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Foreign law firms into India: voices in favour, against and why nothing changes

Curvy road ahead
Curvy road ahead

Who are the players in the saga around legal market liberalisation? And do those in favour actually care enough to make a difference? Legally India talks to the opposing factions and finds out why no progress has been made - and if any is around the corner.

Last December the Bombay High Court ruled against Ashurst, Chadbourne & Parke and White & Case in the Lawyers Collective case, restating that foreign lawyers were not permitted to practise in India.

Ashurst had to close its liaison office in Delhi but, with the case finally off the court books, business as usual continued for foreign firms for the most part. But only three months later in March 2010 a petition hit the High Court in the South Indian city of Chennai and again put international India practices on tenterhooks.

The case filed by a local advocate accused 31 foreign firms of still operating illegally in India. The list of respondents includes all four magic circle firms as well as top US and international players and legal process outsourcing (LPO) company Integreon, which built and is operating Clifford Chance's legal offshoring centre near Gurgaon.

The case is currently limping its way through the Madras High Court and is attracting only moderate political interest.

This comes on top of the seeming ambivalence of current Indian law minister Veerappa Moily on the issue. The mantra that the Indian legal market will liberalise 'in two years' has become a joke told by every jaded foreign lawyer in India. Yet there is plenty of optimism too, with many different players having an interest in Indian liberalisation.

The politicians

As regulator of all Indian lawyers the Bar Council of India (BCI) has considerable symbolic power to allow foreign firms into the country. But the intentions of new BCI chair Gopal Subramanium are hard to read.

He is also the solicitor general and quite different from the usual BCI semi-political animal, having been invited to take the chairmanship as an ex-officio member. Since taking up the reins in April Subramanium has not been afraid to rock the boat or shake things up in the name of reform, but even if he had the will to let foreign law firms into the country – and there is scant evidence that he does - he would probably face a tough time pushing it through.

On top of that, a statutory amendment of the Advocates Act 1961 would probably ultimately be necessary to liberalise the market in a meaningful way.

The law ministry’s support is therefore vital, although even under the generally progressive leadership of Moily, there are only few votes in allowing foreigners in to practise law. It is also unclear how long it would take a redrafted Advocates Act to actually clear the legislature.

The legal fraternity

The general opinion among the Indian legal fraternity is that most litigators do not have much to fear from liberalisation. True, imagining a foreign law firm eking out a living in District and High Courts or competing with the giants of the Indian bar at the Supreme Court is an unlikely scenario for anyone who has had first-hand dealings with much of the judicial infrastructure. And if liberalisation were to happen, it would be very likely that the government would not allow foreigners to litigate anyway.

Nevertheless, the generally unquestioned consensus of the average litigator is that foreign firms will not be good for the bar. In fact, in the early 1990s when foreign firms first seriously approached India in various guises, it was Delhi litigators who marched on parliament en masse and demanded that the government intervene.

If anything, senior Indian law firm partners will be the ones who have the least to gain from foreign law firms, and this is fair enough. Many successful and large Indian law firms are still effectively near-sole proprietorships and business is going well – why invite someone in who will make your life more difficult if you don’t have to?

“My only fear is just one thing,” says one senior partner. “These guys can offer a lot of money and just destabilise us temporarily - that’s what they did when they hired people from the UK market [several years ago]. But I think eventually they will not succeed in the market.”

Organised voice

The Society of Indian Law Firms (SILF) is one of the main voices against the entry of foreign law firms and is the only body representing law firms in India. It was founded in part to protect the interests of law firm owners in India, which specifically included opposing liberalisation.

Yet not everyone is happy about its existence. “When SILF was created we didn't agree with why it was created,” recalls one law firm partner in the ‘pro’ camp.

The brothers Cyril and Shardul Shroff, who jointly run India’s largest firm Amarchand Mangaldas, have been highly influential opponents of letting foreign firms in. They argue that domestic firms need more time to modernise, although they accept that foreign firms’ entry is inevitable one day.

Luthra & Luthra founder and managing partner Rajiv Luthra says liberalisation is an eventuality as India is a signatory to the General Agreement on Trade and Services (GATS), Indian legal services would ultimately become global, which would be in the eventual interest of the profession. “But the laws and rules that we currently have tie our hands behind our backs,” he adds. “Our rules and laws should be made at par with world, so that we get a level playing field and only then open the market in a step wise form.”

