will get exposure to international legal practices, cross border transactions and other interesting opportunities. At present only a very small proportion of lawyers graduating from various law schools across the country get a chance to become corporate lawyers and this results in their immigration to other countries.
If foreign law firms are allowed to immediately enter India, it will result in a situation of skewed and unfair competition, placing the Indian law firms at a great disadvantage. On the other hand, foreign law firms will be able to aggressively advertise and market their India related competencies in countries outside India.
Allowing foreign law firms to practice in India will lead to more competition and hunt for clients as well as for talented lawyers. Benefits would be reaped in the form of better pay for the fresh law graduates. Reiterating the fact Sandeep Jindal, Advocate, Delhi High Court states, “Opening the entry of foreign law firm in India will, no doubt, bring in competition and raise the standards of service in the legal sector, where most Indian law firms and lawyers are engaged in competition among themselves. These firms are neither ready to face this competition nor dilute the control on their current work force, especially the young brains. Entry of International Legal Firms will bring along a lot of benefits to new generation of lawyers, in terms of increased number of cases as well as more fees. We should not be afraid of competition as they will ensure good quality and bring in worldclass elements in our legal fraternity. Moreover, we should not look at this issue as ‘entry of foreign firms in India’ but as ‘Globalisation of the Indian Legal Profession’.”
Domestic firms are hesitant to spend time or money in recruitment or to impart training or paying worthy salaries to the lawyers. This forces lawyers to look for opportunities of moving to other countries. Law firms of other countries train and absorb them as they get competent lawyers at much lower package (as compared to those of lawyers from their country). US and UK law firms employ lawyers from Indian law firms. This reflects the competence and talent of Indian lawyers and so domestic law firms need to impart training and give plentiful opportunities to lawyers graduating in sIndia in order to retain them.
A major argument advanced to oppose entry of foreign law firms is the lack of level playing field for domestic firms to compete with international law firms. As of now, law firms exist with conspicuous inequalities in terms of their size, revenue and quality. These inequalities have not led to disappearance or perishing of small law firms rather the firms operating in the
For better training and attractive pay packages, talented lawyers from countries like New Zealand and Australia joined US and UK law firms. They were engaged happily by law firms in the US and UK because they were well versed in English as well as trained in their law system and also because of insufficiency in number of lawyers in US and UK. However, law firms in Australia or New Zealand did not perish rather they became more powerful because of healthy competition. Later, these lawyers were tempted to come back by offering them good opportunities and handsome packages.
“Legal practice is now ‘Corporate’ unlike earlier times. Competing with foreign law firms will certainly have a deep impact on the functioning of Indian law firms but its effect on litigation lawyers may not be so significant. Although, overall corporate law practice may suffer a set back as foreign clients may be more comfortable with International law firms with base in India than hiring the services of an Indian law firm.”
legal services sector have consolidated and discovered a market for themselves where they offer better comparative advantage in their fields of practice.
Allowing foreign law firms would not only attract more foreign investment but will also generate more recruitment opportunities for young and talented Indian lawyers. It will also prevent what is commonly known as ‘brain-drain’ to UK and US law firms as they will get attractive pay packages and exposure to International best practices within India. Further, foreign firms have declared that they would not practice Indian law or enter into any sort of litigation in Indian courts thus insulating Indian lawyers from the work carried on by the foreign law firms.
Indian economy is growing steadily and will provide excellent opportunities to foreign law firms both in terms of revenue and exposure. Majority of Indian lawyers are into litigation while firms dealing with cross-border transactional work are very few in numbers and this is where foreign law firms could step in to fill up this gap as well as take advantage of their experience. Anand Prasad, Partner, Trilegal opines. “I am not much aware of the provisions of GATS dealing with the issue of opening up of Indian legal sector to foreign law firms. However, I am strongly in favour of entry of law firms in India. It will be very beneficial and lead to healthy competition between foreign lawyers and Indian lawyers.”
Further transactional work which at present is being outsourced will be done in India. This will not only provide foreign law firms with more work but will also generate more revenue for Indian economy while preventing the outflow of revenue. When foreign law firms will be allowed to enter the legal service sector, gaps between resourceful giant law firms and comparatively smaller or small firms will continue but each firm would find its own space. Legal fraternity will witness restructuring of law firms in the form
“India or for that matter, any other member State of GATS has not made any specific commitment under GATS to open up its legal services sector. In absence of such specific commitment, India is not obliged to open its legal services sector to foreign law firms or foreign legal consultants.”
