A divided house queers the pitch

The Bar Council of India's proposal to open up legal services has brought to the fore divisions within the profession

An India market survey by a consultancy firm for an international client in 2014 threw up some interesting numbers. Of the top 100 foreign law firms that have undertaken India-related work, 69 have a dedicated India desk, mostly out of Singapore or London. Thirty of these were America-based, and 19 from Britain.

Since then, action in the India market has intensified. The government has over the past two years set the ball rolling to liberalise legal services and allow foreign lawyers and law firms to practise international law in India. In anticipation of the changes, large and mid-sized law firms, under the aegis of the Society of Indian Law Firms, that had so far been resisting the move, changed tack. They pitched for a phased and sequential approach for entry of foreign firms, spread over five to seven years.
 

However, the recently released draft rules for entry of foreign lawyers and law firms by the sector regulator, Bar Council of India, were akin to setting the cat among the pigeons. There is no mention in the draft rules of removing the restriction on Indian law firms and lawyers when it comes to publicising or advertising their services. It is silent over the issue of a phased entry for foreign law firms or removal of ambiguities around ownership structures.

Instead, it seeks to allow foreign lawyers and law firms to register with the Bar Council for a prescribed fee, open offices in the country, hire Indian lawyers or enter into partnerships with Indian law firms, among others.

"The Bar Council has directly jumped to stage-3 of our proposal. Internal liberalisation was a pre-condition before opening of the sector," said Lalit Bhasin, president, Society of Indian Law Firms. The association is currently preparing its response to the Bar Council's proposals, expected to be discussed among various stakeholders in August.

With the timelines for entry of foreign players getting blurred, what is irking many large domestic entities is the impact on their revenue, largely coming from cross-border commercial deals. Till now, foreign law firms and large domestic players enjoyed a cosy and symbiotic relationship, charging a premium for their services, with each referring businesses to each other. With foreign firms now getting a foot in the India door, the economics could go for a toss. Even as getting business becomes more competitive, the costs - namely remuneration for top talent - are likely to go northwards. "The war for talent is here to stay, along with the churn in the market," said Bithika Anand, chief executive at Legal League Consulting.

CAUGHT IN PROCEDURAL HURDLES

KEY DRAFT BAR COUNCIL RULES FOR FOREIGN LAWYERS/ LAW FIRMS

• Allowed to practise international arbitration and dispense international law in India on the principle of reciprocity (but cannot appear in the courts)
• The foreign law firm could be a limited liability partnership, company or a corporation
• Register with the Bar Council with a fee of $25,000 for individual lawyers, $50,000 for firms, private limited partnerships, company, limited liability partnership
• Allowed to open offices in India, engage or hire Indian lawyers, enter into partnership with Indian law firms
• Come under the ambit of the rules and regulation of Bar Council of India

WHAT THE BIG BOYS WANT

• Internal liberalisation of the legal profession  as a pre-condition to opening up of the legal services
• A phased entry for foreign law firms/ lawyers spread over five to seven years
• Remove restriction on Indian law firm/lawyers to publicise/advertise
• Remove ambiguities around ownership structure. Indian law firms are not allowed to incorporate under the company law, or operate as limited liability partnership

GREY AREAS THAT NEED CLARITY

• Does the draft rules envisage creating two different playing fields – one for domestic law firms, and the other for foreign players?
• How does the Bar Council monitor whether foreign firms are dispensing Indian law to their clients?
• Can Indian lawyers hired by foreign law firms practise Indian law?
• How does partnerships between foreign and Indian law firms work under different ownership structures?

Many are questioning the need for creating a dual playing field, one for domestic players and another for foreign ones. "We are in favour of creating a level playing field for domestic players with the entry of foreign law firms," noted Ashok Sharma, president, Indian Corporate Counsel Association. Many foreign lawyers feel the high fee structure for registration of foreign lawyers and law companies, and the cumbersome process for registration, raise the bar for entry. According to Erik Wulff, partner, DLA Piper LLP, a US-based legal entity, the fees appear disproportionate to the cost of the administrative process of evaluating applications. Some like advocate Anand Prasad feel the high fee structures might also work against Indian law firm's efforts to go international. "In fact, the cleverly drafted rules provide foreign firms limited room for their operations," he adds.

One of the issues relates to recognition of reciprocity arrangements by the Bar Council of India. As Wulff points out there is little clarity on how BCI will look at the terms of reciprocity when a multi-jurisdictional law firm opens office in India. "BCI will need to look at these situations realistically and practically," he adds. Also, there is no clarity on whether Indian lawyers hired by foreign law firms can advise on Indian law.

As the turf battle between big Indian law firms and their international brethren intensifies, the landscape for corporate legal services is headed for a churn for some time to come.