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Poor foreigners / Issue 58

Legally India newsletter
Legally India newsletter
It appears there is just no winning in India for foreign law firms.

As though the opposition to them practising law here is not enough, the Indian Revenue Services (IRS) too are making their life hard.

Linklaters was hit with an income tax tribunal ruling last Friday, which decided that the firm would be taxable for all work it did for Indian businesses even if done from overseas.

The ruling, which is in line with an amendment by the government's of the income tax laws, will be significant blow as it goes much further than the previous tax ruling against Clifford Chance that is currently in the Supreme Court.

The crux is that any foreign law firm whose partners or associates in aggregate have spent 90 days or more per year in India could be landed with a tax bill going back at least six years. Apart from the headache of having to be assessed by IRS officers, an Indian income tax rate of 40 per cent this would also not come cheaply.

Myriad firms could fall into the net with frequent partner India visits and very popular multiple-month associate secondments.

Read our full analysis on what Indian tax experts think the Linklaters ruling means and where it could go.

One ray of hope for foreign law firms this week was the news that the Chennai writ petition against them would be moved to the Supreme Court. No one expects a groundbreaking shift in policy but foreign lawyers may prefer a trip to Delhi over Tamil Nadu and closure of the case could now come sooner rather than later, whichever way it will swing.

The incentive to be here is still there, of course. India was the world's top infrastructure projects destination in the first six months of 2010 and firms such as Luthra, Amarchand and AZB ruled the roost although a large number of smaller and niche outfits profited too, according to Dealogic's latest league table.

Start-up Axon and Norton Rose picked up a rare convertible debt issue in the wake of European market turmoils, Trilegal's breakaway Phoenix landed an interesting $325m hotel fund JV, while JSA and ELP structured a strategic spicy investment.

One new senior capital markets lawyer who joined Luthra & Luthra this week from Clifford Chance London said that India was on the "cusp of a wave" and he was already pulling all nighters after only four days back in India.

War for legal talent will remain one of the biggest challenges India will face in the coming years and ICICI Bank, which is one of the country's largest legal employers, has correspondingly increased its base pay for freshers above the magical Rs 9 lakh barrier.

This week's expert Legal Opinion agrees about the challenges and adds several more, explaining how to start your own LPO and how not to.

What should help will be Bar Council of India (BCI) chairman Gopal Subramanium unveiling the rest of the roadmap to improving legal education by 2011. The programme and timing is certainly ambitious but the measures are sound and include assessing law college quality, improving teaching and introducing standardisation.

Meanwhile final year law students have continued getting more legal experience than a bar exam could ever provide, with two more writ petitions against it - now 10 in total and counting - one of which is going straight to the Supreme Court.

We have also posted the Bar Council of India's (BCI) responses to concerned students' questions but it looks as though this issue is currently in a clinch.

Perhaps winning things outright is just difficult in India, irrespective of whether you are a foreign lawyer or not?

Blogging competition

Talking of winning, Legally India's hugely popular blogging competition is entering its last week with several more quality entries.
TO ALL BLOGGERS: please start thinking about what have been your top six or so favourite posts. We will get in touch with you in due course with more details on judging.

Comment of the week

The Bombay Solicitors exam "may be a colonial hangover" but NLS grads are "a bunch of oversmart legal executives who think they have the authority to give their unwarranted [remarks]/comments on solicitors exams rather then [appreciate] the fact that there have been people who have worked hard for it and have been [successful] in clearing them".

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