| Introduction: | | | | given the vast pool of legal professionals in India. It can |
| Indian market is growing and many multi national | | | | very well be said that the Bar Association of India is |
| companies have opened up offices in India in the | | | | fully cognizant of the un-savoury legal practices and |
| recent past. Nearly half of the fortune five hundred | | | | will be able to regulate against them. Overall, the Indian |
| companies in India have either opened their offices or | | | | citizens and the clients will benefit from the entry of |
| their call centres. Indian companies are taking over | | | | foreign law firms as they will be facilitated by a wider |
| companies abroad. With estimates of annual growth | | | | array of expertise from the industry. They should also |
| ranging between 7 and 9 per cent, India’s economy | | | | be allowed so that they bring with them a fresh brand |
| is one of the fastest-growing in the world. | | | | of professionalism, competence and expertise that the |
| Even more importantly, the type of economic activity | | | | legal profession here has failed to develop on their |
| that Foreign Law Firms are likely to profit from- such | | | | own. |
| as large cross border deals- is growing even faster. A | | | | The clients of foreign firms, mainly multinationals, would |
| greater number of foreign clients are now involved in | | | | offer considerably higher pay package than those |
| Indian transactions, too, which is why these firms want | | | | offered in India and the opening up of legal services |
| to establish a stronghold in India, to better serve their | | | | would bring in foreign investment with them which in |
| clients. | | | | turn would be helpful and supportive in the overall |
| The Indian Bar Council has imposed restrictions on the | | | | growth of the economy. More to the point is that the |
| activities of foreign law firms in recent years that have | | | | foreign law firms will be ready to lend a hand in the |
| sharply curtailed participation of foreign law firms in the | | | | creation of jobs in the legal market. |
| Indian legal services market. | | | | |
| India requires that anyone wishing to practice law must | | | | It will allow firms to outsource price-pressured |
| enroll as a member of the Bar Council and if that | | | | commoditized and mid-level services to their own |
| person happens to be a foreign national then he must | | | | offices in India, rather than referring the work to other |
| belong to a country that allows Indian nationals | | | | local firms, so keeping a tighter grip on quality and client |
| reciprocal rights to practice in their country. Foreign | | | | service and improving communication and collaboration |
| Direct Investment is not permitted in this sector, and | | | | efficiencies. Apart from foreign law firms’ familiarity |
| international law firms are also not authorized to open | | | | with global operations of foreign owned businesses, |
| offices in India. Foreign services providers may be | | | | they also provide higher comfort to the headquarter |
| engaged as employees or consultants in local law | | | | staff of foreign businesses and permit flexibility in |
| firms, but they cannot sign legal documents, represent | | | | access to a variety of legal service providers. |
| clients, or be appointed as partners. | | | | |
| In 1994, two New York-based and one London-based | | | | Foreign law firms have tie-ups and associate offices in |
| law firm had sought permission from the Reserve | | | | India with whom they continue to work. So, even if |
| Bank of India (RBI) to begin liaison office activities in | | | | they have not set up offices in India, they have liaison |
| India to advise and assist non-Indian clients in | | | | offices or India departments that effectively do the |
| connection with their activities in India and outside India. | | | | work. If we allow them more transparency and open |
| The three law firms, White & Case (New York), | | | | up the avenues for their full fledged offices it will not |
| Chadbourne & Parke (New York) and Ashurst Morris | | | | only help remove the ambiguity but will provide a |
| Crisp (United Kingdom) were granted permission under | | | | ubiquitous disposition and will moreover concretise the |
| the Foreign Exchange Regulation Act (FERA) to start | | | | prevailing concept. |
| liaison activities. However, in 1995, Lawyers’ | | | | |
| Collective, a public interest trust set up by lawyers to | | | | Although the initiation of the foreign firms would come |
| provide legal aid, moved Bombay High Court | | | | as a rude and uncouth shock to the most of the |
| challenging the right of foreign law firms to “practice | | | | lawyers who consider the profession as their birth right |
| law” in India. The High Court had held that the | | | | but would be accommodating in curbing the personal |
| practices engaged by these firms amounted to | | | | fiefdoms in the field which is created by some of the |
| “practicing the law” and hence were not to be | | | | family run partnership firms working on feudalistic lines, |
| permitted. The Foreign Law Firms had challenged this | | | | bereft of professionalism and vision. |
| judgment to the Supreme Court, which remanded the | | | | A significant number of Indian law graduates are being |
| case back to the High Court to hear and decide. | | | | recruited or are poached, either as associates or as |
