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Amy Hariani is the Director and Legal Counsel for the U.S.-India Business Council (USIBC), which is the largest bi-lateral trade organization between the U.S. and India representing about 350 companies that do business either in India or in the U.S. or both. Amy manages the Life Sciences and Legal and Professional Services portfolios at USIBC.
In this interview with Bar & Bench, Amy talks about investor sentiment – both from an Indian perspective and U.S. perspective, legal hurdles U.S. companies face while Investing in India, liberalization of Indian legal market and the Indian Bar growing in the US.
Bar & Bench: What is the investor sentiment – from an Indian perspective as well as from a U.S. perspective?
Amy Hariani: We are seeing an increase in the number of investments and transactions by big Indian corporates in the United States. In fact, companies like Reliance, Tata, Mittal etc. are taking advantage of the increasingly positive economic indicators in the U.S. and buying assets and investing in the U.S. I was very surprised recently when I was in my home state of Minnesota where I was driving by one of the Great Lakes, Lake Superior, and I saw a Mittal ship passing by. It was very odd because this is a very remote part of the U.S., but then I came to realize that Mittal had invested in steel mines in my home state. So, Indian companies are investing all over the country in various sectors. Another area that I think is providing opportunities for Indian companies in the U.S. is the recent discovery of our shale gas reserves. The United States is developing technology to extract LNG from below the ground and this has resulted in significant energy resources. I believe that Reliance now owns one third of one of the largest shale gas reserves in the United States. So from the Indian perspective, I would say that the investor sentiment could never be better. It is one of the best times I have ever seen.
The U.S. investor sentiment in India, I think, continues to remain optimistic in the long term although increasingly realistic of the investment challenges while there. We continue to see significant interest by U.S. investors in India, particularly because the fundamental market dynamics of 1.3 billion people and a growing middle class cannot be ignored. So, I think depending on the sector and the type of the investment transaction, the companies that are looking to make acquisitions are mindful of some of the challenges, whether it is the FDI challenge or some other rules and regulations that take some patience to work through. But despite some of those challenges, I think U.S. companies continue to remain optimistic and continue to want to invest in India in a very significant way. There are certain sectors that have not liberalised as much as the US investors would want them to be liberalised. I think there is a lot of potential in those sectors. For example, the insurance sector or defense; I think if India were to liberalize the investment caps in those sectors, significant FDI would surely follow. Also some companies are facing challenging issues like tax predictability and intellectual property challenges – but we are working with the companies and the Government of India to find solutions.
B&B: Do you assist Indian companies in investing abroad in the U.S. and U.S. companies investing in India?
Amy: We do advise Indian companies investing in the US. We often work with some of the US states; so we are regularly in touch with various states and Governors’ staff and other trade development officers in different states. It really happens two ways; the first is US states are very competitive against each other and are really keen to attract investment into their state from India. So Governors are going to visit India at a pretty remarkable rate right now to meet and tell Indian companies about the opportunities in their states whether it is New Jersey, Ohio, and Washington, Arizona, South Carolina, etc. So we are assisting these Governors’ to make their maiden trip to India and to develop an agenda that is worthwhile while there. Similarly, when the Indian companies reach out to us, we are aware of which states are interested in India and which sectors they are hoping to attract. We try to pair the companies with the states as much as we can.
We also advise U.S. companies investing in India, by again pointing them to certain Indian states to look at for investment. Much like the U.S., there are certain states in India that are more attractive to certain sectors. There are also certain states in India that would really like to attract FDI, and are easier to work with investors, thereby ensuring that their investment is up and running smoothly. There are also considerations U.S. companies must take into account when first entering India such as labor and employment laws, transportation and infrastructure issues, local partners, etc. We help our member companies on all these fronts.
B&B: What are the legal hurdles that U.S. companies face while investing in India?
Amy: I think there are several legal challenges U.S. companies must overcome while investing in India. The first is regulatory approval. The issue for some of the companies is whether or not there is a particular sectoral cap, because this is in most cases, a foreign concept to American companies (becuase we do not really have very many sectoral caps in our economy). So, when they invest in India they have to be mindful of the different sectoral caps and how they can structure their investment given the FDI limitations that may be there. Even if there are no limitations on the cap, they may have to file with the Competition Commission of India and/or the FIPB depending on the nature of their investment. Simply being aware of these rules and putting their best foot forward for their investment in India is paramount.
The second challenge for the U.S. companies is in knowing the Indian market. Many new American investors often scoff at this, but really knowing and understanding India takes significant time and resources. How your investment will fare in Kerala or Tamil Nadu or Gujarat will really depend on a number of factors. This is often over-looked because in the U.S. we have the same language medium throughout the country and very similar laws and rules in most of our states. But in India, the south is very diverse from the north, and different states can have a lot more restrictions than others. So it is a matter of making the companies aware when they are looking to invest in India that there are significant differences depending on what and where they are investing in. I think the companies need to be clear about certain things including whether they want to invest in certain parts of India or all over India or do they want to target certain states initially. I think that is an important challenge.
Another important challenge is for the companies to understand some of major differences in the legal regime. For example, labour laws are very different in India in comparison to those in the U.S. Additionally, getting permits to run the business may take a lot more time and resources.
Finally, one significant issue I often see is the expectation of how things are done in India. Americans who come to India often have a timeline of what they want to get done. But what they do not realize is that sometimes things take a bit longer in India and they need to communicate to the management these expectations at the outset. I think companies will continue to be very happy with the outcome of their investment so long as they are mindful that things may not get done as fast as in the U.S. and there may be more challenges, but nevertheless the investment provides a good opportunity.
B&B: How do you think the Indian legal profession has evolved over the years?
