•  •  Dark Mode

Your Interests & Preferences

I am a...

law firm lawyer
in-house company lawyer
litigation lawyer
law student
aspiring student
other

Website Look & Feel

 •  •  Dark Mode
Blog Layout

Save preferences
This article, like many others, was first published exclusively for subscribers, some time before everyone else got to read it.

If you'd like several goodies and first access to stories like these in future, subscribe instantly here

Liberalisation is close but far from a done deal: Analysing the BCI, Silf and others’ gameplans and odds of success

Is the door for foreign law firms to India half open or half closed? Guess what, it totally depends...
Is the door for foreign law firms to India half open or half closed? Guess what, it totally depends...

The liberalisation process might never have been as advanced, but it remains a process fraught with sensitivity.

Five ministries are due to meet Tuesday (5 February) with the Bar Council of India (BCI) and three lobby groups that have a stake in the matter of the entry of foreign law firms, as first reported in Legally India on Friday.

The occasion: to figure out whether the BCI's long-anticipated draft rules to allow foreign lawyers to work in India are fit for purpose.

However, contrary to at least one press report, it won't just be a matter of approving those rules but of resolving different stakeholders' fundamental disagreements about how the process will work. One person familiar with the discussions even predicted that the meeting would be more about government and SILF “firefighting” the BCI draft than anything else.

Other law firm lawyers and stakeholders spoken to, most of whom declined to be named in light of the sensitivity of ongoing negotiations and positions, expressed doubts and concern about a variety of matters, including outright legality and constitutionality of the proposed rules, to practicalities and the nitty gritty of language used.

The factions

Word on the street is that the government was looking for things to being close to done and dusted around September of this year, but even if the government and Narendra Modi are still serious (having repeatedly gone on record to say that liberalisation is a priority due to its perceived economic benefits), they'll have a delicate balancing act ahead of them and that deadline looks optimistic.

The stakeholders to convince remain the same. Corporate groups such as the Federation of Indian Chambers of Commerce and Industry (FICCI) or the Indian Corporate Counsel's Association (ICCA), which have both been invited to today's meeting will not have any demands that stray too far from the government line. Both bodies have in the past been content to advocate for the entry of foreign lawyers in India, hoping that this would increase competition and service levels of available legal advice, while decreasing prices and the pre-dominance of a few big law firms in the market.

Some of those few law big firms have naturally been resisting the prospect of foreign competition the hardest for years, led by their only real trade association, the Society of Indian Law Firms (Silf).

Silf has sung from a single tune sheet nearly since its inception 16 years ago, consistently and vociferously anti-liberalisation under its uncontested three-time president Lalit Bhasin.

However, as reported in Legally India and Mint last year, that tune has now changed after major pressure by this government that Silf either get on board or risk being sidelined from future discussions.

The final player currently formally involved is the BCI, which has now produced the first ever tangible draft proposal of how India's legal market could be liberalised, which will be the core subject of today's discussions.

Nominally, the BCI is also supposed to represent the bar and its legions of litigators, but in reality the power at the bar rests with the bar associations as reported in Mint last year.

Also, although Delhi lawyers went on strike in 2006, the last time liberalisation indirectly became an issue, the BCI draft rules have expressly carved out arguing in court from what foreign lawyers will be allowed to do.

“The bar is sitting in their own world, so long as they don't get new foreign lawyers coming in and arguing against them, they won't object,” commented one law firm partner.

That said, bar politics is very unpredictable and in light of the BJP government's heavy investment in the idea, it is possible the Congress party may use its strong lobby in bar associations to try and use the issue for political mileage.

Or, as one lawyer put it with tongue-in-cheek, if Arvind Kejriwal were to get wind of it, he would gleefully begin shooting it down. Others suspect that several “poison pills” have been inserted into the BCI rules, such as allowing foreign lawyers to arbitrate for foreign companies in India, which will mobilise resistance from the bar.

The process is fraught with sensitivity.

The reason for rules

The Bar Council of India Rules for registration and regulation of foreign lawyers in India, 2016, to give them their full name, seem pretty sensible on first reading (see box).

The BCI's proposal in a nutshell

- Foreign lawyers and law firms can set up offices in India after registering with the BCI and paying registration fees and security deposits of between $40,000 for individual lawyers and $90,000 for law firms.

- Foreign lawyers would be allowed to do all non-Indian legal transactional work and hire Indian lawyers or go into partnership with Indian lawyers.