| Today there are about 38 ‘magic circle’ firms | | | | trainees, by the leading law firms outside. For the last |
| with their liaison offices or referral relationships with | | | | few years, the leading law schools have attracted the |
| their Indian counterparts, while others strike up informal | | | | attention of foreign law firms in their campus |
| associations. | | | | recruitment programmes. So the moral of the story is |
| | | | | clearly written on the wall that if we do not allow the |
| Regulations: | | | | foreign firms to cross the threshold they will take |
| For the purpose of regulating the legal service and the | | | | away the brightest of our law graduates nurture them |
| practising of lawyers in the courts the Indian legislature | | | | and make us the victims of brain drain. This would |
| has enacted the Advocates Act which has provisions | | | | make the legal field tantamount the engineering |
| for the supervision of the legal arena. | | | | colleges where in the talent is poached by foreign |
| Sec. 24 of the Advocates Act requires that only | | | | companie |
| natural persons who are citizens of India can be | | | | The reasons why the Indian legal market should not be |
| enrolled as Advocates. This section also provides that | | | | unwrapped to the world are: |
| apart from other provisions contained in the Act, a | | | | The opening of the Indian legal market is not only |
| national of any other country may be admitted as an | | | | prejudicial to the interests of the Indian legal profession, |
| advocate on a State roll, if citizens of India, duly | | | | but liberalisation also has important implications for the |
| qualified, are permitted to practice law in that other | | | | nation. The legal profession is instrumental to the |
| country. | | | | administration of justice. To permit foreign lawyers to |
| Sec. 33 of Advocates Act: Advocates alone entitled | | | | encroach on this extremely important aspect of a |
| to practice: Except as otherwise provided in this Act | | | | democracy could be contrary to public interest. A |
| or in any other law for the time being in force, no | | | | symbiotic system of co-existence that has succeeded |
| person shall, on or after the appointed day, be entitled | | | | in meeting every need of a client has always been in |
| to practice in any court or before any authority or | | | | place. This system has worked well for decades and |
| person unless he is enrolled as an advocate under this | | | | there is no reason why it will not work in the future. |
| Act. | | | | The effect of the expansion of the market will be a |
| Sec. 47 of the Advocates Act subjects of any foreign | | | | shift by Indian corporate clients to foreign law firms |
| country, which discriminates against the citizen of India | | | | who offer services on a scale that Indian law firms |
| in the matter of legal practice, shall not be entitled to | | | | cannot presently match. Those Indian law firms that |
| practice in India. It also empowers the Bar Council of | | | | provide services in commercial law can expect to find |
| India to lay down conditions subject to which foreign | | | | themselves under severe competition, and perhaps |
| subjects may be recognized for being enrolled as an | | | | even forced out of business. The fear then is that |
| advocate. | | | | foreign law firms will end up eliminating their Indian |
| Rule 2 of Chapter III under Sec.49 (1) (ah) of the | | | | competitors and will create a situation similar to that |
| Advocates Act reads as: An Advocate shall not enter | | | | which exists in the field of accounting. |
| into a partnership or any other arrangement for sharing | | | | There is a stark difference between the nature of the |
| remuneration with any person or legal Practitioner who | | | | legal tradition in India and those of the foreign firms, |
| is not an Advocate. | | | | which are representative of a legal culture of |
| Even if a foreigner is allowed certificate of practice | | | | ambulance chasers. Globalization and liberalization of |
| law in India, he has to secure permission from RBI if he | | | | the legal field is resisted on the ground that in India |
| desires to acquire foreign exchange and remit the | | | | rendering legal advice is a service to society and |
| same outside India under Sec. 29 and Sec. 30 of the | | | | hence there exists restrictions on soliciting and advising. |
| Foreign Exchange Regulation Act, 1973. Although the | | | | The Indian Law Firms argue that they are not |
| Foreign Exchange Regulation Act has been repealed | | | | prepared for the onslaught in the form of competition |
| we have similar provisions in the Foreign Exchange | | | | from global firms and the proposal to open up the legal |
| Management Act, 1999 which is the successor of the | | | | service sector is premature as Indian law firms are at |
| previous Act. | | | | a nascent stage of development. Some firms also |
| Sec.11 of the Companies Act provides that a | | | | claim that allowing corporatisation will destroy the |
| partnership or any other form of association with more | | | | values of the local industry, turning lawyers into |
| than 20 partners if not registered as a company, shall | | | | mercenaries. |
| be an unlawful assembly. Thus Indian law firms cannot | | | | There is no comparison between the legal sector and |
| have more than 20 partners. | | | | other sectors. No country has thrown open the sector |
