BackEntry of foreign law firms far from a done deal
The NDA government still has to undertake a delicate balancing act if it is to convince all the stakeholders
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Five ministries are due to meet on 5 July with the Bar Council of India (BCI) and three lobby groups that have a stake in the matter of the entry of foreign law firms, Mint reported on 1 July.
The meeting has been called to discuss whether BCI’s long-anticipated draft rules to allow foreign lawyers to work in India are fit for the purpose.
The meeting will also seek to resolve fundamental disagreements about how the process will work. One person familiar with the discussions even predicted that the meeting would be more about the government and Silf (one of the lobbies, the Society of Indian Law Firms) addressing issues in the BCI draft.
All the lawyers Legally India spoke to for this story asked not to be named.
Word on the street is that the government was looking for things being close to done and dusted around September, but even if the government and Prime Minister Narendra Modi are still serious (having repeatedly gone on record to say that liberalization is a priority due to its perceived economic benefits), they’ll have a delicate balancing act ahead of them, and that deadline looks optimistic.
The stakeholders to convince remain the same.
Corporate lobby groups such as the Federation of Indian Chambers of Commerce and Industry (Ficci) or the Indian Corporate Counsel Association (Icca), both of which have been invited to the 5 July meeting, are unlikely to have any demands, and their position on the issue is the same as the government’s. Both bodies have in the past been content to advocate for the entry of foreign lawyers in India, hoping that this would increase competition and service levels, and reduce the dominance of a few large law firms.
Some of these large firms are opposed to the prospect of foreign competition. Their interests are represented by their only real trade association, Silf.
Silf has consistently and vociferously opposed the entry of foreign law firms.
However, as reported in Mint last year, Silf has changed its position under pressure from the government.
The final stakeholder in the process is BCI itself, which has produced the draft that will be discussed at the 5 July meeting.
Nominally, BCI is also supposed to represent the bar and its legions of litigators, but in reality the power at the bar rests with the bar associations, as reported in Mint last year. BCI’s draft rules have expressly carved out arguing in court from what foreign lawyers will be allowed to do.
“The bar is sitting in their own world and so long as they don’t get new foreign lawyers coming in and arguing against them, they won’t object," said a partner at a law firm. That may be the case, but some lawyers say that BCI’s draft rules may have enough “poison pills" that may attract the bar’s ire, such as allowing foreign law firms to arbitrate for foreign companies in India.
And, given the Bharatiya Janata Party-led government’s interest in allowing the entry of foreign law firms, it is likely that the Congress party, which has a strong presence in bar associations, and even the Aam Aadmi Party will oppose the move, if only to hinder their rival.
Put otherwise, the meeting is unlikely to be a straightforward affair.
The Bar Council of India Rules for Registration and Regulation of Foreign Lawyers in India, 2016, seem pretty sensible on first reading.
The preamble to the rules is the first time that BCI has come out in full-throated support of liberalization. It claims liberalization will benefit both Indian and foreign lawyers, and adds that the Indian legal professional’s “proficiency in law is comparable with international standards".
If “we sleep over the matter, the legal fraternity of India may be left behind", it said, promising that domestic lawyers would “not likely suffer any disadvantage in case law practice" with the entry of foreigners in a “well controlled and regulated manner on the principle of reciprocity".
Reciprocity has been the most ancient of keywords in the liberalization debate.
The Advocates Act (section 29) states that “only one class of persons [is] entitled to practice the profession of law, namely, advocates".
It also states that the only people who can become advocates in India are citizens of India, or foreign nationals from countries that allow “duly qualified" citizens of India to practise law (section 24).
Interestingly, BCI has nearly complete discretion to “prescribe conditions, if any", under which foreign lawyers may be admitted as Indian advocates (section 47), and enjoys wide rule-making powers under the Act.
Thus, even without any statutory amendment, BCI could unilaterally decide to open up the market for foreign lawyers from tomorrow, if it so chose.
But its draft rules in effect create a new class of advocates, namely that of “foreign lawyer".
One question is whether this would be outside BCI’s powers under the Advocates Act, and it forms the basis of a legal challenge if implemented.
BCI could perhaps effectively defend itself in court by claiming that it has not in fact created a new class of advocates of “foreign lawyer", but simply decided to admit a new type of lawyer as a normal advocate (as it is entitled to do) while restricting that new lawyer’s ability to practise in courts and tribunals (which it also has some power to do under the Act).
Another potential challenge could happen on constitutional grounds: the right to equal treatment before the law, for instance, could be invoked since BCI’s rules defining foreign lawyers include law firms, limited liability partnerships (LLPs), and companies or corporations allowed to practise law abroad.
