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Why foreign law firms are most likely to enter India now (or never): An investigation into the realities of legal policy, lobbying & backroom talks

Lalit Bhasin: Significant positions
Lalit Bhasin: Significant positions
Legally India investigates in Mint how special interests have succeeded at and could end up indefinitely stalling reform of legal services, despite the government's best laid intentions.

For nearly two decades, Lalit Bhasin, the president of the Society of Indian Law Firms (Silf), has been one of the most consistent, visible and hard-line opponents of the entry of foreign law firms into India.

To the legal world, in India and abroad, it was therefore significant and puzzling, in roughly equal measure, when on 14 December 2014 Bhasin wrote an opinion piece in the Business Standard that Indian law firms were now “much better placed to face the entry of foreign law firms, although in a phased manner, subject to the approval of the regulatory body, the Bar Council of India”. He suggested a timeline for the foreigners' entry over a period of five to seven years.

Last week, on 27 February 2015, the PTI reported that the Narendra Modi-led government was serious about pushing the legal liberalisation agenda and had started talks with the Bar Council of India (BCI) to that purpose.

For the foreign law firms, who have been clamouring at varying decibel levels to enter India for decades, it might appear as though the stars have finally aligned and their prayers have been answered.

But as foreign law firms have all learned the hard way by now, in India few things ever come easy...

Click here to read on (from today's print edition of Mint).

Liberal arts

Liberalisation of the Indian legal market is nearly as old as the liberalised economy, and it is closely linked with the Society of Indian Law Firms, which, alongside the law ministry and the BCI, has been a favourite lobbying target of foreign lawyers seeking entry.

Silf was set up in 2000 against the backdrop of the nineties boom, which brought with it swelling pocketbooks, especially for the promoters of its corporate law firms.

Many Silf members initially came together to fight against against strictures from the Delhi bar council, which had sent notices to Delhi firms with listings in an international legal directory. The council claimed this was in violation of the 1961 Advocates Act lawyer advertising restrictions. (In 2008 the Delhi bar council relaxed its rules to allow advocates to have simple websites; advertising remains forbidden, though many firms bend those rules).

Silf is now an organisation with a voluntary membership of more than 100 law firms, styling itself as the “apex body of law firms in India” on its website.

It's a powerful group with office bearers including senior partners from pretty much all Indian law firms. Amarchand Mangaldas Delhi managing partner Shardul Shroff is associate president, there are four senior vice presidents (Dua Associates founder Ranji Dua, Luthra & Luthra founder Rajiv Luthra, Rajinder Narain & Co managing partner Ravi Nath, and AZB & Partners Mumbai managing partner Zia Mody), 11 vice presidents, 7 general and joint general secretaries, 3 assistant and associate secretaries and 2 treasurers, as well as 20 members in its executive committee.

It also claims chapters in seven cities but the real Silf action has really always been in Delhi.

Initial and recurring ideas for Silf activities have included evolving standards of industry-wide training programmes and providing inputs into laws and regulations akin to a group like FICCI. While Silf does organise a cricket tournament and sponsors and hosts conferences and other events, most other initiatives never really took off.

One member who declined to be named because he was still a part of Silf, said that he soon “lost interest” in Silf's activities, many of which boiled down to having “a cup of tea with someone from a ministry” (though he admitted that Silf was “not a total waste of time” and has provided some value, in particular raising the profile of the profession abroad at conferences thanks in part to Bhasin's tireless statesmanship).

“But to oppose foreign law firms was part of the mission from the start,” noted the Silf member.

Bloody Brits

Foreign firms have been bashing their heads bloody against India's entry gates for a long time, while neither the arguments nor the Indian regulatory landscape have noticeably changed.

In February 2000, thousands of Indian lawyers, backed by bar associations and the BCI, marched on Parliament House with placards and slogans. They protested the government's planned amendments of the Civil Procedure Code and, in particular, plans to allow foreign lawyers to enter India by amending the Advocates Act, without having held proper consultations with the bar (the police eventually tear-gassed and lathi-charged the lawyers).

HR Bhardwaj, law minister from 2004, was generally perceived to have been converted into a liberalisation proponent, with the gentle prodding of lawyers such as Som Mandal, managing partner of FoxMandal Little as it was then called.

By 2007 there was genuine optimism, particularly in the UK, that liberalisation was on the horizon after moderately promising talks between the UK's Law Society – the statutory lawyer's representative organ – and Silf (though an optimistic report in the Law Society Gazette noted presciently that “there have been countless false dawns over the last few years when it comes to opening up the Indian market”).