| Apart from all these barriers the legal fraternity in India | | | | overnight. Japan took 20 years. Korea has been |
| is neither too interested in allowing their foreign | | | | deliberating for more than 10 years. And Japan, Korea |
| counterparts to rub shoulders with them and is quite | | | | and China had other reasons for liberalisation - |
| adamant and opinionated on the opposition of the | | | | language barriers, cultural differences and inherent |
| globalization of the six hundred crore large legal | | | | inadequacies. US also has the most rigid rules on |
| service industry. | | | | foreign firms. India, on the other hand, is quite |
| All these enactments, legislations and hostility make the | | | | self-sufficient. So, India should not be in such a tearing |
| legal services field a difficult sphere to tread on and | | | | hurry to open up the market and rather give it a |
| also make the option virtually impregnable and highly | | | | prudent thought. |
| unattractive for the foreign entities to set foot in the | | | | |
| Indian legal scenario. | | | | Conclusion: |
| Change is in the air: | | | | It is a quest of balance of advantage. It is a common |
| But the winds of change have started blowing and | | | | phenomenon in India that prior to liberalization of any |
| that too in the right direction. The Indian government is | | | | sector, there is been widespread opposition for |
| planning to liberalize its stand on the opening of the | | | | example the Insurance sector. The reason for this |
| legal market and is keen on deciding to make it a level | | | | appear to be that corporate law remains more or less |
| playing field. There has been a change in the | | | | homogenous across borders. The fact remains that |
| government’s policy and course of action. The | | | | India is in the process of globalizing its economy. In the |
| government is in favour of allowing foreign law firms | | | | process, the legal market opening up to competition |
| and lawyers to open up offices in the country, although | | | | from the international legal market is rather inevitable. |
| it has evoked mixed reactions amongst the legal | | | | Instead of deliberating about the advantages and |
| fraternity. In terms of professional demand, there is a | | | | disadvantages of the legal markets being opened up |
| shortage of legal experts to the tune of 22%, | | | | to foreign firms, it is perhaps more sensible to accept |
| according to a FICCI report. The Government has | | | | that the entry of foreign firms in India is only a matter |
| shown interest in making Limited Liability Partnerships | | | | of time. This should be seen as an opportunity: for the |
| (LLPs) a reality in India and has taken efforts to have | | | | law firms, of competition, and for the graduates, as a |
| an enactment in place to govern it. This would enable | | | | wider range of employment options. |
| foreign law firms (as well as accounting firms) to have | | | | Advocating protectionism is taking a parochial and |
| tie-ups and associate offices in India and can come | | | | myopic view. Parochial, because liberalization will only |
| into operation in this manner. The Bar Council is also | | | | shut-shop for uncompetitive entities, which are a |
| looking into the requests for relaxing the constraints on | | | | burden on the economy. Myopic because the long |
| advertising the legal profession. | | | | term benefits should be the driving consideration for |
| India being a signatory to the General Agreement on | | | | policy makers. Liberalization of services involves fairly |
| Trade in Services (GATS), which is an organ of the | | | | painful short-term adjustment costs, which requires |
| World Trade Organization (WTO) and whose | | | | that the institutional and regulatory environment be |
| objective is to facilitate free flow of services across | | | | strengthened before hand. Once these are put in place |
| the world, is under an obligation to open up the service | | | | the Indian economy can take the advantage of entire |
| sector to Member Nations and the legal profession is | | | | Asian market both drawing inwards and supplying |
| also taken to be one of the services which is included | | | | outwards the services of legal professionals. If India |
| in GATS. | | | | held back, it risked "missing the boat" on a change that |
| | | | | would give it access to needed legal expertise and |
| "Services" would include any service in any sector | | | | increase the opportunities for local lawyers to do |
| except services supplied in the exercise of | | | | international work. |
| governmental authorities as defined in GATS. "A | | | | The matter regarding entry of foreign firms and |
| service supplied in the exercise of governmental | | | | lawyers into India requires in-depth deliberations and |
| authorities" is also defined to mean any service that is | | | | should be carefully considered in consultation with the |
| supplied neither on a commercial basis nor in | | | | Bar Council of India(BCI), All India Bar |
| competition with one or more service suppliers. Since | | | | Association(AIBA), Supreme Court Bar |
| India is a responsible prominent and founder member | | | | Association(SCBA), Bar Association of India(BAI), |
| country of the multilateral trading system, it must | | | | Society of Indian Law Firms(SILF) and other bodies of |
| endeavour to abide by its commitment to the WTO. | | | | the legal profession before a final decision is taken. In |
