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 (Advocates Act) and the Bar Council of India (BCI) Rules, the Madras High Court ruled on Tuesday.
However, the bench of Chief Justice M Y Eqbal and Justice T S Sivagnanam did give a breather to foreign lawyers. The Court clearly 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 Court also held that foreign lawyers cannot be debarred to come to India and conduct arbitration proceedings in respect of disputes arising out of a contract relating to international commercial arbitration.
The decision comes in the light of a Public Interest Litigation (PIL) filed by A. K. Balaji, an advocate and a member of Association of Indian Lawyers against 31 foreign law firms from Australia, USA and UK and also including one LPO.
The PIL challenged the entry of foreign law firms into the country and sought a writ of mandamus directing the Government to take action against foreign law firms practicing 'illegally' in India either in litigation side or in the field of non-litigation.
The PIL had also claimed that these foreign law firms were violating provisions of the Advocates Act by providing legal services in India.
Relief to foreign lawyers?
There was certain degree of uncertainty amongst foreign lawyers on the question as to whether they could fly into India to advise Indian clients on foreign law. It appears that this decision has given some clarity by allowing foreign lawyers to travel to India for a short span on a ‘fly in fly out’ basis to advise clients on foreign law. The general feeling amongst foreign lawyers seems to be that of relief, a sentiment confirmed by White & Case India Practice Head Nandan Nelivigi. White & Case was one of the 31 foreign law firms which was dragged to the Court by AK Balaji.
Speaking to Bar & Bench Nandan said, “The Madras High Court reached a very sensible and pragmatic conclusion in upholding the right of foreign lawyers to continue to advise their clients in India-related matters on the laws of the jurisdictions in which such lawyers are qualified, on diverse international legal issues and in international commercial arbitrations. In doing so, the Court correctly held that foreign lawyers can visit India for a temporary period on a ‘fly in and fly out’ basis”.
According to Nandan, the Madras High Court judgment is the first step in the right direction. Ashurst's India Head Richard Gubbins too agrees to this.
Interestingly, Gubbins, whose firm was one of the Respondents in the Lawyers Collective case feels that there is still uncertainty as to what the "practice of law" means under the Advocates Act. He said, “Until the Advocates Act is amended to reflect modern commercial reality, that uncertainty will remain. Foreign law firms have no intention to practice Indian Law – there are excellent Indian Law Firms we can turn to for that”.
Richard further said, “The fact remains that it will continue to be burdensome, particularly from a cost and expense angle, for Indian clients to have to fly their foreign lawyers in for consultation when in other major financial centres of the world they can attend their clients office at the drop of a hat.”
The judgment does bring some clarity to the issue as to what foreign lawyers and foreign law firms are allowed or not allowed to do. It is clear from the judgment that practice of law means practice of Indian law (both litigious and non-litigious) and not foreign law. Therefore, now if international firms can practice foreign law in India, we do not see any logic in allowing foreign lawyers to only practice for a short span of time on ‘fly in fly out’ basis. Also, no clarity has been provided on what is ‘fly in fly out’ basis?
Another important issue that has been left unanswered is the best friends relationship that foreign law firms have with Indian law firms.
However, Clifford Chance India Practice Head Geraint Hughes seems to have concern over lack of clarity as whether the Court is saying that foreign lawyers cannot otherwise practice non Indian law in India.
Continuing this line of thought, Geraint opines that, “If that is the case, we consider it to be unnecessarily and unreasonably restrictive and we believe [it] would be a misreading of the Advocates Act, which we do not believe was ever intended to address the question of the practice of non Indian Law. We will be considering whether an appeal to get clarity on these points is appropriate”.
Geraint further added "We are pleased that the Court has upheld the rights of foreign lawyers to visit clients in India, to advise them on non Indian law issues.”
Indian Law Firms view on the Judgment
Speaking to Bar & Bench Clasis Law Partner Harsh Pratap says, “In my view this is a step forward but two steps backwards. The ruling allows foreign lawyers to come to India, advise a client on foreign law and go back. Well if a client in India required advice on foreign law, he would contact a foreign lawyer in any case. I don’t see how the situation was any different prior to this ruling. The ruling does not allow foreign lawyers to practice in India”.
