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Entry of Foreign Law Firms: Let them in

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"The legal profession in so-called advanced countries is a product of Industrial Revolution whereas in India it is a product of Independence Revolution"

-- Mr Lalit Bhasin

These are the words that made me think. Should foreign law firms be allowed in India? Are they necessary?

Just as I questioned myself, a small part inside me said ‘Yes’ immediately. It was then, that I thought about it properly and tried to research on it.

Past:

In 1994, two New York-based and one London-based law firm had sought permission from the Reserve Bank of 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 challenging the 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 were not to be permitted.

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 per the same Act.

Countries other than India, usually have two types of lawyers. Barristers and Solicitors. Solicitors can give advice and draft documents but cannot argue in the court. Barristers can do everything that solicitor can and also argue in the court. Indian lawyers can do both, and they usually do it too.

The biggest problem with this debate is that there is a lot of false news going around regarding the it. A lot of people are given only one side of the story and choose sides based on it. We are human beings, we will always oppose change.

Foreign law firms are not here for advocacy work, they are here for transaction work. All the Indian law firm’s majority work is transaction work. Why will they not oppose competition? Who would not want a closed market for such a huge and growing economy? It is simple economics.

The argument in favour of the Indian law firms is that they will bring in professionalism. I am definitely not saying that the current firms are not professional. I mean that global competition will force them to become better than they are right now. Increased competition is always good for the consumer and the economy.

Reciprocity and international law obligations are also very strong arguments. Foreign countries allow Indian lawyers to work there, after certain small requirements are met with, then why should we not reciprocate the favour? India is a founder member of World Trade Organisation’s (WTO), General Agreement on Trade in Services (GATS). The main objective of this agreement is to facilitate free flow of services across the world.

Other countries which allow foreign lawyer and firms have certain restrictions. For example in California the Foreign Law Firms were only permitted to deal in laws not specific to California. In countries like Singapore, Hong-Kong and Japan they are restricted to servicing only foreign firms. The models of all these places, their practices, rules and regulations need to be analysed thoroughly before being incorporated into the Indian system.

There have been news that government is going to allow foreign law firms in a short while. There is immense pressure on the government from both sides. Foreign governments are pressurising it to allow the entry and Indian law firms and the Bar Council of India is asking it to go against it. There have been speculations that foreign law firms may be allowed to enter but in phases. In the first phase, they will be allowed to set up offices here but it has to work solely as if it is outsourcing its work to India. In the second phase they will be allowed to do transaction work in India. It might be restricted to work for foreign companies who are working with Indian companies. In the third and the final phase, they will be given total access. They will be treated like any other lawyer in India. Although they might have to pass some examination. It is still not very clear.

If we look at it in a strict sense then we can see that they are already here. We are all aware of the so called ‘friendship agreements’ between foreign law firms and Indian law firms. They have common training programmes and a lot of other such things. So they are already making a foundation for an entry.

I don’t understand one thing though. It’s a really simple question. If they have allowed us into their markets then why can we not allow them in our? I would like to refer to the book ‘The World Is Flat’ by Thomas Friedman. It advocated the fact that the world is now a common market and all the products and services are launched will have a level playing field. This is not the condition with our legal services. We want other countries to open up their markets. We ask them for more lenient laws for settling there and doing business there. We want all other countries to follow GATS, but what are we doing? How hypocritical are we?

The humorous part is that foreign law firms are not being bogged down. They are pretty smart too. Apart from the ‘friendship agreements’ they have already started hiring fresh law graduates from law colleges in the country. They are giving them monetary benefits which are much more than the average that Indian law firms are providing. They are brain draining us. Their message is clear, if you don’t allow us to work in your country then we will take your brightest law graduates and camp them in our country and charge you in pound sterling or dollars or whatever.

Foreign law firms are more professional. They don’t have the ‘only 20 partners’ restriction. So they have a lot of partners and so employees there have a higher chance of becoming a partner. Indian government is planning on bringing in Limited Liability Partnerships. This way, the situation in India will change. I have heard that Clifford Chance has over 600 partners. I am not sure but if it is then I am surprised.

My suggestion:

Let them enter. They will make the market more client friendly. They will bring more jobs. They will being professionalism. Indian law firms are already facing a lot of competition but are still able to hold on to the top spot. I don’t think they will have a problem with that later on. You cannot avoid competition forever. There should be Special Exams for foreign lawyers so that the quality of lawyers that are allowed to practice can be moderated. Multi National Companies have changed the entire business scene. They have made a MBA degree a special qualification. The students now get a higher salary because they are now wanted by a larger population. Something similar can happen to a law degree. This is very important for people who consider National Law Schools are the IIM’s of law just like people think that IIT’s are the IIM’s of engineering. No one’s vested interest should come in the way of common good. I am not advocating the entry for monetary purposes. I am supporting it so that Indian lawyers become more efficient. They have started slacking in their effort. There is a scarcity of ‘good’ lawyers and law firms in the country. They can be counted on our fingers. I want it to change.

Future:

The decision is still pending. Mr. Law Minister is not ready to take a stance. No organisation/website wants to take sides because they are afraid of backlash if the decision goes against them. A lot of polls have been conducted, all which showed a majority of people who want foreign law firms in India.

Don’t push India back by trapping its economy. Imagine the situation if we had not liberalized the economy in 1991. Let’s not do anything that we might regret in the future.