- Foreign lawyers would not be allowed to practice law relating to courts, tribunals, boards or statutory authorities but can argue for foreign clients in international arbitrations held in India.

- Foreign lawyers will have to submit a raft of documents to the BCI before they can get registered, including certificates of practice from their home jursidictions.

Please click here to read the full rules.

As reiterated in the rules' “objects and reasons” preamble, the BCI “had initially opposed the entry of foreign lawyers in India in any form” but between 2007 and 2014, it said that it was authorised by the legal fraternity to explore the potential and prospects of opening up with government departments and other countries' regulators.

The preamble to the rules is the first time that the BCI has been reported to come out in such full-throated support for the project: liberalisation would benefit both Indian and foreign lawyers, and Indian lawyers “proficiency in law is comparable with the international standards”, the regulator wrote.

If “we sleep over the matter, the legal fraternity of India may be left behind,” it said, promising that domestic lawyers would “not likely suffer any disadvantage in case law practice” with the entry of foreigners in a “well controlled and regulated manner on the principle of reciprocity”.

The reciprocity question

Reciprocity has been the most ancient of keywords in the liberalisation debate. Well, at least since 1961, when the Advocates Act was passed.

The principle of reciprocity and wording of the Act are also fundamental in answering the question whether the Act needs to be amended by Parliament, or whether the BCI can usher in the revolutionary changes under its existing powers.

The Advocates Act (section 29) states that “only one class of persons [is] entitled to practice the profession of law, namely, advocates”.

It also states that the only people who can become advocates in India are citizens of India, or foreign nationals if that foreigner's country in turn allows “duly qualified” citizens of India to practice law in that foreign country (section 24).

Finally, the BCI has nearly complete discretion to “prescribe conditions, if any”, under which foreign lawyers may be admitted as Indian advocates (section 47), and enjoys wide rule-making powers under the Act to further the BCI's raisons d'etre.

On its face, it could seem possible that even without any statutory amendment, the BCI could nearly unilaterally decide to open up the market for foreign lawyers from tomorrow, if it so chose.

But the BCI's draft rules in effect create a new 'class' of advocates, namely that of “foreign lawyer”.

One question is whether this would be outside the BCI's powers under the Advocates Act – ultra vires – which could form the basis of a legal legal challenge if implemented.

Challenging

The BCI could perhaps effectively defend itself in court by claiming that it has not in fact created a new class of advocates of “foreign lawyer”, but simply decided to admit a new type of lawyer as a normal advocate (as it is entitled to do) while restrict that new lawyer's ability to practice in courts and tribunals (which it also has some power to do under the Act).

Another potential challenge could happen on constitutional grounds: the right to equal treatment before the law, for instance, could be invoked since the BCI rules defined foreign lawyers as not just including law firms, but also limited liability partnerships (LLPs), companies or corporations allowed to practice law abroad.

By contrast, Indian companies are not allowed to practice law, and even LLPs are in a grey area.

“It could create uncertainty,” said one law firm partner. “If regulations are ultra vires the Act, whether legal or not, it poses a risk.” He explained that the rules, as presently drafted, could result in foreign firms naively forking over $90,000 to the BCI, only to find themselves quagmired in a legal challenge of the act for the next decade or longer (as happened in the Lawyers Collective case between 1995 and 2009, or the 2010 Madras high court AK Balaji case, which is currently in the Supreme Court).

Silf view: Phasing in foreigners

Furthermore, and this is both a legal and a practical commercial point, most foreign law firms have no restrictions on advertising or marketing their brands, while in several foreign jurisdictions law firms can seek outside investment from non-lawyers and even be listed on the stockmarkets.

Indian law firms may claim that since they can't really do any of those things, it discriminates against them.

And that is partly the argument of Silf.

Silf president Lalit Bhasin said he did not have any fundamental problems (anymore) with opening up the profession but said that the BCI rules “jumbled up” the “phased entry” of foreign law firms that had been promised by the ministry, and risked creating a “very confusing picture”.

“I don't think any proper application of mind has been there. Let them come but it should be phased entry,” said Bhasin.

The phased entry model refers to the five to seven year plan laid out by Silf in late 2015, which would begin with first legally allowing Indian law firms to advertise, officially be allowed to have proper websites and brochures (although many already do), clarifying whether Indian law firms can incorporate as LLPs, and generally 'levelling the playing field' of regulation vis-a-vis their foreign counterparts.