With regard to international arbitrations, Harsh said, “The ruling allows foreign lawyers to participate in international commercial arbitrations. Whilst this is a welcome move, again if the venue of the arbitration is India, the Arbitration & Conciliation Act, 1996, will in most cases apply and hence the “public policy” of India will step in. We will hence be back to Indian law.
Undoubtedly, this decision will be appealed against and we have not heard the last on the matter. There is also the Bombay High Court ruling, which effectively does not allow foreign lawyers from doing litigation or non-litigation work in India”.
However, Trilegal Founding Partner Anand Prasad, whose firm has a best friends relationship with Allen & Overy said, “It is a very non-controversial judgment, which interprets the legal position in the way I would have understood it. I think the Petitioner in the Chennai High Court was trying to push a very aggressive view, which the court has declined to accept. The judgment has reaffirmed the commonly interpreted view of those regulatory positions”.
“The Court should also be looking to imposing costs on people who bring about disruptive proceedings purportedly in the name of public interest. This petition, was not just directed against foreign lawyers but also sought to threaten the livelihood of thousands of hard working citizens that work in the LPO industry”, added Anand.
Dua Associates Partner Senthil Ramamoorthy representing the US Law Firm said, “We are quite happy with the judgment. Our principal submission before the Court was that we don’t have offices in India and we don’t practice Indian law and we’ fly in fly out’ to advice our clients on non Indian law and whenever there is an Indian law aspect to a transaction, we engage services of the Indian lawyers. Our case was that the Advocates Act or BCI Rules do not prohibit this. The court has accepted that contention”.
Senthil added, “The judgment has vindicated the status quo that was prevailing earlier except that it was unclear earlier as to whether what was being done by foreign lawyers or law firms was legally permissible or not. To that extent the Court has clarified that yes it is not prohibited by the applicable statutes and Rules and you may do it”.
The Court has held that Legal Process Outsourcing units (LPOs, the legal version of business process outsourcing units, or BPOs) are permitted to function in India as they are not violative of the Advocates Act, but they could not render legal advice to clients. The ruling also empowers the BCI to take action against erring LPOs that set up shop in India.
With regard to Court’s decision on LPOs, Nishith Desai Partner Vivek Kathpalia and Associate Payel Chatterjee (Counsels for Integreon) said, “The judgment in our view other than dealing with practice of foreign law by foreign lawyers in India also opens up plethora of questions that are yet to be answered. Specifically with regard to operation of LPO’s the judgment seems to have taken a view that as long as LPO’s are not practicing law, they are free to operate in India. However, more clarity with regard to its functioning and regulation can be obtained only upon further study with respect to nature of its activities by the Government and Bar Council.”
While Ganesh Natarajan, President of Mindcrest said, "I believe the ruling is a welcome clarification by the Court for both LPOs and foreign law firms. Certainly a step in the right direction.”
Natarajan further said, “It clarifies that LPOs are not practicing Indian law but tacitly acknowledges the employment generation activities of LPOs.”
Impact on Economic Growth
The Madras High Court found “force” in the submission made by the learned counsel appearing for the foreign law firms that if foreign law firms are not allowed to take part in negotiations, for settling up documents and conduct arbitrations in India, it will have a counter productive effect on the aim of the Government to make India a hub of international arbitration.
Therefore, the Court observed that to advocate a proposition that foreign lawyers or foreign law firms cannot come into India to advise their clients on foreign law would be a far fetched and dangerous proposition It added that in its opinion, it would be a step backward, when India is becoming a preferred seat for international commercial arbitrations.
The Court also referred to the recent Vodafone decision wherein the Supreme Court observed that every strategic foreign direct investment (FDI) coming to India should be seen in a holistic manner. The Supreme Court observed that the question involved in the said case was of considerable public importance, especially on FDI , which is indispensable for a growing economy like India.
