FOREIGN LAW FIRMS IN INDIA : BOON OR BANE
– Rushil Shukla*
Who could have thought The opening of a legal firm by a Nigerian in Delhihas not only lawyers up in arms against the unauthorized practice but has also revived the decade-and-a-half-old debate over the more importantquestion -should foreign lawyers beallowed entry into India?
It is often asserted that India has the potential to become one of the world’s greatest legal centers in the 21st century, alongside London and NewYork. It has innate advantages in its common law traditions and English language capability. But until very recently India had not recognized the role thatadvisory legalservices haveto play in attracting foreign investmentand developing a broader-based services economy. By not allowing these Foreign Law Firms (hereinafter FLF)should we even compare ourselves with the other legal centres?
Under section 7(1) of the Advocates Act 1961, foreign law degrees are recognized by the Bar Council of India on a reciprocal basis, and legal academics can teach and engage in legal research without any bar. However, foreign nationals are prohibited from “practicing law” in India as perthe sameAct. (Itwill be argued thatthis is an unnecessarily harsh measure, and having standardized bar examinations, as is done in the USA or UK, is a better solution.) .
In 1994, two New York-based and one London-based law firm had sought permission from the Reserve Bankof India(RBI) 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 challengingthe right of foreign law firms to “practice law” in India. The High Court had held that the practices engaged by these firms amounted to “practicing the law” and hence werenot to be permitted.The FLFs had challenged this judgment to the Supreme Court, which remanded the case back to the High Court to hear and decide. It is at this stage that proceedings currently lie.
“The position as it stands as of now is that the practice of law in India is governed by theAdvocates Act of 1961………Foreign law firms are simply not allowed to engage in the practice of law in India.” Is what was blogged by Mark Ross who is UK attorney and Director of Business Development at LawScribe, Inc.
“Forget about the protectionist streak against Outsourcing here in the West. As we’ve mentioned before, India has basically kicked foreign lawyers and firms out of the country…..” as was blogged by Chintan Amin who is the Vice President – Public Relations at North American South Asian Bar Association Senior Counsel, Corporate Law & Compliance at Bayer
India being a signatory to the General Agreement on Trade in Services (GATS) which is an organ ofthe World Trade Organization (WTO)is underan obligation to open up theservice sectorto Member Nations.
“Services” would include any service in any sector except services supplied in the exercise of GovernmentalAuthorities as defined in GATS. “Aservice supplied in theexercise of GovernmentalAuthorities” is also defined to mean any service that is supplied neither on a commercialbasis nor in competition with oneor moreservice suppliers.
Legal profession is also taken to be one of the services which are included in GATS. With the liberalization and globalization policy followed in India,multinationals andforeign corporations areincreasingly entering India. Foreign financialinstitutions and business concerns are also entering Indiain afairly large number. Theirbusiness transactions in India are obviously governed by theIndian lawand FLF’s and foreign legal consultants (FLC’s) being not fully conversant with the Indian legislation requires the assistanceof lawyers enrolled and practicing in India. This has led to the idea of entry of foreign legalconsultants and liberalization of legal practices in India in keeping with the guidelines evolved by the International BarAssociation (IBA)and the GATS. If this idea is to be put into practice, the Advocates Act, 1961 which governs legal practice in India needs to be amended.
Legal “practice” is not defined in theAdvocates Act but a reading of Sections 30 and 33 indicates that practice is limited to appearance before any court, tribunalor authority. It does not include legal advice, documentation,alternative methodsof resolvingdisputes and such other services. Section 24 (i)(a) of the Act provides that a person shall be qualified to be admitted as an Advocate on the State Roll if he is a citizen ofIndia provided that subjectto this Act a national of any other country may be admitted as anAdvocate on the State Roll ifthe citizens ofIndia duly qualified are permitted to practice lawin thatother country.
Section 47 of the Act provides that where a country specified by the Central Govt. in this behalf by a notification in the Official Gazette prevents the citizens of India from practicing the profession of law subjects them to unfairdiscrimination in that country, no subjectof any such country shallbe entitled to practicethat profession of law in India.
In any case, Bo mb ay Hig h Co ur t ha s author itatively pronounced on these aspects under discussion here and until the judgment is over-ruled or the laws are amended this remains the law of the land.
One has a right to say that the judgment is wrong – but there haveto be cogent reasons.
The reason given that Chartered Accountants, Engineers, Company Secretaries are doing legal work is begging the question. What these professionals aredoing is illegal, beingin gross breach of the provisions of the Advocates Act (Section 33) which authorises only advocates to engage in practice of law.
