Advent of Foreign Law Firms in India

The opening of a legal firm by a Nigerian in Delhi has				stalwarts did have a very high standard. However,
not only lawyers up in arms against the unauthorized				today that standard of profession is nowhere to be
practice but has also revived the				seen or experienced. Legal profession has also
decade-and-a-half-old debate over the more				become totally commercialized with no human or
important question - should foreign lawyers be				moral values. The standard has gone down
allowed entry into India?				considerably. However, the fees charged have
It is often asserted that India has the potential to				tremendously increased, disproportionately to the
become one of the world's great legal centers in the				service rendered to the clients. No effort is being
21st century, alongside London and New York. It has				made in any corner to set the wrong or malpractices
innate advantages in its common law traditions and				which have crept in in the legal profession. On this
English language capability. But until very recently India				background, what would be the "raised standards"? If
had not recognized the role that advisory legal				at all the standards are raised, would the entire class
services have to play in attracting foreign investment				of legal practitioners in India benefit or will it be only a
and developing a broader-based services economy.				small section of the legal practitioners who would be
India being a signatory to the General Agreement on				able to take advantage of the new situation? In that
Trade in Services (GATS) which is an organ of the				case, can this move be said to be in the interest of
World Trade Organization (WTO) is under an				the legal practitioners? The situation so far as the
obligation to open up the service sector to Member				FLC's are concerned would be completely different
Nations.				since all the FLC's who aspire to come to India will
"Services" would include any service in any sector				get equal treatment whereas the Indian legal
except services supplied in the exercise of				practitioners would be deprived of equality in
governmental authorities as defined in GATS. "A				profession. Besides the FLC's will have foreign clients
service supplied in the exercise of governmental				and even though they are allowed to practice in India
authorities" is also defined to mean any service that				with a reasonable restriction of obtaining law degree
is supplied neither on a commercial basis nor in				in India, for some time definitely they will need Indian
competition with one or more service suppliers.				lawyers to get their work done. With the resources
Legal profession is also taken to be one of the				at their end and with the higher exchange rate in
services which is included in GATS. With the				currency, they will be able to hire and retain young
liberalization and globalization policy followed in India,				lawyers with substantial pay packages, though as
multinationals and foreign corporations are increasingly				compared to their fees in their country it would be
entering India. Foreign financial institutions and				much lower, with the result that good reputed
business concerns are also entering India in a fairly				Attorney's/Solicitor's Firms in India would lose their
large number. Their business transactions in India are				good hands and their work may suffer. Law Firms in
obviously governed by the Indian law and the foreign				U.S.A have funds equal to the annual budget of the
law firms (FLF's) and foreign legal consultants (FLC's)				State of Maharashtra. With such resources, in a short
being not fully conversant with the Indian legislation				time, such FLF's would do away with the existing law
require the assistance of lawyers enrolled and				firms in India. On this background would our law firms
practicing in India. This has led to the idea of entry of				withstand the competition and the quality of service,
foreign legal consultants and liberalization of legal				is an important question to be examined.
practices in India in keeping with the guidelines				The U.S and some other advanced countries have
evolved by the International Bar Association (IBA)				large law firms operating on International scales which
and the GATS. If this idea is to be put into practice,				are primarily business organizations designed to
the Advocates Act, 1961 which governs legal practice				promote commercial interest of their giant client
in India needs to be amended.				corporations. The size, power, influence and
Legal "practice" is not defined in the Advocates Act				economical standards of these large international law
but a reading of Sections 30 and 33 indicates that				firms would definitely affect the legal system of our
practice is limited to appearance before any court,				country adversely. We cannot match howsoever far
tribunal or authority. It does not include legal advice,				we may stretch it, their size, power and most
documentation, alternative methods of resolving				importantly economical standard. There is a limitation
disputes and such other services. Section 24 (i)(a) of				here on the number of partners in an Attorney's
the Act provides that a person shall be qualified to				Solicitor's firm. The number is restricted to 20 under
be admitted as an Advocate on the State Roll if he is				the Partnership Act, which restriction is non-existent
a citizen of India provided that subject to this Act a				in a foreign law firm. To bring uniformity this limitation
national of any other country may be admitted as an				will have to be removed allowing for more partners,
Advocate on the State Roll if the citizens of India				increasing of funding and manpower.
duly qualified are permitted to practice law in that				Moreover the FLF's have "single window services"
other country.				meaning services which not only include legal but also
Section 47 of the Act provides that where a country				accountancy, management, financial and other advice
specified by the Central Govt. in this behalf by a				to their clients. The multidisciplinary partnerships will
notification in the Official Gazette prevents the				cater to the needs of the clients in the
citizens of India from practicing the profession of law				above-mentioned different fields. Such partnerships
subjects them to unfair discrimination in that country,				may endanger the ethics of the legal profession as
no subject of any such country shall be entitled to				confidential information may be passed out within the
practice that profession of law in India.				partnership to the non-lawyer professionals. This
The basic principles set out by IBA on the question				would prejudicially affect not only the clients but also
of validity of FLC's are fairness, uniform and				the lawyers since the independence of the lawyers
non-discriminatory treatment, clarity and				would be compromised. Once the FLF's and FLC's are
transparency, professional responsibility, reality and				allowed entry into India the Bar Council of India will
flexibility. The guidelines laid down by the IBA are as				have to make rules and regulations also for such
follows:				multidisciplinary partnerships or single window services.
