Foreign Law Firms in India: Why it isn't a bad thing

Bar & Bench September 7 2017
Foreign law firms

Pragya Chaturvedi

It was not long ago that the entry and operation of foreign law firms and lawyers in India seemed improbable.

However, the Bar Council of India (BCI), under direction from the Ministry of Law & Justice, drafted and notified the Registration and Regulation of Foreign Lawyers in India Rules, 2016. These rules allow the entry of foreign law firms and lawyers in India and allow them to practice non-Indian law.

While the journey up until now has been rocky and full of U-turns on the part of the BCI, the much awaited liberalisation of the Indian legal market is now more likely to happen than ever.

Present Situation

Section 24 of the Advocates Act, 1961 lists the conditions for enrolment of advocates to their respective State Bar Councils. Indian citizenship, inter-alia, is one of the conditions for the enrolment. The proviso to sub-section (1), however, allows foreign nationals to enroll in India, subject to reciprocity in their home country.

The reciprocity provisions of Section 47 empower the BCI to prescribe conditions, subject to which non-Indian citizens with foreign law degrees may enrol as advocates in India. It also attempts to protect Indian citizens from unfair discrimination in foreign countries. Section 47 (1) prohibits foreign nationals from practicing law in India if there is no reciprocal arrangement in their home country.

Section 49 empowers the BCI to make rules for enrolment of non-Indian citizens with a foreign law degree.

Genesis for Change

The introduction of these Rules is not a compulsive exercise. It is a result of prolonged debates, discussions, and deliberations over a long period of time.

Foreign law firms are not new to doing business in India. In the 1990s, a couple of foreign firms (Ashurst, Chadbourne & Parke and White & Case, for example) were operating through liaisoning offices in India. But the judgment in Lawyers Collective v. BCI  forced them to shut shop.

Circumvention attempts saw foreign firms setting up Indian desks in other places such as London or Singapore. Entering into a 'best friend' referral arrangement was another such attempt.

However, these were only temporary arrangements and full-fledged operations by foreign law firms did not come to fruition.

The Present Debate

The present debate surrounding entry of foreign law firms and foreign lawyers in India dates back to at least 2012. On 21st February, 2012, the Madras High Court in AK Balaji vs UOI ruled that,

"there is no bar either in the Act or the Rules for the 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 advice to their clients in India regarding foreign law or their own system of law and on diverse international legal issues."

The 2 judge-bench also held,

"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."

Earlier, the Supreme Court, in Vodafone International Holdings B.V. v. Union of India and another, had expressed a similar view. While the primary issue concerned taxation of Capital Gains, the SC observed that

"in the overall economic growth of the country, International Commercial Arbitration would play a vital part."

The Madras High Court, while delivering the judgment in AK Balaji, took the above judgment into account and held that in the era of FDI and foreign transactions, it was imperative to have lawyers with expertise on foreign law.

International Agreements and Government Initiatives

India is a part of the WTO and the GATS. Consequently, it is obligated under the agreement to introduce liberalization in services, including services in the legal sector.

The Narendra Modi government, acting on the above obligation, initiated talks with BCI in February 2015 to allow foreign law firms to enter the Indian legal sector.

The Society of Indian Law Firms (SILF), after initial resistance, has been in favour of legal liberalization. The BCI too, after initial opposition and reservation, has agreed to allow foreign lawyers in India 'in principle'. Both SILF and BCI agreed that the entry should be done in a phased manner to allow Indian firms and lawyers to cope with the change.

Pursuant to the above agreement, in 2016, BCI drafted Rules allowing foreign lawyers in India.

Situation under the New Rules

The new draft rules provide for the following:

  • Allowing foreign law firms and lawyers to set up an office in India. This is subject to registration with BCI for an initial period of 5 years and practicing non-Indian law.
  • Deeming foreign lawyers as Indian lawyers under section 29, 30, and 33 of the Advocates Act.
  • Barring foreign lawyers from appearing before Indian courts and tribunals or to provide any advice relating to them.
  • Allowing foreign lawyers to hire and enter into a partnership with Indian lawyers.
  • Registration fee of $25,000 for individuals and $50,000 for partnership firms.
  • Renewal fee of $10,000 for individuals and $20,000 for partnership firms.
  • Allowing foreign lawyers to participate in international arbitration in India.
  • Refundable security deposit for foreign lawyers to practice in India.
  • Registering foreign lawyers on a reciprocal basis.
  • Requirement of certificate from home ministry and bodies equivalent to foreign bar councils.
  • Same disciplinary and ethical obligations for foreign and Indian lawyers.

