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Written by Kian Ganz Tuesday, 28 July 2009 12:18

For an Indian firm, going under the wing of an international firm is not necessarily as appealing as some might suppose and could even be downright dangerous.

Despite best friendships being the talk of Indian towns, very few Indian firms have actually taken the leap to forge such relations.

International firms' lack of enthusiasm is certainly not the problem but the dowry they can bring to the table is often fairly intangible while risks for Indian firms can be real and numerous.

"Other international firms view us differently - some of it is good for us, some of it not so good," muses Trilegal co-founder Anand Prasad, looking back on almost 18 months of the firm's formal tie-up with Allen & Overy (A&O) (22 February 2008).

He says that the main benefit for Trilegal has been the higher visibility that association with the A&O brand has brought.

When you deal with unknown local firms there is always a question mark in the back of your mind, he explains. "But when you think of them as a relationship firm for the magic circle, many of those question marks actually get diluted."

ALMT Legal partner S R Arun is quick to agree. "The immediate benefit is visibility and presentation to domestic clients. If you say you are an international [Indian] firm, they want to see what presence you have in other jurisdictions."

ALMT's recent tie up with Clyde & Co (4 June) gave ALMT access to lawyers in 22 new markets next to its own small existing office in London.

Arun says that link-ups with foreign firm can also be valuable in improving a recruitment brand and associate retention, which is a big problem for many Indian firms.

Foreign firms' activities are of course strictly regulated in India. Cash gifts are forbidden so the most tangible offerings many international firms can therefore bring to a friendship are IT infrastructure, training and logistical support.

These are certainly valuable but are nothing you cannot ultimately buy on a good corporate credit card or even build completely in-house with the right partner enthusiasm.

On the other hand, the risk of alienating your existing friends is very real.

"It hurts when long-standing relationships begin to disappear," says Prasad, adding that firms that are competing less directly with A&O have not been too concerned. US practices in particular appear to be forgiving of Trilegal’s UK buddy, and A&O has stepped up to take up the slack.

Around 60-65 per cent of Trilegal’s fees continue to be related directly to international referrals - the same proportion as before the tie-up, claims Prasad.

ALMT partner Shalini Agarwal agrees, particularly on the US front where Clyde’s offering is fairly niche and not a huge threat to existing US friends. "Best friends is best friends," she says. "It doesn't mean you don't have any other friends."

Some may have a harder time getting over (and around) AZB’s best friendship with Clifford Chance, which was inked little more than half a year ago (14 January 2008).

AZB was among many foreign firms' top choices for referrals until Clifford Chance made the firm a less appetising option for them.

One US firm's partner explains the dilemma he and others are facing: "The problem is they're really good so I don't want to stop using them."

AZB's main problem is that many international firms have also felt to have a strong claim to become its best friend and several are understood to have tried. The fact that they did not succeed has created disappointment, if not resentment.

AZB is well-known for some of its existing close ties to foreign firms – AZB is linked to Herbert Smith by virtue of one the firms' shared flagship client Tata and Zia Mody training ground was famously Baker & McKenzie.

But in less than half-a-year of magic-circle-friendship, many other foreign firms have decreased their work-flows to AZB significantly.

AZB co-founding partner Bahram Vakil acknowledges the problem.

"It was very clear to us that, once you have this kind of friendship and you are open about it, you’re going to lose out on a lot of other work," he says.

However, he insists that AZB has done its best to maintain its friendships with other firms. "We did a big matter with Slaughters [London firm Slaughter & May] recently and Baker & McKenzie continues being an old friend," he says.

"And there are jurisdictions where Clifford Chance doesn’t have a presence," he adds.

In reality, however, there are few areas where Clifford Chance does not compete with one international firm or another. The tall order for the magic circle firm's India group will now be to step up to fill the small gaps left by dozens of foreign firms that would in future prefer to work with independents in India, all other things being equal.

AZB faces the challenge of ­making existing friends feel special, despite the baggage of magic circle affiliation. And it will need a good answer for some of its partners who could start asking their friends: "Why don’t you call me as often as you used to?"

A similar version of this article by Legally India first appeared in The Lawyer magazine yesterday.

Comments (6)

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#1...
written by A friend, 28 July 2009 03:18

Amarchand has understood this. Only start-ups and second-rate firms should do best friends. It is in almost everybody else's best interests to stay independent.

Who knows how long liberalization will still take. Linking your fortunes to one international firm is not the wisest move in the meantime.

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#2...
written by a friend of a friend, 28 July 2009 04:29

I disagree with 481. Everyone has their own priorities and objectives when they enter into an alliance. Just because they do so does not mean that it is a second rate firm. Also, AZB is not a second rate firm from any perpsective.

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#3...
written by Anon, 28 July 2009 05:27

It is difficult to think of Magic Circle firms like Clifford and A&O wanting to do deals with firms they thought of as second rate firms. By anyone's estimate AZB and Trilegal are amongst the better outfits around. They are not fools - they have worked with firms around the world and probably can tell good from average and would have had a fair amount of choice. Time alone will tell what is the best strategy.

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#4...
written by Anonymous?, 28 July 2009 05:49

Wow Kian. Surprised you didn't censor some words out of the previous post. So let's see. What we will see here are comments that will be deemed as appropriate or inappropriate by someone who derives half of the news and comments and interviews from the people that are commented on. No conflict of interest there I guess. Why the earlier remarks were censored are still not clear. And you apparently don't have an answer.

[Sorry, which earlier remarks are you referring to? Please post your reply in the forum at http://tinyurl.com/mualms where I am currently trying to flesh out the best moderation policy that works for as many people as possible. Best regards, Kian]

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#5...
written by A friend, 28 July 2009 05:55

If you read my post at 481 I was not saying any of the firms that have tied up are second-rate just that they should not and it is an unwise move.

What would hypothetically happen if Clifford Chance or A&O India practice suddenly faces a difficult time or one half decides to set up their own firm or join a rival? Or if the international firms decided to make a new best friend?

Many of that Indian firm's referrals would disappear overnight and then it's crunch time my friend.

And don't say that will never happen - UK firms have done this all over Europe for years, flip flopping between best friends and alliances, leaving the local friend friendless at the end of the day after years of referrals and client-poaching.

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#6...
written by Observer, 28 July 2009 07:01

It seems the "best friend" concept is somewhat premature. Ideally, this concept should be adopted just before the Indian market opens up for foreign firms. If the market liberalization takes time to see the light of the day, many of these "best friends" alliances may actually have resulted in irretrievable losses at least to the Indian end of the "best friends" alliance.

As a matter of fact, there are not many Indian firms worth an offer from a magic circle firm like CC. You can almost count them, Amarchand/AZB/Luthra/Trilegal/J.Sagar/FML. Whereas referred work from abroad does not necessarily have to be restricted to the magic circle firms, though the best instructions probably would. Therefore, longer it takes for the markets to open up, the cracks in the "best friends" bond would be easier to see. It seems there are miles to go before "best friends" turn into "friends for a lifetime".

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