"Legal consultant means a person qualified to practice				The multidisciplinary partnerships may look attractive
law in a country (home country) and who desires to				but the crucial question is whether the quality of
be licensed to practice law as a legal consultant				services and accountability of systems can be
without being examined by a body or an authority to				maintained? The code of ethics needs review to
regulate the legal profession in a country (host				bring international legal practice under its purview.
country) other than a home country, such a person				The Foreign law firms may seek license for full and
has to apply to the host authority for a license by				regular legal practice like that of Indian lawyers or
following the procedure for obtaining a license subject				they may come for a limited practice of consultancy
to the reasonable conditions imposed by the host				for foreign partners on home country laws.
authority on the issue of licenses. This license requires				Accordingly the rules and regulations will have to be
renewal. A legal consultant has to submit an				framed to meet both these situations. The FLF's who
undertaking alongwith his application not to accept,				intend to come for regular legal practice may have to
hold, transfer, deal with a client found or assigned				be subjected to immigration and citizenship laws.
unless the legal consultant does so in a manner				Those who seek limited practice may enter into
authorized by the host authority to agree and abide				partnerships with the home country law firms without
by the code of ethics applicable to host jurisdiction				any scrutiny from the organized legal profession. It is
besides to abide by all the rules and regulations of				therefore necessary that a transparent, fair and
both the home and host jurisdiction.				accountable system be evolved to regulate and
It is open to the host authority to impose the				control the internationalization of legal practice.
requirement of reciprocity and to impose reasonable				With the globalization and liberalization policy not only
restrictions on the practice of FLC's in the host				foreign businessmen have come to India for
country, that the FLC's may not appear as an				investment but even the foreign goods and products
attorney or plead in any court or tribunal in the host				such as agricultural products and other goods have
country and the FLC's may not prepare any				entered the Indian market. The Indian goods and
documents or instruments whose preparation or				products have to face a tough competition with
performance of other services, is specifically				these foreign products which are cheaper though
reserved by the host authority for performance by				may not be better in quality. The result is that the
its local members.				Indian agriculturists and merchants are seriously
Many experts have given their views on entry of				prejudiced in their business. We also have the
FLF's and FLC's in India pursuant to GATS. They are				example of Enron which was in news where the
not opposed to the idea but it is suggested by them				Indian law was modified without probably realizing the
that some restrictions, adequate safeguards and				adverse effect it would have on the electrical
qualifications should be provided for besides				companies in the State. The agreements signed with
reciprocity.				Enron do not appear to be in the interest of the
The restrictions, if any, will have to be reasonable.				State or the Nation. However, such matters are
Obtaining Indian law degree and practicing Indian law				thought of only later and not when the actual action
for a period to be stipulated for entry may be the				is taken. With the present experience, it is felt that
only reasonable restrictions. Canadian model of				we should not be carried away with the idea of
University training, examination and articleship				raising our standards or of being on par with the
administered through a joint committee accreditation				other developed countries where the guideline of
may be a viable solution. To follow the principle of				reciprocity may be followed and the FLC's and FLF's
non-discrimination, it may not be possible to impose				would be allowed to enter the country. We have to
any onerous restriction limiting the clientele, the				be very alert and watchful and think well in advance
nature of legal work, the fees to be marked, the				to do away with any lacunas or loopholes in the rules
form of fees (Rupees or foreign currency) etc. So				and regulations that may be introduced to safeguard
far as reciprocity is concerned level playing field and				the interest of the lawyers in our country.
uniform code of conduct will have to be worked out.				One more point which may need consideration is
Many western nations allow their lawyers to				about the countries who would be interested in India.
