Entry of Foreign law firms debate Silent Stakeholders

Entry of Foreign law firms debate Silent Stakeholders

Bar & Bench

The never-ending debate on the entry of foreign law firms is back in the news (we wonder if this issue was ever not in news!) with the recent ruling of Chennai High Court allowing foreign lawyers to ‘fly-in fly-out’ for temporary period to advise on foreign law.

While doing this piece we realised something very important – the views of Indian law firms, foreign law firms, SILF, Bar Council and the Law Ministry are known to all and have been well articulated across various forums, but the views of two significant stakeholders (clients and young lawyers and law students) have not found the right platform. We call them the ‘Silent Stakeholders’ in this debate!

The young lawyers and law students have a lot at stake in this debate on entry of foreign law firms. Experts have argued that the opening up of the legal market will create more opportunities for lawyers; increase exposure to international laws and provide them access to professional practices and better training. This will directly impacts the junior associates and the law students and yet they remain the silent spectators to this whole debate.

We, at Bar & Bench, want the views of these key stakeholders to be heard. The collective voice of young lawyers and law students may have an impact. With this in mind, we have decided to conduct a survey involving young lawyers and law students and give them the platform to get their views on the table. Watch this space for further details about the survey. What are we going to do with the survey? We hope to come out with an exhaustive report on the survey and share it with you. Halla Bol!

In this piece, we have traced the key developments and issues relating to the debate and also compiled the views of various stakeholders.

History: Lawyers Collective Case

It all started in 1994 when three foreign law firms got the Reserve Bank of India’s (RBI) approval for setting up liaison offices in India. NY based law firms, White & Case and Chadbourne & Parke and London-based firm Ashurst Morris Crisp were granted permission under the Foreign Exchange Regulation Act (FERA) to start liaison activities in India.

In 1995, Lawyers Collective filed a petition in the Bombay High Court against the opening of liaison offices in India by the foreign law firms. The petition sought a declaration from the Court that the foreign law firms cannot be permitted to carry on litigious and non-litigious activities in India unless they are enrolled as advocates under the Advocates Act, 1961 (the Act). It was argued that since the foreign firms were not enrolled as advocates under the Act, they could not be allowed to practice even in non-litigious matters, such as drafting documents, reviewing and providing comments on documents, conducting negotiations and advising clients on international standards, which were the functions being performed by the liaison offices.

The foreign law firms countered this argument by stating that the Act covered only litigation practice in court and not advisory work pertaining to foreign law in India and thus the Act did not regulate the non-litigious practice of law.

The High Court Bench, comprising of Chief Justice Swatanter Kumar and Justice J.P. Devadhar, declined to interpret the Act in this narrow fashion. The High Court held that the practice of the profession of law included litigious as well as non-litigious matters. The High Court was of the view that it was necessary to include non-litigious matters under the purview of the Act and the Bar Council Rules, since unregulated practice of law would not be conducive to upholding the high standards of the profession.

Best Friends Relations

A trend started a few years back wherein foreign law firms started entering into so called ‘Best Friends Relationships’ with Indian law firms. The foreign law firms basically enter into an agreement with an Indian law firm, either exclusive or non-exclusive, either to refer clients or to share their skills and expertise in different areas.

Some of the most prominent foreign law firms that have formally entered into such arrangements are leading UK firms – Allen & Overy, Linklaters, Ashurst and Clyde & Co. Clifford Chance too had an arrangement with AZB which ended last year. In addition, there are a number of other rumored informal arrangements between foreign firms and Indian law firms.

Another trend that has been noticed over the last few years is that of several leading UK and US based firms have set up India practice, mostly with Indian lawyers, and they are mainly based out of Singapore or Hong Kong or London for geographical convenience. These firms have also started to directly recruit law students from the National Law Schools.

Chennai Writ

As foreign lawyers are not permitted to set up offices in India, depending on the demands of their clients they regularly fly-in and fly-out to advise clients on foreign laws.

The mode of ‘fly-in and fly-out’ was challenged in a writ petition filed in the Chennai High Court. The writ petition was filed by the Association of Indian Lawyers against 31 foreign law firms and one of the largest LPOs in India. The writ petition not only dealt with the issue of entry of foreign law firms, but also on the modus operandi currently adopted by these firms to provide legal services in India. A.K. Balaji, one of the representatives of the Association had alleged violations under the Advocates Act, Immigration Act and had also raised a number of other issues.

The Madras High Court ruled that foreign law firms or foreign lawyers cannot practice the profession of law in India either on the litigation or non-litigation side, unless they fulfill the requirement of the Act and the Bar Council of India (BCI) Rules.

However, the Bench of Chief Justice M Y Eqbal and Justice T S Sivagnanam did give a breather to foreign lawyers. The Court clearly stated that there is no bar either in the Act or the BCI Rules for 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 on foreign law to their clients in India.

The Court also held that foreign lawyers cannot be debarred to come to India and conduct arbitration proceedings in respect of disputes arising out of a contract relating to international commercial arbitration.

This decision has given some relief to foreign law firms.

Views of various stakeholders

The debate whether the entry of foreign law firms should be allowed or not has been going on for a very long time. There are both positives and negatives to this. There are numerous arguments in favour of the opening up of the Indian market. Some of them are increased professionalism, better quality, more competition, more opportunities for young lawyers etc. However, there are some issues that need to be resolved before the foreign law firms are allowed entry. There needs to be uniformity and level playing field. The competition needs to be fair. There is restriction on Indian law firms to advertise, the regulation of LLPs among lawyers is still not clear. All these things need to be clarified before the foreign law firms are allowed.

In this entire debate everyone seems to have their own agenda. We at Bar & Bench have over the past year or so spoken to various stakeholders and asked them pointed questions on this issue. In the backdrop of the recent Madras High Court decision it is interesting to revisit some of the views.

