foreign law firms
Clifford Chance senior partner Stuart Popham is the law firm representative on British prime minister David Cameron's India delegation this week, representing the UK legal and financial professional services community as head of a new trade body.
"The legal profession in so-called advanced countries is a product of Industrial Revolution whereas in India it is a product of Independence Revolution"
These are the words that made me think. Should foreign law firms be allowed in India? Are they necessary?
Just as I questioned myself, a small part inside me said ‘Yes’ immediately. It was then, that I thought about it properly and tried to research on it.
Past:
In 1994, two New York-based and one London-based law firm had sought permission from the Reserve Bank of India (RBI) to begin liaison office activities in India to advise and assist non-Indian clients in connection with their activities in India and outside India. The three law firms, White & Case (NY), Chadbourne & Parke (NY) and Ashurst Morris Crisp (UK) were granted permission under the Foreign Exchange Regulation Act (FERA) to start liaison activities. However, in 1995, Lawyers’ Collective, a public interest trust set up by lawyers to provide legal aid, moved Bombay HC challenging the right of foreign law firms to “practice law” in India. The High Court had held that the practices engaged by these firms amounted to “practicing the law” and hence were not to be permitted.
Under Section 7(1) of the Advocates Act 1961, foreign law degrees are recognized by the Bar Council of India on a reciprocal basis, and legal academics can teach and engage in legal research without any bar. However, foreign nationals are prohibited from “practicing law” in India as per the same Act.
Countries other than India, usually have two types of lawyers. Barristers and Solicitors. Solicitors can give advice and draft documents but cannot argue in the court. Barristers can do everything that solicitor can and also argue in the court. Indian lawyers can do both, and they usually do it too.
The biggest problem with this debate is that there is a lot of false news going around regarding the it. A lot of people are given only one side of the story and choose sides based on it. We are human beings, we will always oppose change.
Foreign law firms are not here for advocacy work, they are here for transaction work. All the Indian law firm’s majority work is transaction work. Why will they not oppose competition? Who would not want a closed market for such a huge and growing economy? It is simple economics.
The argument in favour of the Indian law firms is that they will bring in professionalism. I am definitely not saying that the current firms are not professional. I mean that global competition will force them to become better than they are right now. Increased competition is always good for the consumer and the economy.
Reciprocity and international law obligations are also very strong arguments. Foreign countries allow Indian lawyers to work there, after certain small requirements are met with, then why should we not reciprocate the favour? India is a founder member of World Trade Organisation’s (WTO), General Agreement on Trade in Services (GATS). The main objective of this agreement is to facilitate free flow of services across the world.
Other countries which allow foreign lawyer and firms have certain restrictions. For example in California the Foreign Law Firms were only permitted to deal in laws not specific to California. In countries like Singapore, Hong-Kong and Japan they are restricted to servicing only foreign firms. The models of all these places, their practices, rules and regulations need to be analysed thoroughly before being incorporated into the Indian system.
There have been news that government is going to allow foreign law firms in a short while. There is immense pressure on the government from both sides. Foreign governments are pressurising it to allow the entry and Indian law firms and the Bar Council of India is asking it to go against it. There have been speculations that foreign law firms may be allowed to enter but in phases. In the first phase, they will be allowed to set up offices here but it has to work solely as if it is outsourcing its work to India. In the second phase they will be allowed to do transaction work in India. It might be restricted to work for foreign companies who are working with Indian companies. In the third and the final phase, they will be given total access. They will be treated like any other lawyer in India. Although they might have to pass some examination. It is still not very clear.
If we look at it in a strict sense then we can see that they are already here. We are all aware of the so called ‘friendship agreements’ between foreign law firms and Indian law firms. They have common training programmes and a lot of other such things. So they are already making a foundation for an entry.
I don’t understand one thing though. It’s a really simple question. If they have allowed us into their markets then why can we not allow them in our? I would like to refer to the book ‘The World Is Flat’ by Thomas Friedman. It advocated the fact that the world is now a common market and all the products and services are launched will have a level playing field. This is not the condition with our legal services. We want other countries to open up their markets. We ask them for more lenient laws for settling there and doing business there. We want all other countries to follow GATS, but what are we doing? How hypocritical are we?
The humorous part is that foreign law firms are not being bogged down. They are pretty smart too. Apart from the ‘friendship agreements’ they have already started hiring fresh law graduates from law colleges in the country. They are giving them monetary benefits which are much more than the average that Indian law firms are providing. They are brain draining us. Their message is clear, if you don’t allow us to work in your country then we will take your brightest law graduates and camp them in our country and charge you in pound sterling or dollars or whatever.
Foreign law firms are more professional. They don’t have the ‘only 20 partners’ restriction. So they have a lot of partners and so employees there have a higher chance of becoming a partner. Indian government is planning on bringing in Limited Liability Partnerships. This way, the situation in India will change. I have heard that Clifford Chance has over 600 partners. I am not sure but if it is then I am surprised.
My suggestion:
Let them enter. They will make the market more client friendly. They will bring more jobs. They will being professionalism. Indian law firms are already facing a lot of competition but are still able to hold on to the top spot. I don’t think they will have a problem with that later on. You cannot avoid competition forever. There should be Special Exams for foreign lawyers so that the quality of lawyers that are allowed to practice can be moderated. Multi National Companies have changed the entire business scene. They have made a MBA degree a special qualification. The students now get a higher salary because they are now wanted by a larger population. Something similar can happen to a law degree. This is very important for people who consider National Law Schools are the IIM’s of law just like people think that IIT’s are the IIM’s of engineering. No one’s vested interest should come in the way of common good. I am not advocating the entry for monetary purposes. I am supporting it so that Indian lawyers become more efficient. They have started slacking in their effort. There is a scarcity of ‘good’ lawyers and law firms in the country. They can be counted on our fingers. I want it to change.