The legal profession is crucial to the efficient functioning of any economy, and in our view, it would be in India’s best interest to open up its legal sector, not only in part to fulfil its obligation under GATS, but also to ensure that India has the capabilities and resources to further its growth and become one of the most dominant global economies.
India has many fine lawyers and that the intellectual ability, legal knowledge and judgment of the top Indian lawyers is as good as can be found anywhere in the world, but by reason of the monopoly enjoyed by the Indian legal profession, it is not at a par with the world’s best practice. I believe the entry of foreign law firms will facilitate the introduction of world’s best practice to the Indian legal profession.
While this is under discussion within India, we would urge amendments to the law and Bar Council rules to allow Indian law firms to financially associate with international firms. This will facilitate international law firms sharing their best practices and intellectual property with Indian firms.
We do not wish to enter the field of litigation. Only Indian advocates should be able to litigate before the Courts.
Indian lawyers are allowed to practice in the UK, provided they clear the examination and formalities prescribed by the Law Society of England and Wales for admission as solicitors, as well as obtain the required work visas.
As foreign lawyers are not permitted to practice in India, there would be little point at the moment in UK lawyers being conversant with Indian laws.
Regarding India opening up its legal sector for foreign law firms and vice versa I say that albeit an obligation may be said to exist, India should be careful in its response rather than charging in blindly. It must first be ascertained whether other countries across the world are similarly enthusiastic in their response and whether Indian firms are allowed to operate in foreign markets. The Indian legal system is different from scientific sector which might require foreign companies to come and join hands with the Indian Companies. Indian legal system does not require any such technical support which the foreign companies might be having in advance stage compared to their Indian counterparts. The common litigant or client in India does not require a foreign company to deal with its cheque bouncing or road accident matter. I am definitely not in favour of foreign law firms setting up their offices in India. Their entry will definitely be a big blow to the Indian legal market despite bringing in some welcome changes.
The only thing that the foreign law firms can bring to India is their conditioning and systematic mode of working but India does not need to share the revenue with the foreign law firms just to learn how to be organized, punctual and abide by ethics. Our own legal system has evolved considerably and so it is futile to say that the foreign law firms are being allowed to enter India in order to teach us ‘better interpretation’ or ‘share expertise’. Judgments like Bhopal Gas Tragedy, Uphaar, Mining in Aravalis, vehicular pollution – use of CNG, interpretation of Section 377 of IPC, Best Bakery Case, trial of Kassab, go on to show that foreign law firms are looking up to the Indian judicial system.
Last but not the least, India should take its own decision rather than buckle under the pressure to allow foreign firms to enter into the Indian market.
of disintegration of existing law firms and mergers of existing law firms where lawyers from multiple fields of specialization will come together to form a conglomerates.
In anticipation of the entry of foreign law firms, many firms have already restructured and integrated to face the likely challenges. They have increased their reach across the country by establishing their offices in various cities. They have recruited law graduates for two year training contracts in their overseas office and adopted equitable sharing of projects to retain their associate lawyers. Karnika Seth adds, “Entry of foreign lawyers in India has both advantages and disadvantages. But if foreign lawyers do enter the Indian legal sector, there is bound to be a significant change in legal practice, the signs of which we are already experiencing.”
Regardless of whether foreign law firms will gain an entry into India, the threat from them has surely enhanced the competitive edge of Indian law firms. Rajender Rana, Former Vice Chairman and presently Member, Bar Council of Delhi states that “If foreign law firms are at all allowed to practice in India, it should be on the basis of reciprocity. Just like Indian lawyers are subjected to various rules and regulations for practicing in other countries, rules and regulations should be applicable to the lawyer of the reciprocating country as well for allowing him or her to practice in India. Government of India, before opening the Indian legal realm, should resolve issues pertaining to tax, reciprocity of rights in other jurisdictions, disciplinary procedures applicable to foreign lawyers and their professional responsibilities and feesharing strategy between lawyers besides removing regulatory restrictions.”
In view of international commitments and opening up of all the important sectors of economy to competition, opening up of legal services is inevitable. Rather than succumbing to international pressures for opening of legal sector to foreign law firms, India should itself ensure all-encompassing growth of lawyers based on principle of reciprocity by ensuring uniformity and nondiscriminatory treatment.
www.grandmasters.in | 8 Years & Counting
www.rcls.in | 8 Years & Counting
www.itlegalsummit.com | 8 Years & Counting
www.bfls.in | 8 Years & Counting
www.maels.in | 8 Years & Counting
www.plcs.co.in | 8 Years & Counting
Copyright © 2020 Lex Witness - India's 1st Magazine on Legal & Corporate Affairs Rights of Admission Reserved
