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ICCA draft liberalisation bill is most thorough yet: Proposes 26-49% legal FDI within 2-5 years, ad rules, CLE, insurance, more

ICCA proposes a third alternative to liberalisation: A bill with gradual FDI ratchet
ICCA proposes a third alternative to liberalisation: A bill with gradual FDI ratchet

The Indian Corporate Counsel Association (ICCA) has produced draft of a Foreign Legal Practitioners (Regulation of Practice) Bill 2016, which it will present at today’s meeting with ministries and stakeholders at 17:30 in Delhi.

According to the cover letter of ICCA founder president Ashok Sharma to law secretary Suresh Chandra:

this Bill has been drafted with the view to encourage healthy discussion on the strategy to be followed. Objective of the draft bill is threefold: 1) to promote the progress of the Indian legal system, 2) to look after the interests of Indian legal practitioners and 3) be fair and equitable in our treatment of foreign practitioners, once they are allowed to practice within our jurisdiction.

The draft, a copy of which has been leaked to Legally India, has been produced by ICCA and management consultancy the Rasich Group, and proceeds on the basis that allowing foreign lawyers’ entry to India may not be possible without separate legislation to complement the Advocates Act. (Read the full draft and summaries below).

The draft bill would allow foreign lawyers practice law in India, although practising Indian law would require that foreign lawyer to fulfil “the qualification criteria” under the Advocates Act.

The bill maintains the status quo with regard to so-called fly-in-fly-out rights of foreign lawyers (as affirmed by the Supreme Court and the Madras high court), but requires foreign lawyers who come to India to advise their clients to register with and be subject to a new local regulator – the “foreign practitioners’ registration board”.

The draft also notes several lacunae in the Bar Council of India (BCI) draft or points where the BCI draft is silent, including:

  • setting out advertising rules,
  • requiring professional indemnity insurance from foreign lawyers,
  • promotion of continuing legal education (CLE),
ICCA’s comments on the BCI draft also suggest clarification of limited liability partnership (LLP) structures for Indian law firms, and bans multi-disciplinary partnerships (allowing profit sharing between lawyers and non-lawyers).

ICCA founder president Ashok Sharma said he could not comment on the draft ahead of today’s meeting with the ministry.

Alternative stakeholder suggestions

The alternative suggestions so far have come from:

The nuts and bolts: The board

The bill proposes the creation of a “foreign practitioners’ registration board” of five members, including a retired Supreme Court judge as chairperson, the BCI chairman or a nominee, one representative each from the law and commerce ministries, and the president (or a nominee) of the Supreme Court Bar Association (SCBA).

Foreign lawyers not qualified to practice law in India and law firms would mandatorily have to register with the board, which can institute disciplinary action against foreign lawyers for violation of “any statutory or ethical obligation”, and has the power to impose fines of up to Rs 1 crores on foreign lawyers violating the rules.

Opening law firm offices: Gradual FDI increases

The bill envisages several phases, gradually increasing the amount of foreign investment allowed by foreign law firms:

  • two years after the bill becomes law, foreign law firms would be allowed to open offices in India holding no more than 26%, with one or more Indian advocates with at least five years of experience holding the remaining 74%.
  • three years after seeing up into a limited liability partnership (LLP) in India, foreign lawyer ownership could ramp up to 49%.
  • five years after the bill becomes law, the Central Government can revise equity shares allowed by foreign lawyers.
Legally India note: The draft wording of the bill is not 100% clear on the apportionment of equity between foreign and Indian lawyers, but footnote 19 to the draft suggests that the above interpretation is what was intended with the draft.

Sole traders: Foreign qualified independent legal practitioners (FQILP)

The bill also makes provision for FQILPs – individual foreign lawyers rather than law firms - to register and practice as individuals in India but would not be allowed to practice litigation (although arbitration would be open to them).

After two years of the bill becoming law, FQILPs would be allowed to become 26% equity holders in Indian law firms, which can ramp up to 49% after three years of becoming a partner in an Indian law firm.

However, FQILPs would not be allowed to join Indian law firms that “operate under the name or trade name of any Foreign Law Firm”, closing a loophole to make foreign law firms use the FQILP route for easier entry, and if there are several FQILPs in the same firm, their ownerships would be aggregated.

Rules of ethics

The draft also includes four pages of detailed ethical rules which foreign lawyers would have to abide by, in Schedule III.

The rules appear similar to the BCI rules of ethics, but also include an obligation to hold professional indemnity insurance details, if any, to impart training by holding workshops (individuals will have to impart training for at least 12 hours per year, and law firms for 60 hours per year).

The ethics rules also have detailed rules surrounding advertising.

Advertising draft fine print

Advertising or soliciting work by foreign lawyers is prohibited under the draft rules, other than:

  • allowing websites with detailed information about firms, including recent representations, developments and knowledge-centric material,
  • authoring articles and participating in media interviews etc,
  • disseminating brochures,
  • sponsoring events
  • being listed in directories (providing no fees and rates are mentioned),
  • fact or knowledge-based advertising that is “informational in nature and not as a form of direct solicitation or provocative solicitation”.

ICCA draft bill to allow foreign lawyers (PDF)

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