This is one issue which the legalprofession has taken up strongly with the Government. We are opposed to multi-disciplinary practice. In any case two wrongs don’t make one right.
On the other hand the observation of the Bombay High Court that the Government should decide on its policy regarding foreign lawyers is not a ‘direction’. It is only an observation and is per incuriam.
But as a matter of fact and law the High Court is wrong in making this observation.
In any case the Government cannot, despite the observation of the High Court, evolve any policy which is contrary to law. Whether or not there should be an amendment to the law is for our Parliament to decide. Moreover the Bar Council of India (BCI) is a statutory body and the Government has no supervisory role over the BCI.
Even if reciprocity were allowed, no Indian firm would go abroad to conduct legal business not because it has no talent, competency or efficiency but economically it would not be a viable proposition. The Indian lawyers haveno resources to set up an establishment in a foreign country nor willthe Indian Government renderany assistance to them to promotetheir business in aforeign country.Even thelarge population ofnon-resident Indians would notdesire to patronize the Indian lawyers even though they may be experts in their own field because the resident lawyers having full knowledge of the law of the country would be available to them at reasonable price because for the legal experts from India apartfrom thefees charged for thelegal consultancy/service they may have to spend on their travelling expense also. The legal service by calling Indian experts would be very expensive for the non- resident Indians and they may not get fulleffective service since the Indian legal consultants may not be very conversant with the laws applicable there. It is only if any Indian party is concerned in a dispute and the question relates also to Indian law that Indian legalConsultant would beinvited to a foreign country and not otherwise.Such occasions will be rare. The picture is different in case of foreign firms who do business across nationalborders, due to globalization.
Some are of the view that instead of being perceived as a threat to lawyers, this should be seen as a move to raising standards within the profession but with reciprocalarrangements. The legal profession as it was practiced years before by the legalstalwarts did have a very high standard. However, today legal profession has also become totally commercialized with no human ormoralvalues. The standard has gone down considerably. On the other hand, the fees charged have tremendously increased, disproportionately to the service rendered to the clients. No effort is being made in any corner to set the wrong or malpractices which have crept in the legal profession. On this background, what would be the “raised standards”? If at all the standards are raised, would the entire class of legal practitioners in India benefit or willit be only a small section of the legal practitioners who would be able to take advantage of the new situation? In that case,can this move, besaid to be in the interestof thelegalpractitioners?
The situation so far as the FLF’s are concerned would be completely different since all the FLF’s who aspire to come to India willget equal treatment whereas the Indian legal practitioners would be deprived of equality in profession. Besides the FLF’s will have foreign clients and even though they are allowed to practice in India with a reasonable restriction of obtaining law degree in India, for some time definitely they willneed Indian lawyers to gettheir workdone. With the resources at their end and with the higher exchange rate in currency, they will be able to hire and retain young lawyers with substantial pay packages, though as compared to their fees in their country it would be much lower, with the result that good reputed Attorney’s/Solicitor’s Firms in India would lose their good hands and their work may suffer. Law Firms in U.S.A have funds equalto the annual budget of the State of Madhya Pradesh. With such resources, in a short time, such FLF’s would do away with the existing lawfirms in India. On this background would ourlaw firms withstand thecompetition and the quality of service, is an important question to be examined.
Despite the resistance to their entry, foreign law firms have tie-ups and associate offices in India with whom they continue to work. So, even if they havenot set up offices in India, they haveliaison offices or India departments that effectively do the work: the London-based Clifford Chance and Baker & McKenzie both have 180 lawyers each for India- related practice! These firms have also started recruiting from Indian lawfirms: top London firms like Clifford Chance, Linklaters have been recruiting from the NationalLaw School of India University campus for some years now.
The Indian legalprofession has, in recentyears, undergonea significant change, emerging as highly competitive and ready to move along with the ongoing wave of globalization. The interest of foreign law firms to open shop in India therefore is hardly surprising, since India offers a full range of legalservices, of comparable quality, at literally a fraction of the price that would otherwise have to be paid. The rather conservative and if I may use theterm, “White Knight’ish”approach of the Bar Council of India to act as a saviour for the smaller Law Firms on the matter has, however, prohibited Foreign Law Firms from operatingin India.
India is in the process of globalizing its economy. In the process, the legal market being opened up to competition from the International LegalMarket is rather ineluctable. Instead of discussing the pro’s n con’s of the issue, it would be more mature, sensible and an act of valour to accept the entry of foreign firms in India is only a matter of time. However, this should not mean that their operations should nor be regulated,since otherwise they may just push out theIndian firms. For us law schoolgrads, their presence in India could well translate into an increasing range of job opportunities and higher salaries…. In the end who wouldn’t prefer getting grander moolah.