Liberalising legal services

A divided industry does not augur well for India's efforts to emerge as regional hub for legal services

In January this year, an inter-ministerial group, chaired by the Union commerce secretary, had proposed a two-phased road map for the opening up of the country's legal services. This includes removing restrictions on domestic law firms over permitting them to issue publicity brochures, open websites, and facilitate easier access to bank finance.

This will be followed by allowing foreign lawyers to practise international arbitration and mediation services in the country on foreign and international law. Next on the line will be opening up of non-litigious services in Indian law for foreign firms.

Both the Bar Council of India (BCI), which regulates the legal fraternity, and the Society of Indian Law Firms (SIFT), represents the interests of large law firms, have, in-principle, agreed to the government's move. However, reservations remain within the industry over the issue of reciprocal access for Indian lawyers in other countries, and the impact that foreign law firms will have on domestic firms. The legal fraternity is strictly opposed to any foreign direct investment and third-party ownership of law firms in the country. Corporate law firms also see an increasing threat to their domestic business from multi-disciplinary practices offered by major accountancy and consultancy firms such as EY, PwC, Deloitte and KPMG.

To allay these fears, the Prime Minister recently called upon the legal fraternity to make India a global arbitration and legal services hub.

"We have suggested a phased sequential opening of the legal services sector over a period of five to seven years. Sudden opening will damage the profession irretrievably," says Lalit Bhasin, president, Society of Indian Law Firms.

Agrees Vandana Shroff, partner, Amarchand Mangaldas: "I am in favour of a phased opening up of legal services." Amarchand & Mangaldas & Suresh A Shroff & Co, India's biggest law firm, is currently going through a break-up. Over the issue of Indian law firms taking on competition from foreign firms, Shroff strikes a confident note. "We are well-prepared to take on any competition from foreign law firms," she says.

A Supreme Court advocate, who earlier held senior positions as a legal officer of the Government of India, concedes that over the years, the issue of making India a global hub for legal services, and the consequent opening up of the legal services, got intertwined with the business interests of a few large law firms.

"The fears are not only overstated but are, at times, self-serving. If you are good in Indian law - the market is big enough for every size of law firm to grow," says Krishnayan Sen, partner, Verus Advocates.

A CHEQUERED ROAD

1995

• India becomes a signatory to General Agreement on Trade in Services, mandating members to open up services trade
• Lawyers Collective files a petition in the Bombay High Court against the opening up of liaison offices in India by foreign law firms
• The Bombay HC held that the RBI licence did not provide permission to ‘practise law’, but only to establish a branch office to act as a communication channel

1999

• The Bombay HC said the RBI should not grant permission to foreign law firms to open offices in India

2010

• Writ petition filed in the Madras High Court against entry of foreign law firms
• Law Ministry reiterates Bar Council of India’s stand to not permit foreign law firms into India

2012

• The Madras HC rules against the practice of foreign law firms in India without enrolling with the BCI under the Advocates Acts.  However, it allows the foreign lawyers to ‘fly in and fly out’ on a temporary basis
• BCI appeals against the judgment of the Madras HC allowing ‘fly in and fly out’ of foreign lawyers
• The Supreme Court directs the RBI to refrain from granting permission to foreign law firms

2014

• The apex court justices state that foreign lawyers should be allowed to work on arbitrations in India to make domestic arbitration more attractive, and to unburden the courts
• In a turnaround of its earlier stand, Society of Indian Law Firms favours entry of foreign law firms in a phased manner

2015

• Meeting of the Inter-Ministerial Group on Services under the chairmanship of commerce secretary consider a road map for legal reforms in India
• The Prime Minister pitches for making India a hub for global arbitration, allays fears of dominance of foreign lawyers

There are many in the legal fraternity who feel that the fear of competition is making the country lose a big business opportunity to "export" and "import" legal services. "There is no reason why India cannot be a hub for exporting legal services, particularly for developing countries in Asia and Africa. Many African Commonwealth countries have based their laws on Indian statutes and Indian judicial authorities. This would require opening up the Indian legal profession to overseas lawyers," says Sarosh Zaiwalla, founder, Zaiwalla & Co Solicitors, a London-based law firm.

With English being the 'business' language, and India following the common law framework, the country is at a vantage position to evolve as a regional hub for legal services for transactional services as well as international arbitration services, says Ramesh K Vaidyananthan, managing partner, Advaya Legal

However, SIFT's Bhasin feels the government has to provide basic infrastructure and financial support to professional bodies to set up institutions that can support creation of an arbitration centre in India. "Ad hoc arbitration, which is currently in vogue, has to be discouraged," he says.

Sen points out that the present law does not differentiate between domestic and international business. "For any arbitral institution to flourish as a world class arbitration hub, it needs a robust legal system, which acts in aid of such arbitration," he adds.

Building credibility is a key to success. "Whether one likes it or not, there is a general perception that Indian arbitration is not entirely free from corrupt arbitrators," says Zaiwalla.

Bithika Anand, CEO, Legal League Consulting, a management specialist, fears that the divide in the industry has the potential to derail the liberalisation process. "It is the country which may eventually lose out."