Disclaimer:

I am not against Indian law firms or the Bar Council of India. I am pro-liberalization. Let the democratic country do its thing. Sorry for the unusually long post. I hope I have made my point.

Constructive suggestions are welcome.

Related read:

Lawyer's Collective

Law Minister

On a lighter note: A picture is worth a thousand words. Click here. 

 

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Like +1 Object -0 Anonymous guest 26 Jul 10, 02:33
It's an awesome attempt. So pehle hats off for this post. I found myself nodding at a lot of points...And at end of the post, yes, i do agree with your point.
Liked this post :)
-Mads
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Like +0 Object -0 Anonymous guest 26 Jul 10, 02:34
oh and i liked the way u went about the post. the sub titles. uber cool :)
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Like +0 Object -0 Anonymous guest 26 Jul 10, 05:18
I agree with your thoughts in principle. I guess the problem is not with the people only but with the system which is made by the people and for the people. In one hand, the Indian law firms oppose this but on the other, they enter into best friend relationship agreements!!! I don’t understand this!!!! If you want them to enter, allow them - practicing law in India is not that easy - especially when it comes to customary laws. What the Indian laws firms need to do is: allow them to enter but put a restriction that they are allowed only for the non-litigation or the corporate practice. I am sure none of the foreigners will be interested in arguing before the courts here!!!! If this principle can be laid and established with the higher-ups, I am sure we will see many foreign law firms entering into this market!!!!
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Like +0 Object -0 sss 26 Jul 10, 09:40
Good post...well compiled and well argued.
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Like +1 Object -0 Anonymous guest 26 Jul 10, 11:07
dude you are echoing the setniments of 99.9% young lawyers. let us hope foreign law firms do eventuallt come in.
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Like +1 Object -0 Anonymous guest 27 Jul 10, 00:41
This is a crazy piece. Why open up the market when you don't have to? Changes should be made gradually and the professional should be national. There is too much loss of flexibility in policy space if this is allowed. For instance, if you opened up under GATS then only regulations that are 'necessary' will be allowed under WTO rules. As a lawyer you have to appreciate the lack of precision, certainty and outsourcing of the decision to the WTO dispute settlement body on what 'necessary' means (after the India intellectual property mailbox decision I am surprised such analysis would not be considered). Added to that, no new regulations will be allowed unless they were forseen by the foreign service supplier AT the time of making the commitment. Unfortunately, this is a scholastic argument based on economistic analysis using Friedman who only saw the crisis after the crisis hit him flat in the face. Free trade can work, but not always... if you reason that because their market is open to you, and you should open up, then perhaps asking the rich countries to open up on agriculture would make more sense... the nationalistic lawyers in India are right to control market entry, why should they surrender the domestic market for the foreign with the REAL RISK of losing out in both?
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Like +1 Object -0 Anonymous guest 27 Jul 10, 10:37
Good post....nicely put together.
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Like +0 Object -0 Anonymous guest 31 Jul 10, 09:31
this is a really gud post!!many of the points are worth consideration, but only if the people responsible for bringing in this change cud really read this!!!!
the plain concept of economics used to explain the points here is very appreciative!it actually tells us in plain words as to how we are oblivious to something important that is staring us right in the face!
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Like +1 Object -0 napster 04 Aug 10, 06:40
@6 Why should we not open it? I have to admit one thing. I am not completely sure about the regulations with GATS so I will not say anything about it as of now. I will read up on it and get back to you.
I quoted Friedman just to prove a point. He is not my role model or something. He is also not the only one to state this. He is one of many.
Don't we have foreign companies working in India? Don't we consider their position before taking policy decisions? Then why not something of that kind for law firms? It will open up the market and bring in competition. Healthy competition is always good for the market. It is good for the people as they will get more options and cheaper services and it is good for lawyers and law students as they will have more employment options.
@7- Thank you.
@8- I hope they do find out about it. :) Thanks.
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Like +0 Object -0 Anonymous guest 12 Aug 10, 15:01
I am sorry but I didn't quite understand the underlying theme of this article. Is this article in response to the Lawyer's Collective judgment ?
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Like +0 Object -0 Anonymous guest 20 Aug 10, 22:17
Finally someone has put up something on LI regarding foreign firms after thinking through the issues, rather than blindly saying that foreign law firms should be allowed because then we will get better jobs and better pay (narrow selfish approach).
Good post, Napster. Kudos
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Like +1 Object -0 napster 21 Aug 10, 03:32
@11- Related posts are always there. People need inspiration. I did not create all of this out of thin air. I did not even give any original idea. I just put together all the ideas that were there.
@12- Thanks a lot :)
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Like +0 Object -0 Anonymous guest 22 Sep 10, 00:54
I fully agree on the same since it will create a lot of job opportunities and it will also structure the Legal industry to an extent
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Like +0 Object -0 Guest 13 Sep 11, 13:10
It is definitely a good post and considering the view of the today's generation of Lawyers i am sure majority will agree with you. I hope the Government takes a stand soon keeping in view the future of young lawyers/law graduates/law students and not get cowered by the pressure from associations / individual Indian law firms who are only bothered about their own interest.

@3 I totally agree with you. you have put forth good suggestions
@6 Dude what are you talking about!!!if health ,education and communication industry could be opened for free trade then why not law?? and how does only allowing entry of foreign law firms affect flexibility of policy making and not IT industry or any other industry!!??
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