advertise whereas in India the lawyers are not				Would these countries be the members of the World
allowed to do so. In California the FLF's were only				Trade Organization or would even the non-member
permitted to deal in laws not specific to California.				countries be allowed to enter India? If the entry is
Even in countries like Singapore, Hong-Kong and				restricted to only the members of the WTO and if
Japan the FLC's are restricted to servicing only				any non-member country desires to enter India,
foreign firms. The treatment meted out to FLC's and				would the entry be denied merely on the ground that
FLF's in other countries and the rules, regulations				it is not the member of the WTO or whether the
made to govern their practice in the foreign country				non-member would be allowed entry to show our
should be thoroughly scrutinized before allowing the				fairness and equality of treatment? Thus many
entry in India.				countries may be interested in coming to India due to
Even if reciprocity were allowed, no Indian firm would				the liberalization; globalization and privatization policy
go abroad to conduct legal business not because it				followed in India but the chances of the Indian firms
has no talent, competency or efficiency but				going out of India to enter any foreign country would
economically it would not be a viable proposition. The				be remote. The principle of reciprocity may be
Indian lawyers have no resources to set up an				introduced on paper but may not be effectively
establishment in a foreign country nor will the Indian				followed.
Government render any assistance to them to				It may be mentioned here that the "Lawyer's
promote their business in a foreign country. Even the				Collective" has filed a public interest litigation before
large population of non-resident Indians would not				the Mumbai High Court questioning the phrase
desire to patronize the Indian lawyers even though				"practice the profession of law" under section 29 of
they may be experts in their own field because the				the Advocates Act. The respondents in their petition
resident lawyers having full knowledge of the law of				include some of the FLF's which had set up their own
the country would be available to them at reasonable				liaison offices in India. It is needless to point out that
price because for the legal experts from India apart				all the above points may be discussed and examined
from the fees charged for the legal consultancy				in the above petition, the result of which is awaited.
service they may have to spend on their traveling				The Indian legal profession has, in recent years,
expense also. The legal service by calling Indian				undergone a significant change, emerging as highly
experts would be very expensive for the				competitive and ready to move along with the
non-resident Indians and they may not get full				ongoing wave of globalization. The interest of foreign
effective service since the Indian legal consultants				law firms to open shop in India therefore is hardly
may not be very conversant with the laws applicable				surprising, since India offers a full range of legal
there. It is only if any Indian party is concerned in a				services, of comparable quality, at literally a fraction
dispute and the question relates also to Indian law				of the price that would otherwise have to be paid.
that Indian legal Consultant would be invited to a				The rather conservative and if one may use the
foreign country and not otherwise. Such occasions will				word, "protectionist" stand of the Bar Council of India
be rare. The picture is different in case of foreign				on the matter has, however, prohibited foreign law
firms who do business across national borders, due				firms from operating in India. A number of the more
to globalization. They demand foreign lawyers since				established ones, perhaps unable to resist the
they like to rely on the services of professionals in				immense potential of the Indian legal markets, and in
their own country who are already familiar with the				anticipation of the "globalization of legal services"
firm's business. If the foreign firms carrying on				under the aegis of the WTO, are slowly (and quite
business in India require advice here on home country				discreetly) establishing their presence in India, this in a
law, that can be made available to them by the				considerable number of cases taking the form of
Indian law firms or the Indian legal consultants. They				their entering into associations with Indian firms, and
can also prepare the legal documentation or provide				in the process, literally operating in India indirectly,
the advisory service for corporate restructuring,				despite the prohibitions against the same. An issue
mergers, acquisitions, intellectual property rights or				that has therefore started to attract the attention
financial instruments required by the foreign firms.				of not simply Indian lawyers, but also law school
These aspects will have to be seriously considered				grads, is the likely consequences of the entry of
while considering the principle of reciprocity.				foreign firms in India. Shall this help an already growing
Reciprocity should therefore be clearly defined and				Indian legal market, or shall it only mean a job loss for
must be effective. It should be ensured that the				Indian law grads?
rules and/or regulations laid down should be strictly				The fact remains that India is in the process of
complied with otherwise as is the experience, the				globalizing its economy. In the process, the legal
rules remain on paper and what is practiced is totally				market opening up to competition from the
different. The authorities either do not pay any heed				international legal market is rather inevitable. Instead
to the violations or they overlook or ignore it as in				of deliberating about the advantages and
the case of the Foreign law firms in India in the Enron				disadvantages of the legal markets being opened up
deal, the permissions for such law firms to set up				to foreign firms, it is perhaps more sensible to accept
liaison offices came from the RBI which reports				that the entry of foreign firms in India is only a
directly to the Finance Ministry. When these law firms				matter of time. However, this should not mean that
violated the very conditions of being liaison offices				their operations should nor be regulated, since
the RBI overlooked or ignored it.				otherwise they may just push out the Indian firms.
Some are of the view that instead of being				For law school grads, their presence in India could well
perceived as a threat to lawyers, this should be seen				translate into an increasing range of job opportunities,
as a move to raising standards within the profession				apart from their presence in India significantly
but with reciprocal arrangements. The legal profession				influencing the way in which the Indian legal market
as it was practiced years before by the legal				evolves in the 21st century.

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Advent of Foreign Law Firms in India