| | | | | the light of the above discussion the following |
| With all these tribulations and the development of | | | | recommendations will be of great importance and will |
| favourable environment, the advent of foreign law | | | | help the industry to take it further. |
| firms seems to be not quite far away. But before | | | | · The law ministry, the Attorney |
| allowing the foreign law firms to operate on the Indian | | | | General's office, the BCI and some leading Indian law |
| soil, there are a few grounds works which should be | | | | firms and lawyers ought to form a committee and set |
| done in order to make it a smooth process for both | | | | up the rules for foreign lawyers practicing in India. |
| the parties. | | | | · The guidelines for advertising in law |
| | | | | directories, maintaining websites, publishing of firms |
| Some restrictions should be provided for the incoming | | | | brochure, etc, ought to be streamlined. |
| firms which off course have to be reasonable enough | | | | · The law prescribing a limit of 20 |
| to give them a fair chance in the light of “equality of | | | | partners should be reviewed and the concept of |
| opportunity”. Adequate safeguards and | | | | limited liability partnership adopted. |
| qualifications should be provided for besides reciprocity. | | | | · Professional negligence insurance |
| Before the opening up of the legal profession, there is | | | | should be made compulsory for all lawyers. |
| need to introduce advance-level legal courses in the | | | | Reference and bibliography: |
| country. We have enough talent and endeavour to | | | | 1. Should foreign law firms get entry into |
| beat anyone in the world. As long as the basic | | | | India? By Dhananjay |
| principles set out by International Bar Association, that | | | | |
| is, fairness, uniform and non-discriminatory treatment, | | | | ( |
| clarity and transparency, professional responsibility, | | | | 2. Law firms given hope of India |
| reality and flexibility are met, the entry of the Foreign | | | | breakthrough Michael. by Peel and Joe Leahy. ( |
| Law Firms should not pose any problems. | | | | 3. Should foreign law firms be allowed into |
| | | | | India? By Cyril |
| Anything that improves competition would be a | | | | |
| welcome development. But there is going to be a long | | | | ( |
| cause and effect list because of the entry of the | | | | 4. Foreign Law firms in India: Legally, the |
| foreign law firms. Sooner or later the trend of | | | | world may not be flat by fiorz Ali k ( |
| liberalization is going to takeover the restrictive mode | | | | 1. Opposition to foreign law firms' entry by Legal |
| of the Indian market. A close analysis of the changing | | | | Correspondent The Hindu. ( |
| scenario with respect to the entry of foreign law firms | | | | 2. "Entry of foreign law firms will cause havoc" by |
| has to be done in order to arrive at the outcome as to | | | | Legal Correspondent, The Hindu. ( |
| what can be the benefits and how are we going to be | | | | 3. The Advocates Act,1961 (Act no. 25 of 1961) |
| affected by the homing prospect. | | | | 4. Foreign Exchange Regulation Act, 1973 (Act 46 of |
| | | | | 1973) |
| | | | | 5. The Foreign Exchange Maintenance Act, 1999 (Act |
| | | | | no 42 of 1999) |
| | | | | 6. The Companies Act, 1956 (Act no. 1 of 1956) |
| The arguments in the favour of making the legal | | | | 7. You just cannot stop the entry of law firms by |
| services market transparent and open are: | | | | Partner, Fox Mandal Little. ( |
| | | | | 8. FICCI Arbitration and Conciliation tribunal (FACT). |
| The first and foremost to be affected would be the | | | | |
| Indian law firms and lawyers. The immediate impact on | | | | ( |
| Indian law firms would be of hugely increasing | | | | 9. Openness is key to the future by David Lewis. ( |
| competition for work from foreign law firms. From the | | | | 10. Law Commission of India ,184th Report on The |
| lawyer’s point of view, working with international | | | | Legal Education & Professional Training and Proposals |
| law firms and opening up of this sector in India would | | | | for Amendments to the Advocates Act, 1961 and the |
| throw open a gamut of opportunities for aspiring | | | | University Grants Commission Act, 1956 |
| lawyers to learn, develop and further their careers. | | | | 11. Foreign law firms are already present in our country |
| Any resistance is due to a rash assumption about the | | | | by Asha Nayar Basu |
| threat of competition. Moreover, allowing foreign | | | | 12. UK's Indian lawyers want two-way street by |
| private law firms in India will certainly help the lawyers | | | | Sudeshna Sen, ( |
| get better job opportunities and break the monopoly of | | | | 13. India’s legal market on the cusp of inevitable |
| a handful private law firms working in India. | | | | change By Reena SenGupta ( |
| | | | | 14. Indian Court Ponders Opening Legal Market to |
| Indian citizens would also be affected as the entry of | | | | Foreign Firms by Richard Lloyd ( |
| foreign law firms is expected to increase the | | | | 15. INDIA ( |
| professionalism and quality of conduct in the legal | | | | 16. Bar Council of India resolution opposes entry of |
| profession. As legal standards improve, the cost of | | | | foreign firms by Malathi Nayak ( |
| legal services may go up but cannot go up significantly | | | | 17. Lowering the bar, a report by Ben Frumin. |