By contrast, Indian companies are not allowed to practise law, and even LLPs are in a grey area.
A partner at a law firm said this could “create uncertainty". Any foreign company that follows BCI’s guidelines could find itself stuck in a legal challenge that lasts a decade, maybe even longer.
Furthermore, and this is both a legal and a practical commercial point, most foreign law firms have no restrictions on advertising or marketing, and in several countries law firms can seek outside investment from non-lawyers and even be listed on stock markets.
Indian law firms may claim that since they can’t really do any of those things, it discriminates against them.
And that is partly the argument of Silf.
Silf president Lalit Bhasin said he did not have any fundamental problems (any more) with opening up the profession, but said that BCI rules “jumbled up" the “phased entry" of foreign law firms that had been promised by the ministry, and risked creating a “very confusing picture".
“I don’t think any proper application of mind has been there. Let them come but it should be phased entry."
The phased entry model refers to the five-to-seven-year plan presented by Silf in late 2015 that would begin with legally allowing Indian law firms to advertise, have proper websites and brochures (although many already do), clarifying whether Indian law firms can incorporate as LLPs, and generally “levelling the playing field" of regulation.
Bhasin noted that nothing had been done by BCI on these issues.
Bhasin said that he would tell the government and stakeholders at the 5 July meeting that Silf would need time to respond to the draft proposal. He added that Silf would call a meeting in the “next week or so" to discuss the issue.
Partners at three law firms said they were preparing detailed submissions with suggestions for Silf.
There is some confusion about the authorship of BCI’s draft rules.
“They are fairly cleverly drafted, (in terms of) how they work around the Act and opening of the market," commented one law firm partner. “This is not BCI or GoI (government of India) drafting," said another.
Some suspect that the Law Society of England and Wales lent a helping hand (though others have rebutted that outright; the Law Society did not respond to an email seeking comment).
Others say that a foreign law firm, or an Indian one, may have helped BCI (though that seems similarly unlikely).
The ball is firmly in the government’s court, as without its push, neither Silf nor BCI would have come on board and been so proactive.
So, can the BCI simply notify its own draft rules? It might be the fastest way to effect the entry of foreign law firms but also brings with it the risk of legal challenge.
However, if the government were to try and do this without BCI, the possible options would be an ordinance or amending the Advocates Act in Parliament. Neither is easy.
The government’s thinking may be that it’s be better to do this slowly and more deliberately, but avoiding outright failure.
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BCI’s proposed rules in a nutshell
—Foreign lawyers and law firms can set up offices in India after registering with BCI and paying registration fees and security deposits of between $40,000 for individual lawyers and $90,000 for law firms.
—Foreign lawyers would be allowed to do all non-Indian legal transactional work and hire Indian lawyers or go into partnership with Indian lawyers.
—Foreign lawyers would not be allowed to practise law relating to courts, tribunals, boards or statutory authorities, but can argue for foreign clients in international arbitrations held in India.
—Foreign lawyers will have to submit a raft of documents to BCI before they can get registered, including certificates of practice from their home jurisdictions.
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Issues to sort out before letting foreign firms in
Since we’re dealing with rules by lawyers for lawyers, there is no shortage of criticism and suggestions of the nitty-gritty details of the rules.
“Everybody looked at opening up of the market as unidirectional," says one law firm partner, “but it (the BCI rules) acts as a bit of a barrier for Indian firms to expand outside." At issue: forcing Indian law firms to pay $40,000 to the BCI before hiring a foreign lawyer could make it financially very unattractive for Indian lawyers to hire foreign talent or expand internationally.
And should a minimum level of experience be specified for individual foreign lawyers to come here (as it is in other jurisdictions)?
And how should the BCI’s role in this be regulated? Should the BCI be earning such sizable amounts of money for vetting a couple of documents and stamping a few papers? And what will it do with that money? Or could that money be better spent by the law ministry?
Is there an appeals mechanism laid out? What if the BCI drags its feet on renewing foreign lawyers’ certificates after they expire? Should those just lapse or be automatically renewed? What will happen in edge cases of bizarrely structured law firms or with lawyers having qualifications in multiple jurisdictions? What kind of certificates from a home jurisdiction do you require of a foreign law firm with offices and lawyers from dozens of countries?
And how will numbers be controlled, if at all, so the market does not suddenly explode with foreign legal entrepreneurs?
And that’s aside from the real fine print that may need looking at, around legal definitions and the precise wording used.
None of that discussion has really happened yet but with a BCI draft now out, there is likely to be much more tangible debate on the subject.
Kian Ganz is publishing editor of Legally India.
Mint’s association with LegallyIndia.com will bring you regular insight and analysis of major developments in law and the legal world.
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