Amy: If you look at how much some of the law firms have grown from post liberalization (1991) till now, it is quite remarkable; and the firms have not only grown in numbers, but also in terms of sophistication and understanding of international transactions and issues. Now, Indian law firms are working more in the international space and travelling abroad and meeting their clients all over the world. So I think that type of growth is really remarkable and makes me confident of their ability to compete globally. I think they have the capability and skills to do it and I really hope that they will take the next step of growing internationally.
B&B: What are your views on liberalization and entry of foreign law firms into India?
Amy: I think the Indian legal market is maturing at a remarkable rate. After the economic liberalization in 1991, you really have seen the legal market strive to catch up. I think the fact that the legal market develops behind the business market is a truism everywhere. Laws are developed and the lawyers have to work very quickly to try and understand what the laws mean and try and find an interpretation that makes sense to business. But [India] has seen remarkable growth.
That being said, I do think that the Indian market is ready and mature enough to start taking the small steps to liberalize. I don’t think it would necessarily make sense to liberalize in the way that the other markets have done which is just to open the doors automatically and let everyone come in. I think there really needs to be some thought process behind how liberalization would occur. For example, in what legal sectors or perhaps in what cities it should happen or perhaps other types of contours around it that would allow liberalization to make sense. Liberalization should not be done for the benefit of foreign law firms, but for the benefit of Indians and Indian lawyers. So how Indian lawyers actually go about liberalizing should be up to them.
We all know that competition makes services better and more efficient. That is the underlying principle in competition laws, isn’t it? But I think another important thing when considering liberalizing legal services is that in order for everyone to compete fairly the landscape should be harmonized. Indian lawyers should be under no different rules and regulations to advertise and solicit business than their international partners. So, in my opinion, there is no reason why they shouldn’t be allowed to have a website or biographies which highlight their very significant work and the victories that they have had. I think it is only fair that when they liberalize the market, the business community has the same access to information and types of qualifications of all of the lawyers.
The other thing that I would really encourage is to have Indian law firms set up shops in other jurisdictions including the United States. I know some of them have already; but I do know and think that some of these firms are already globally competitive and globally known. So, I would really hope to see in my lifetime Indian laws firms with offices in Singapore, London, and New York.
B&B: UK based law firms are putting more pressure and are more aggressive than the US law firms for entering the Indian market. Thoughts?
Amy: I think each country and legal system has its own understanding of how and when the market should open. I think probably what has been the most successful part is that our American law firms have developed really fantastic relationships with Indian law firms not just on professional level but also at personal level. So, because of that, the conversation between the American law firms and Indian law firms has turned from “When are you going to open the market?” to “Well we work together very nicely right now and are happy to continue doing this until we find a mutually agreeable solution”; I don’t think any of the American lawyers would want to cause trouble to their Indian law firm friends. As I said, competition is always healthy but at the same time they are mindful of the overall relationship and I think the American law firms are keen to see the market open but on acceptable terms to their Indian friends.
But, as I said earlier, I believe that liberalisation needs to be something that makes sense to the Indian lawyers and to the Indian firms.
B&B: Some law firms did manage to establish a best friend relationship and most of them didn’t work. What is your take on this non-exclusive agreement between law firms?
Amy: I think if they work for the law firms on both sides, I see no reason why the law firms shouldn’t enter into them. But my understanding is that for the few that have had them in the past, it hasn’t really worked out for various reasons. The least of which is, like in any competitive scenario, you would want to have the best available option to you; so if you set up a best friend relationship, you may be limiting who you will turn to in the Indian market place. I think it is up to each individual law firm on how they want to continue to do business in India and up to Indian law firms on how they want to partner with American law firms.
B&B: Your thoughts on legal education in the US and the legal job market right now?
Amy: I think we have seen a sea change in legal education in the US as a result of our economic down turn in 2008-09 where a number of US law firms engaged in lay-offs and to this day are not hiring many new lawyers as they previously used to. I think the legal market has shrunk in that regard both in terms of the number of law students going to law schools and the number of law firms hiring. I think new lawyers now have different expectations when they graduate than say, when I graduated. It is a lot more difficult to get into a law firm now. Also, the company side/client side is a lot more demanding from these law firms; so there are a lot more restrictions placed on the number of young lawyers who can work on a case or the billing structure of a law firm on cases. The legal community is trying to navigate new waters and figure out how they can still provide high quality legal service at a smaller cost.
B&B: Do you see the Indian Bar growing in the US?
Amy: Yes, in a couple of different ways. The first is an increase in the number of Indian LL.M. students. So these are lawyers who have already received their law degree in India and have come to the U.S. to get their LL.M. The advantage of doing that is after they have received the LL.M. they can actually sit for the Bar exam here in the U.S., although they can only sit in certain U.S. States. I think that is a fantastic development that really allows and promotes the exchange of professionals between both the countries. The other advantage of this is that the American law firms are employing these lawyers to help them with some of the India issues. Not just to advise on Indian issues but to advise companies that want to go into the Indian market as to whom they should partner with in India, which law firm should they be working with etc.
Another area we are seeing an increase is in the number of JD degrees, which is a 3-year law degree in the U.S. Students come straight from India and get a law degree here and I think that is a very interesting development. We also see a number of Indian lawyers, who do their schooling entirely in India and practice in the U.S. as foreign legal consultants. Over 30 U.S. states permit this practice.
B&B: Any other interesting developments you see or would like to see between the two countries?
Amy: What I would like to see a little bit more is exchange of professionals. I also hope to see an increase in the number of law professors that are exchanged. One of the things that I am seeing right now is that a number of American universities are signing MoUs and other agreements with Indian law schools though these agreements vary between law schools.
I left my big-law job because I believe in the U.S.-India relationship more than anything and I want to see our two democracies grow closer. We have so much to offer each other, I just hope we all see the potential and take steps to strengthen our partnership and friendship.