Looking past the hype Lawyers Collective v Chadbourne Ashurst and White & Case

Contrary to the hype about closing the doors of India’s legal market to foreign firms, and declaring the practice of all law by foreign firms in India “illegal”, the Bombay High Court judgment on the opening of liaison offices by foreign firms remains stubborn in its inertia. It has moved neither forward nor backward, but has reiterated the existing status quo. By bringing non-litigious matters within the purview of the Advocates Act, the Court has not disturbed the functioning of any international firm- however, it may just end up as a thorn in the side of several Indian lawyers. The real-time impact of this judgment is negligible, says Vinaya Natarajan..In 1994, two New York-based law firms and one London-based law firm decided to set up shop in India. Chadbourne & Parke and Ashurst Morris Crisp set up liaison offices in New Delhi, while White & Case chose to base their India office out of Bombay, with the permission of the Reserve Bank of India (RBI). In 1995, Indian NGO, Lawyers Collective decided to challenge the order of the RBI granting permission to these firms to open liaison offices in India. In 1995, the Indian legal sector was still a largely closed market. The General Agreement on Trade in Services (GATS) had come into force only in January that year, and its scope was still under debate. In 1995, only one of the National law universities, the NLSIU, was in existence. In 1995, ‘best friends’ was a word still denoting personal relationships between individuals..Fast forward to 2009. As India settles firmly into the 21st century, the dynamics of the Indian legal sector have changed completely. The UPA-led government is vocal in its support of liberalization. Law firms in India are no longer traditional family-oriented entities relying on litigation as their primary source of income. There are over fifteen National Law Universities, promoting excellence in legal education. And most importantly, law firms, both Indian and international, have found loopholes in the rules prohibiting the practice of law by foreign firms in India. This is what is now called a ‘best friends’ relationship, an agreement, either exclusive or non-exclusive, between an Indian and an international firm to refer clients and, in some cases, share skill-sets..In this era of co-operation, what is the significance of the Bombay High Court’s judgment regarding the practice of law by persons not enrolled with the Bar Council of India? Let me look first at Lawyers Collective’s petition. I spoke to Firdaus Moosa, who led the brief for Lawyers Collective, and she was very specific about the questions raised in the matter, and Lawyers Collective’s prayer to the Court. Firstly, there was the question of whether the permissions granted by the RBI under Section 29 of the Foreign Exchange Regulation Act, 1973 (FERA) are legal and valid. And secondly, assuming that these permissions are valid, whether these foreign law firms could carry on their liaison activities in India only on being enrolled as advocates under the Advocates Act, 1961..The Court has, in its judgment, stated that the “core dispute is with reference to the permission granted by RBI to the respondents No.12 to 14 to open their liaison offices in India under Section 29 of the 1973 Act.” [Respondents 12 to 14 being White & Case, Chadbourne & Parke and Ashurst, and the 1973 Act referring to the FERA] The Court, granting the prayer of Lawyers Collective, held that the RBI did not have the authority to grant permission to these firms to carry on the practice of non-litigious matters, and also, that the practice of the profession of law, governed by the Advocates Act and the Rules of the Bar Council of India, includes the practice of non-litigious legal matters. Thus, “to practice in non-litigious matters in India, the Respondent Nos.12 to 14 were bound to follow the provisions contained in the 1961 Act [Advocates Act].”.This basically means that a person who is not enrolled as an advocate under the Advocates Act cannot practice the profession of law in India, whether in relation to litigious or non-litigious matters. And my only response to this is- So what? Contrary to the hype about closing the doors of India’s legal market to foreign firms, and declaring the practice of all law by foreign firms in India “illegal”, this judgment remains stubborn in its inertia. It has moved neither forward nor backward, but has reiterated the existing status quo. By bringing non-litigious matters within the purview of the Advocates Act, the Court has not disturbed the functioning of any international firm- however, it may just end up as a thorn in the side of several Indian lawyers..When Chadbourne et al were forced to close their doors in 1995, foreign law firms began to look for another way to enter the Indian market. ‘Best friends’ agreements were one way to overcome the hurdles posed by a closed market. The other, quite simply, was to directly hire Indian lawyers for transaction advisory relating to India. Over the last few years, several UK ‘Magic Circle’ firms, as well as some leading US-based firms have hired trainees directly from Indian law schools. Every major international firm has an India practice, usually with several Indian lawyers within the practice group, based out of Singapore or Hong Kong for geographical convenience..Consider then, what impact the Bombay High Court’s decision will have on these firms? Why, none. In fact, since the judgment restricts itself to stating that persons who are not enrolled under the Advocates Act cannot practice law in India, it would not be inconceivable for these firms to send some of their Indian associates and Partners to set up a liaison office in India..And even if the modalities of such an arrangement prove impractical, witness the trends already occurring in the market. Earlier this year, Allen & Overy sent their Singapore-based Capital Markets Partner, Srinivas Parthasarathy to allied firm Trilegal, to boost its ailing capital markets practice. Last month, Linklaters sent two of its Partners to best friend Talwar Thakore. Clifford Chance, which tied up with AZB in January this year, sent its Senior Partner Chris Wyman to India for several months to improve integration between the two firms. The real-time impact of the Bombay High Court’s decision on these firms appears to be negligible..Indian lawyers, on the other hand, may not get off scot free. If the practice of non-litigious matters requires a person to be enrolled as an advocate, several State Bar Council offices are going to be receiving applications from associates in Indian firms, come the morning..Leafing through news reports of the judgment, I was particularly amused by one anonymous commentator who felt that this decision did not merit fourteen years of thought on the part of the Bombay High Court. One cannot help but agree. In 1996, an appeal reached the Supreme Court on an interim order passed by the High Court in this matter. The Supreme Court reverted the case to the High Court with orders to decide the matter expeditiously. There appears to have been some confusion within the High Court over the definition of “expedite”, since it took another thirteen years for the Court to render a judgment that, tragically, will probably soon fade into the annals of history, obscure, unremembered and unremarked..To read about the Bombay High Court’s judgment, click here..To read the full text of the judgment, click here.