From 14 November 2013 meeting minutes between BCI & Silf
From 14 November 2013 meeting minutes between BCI & Silf

But even with legal services under pressure to open up under WTO talks, Bhasin, who was then general secretary of the Bar Association of India, had remained negative about liberalisation without a “level playing field”. In particular, he said that Indian law firms were not allowed to advertise or exceed 20 partners, unlike their foreign counterparts. (Some larger Indian firms have got around the limit by linking multiple 20-member partnerships to each other).

By 2009, after former law minister HR Bhardwaj was dumped from Congress' cabinet and replaced with Veerappa Moily, the liberalisation process quickly slowed down after the BCI was not enthusiastic about it in meetings with Moily.

In 2009 the Bombay high court decided a writ petition against three foreign law firms for having illegal representative offices in India, which had been dragged to court 14 years earlier by Mumbai-based NGO the Lawyers Collective.

Any momentum that still existed went by 2010, when Chennai advocate AK Balaji filed a writ petition in the Madras high court against 31 foreign firms, claiming they were practising illegally in India when visiting to work on deals. A ruling in 2012, for the most part, exonerated the foreign law firms and provided some legal clarity by allowing foreign lawyers to fly into India to advise their clients on deals.

However, the BCI appealed to the Supreme Court where the case still languishes, with the majority of foreign law firm respondents having been deleted from the case because the BCI could not find a way to serve them with court papers.

Several high-profile delegations from the US, UK and elsewhere have included contingents negotiating for liberalisation. Former senior partner of international law firm Clifford Chance, Stuart Popham, vowed in 2010 when visiting India with the UK's prime minister that the firm would have an office in India by 2012. Optimism remained in 2011 despite another UK delegation failing to achieve anything of note.

Overshadowed by the pending Balaji decision and an ineffective government, most efforts petered out, but three years later, in September 2014, the UK law minister Shailesh Vara, a Gujarati by origin, began lobbying Modi's government, which has ambitious economic reform plans after having won an overwhelming mandate in the general elections.

Fait accompli?

On 12 November 2014, the government held a high-powered “national services conclave” to improve and reform the country's services sectors. It was there that the commerce ministry first unveiled a proposal “for a phased opening up of the sector in non-litigous services and international arbtiration”, according to a Hindu Businessline report citing an unnamed government official.

After the conclave on 17 November, Bhasin met with commerce ministry joint secretary Sudhanshu Pandey “on the subject of … allowing Foreign Law Firms to enter India”, according to a letter sent by Bhasin to Pandey on 12 December 2014.

Silf letter to commerce ministry
Silf letter to commerce ministry

According to three lawyers with knowledge of the events who did not want to be identified due to the sensitivities involved, the government had made a strong case for the entry of foreign law firms to Bhasin and BCI chairman Manan Kumar Mishra.

One person with knowledge of the meeting said that the opening up of the legal sector within two years was almost presented as a fait accompli to Bhasin and Mishra. “They were told in no uncertain terms that this is something that will happen, like it or not, so get your act together, it will happen either with you or without you.”

According to two sources, the administration was gearing up to make an announcement on the issue during US President Obama's visit to India in January. However, Bhasin negotiated a delay in the process by promising to make a public announcement that SILF was no longer opposed to the entry of foreign law firms.

Bhasin declined to comment on the meeting. Pandey did not respond to an email seeking comment.

Phases of a blue moon?

After the ministry meeting with Silf and the BCI, J Sagar Associates (JSA) founder Jyoti Sagar, who retired in 2013 but remains active in the firm, community and liberalisation talks, was briefed by Silf to write a “note on phased sequential approach for entry of foreign legal consultants / law firms into India”, which Bhasin said has been submitted to the commerce ministry.

Silf's note proposed a three-phase (rather than “two phase”) entry of foreign law firms to India.:

“Phase I” would entail “reforming the environment for domestic firms”, including permitting basic advertising and marketing, streamlining conversion of law firms to limited liability partnerships (LLPs), and “ceasing of all 'surrogate practice' of Indian law in India [and outside of India] by foreign firms through various devices and structures”.

This would be followed by “phase II” - foreign lawyers and foreign law firms may be permitted to have presence in India subject to conditions”, being “permitted to practice their 'home country' law only”. Phase II would operate for “a minimum of seven years”, after which there would be “an assessment of readiness of Indian law firms”.

If, after the assessment, “it is considered appropriate”, phase III would begin, which would allow foreign law firms to practice Indian non-litigation law, subject to strict controls on their numbers, as well as “reciprocity” - the “ability of Indian lawyers to practice in the foreign jurisdiction on similar terms and conditions”.