SILF President

SILF President Lalit Bhasin seems to be totally opposed to the idea of allowing foreign law firms to enter India.In his interview with Bar & Bench, he said, “The issue has been debated for so long and almost every month there is a delegation particularly from the UK with high profile representation, including, delegates from the Law Society of England, Ministry of Justice and the office of the Lord Mayor of London. They all come with this one-point agenda that the legal services in India should be opened. I always ask, why should we open? There has to be a good reason, some rationale – what is the rationale? Who needs the legal services industry to be opened up?”

Bhasin also feels that the recession and negative growth in the UK has led the British government and law firms to lobby with the Indian government for liberalizing the legal market.  Bhasin is not averse to having mutually acceptable relationships with foreign law firms or foreign law organizations. He has the same approach as what was upheld by the Bombay High Court in the Lawyers Collective case.  According to Bhasin, the entire legal profession in India is completely opposed to the entry of foreign law firms.

Former Bar Council of India Chairman

Former BCI Chairman Gopal Subramanium thinks that it is an evolving situation. Subramanium said, “I think people in the legal profession now want to increase their abilities and skills. I think the future is too dynamic to take a rigid position. I would say, we have to act with complete care because some of these decisions could be irreversible”.

Former Law Minister

Former Law Minister Veerappa Moily said, “We need to make global lawyers and at the same time we need to be prepared for the foreign lawyers. It’s a transition we need to prepare ourselves for. We need to do a lot of work and we still haven’t taken a decision”. Moily clearly mentioned that any decision on this issue will only be taken after a due consultation with the Bar Council of India.

Indian law firms

Amarchand Mangaldas Managing Partner Shardul Shroff is of the view that the foreign law firms have to be allowed only in a regulated manner. There needs to be a level playing field and everyone should get the same benefits. Shroff said, “Whether the foreign law firms come to India or not, we are not going to stop our thinking, we are not going to stop growing. Regarding foreign law firms, let them come, but in a regulated manner. Today you do not have any rules of the game, you do not have a level playing field”.

“Nobody is actually preventing foreign lawyers from coming into India. I know hundreds of foreign lawyers who come in and go out daily. It’s a canard which is being spread because our regulators and legislators have not learnt and implemented what it takes to protect a profession, in a valid way and not restrictive way, I am not for restriction. I am saying, make the rules right along with a level playing field.  Let everybody get the same benefits”, said Shroff.

Luthra & Luthra Managing Partner Rajiv Luthra shares the same view as Shroff and feels that the entry of foreign firms is inevitable. Luthra said, “However, for us to be a truly global player, a fair number of changes are required to some of our laws to bring them in consonance with those found in many other parts of the world”.

Dua Associates Managing Partner Ranji Dua said, “My view on the entry of foreign law firms has been the same for the last ten – fifteen odd years, I encourage the opening up to international law firms but with a robust regulatory framework. If we can’t provide a regulatory framework then there will be absolute chaos and we will have a lot of disgruntled people. I think really the prerequisite is for our government to come up with a framework like Singapore did, like other countries have done”.

Anand Prasad of Trilegal is a strong believer in liberalization of the market. “We believe that the market shouldbe opened and expertise must come into India which should lead to significant improvements in the quality of legal services. There will be a diffusion of knowledge and expertise once the market opens up just like what happened to the Indian economy. Liberalization actually enhances the choice for the customers”

Prasad feels that there will be some firms that will die down because they are not able to match up the challenge but there will be other firms that will reform and become larger. So a client will have host of law firms that it can pick from which will improve competition and improve the level of service.

Rabindra Jhunjhunwala too has very liberal views on this debate. Jhunjhunwala said, “We are very open to this whole liberalization process. We do not see why they cannot practise here. I go to the extent of saying that they are already practising here, if you consider some of the existing relationships; some international law firms are already here! We are just beguiling ourselves by saying that international law firms are not working in India. They are working out of Singapore or Hong Kong. Some are even working out of India. We should just formulate the rules of the game and go ahead”.

Foreign Lawyers

Allen & Overy has a best-friends relationship with Trilegal since 2008. Senior Partner David Morley said, “India is a very important market, we have lots of highly valued clients here, clients who are looking to invest in India and Indian companies looking to invest in the rest of the world and so on. I think liberalisation is only going to happen when the key stake holders who are involved in the debate believe that it is for greater good”.

David actually brings out a very interesting observation that there are may be two voices that perhaps have not been allowed enough voice in the debate so far. David said, “The first voice is of the clients and we hear from clients that they want more choice and that is not surprising. Second one I think is may be younger lawyers as well. There is no doubt India has enormous reserve of incredibly talented people and a lot of those lawyers feel that they have to go abroad to gain experience and training. In the long term that would not be necessary and they can contribute to growing Indian economy. So those are the two voices that should be heard”.

White & Case Partner Nandan Nelivigi also shares a similar view as David and goes on to say that liberalization will have a positive impact on Indian legal profession as a whole. Nandan feels that it is a cause that that Indian lawyers and law students need to recognize and fight for in their own interest.  He is not sure that the stakes are as high for foreign lawyers as they are for Indian lawyers and law students.

Nandan said, “Most lawyers in India, including the staunchest opponents of liberalization of the Indian legal market, know and believe that the Indian market needs to be open to foreign lawyers.  The only question is one of timing”.

Richard Gubbins of Ashurst has given up trying to predict when the market will open up! Gubbin said, “Indian corporate clients want to have immediate access to their global law firms like any other multi-national company and it cannot be cost effective for them to have to fly their lawyers into India to obtain international legal advice. In my opinion the Indian law firms would benefit in the same way as other jurisdictions have benefitted if international law firms were allowed to set up offices in India”.

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