Foreign Lawyers in India: Good or Bad?

Allowing entry of foreign lawyers is a bone of contention among Indian lawyers and Bar Councils. The primary reason for opposition to the proposed changes to the BCI Rules is the potential loss of livelihood for the Indian legal community.

However, it is important to analyze the situation with a holistic view and consider its overall impact before arriving at a conclusion.

The Good

Despite initial apprehensions, there are numerous ways in which entry of foreign lawyers in India may prove to be a boon.

Transfer of Knowledge

Entry of foreign players into India would allow exchange of knowledge, expertise, and skill between Indian and foreign firms. This will facilitate enrichment and transfer of resources at a mutual level.

Global Opportunities for Indian Lawyers

Allowing foreign law firms in India on reciprocal basis will provide Indian lawyers the opportunity to practice abroad. The result will be a wider net of opportunity to provide services to leading companies, locally as well as globally.

Indian firms will be able to widen the net of their practice by providing advice on transnational transactions involving Indian companies.

Infrastructural Development at Institutional Level

This kind of development is necessary at both academic and practical training level. Entry of foreign law firms will raise the bar of present legal education. The focus will shift from academic cramming to instilling practical knowledge and training in students.

Job Creation

If foreign law firms set up shop in India, they will need manpower in the form of lawyers who are well versed with the local law. Indian attorneys who know the local working conditions first-hand fit the bill perfectly. Even if a small percentage of the total workforce consists of foreign lawyers, it is still a huge job creation opportunity for the Indian legal service sector.

The Indian legal fraternity stands to gain from this move and not lose out. Graduates fresh out of law school will be able to find lucrative opportunities in their home country, but with international exposure.

Improved Quality of Service

The competition that emerges at an international level will help improve the present quality of legal service. Service that conforms to international standards will eventually lead to superior quality of service being offered at competitive prices. This will prove to be a substantial relief for a client who have to shell out significant sums of money to avail quality legal service.

The Bad

Loss of opportunities for local law firms and Indian attorneys is the primary concern at this moment. Just as the entry of retail giants like Amazon has hit small time retailers and dealers in India, this move is being perceived in a similar vein.

Another concern is the considerable gap in legal training and education in India when compared to its foreign counterparts. This raises serious questions about the employability of fresh graduates and young legal professionals.

Stringent immigration laws and astronomical tuition and bar exam fee is another area of concern for those wanting to equip themselves with a foreign law degree.

Unfounded Fears

Prominent Senior Advocates Harish Salve and Gopal Jain have re-iterated the government's pro-liberalization stand in a recent interview. They have termed the reservations expressed above as unnecessary fear-mongering. As per Mr. Salve, in India, they have set up high walls just to keep it as a preserve of the few. He also questioned the loss of livelihood premise by making a well-reasoned argument.

"If 20 global law firms hire 2,000 youngsters from India, whose future are we stealing?"

Mr. Jain believes that when foreign players can come and play cricket in India, why can't foreign lawyers come and practice here? He stated that international exposure can only benefit the Indian legal fraternity.

Conclusion

The downside, as of now does seem like a deterrent. But, the benefits of allowing foreign lawyers in India far outweigh the negatives on any given day. However, as former Chief Justice of India JS Khehar suggested, reciprocity is the solution to this problem. The Advocates Act, 1961 also provides for the same. Entering into MoUs with other nations and insisting on reciprocity is the way forward.

The service sector thrives on competitive prices and quality of service on offer. Entry of foreign firms and foreign lawyers in India will result in increased competition. In turn, it will see Indian firms competing to provide the best price and offer the best service.

Eventually, it will play out to the benefit of both the service recipient and the provider. Increased quality will translate to increased business. For the customers, quality and competitive prices will ensure the best service at negotiable prices.

Support of seasoned lawyers only strengthens the case for allowing foreign lawyers in India.

It is possible to bridge the gap in training and education through infrastructural and administrative reforms at an institutional level. MoUs and exchange programs with foreign law universities will facilitate international legal education.

Entry of foreign lawyers in India in a phased manner is the need of the hour so as to allow the Indian legal service market to keep abreast with the global legal industry.

Pragya Chaturvedi is an IPR Attorney and Editor at PocketLawyer.com

 

 

The views expressed in this article are of the author. The opinions in the article do not reflect the views of Bar & Bench.