SILF’s chairman Lalit Bhasin, who also heads law firm Bhasin & Co, is easily the most outspoken and public anti-liberalisation lawyer in India. “We had a meeting with the law minister on this issue only 10 days ago and everyone spoke in one voice, and there were all the top representatives of the law firms present,” said Bhasin last month.

The truth is, though, that while SILF officially numbers more than 80 law firm members, a small number normally dominates proceedings. Those actually fully in favour of pro-liberalisation have only a few avenues open to them.

“When we raise [liberalisation] at SILF it seems from time to time that we're all in a bit of a minority or at least a minority from people at those meetings,” says one SILF member who is in favour of foreign firms entering India.

Only Trilegal, which has a best friends relationship with Allen & Overy (A&O), has spoken out in favour of liberalisation. One partner recalls: “They and FoxMandal used to speak out.”

In the foxhole

As managing partner of FoxMandal Little, Som Mandal was for a long while the unofficial Indian firm partner spokesperson of the liberalisation proponents. He had a strong relationship with former law minister Hansraj Bhardwaj, who was himself slowly turned into a supporter of the entry of foreign law firms.

“I think FoxMandal has made every attempt to have [liberalisation] done that I'm aware of and they nearly got it,” says one Indian managing partner.

Since the change in government Mandal has been conspicuously quiet and did not respond to repeated messages and emails over the previous weeks requesting his views on liberalisation.

This is perhaps symptomatic of a general apathy and sense of futility on the side of the reformists.

“Even an internal view that might exist within SILF is stifled,” says one strongly pro-liberalisation partner. “There's no organisation other than SILF that exists that could talk for law firms and none of us who are busy lawyers has time to set anything up like that.

“When the decision is, ‘do I go on out there and service the client or go about general political lobbying exercise [in favour of foreign law firms],’ the answer is quite clearly to do the client work,” he muses.

A&O best friend partner Anand Prasad has a similar outlook: “We'd like to see the Indian legal market open at the earliest. But there's really not much we're doing about it – there's no formal process we can participate in so the decision making process isn't clear.”

And Khaitan & Co partner Rabindra Jhunjhunwala too says that the official view of his firm is that it is open to foreign firms entering the market, then adding: “We are not against them but we are not lobbying for it or against it.”

The whispered case in favour

Even someone such as AZB & Partners founding partner Zia Mody, who was the main engineer of the firm's best friends relationhip with Clifford Chance late in 2008, is only “very softly pro” in the words of one Indian lawyer. “I've never heard Zia speak in favour,” claims another senior partner. “She should be [in favour], but I've never heard her say so in a public forum.”

One reason she is not on a soapbox or campaigning could be a fear of drawing the ire of the anti-liberalisation lobby, although AZB co-founding partner Bahram Vakil is more outspoken.

“I've always been pro but have been in a very tiny minority,” he says, adding that he represented White & Case more than 10 years ago when the Lawyers Collective case first caused a storm.

“I always though that it will open up the market, create much more potential for everybody or at least the vast majority and also in terms of training, expertise, there are certain areas where we can hold our own against foreign firms but there are certain areas where we have some catching up to do,” explains Vakil. “It should be a good exchange, as we've found with [Clifford Chance] and it’s certainly not been one-way but a very mutual exchange of ideas.”

“Competition is always healthy,” adds Khaitan & Co’s Jhunjhunwala. . “It's not as if there's no competition today and there is enough in the market and there'll be more.”

Fellow Khaitan & Co partner Upendra Joshi agrees. “Personally I see absolutely nothing wrong with foreign law firms coming in, in fact they should as quickly as they can be permitted. Because it doesn't make sense to have a protectionist attitude and at the end of the day it boils down to that if we're saying we don't want competition.”

The new generation of law firm owners tend to also generally be openly in favour of the foreigners.

The founding partner of Induslaw Gaurav Dani, for example, believes very strongly that foreign firms should be allowed in. “It'll give us good competition, healthy competition, it'll help us improve our systems," Dani says. “It'll do something similar to what happened in the accountants’ profession and the reality is that foreign firms are needed because of the dominance of four or five firms in market. The future in India is of firms that are institutionalised and not family run.”

“And the market is big enough.”

At the end of the day, for everyone sitting on the Indian side of the Advocates Act, this will remain a reason to smile. For those abroad, it might still elicit a tear or two.

But in the absence of a new voice, approach or script the the status quo will remain the most stable configuration for longer than just two years.

This is a longer edited version of an article that was published in The Lawyer magazine in the UK today.

Photo by bob

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