Future:
The decision is still pending. Mr. Law Minister is not ready to take a stance. No organisation/website wants to take sides because they are afraid of backlash if the decision goes against them. A lot of polls have been conducted, all which showed a majority of people who want foreign law firms in India.
Don’t push India back by trapping its economy. Imagine the situation if we had not liberalized the economy in 1991. Let’s not do anything that we might regret in the future.
Disclaimer:
I am not against Indian law firms or the Bar Council of India. I am pro-liberalization. Let the democratic country do its thing. Sorry for the unusually long post. I hope I have made my point.
Constructive suggestions are welcome.
Related read:
On a lighter note: A picture is worth a thousand words. Click here.
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.
Madras writ petition v foreign firms will be moved to Supreme Court for "final decision", says Moily
The Indian government will attempt to move the Chennai writ petition against 31 foreign firms to the Supreme Court in order to take a "broader perspective" and make a "final decision" on the entry of foreign law firms said law minister Veerappa Moily, according to newspaper reports.
Friday's Mumbai Income Appellate Tax Tribunal (ITAT) ruling against Linklaters makes potentially all overseas professional services and law firms subject to income tax in India for the last six years or more if their staff visit India for 90 days in aggregate per year. The repercussions could be serious, according to Indian tax lawyers.
The beginning of the week got off to a slow start as opposition parties called a national strike (Bharat bandh) to protest the fuel price hike. In Bangalore, Mumbai and Kolkata many streets were deserted.
By contrast Tamil Nadu, which was largely unaffected by the bandh, was comparatively active.
As the Madras High Court decided on Wednesday (7 July) to serve 31 foreign law firms with the petition that seeks to prevent them from operating in India, respondent firms and local corporate lawyers have expressed confidence that firms' India businesses would remain largely unaffected.
The 31 international law firms and one legal process outsourcing (LPO) company will now be served with notices to defend the Chennai writ petition that aims to prevent foreign firms practising any law in India.
Today, as the petitioner pressed for an injunction against the foreign firms, the government respondents' counsels asked for time to file responses while the law ministry and Bar Council of India would "frame guidelines" on the issue.
The Union law minister Veerapa Moily has publicly said for the first time that the entry of foreign law firms was more of a "transitional problem" rather than "perennial" and that minds should not be shut to "big ideas", while reasserting the need for "proper capacity building".
All government respondents have now formally filed their representations through senior counsels in the Chennai writ petition case against foreign law firms when the matter was listed for hearing on 9 June after the end of one month of Madras High Court vacations on 7 June.
The 86-year-old senior advocate and politician Ram Jethmalani is a living legend of the criminal bar that is unlikely to ever fade quietly into the background. Despite his self-proclaimed desperation to retire he was recently instructed to co-defend former IPL chairman Lalit Modi, fought for Anil Ambani against his estranged brother in the Supreme Court and won the presidential election to the Supreme Court Bar Association (SCBA), vowing to clean up the tainted body.
Unafraid of controversy, Jethmalani remains as outspoken as ever and Legally India talks to him about the practice of law, why he thinks that foreign law firms would benefit Indian lawyers, how a bar exam is not necessary and how the corruption, backlog of cases and decline of the legal profession are squarely the government's fault.
Legal process outsourcing (LPO) companies have come under the spotlight after the the recent Balaji Chennai High Court writ petition and the Bombay High Court's decision in the Lawyers Collective v. Ashurst case. The cases have created significant uncertainty, argues SDD Global's Sanjay Bhatia, although for the most part it has been a false alarm for LPOs.
The first hearing in the Chennai writ petition against 31 foreign law firms has run into the Madras High Court holidays and will not be heard for at least another month, although several other interested parties have now also pledged to file affidavits in support of the petition.
The Bar Council of India (BCI) has been pivotal in the debate on the entry of foreign law firms. The Solicitor general and newly elected BCI chairman Gopal Subramaniam tells Legally India about what has to happen before foreign lawyers can practice here.
The Chennai public interest litigation (PIL) against 31 foreign law firms that was scheduled for Government respondents' filing of replies on 8 April remains unheard to date owing to judicial delays.
The first hearing in the Chennai writ petition against foreign firms will be held today, after having been postponed from yesterday as the bench failed to convene for a post-lunch session.
A Tamil Nadu advocate has reportedly filed a writ petition against 30 foreign law firms and legal process outsourcing (LPO) company Integreon for "illegally practising" law in violation of the Advocates Act 1961, according to unconfirmed media reports, although no notices have been served on the respondents yet.
This week J Sagar Associates (JSA) partner Nishith Dhruva left the firm to set up his own practice. And on good terms too, throwing a party last Friday where most of the firm and partners put on their dancing shoes.
Now that is what is called "amicable".
The question is not whether to allow entry of foreign lawyers in India, but the question is until when can entry of foreign lawyers be prevented in India, argues Kaden Boriss Legal LLP founding partner Hemant K Batra.
The Society of Indian Law Firms (SILF) is hoping to widen its appeal outside of its traditional centre Delhi by strengthening local metro chapters and inducting new committee members.
SILF's Mumbai, Kolkata, Bangalore, Hyderabad and other regional chapters will be headed by prominent local lawyers.