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MSM reports of ‘blow’ to foreign law firms greatly exaggerated: SC affirms fly-in-fly-out, cites repealed FERA, nothing changed

Reports of foreign law firms' death greatly exaggerated (M. Twain, possibly)
Reports of foreign law firms' death greatly exaggerated (M. Twain, possibly)

Contrary to media reports, the Supreme Court has reaffirmed the Madras high court judgment on foreign law firms, expressly permitting the “fly-in-fly-out” of foreign lawyers, while reiterating the law laid down in the Bombay high court’s Lawyers Collective judgment preventing foreign lawyers from opening up offices in India.

After Legally India first reported the hearing yesterday, the Supreme Court’s order is now available, which states:

“It is clarified that Reserve Bank of India shall not grant any permission to foreign law firms to open liaison offices in India under Section 29 of the Foreign Exchange Regulation Act, 1973.

“It is also clarified that the expression ‘to practice the profession of law’ under Section 29 of the Advocates Act, 1961 covers the persons practising litigious matters as well as non-litigious matters other than contemplated in para 63 (ii) of the impugned order and, therefore, to practice in non-litigious matters in India, the foreign law firms, by whatever name called or described, shall be bound to follow the provisions contained in the Advocates Act, 1961.” [emphasis added]

With this order, the apex court explicitly recognised the “fly-in-fly-out” permission granted to foreign lawyers by the Madras High Court, which held in paragraph 63 (ii) that:

“there is no bar either in the Act or the Rules for the foreign law firms or foreign lawyers to visit India for a temporary period on a ‘fly in and fly out’ basis, for the purpose of giving legal advise to their clients in India regarding foreign law or their own system of law and on diverse international legal issues.”

Dua Associates Chennai partner Senthil Kumar commented: “There is in my view a carve-out for practice of non Indian law and the judgment has reiterated the Madras high court order.”

The 1973 Foreign Exchange Regulation Act (FERA) cited in yesterday’s apex court order was repealed in 1999 and replaced with the Foreign Exchange Management Act (FEMA) 1999.

FERA was relied on in the 1999 Lawyers Collective judgment, which was filed in 1995 against foreign firms Ashurst Morris Crisp, as it was then known, Chadbourne & Parke and White & Case.

That 1999 Bombay high court judgment had stated that the RBI should not grant permission to foreign law firms to open offices in India.

According to yesterday’s order, senior counsel Abhishek Manu Singhvi and Dua Associates appeared for White & Case and Covington & Burling. Senior counsel Nageshwar Rao and three advocates appeared for Allen & Overy. Senior counsel Mukul Rohatgi and six other counsel appeared for Ashurst, Linklaters, Clifford Chance, Eversheds, Clyde & Co and Bird & Bird.

The apex court ordered notice to be served on all respondents within 10 weeks, except for the firms mentioned above where counsel waived service.

Senior counsel MN Krishnamani and senior counsel Manan Mishra appeared for the BCI.

Yesterday, Krishnamani told Legally India that he had argued in particular against legal process outsourcing (LPO) units being used as “camouflage” by foreign law firms.

A sampling of main stream media reports on yesterday’s judgment

The Calcutta Telegraph went with the headline “Blow to foreign law firms - Non-litigious work also out of bounds: SC” and wrote:

The Supreme Court has issued an interim order restricting foreign law firms from pursuing any non-litigious work in the country. It also directed the RBI not to permit any foreign law firm to set up a liaison office in India.

The Pioneer reported “Foreign law firms can’t set up base in India: SC”

This has come as big jolt to foreign lawyers. For, the Madras High Court had permitted them to at least make temporary visits for giving legal advice to their clients on a “fly in and fly out” basis. This was a concession granted by the Madras High Court over the Bombay High Court order of December 16, 2009 which expressly refused foreign legal firms to set base or carry out any kind of “litigious and non-litigious” practice in India.

The TOI’s story headlined “Don’t let foreign law firms in: SC” led with:

In a significant order that will affect nascent backdoor steps being taken by foreign lawyers to enter India, the Supreme Court on Wednesday directed the Reserve Bank of India not to permit law firms from abroad to open liaison offices in the country.

The Hindu in “Supreme Court tells RBI to bar foreign law firms” led with:

The Supreme Court has asked the Reserve Bank of India not to grant permission to or register foreign law firms to set up liaison offices in India under Section 29 of the Foreign Exchange Regulation Act, 1973, for fighting litigation in the country.

Photo by Chad McDonald

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