Therefore, the Madras High Court observed that they should not lose sight of the fact that in the overall economic growth of the country and that international commercial arbitration would play a vital role. The Court has given importance to the fact that it is important to allow foreign lawyers to attend international arbitrations keeping in mind the economic growth of the country and the effort to make India a hub for international arbitration.
White & Case Partner Nandan too feels the same way and said, “An adverse ruling on this issue would have increased the transaction costs of Indian and international clients doing business with India, affected foreign direct investment in India and defeated the Government of India's goal of making India a preferred venue of international commercial arbitrations.”
“There are tremendous opportunities for legal practitioners in India and in other countries and for the respective professional organizations in those countries to interact and collaborate for their mutual benefit”, added Nandan.
Geraint goes a step further and said ”We continue to believe that the removal of restrictive barriers in the Indian legal market will bring direct benefits to the Indian economy and to Indian businesses, and bring positive advantages to the profession domestically and we look forward to a time when the Indian Government is ready to take concrete steps in this direction”.
Speaking to Bar & Bench the Petitioner AK Balaji said, “I am happy with the judgment. However, with regard to arbitration, the Court has given some relaxation to the foreign law firms. We have not decided whether we will prefer an appeal or not. My only request with the Law Ministry and Government of India is to openly discuss the issue with advocates and the Bar Council”.
The Counsel for the Petitioner, Karthikeyan said, “It is a reasonable judgment. Our association will decide whether we will file an appeal or not. We have a meeting this weekend and then we will take a call if an appeal will be filed”.
Karthikeyan further said, “After this judgment, the system with regard to entry of foreign law firms and foreign lawyers will be regulated which was not earlier regulated. The Bar Council will be now be more vigilant and will keep a watch on foreign law firms and foreign layers including LPOs”.
Karthikeyan feels that the BCI now needs to decide whether they have to frame any rules with regard to regulation of entry of foreign law firms and foreign lawyers and that the government needs to take a call on whether the Advocates Act needs to be amended.
Lawyers Collective vs. A.K. Balaji
The Madras High Court before deciding the issue in the instant case discussed the ratio of the Bombay High Court in Lawyers Collective case.
The Bombay High Court in the Lawyers Collective case held that the practice of the profession of law included litigious as well as non-litigious matters. The Court felt that it was necessary to include non-litigious matters under the purview of the Advocates Act and the BCI Rules, since unregulated practice of law would not be conducive to upholding the high standards of the profession.
The Madras High Court observed, “The Bombay High Court, has rightly held that establishing liaison office in India by the foreign law firm and rendering liaisoning activities in all forms cannot be permitted since such activities are opposed to the provisions of the Advocates Act and the Bar Council of India Rules. We do not differ from the view taken by the Bombay High Court on this aspect”.
“However, the question here is, whether a foreign lawyer visiting India for a temporary period to advise his client on foreign law can be barred under the provisions of the Advocates Act. This issue was neither raised nor answered by the Bombay High Court in the aforesaid judgment”, said the Court.
Therefore, the Madras Bench went on to hold that foreign lawyers are not barred from visiting India on temporary basis to advice on foreign law.
BCI Chairman Ashok Parija has indicated that the BCI will soon file an appeal before the Supreme Court of India.
Parija said, “I think the Madras High Court judgment has gone beyond what was held in the Bombay High Court. We will consider filing an appeal before the Supreme Court as the two High Courts have given two divergent views. The Bombay judgment clearly states that foreign law firms cannot have an office in India and cannot practice law while Madras High Court is allowing foreign lawyers to come to India on temporary basis. To that extent, the two High Courts appear to be in conflict”.
Parija also informed Bar & Bench that they will have a meeting on March 3 to discuss the judgment and the future course of action. Parija said, “Primafacie, I am of the view that the appeal should be filed but it will depend on what the Council will decide”.
It appears that at least one party will go in appeal against this decision of Madras High Court. This judgment has given clarity to foreign lawyers to at least visit India for temporary period on ‘fly in fly out’ basis to advice on foreign laws. However, there are certain questions that remain unanswered and one of them is if the foreign lawyers can advice on foreign law and stay for temporary period, why can’t they set up a permanent presence?