Bhasin noted that nothing had been done by the BCI on allowing law firms to advertise, despite repeated requests, while getting the BCI to formally sanction LLPs (despite several law firms operating as LLPs) has been a long-unfulfilled wish from law firm lawyers of their regulator.

Bhasin said that he would ask the government and stakeholders at today's meeting that Silf would need time to respond to the draft proposal and would call a Silf meeting in the “next week or so”.

At least three out of five law firm partners spoken to by Legally India said they were preparing detailed submissions with suggestions for Silf (see box).

You've been lawyered: The fine print

Since we're dealing with rules by lawyers for lawyers, there is no shortage of criticism and suggestions of the nitty gritty of the rules.

“Everybody looked at opening up of the market as uni-directional,” says one law firm partner, “but it (the BCI rules) acts as a bit of a barrier for Indian firms to expand outside.” At issue: forcing Indian law firms to pay $40,000 to the BCI before hiring a foreign lawyer could make it financially very unattractive for Indian lawyers to hire foreign talent or expand internationally.

And should a minimum level of experience be specified for individual foreign lawyers to come here (as it is in other jurisdictions)?

And how should the BCI's role in this be regulated? Should the BCI be earning such sizable amounts of money for vetting a couple of documents and stamping a few papers and what will it do with that money? Or could that money be better spent by the law ministry?

Is there an appeals mechanism laid out? What if the BCI drags its feet on renewing foreign lawyer certificates after they expire? Should those just lapse or be automatically renewed? What will happen in edge cases of bizarrely-structured law firms or with lawyers having qualifications in multiple jurisdictions? What kind of certificates from a home jurisdiction do you require of a foreign law firm with offices and lawyers from dozens of countries?

And how will numbers be controlled, if at all, so the market does not suddenly explode with foreign legal entrepreneurs?

And that's aside from the real fine-print that may need looking at, around legal definitions and the precise wording used.

None of that discussion has really happened yet but with a tangible BCI draft now out, there is likely to be much more tangible debate on the subject.

Along similar lines, it is also worth noting that the BCI proposal basically goes from zero to 100% in one step. Most other jurisdictions, such as Singapore – although that has not necessarily been a poster child in how to liberalise, with several misfirings – opted for an approach where the percentage of foreign 'ownership' in local law firms would ratchet up gradually, only reaching 100%-foreign-owned firms after several years.

Mystery drafting

No one spoken to was entirely sure who had actually come up with the BCI rules and judging by the BCI's usual textual output, all lawyers spoken to said they thought it unlikely that the BCI had produced these rules without any external help.

“They are fairly cleverly drafted, how it works around the Act and opening of the market, they're actually written very well,” commented one law firm partner about the rules, while another said more bluntly: “This is not BCI or GoI (Government of India) drafting.”

Some suspect that the Law Society of England and Wales had lent a helping hand (though others have rebutted that outright; we have reached out to the Law Society for comment but not heard back).

Others feel that a foreign law firm may have helped the BCI (though that seems similarly unlikely), while one other person spoken to felt that an Indian law firm or one or more senior lawyers intimately familiar with the Advocates Act may have drafted the rules (again, we have not been able to find any evidence to confirm that yet).

Next steps?

The ball is firmly in the government's court, as without their push, neither Silf nor BCI would have come on board and been so proactive.

So, can the BCI simply notify its own draft rules? It might be the fastest way to effect entry but also brings with it the risk of legal challenge.

And considering this and previous governments' distrust of the BCI and other professional regulators, having several times tried or proposed to strip the BCI of legal education and other powers, it is very possible that the government would prefer an independent body to act as the Gateway to India law Inc and to come up with its own draft.

However, if the government were to do it without the BCI, the possible options would be an ordinance and amending the Advocates Act in Parliament, and that could become hostage to political vagaries more than anything else.

Rightly, the government's thinking may be that it's be better to do this slowly and more deliberately, but avoiding outright failure of the entire initiative remains an ever-present possibility.

A version of this article appeared in today’s edition of Mint. Mint’s association with LegallyIndia.com will bring you regular insight and analysis of major developments in law and the legal world.

Legally India subscribers got an early look at this article via our exclusive subscriber only newsletter. To support us so we can do more work and reporting like this, please subscribe below.

Photo by Klearchos Kapoutsis

Click to show 8 comments
at your own risk
(alt+c)
By reading the comments you agree that they are the (often anonymous) personal views and opinions of readers, which may be biased and unreliable, and for which Legally India therefore has no liability. If you believe a comment is inappropriate, please click 'Report to LI' below the comment and we will review it as soon as practicable.