Sagar declined to comment on the note when contacted.

[Click here to read note proposing phased entry of foreign law firms here]

[Click here to read Silf’s proposed rules regulating foreign law firm lawyers]

On 14 December, Bhasin wrote his first opinion column revealing this phased approach over five to seven years, which he repeated in an interview to the paper on 22 February.

Kaviraj Singh, general secretary of the nearly four-year-old Indian National Bar Association (INBA) and vice-chairman of the American Bar Association's India section, said that Bhasin was representing a few family law firms seeking to stop liberalisation by adopting delaying tactics and by preventing an open debate of the topic.

“If you slow [liberalisation] down and you say, 'first let us achieve this target', no one is going to open it. India will become an irrelevant place,” Singh commented, adding that INBA had sent a representation that Modi should allow a foreign consulting regime after holding discussions with all stake holders.

Level playing field

Despite its long history of influence in this debate, non-law firm lawyers may, yet again, end up proving a bigger factor in the government's reform plans than Silf.

Invite from BCI chairman Mishra to meet Silf dated 30 August 2013
Invite from BCI chairman Mishra to meet Silf dated 30 August 2013

BCI chairman Manan Kumar Mishra, first elected in 2012, had always been publicly opposed to the entry of foreign law firms, insisting on “reciprocity” to allow Indian lawyers to practice abroad. (Indian lawyers are permitted to practice in a number of countries, usually subject to passing local admissions tests).

In November 2013, according to emails and meeting minutes, Mishra had met with a number of Silf members, including Bhasin, to “consider the matter with regards to issues of common interest for Law Firms and BCI”.

They discussed the BCI's stand in the Balaji Chennai writ petition against foreign firms that was pending in the Supreme Court, in which the BCI was one of the respondents, and they tabled talks around “recognition of Law Firms by BCI, Practice of Law by Chartered Accountants, Websites, Firm Brochures, LLPs etc”.

The talks with Silf stopped in April 2014, when Mishra's term as BCI chairman ran out and he joined the BJP. According to an email seen by Mint, Bhasin said that “nothing much came out of” a Silf meeting with Biri Singh Sinsinwar, who took over the BCI chairmanship from Mishra.

When Mishra was re-elected as BCI chairman in November 2014, Silf intended to schedule a new meeting with Mishra on 26 December 2014, which was eventually cancelled.

Mishra, the BCI and Silf are now in close discussions with the law ministry, confirmed Bhasin and Mishra.

“Government is waiting for the opinion of Indian lawyers,” Mishra commented via email. “We are thinking in positive direction, but it all depends on the attitude of foreign countries: how they reciprocate? It can't be one-sided. We can't put our lawyers or law firms in loss.”

“Since our government is depending on BCI in this regard, we are seriously working out,” he said, adding that the BCI was also holding discussions with Australia, would write to the Law Society of England & Wales, and would visit the US in April with a delegation including either the Union law minister or government representatives.

The Balaji case pending in the Supreme Court would be solved, said Mishra, once the BCI and government “arrive at some conclusion”.

However, Delhi High Court Bar Association (DHCBA) president Rajiv Khosla claimed that neither SILF nor the BCI chairman had any specific powers in this situation. “If the government wants to do something, first they must give it black and white to the Bar Council of India (BCI); the BCI should send it to all bar councils of different states, and the state bar councils must have meetings with [local] bar associations.”

Without consultations with bar associations on the exact scope of the regulations and amendments, and without appropriate government guarantees that foreign law firms would not be allowed to encroach on court and litigation practice, he promised that lawyers at the bar would not be happy.

“Then another demonstration will be there.” Khosla is referring to the protests of 2000 when, he said, 40,000 lawyers, including Khosla himself, marched on Parliament and got then-law minister Ram Jethmalani to back down on the issue of bringing foreign law firms in.

As other governments in history, it's clear that this one is seriously interested in opening up the legal market. Why is not entirely clear: several sources close to the discussions suspect that the Modi government is keen to increase foreign investment in the infrastructure space, where foreign law firms will make foreign companies feel just a little more comfortable, while last week’s PTI report also claimed that the government wants to be able to draw on the expertise of international arbitration experts more readily. One trade law expert, who declined to be named, said that it was highly unlikely that the WTO talks on services were the reason, since they would not resume with India any time soon.

But perhaps the more important question than why, is whether the government will be powerful, determined and sensitive enough to see this policy change through, despite the thicket of vested interests that has successfully resisted all reforms to date.

A version of this article was first published in today’s edition of Mint. Legally India’s association with Mint will bring you regular insight and analysis of major developments in law and the legal world.

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