New Delhi: Once upon a time, legal practitioners in England were paid through voluntary contributions of a few guineas dropped into a small pouch attached to the back of their gowns. Even today, advocates in India sport the pouch as part of their traditional robe. But that is where the compensation comparison ends.
As the Indian government mulls opening the legal services sector to foreign law firms, a booming Indian economy and a spurt in demand for lawyers, especially business lawyers, has seen a sustained increase in lawyers’ fees and salaries.
“Post-liberalization, companies are financially stronger, commercial deals are looking different since stakes are higher,” says Anand Prasad, founding partner of Trilegal, New Delhi. “Today, most corporate representatives turn up at the negotiating table with a lawyer.”
Not surprising, given the frenetic pace of mergers and acquisitions, private equity plac-ements, initial public offerings, big-ticket foreign direct investment deals and forging of new joint ventures—all of which require legal advice, especially in the context of India’s still complicated, and sometimes convoluted, multiple laws.
Most law firms that Mint talked to were quite reluctant to discuss their annual revenues. But a cross-section of lawyers across medium and large corporate legal advisory firms, defined by the number of partners and associates, generally said the hourly rates for a junior associate at a corporate law firm would average Rs3,000-6,000, while for a senior associate it could vary between Rs6,000 and Rs10,000. This is double of what they charged a decade ago. Over the same period, cost of advice from partners of law firms has risen similarly, from Rs3,000-8,000 per hour to Rs9,000-16,000, with significant exceptions for specialists and hot-shot names.
Meanwhile, the typical difference in fees that Indian lawyers used to charge for domestic clients and international clients is starting to disappear.
“The difference between rates charged to domestic and international clients is gradually narrowing,” says Som Mandal, partner at Fox Mandal Little, India’s largest law firm with 300 lawyers and 50 partners.
Sanjay Asher, senior equity partner at full-service legal firm Crawford Bayley in Mumbai, also believes that the legal sector is moving to harmonize rates in part because while “business needs that drive corporate law practice are changing, the work done for Indian clients and foreign clients is the same”.
International clients, meanwhile, say they still find professional fees charged in India relatively cheaper compared with the West. They add that they appreciate the multi-tasking abilities of many Indian lawyers compared with their peers in, say, the US, where the trend is more towards super specialization in limited areas of law. Often, in deals involving India, the value-add tends to come from the Indian side largely because of the plethora of regulatory issues in India.
Also helping the increase in rates, as well as the equalization of rates, is the increasingly complex nature of transactions that Indian lawyers, especially in the corporate arena, are working on. Meanwhile, several cross-border transactions are also leading to much higher interaction between Indian and foreign law firms, leading to a more level playing field in terms of compensation.
Interestingly, it is not just corporate law, but even conventional litigation practice, which absorbs more than 90% of the lawyers in the country, that is undergoing a transformation, partly because of growing activism of courts in a large range of business issues.
“Courts deliver significant decisions involving the day-to-day affairs of the country and stakes in litigation have also gone up considerably,” explains Raian Karanjawala, managing and founding partner of Karanjawala and Co., which predominantly handles litigation matters from causes celebres and pro-bono, or free, public interest litigations, to private corporate sector alongside arbitration matters.
While law firms have seen an increase in their fees, lawyers also say clients, too, have become much more demanding. “Clients are conscious of costs and want preliminary advice on their legal queries within 24 hours,” says Sangeeta Bharti, a partner at Jurisperitus, a law firm that specializes in sectors such as infrastructure, real estate and energy. “While dealing with foreign clients I am often sitting in my office in India and working across time zones all night long.”
There is also a growing demand for industry specialization. “I expect a lawyer to be able to draft a petition once I have given him broad guidelines. He must also familiarize himself with technical aspects of an issue,” says T.V. Ramachandran, director general of the Cellular Operators Association of India, and someone who has been in the thick of a raft of legal disputes that have dogged the opening up of the telecom sector.
Industry segments such as telecom, aviation, pharmaceuticals, energy and power, which have developed rapidly in recent years, have begun to seek out lawyers equipped with specialized skills or firms that can provide such advice.
Law firm Lakshmi Kumaran & Sridharan, which represented Ranbaxy Laboratories Ltd in the recent patent dispute involving Novartis AG, has set up an intellectual property department that now includes 40 engineers and scientists. “We also encourage engineers that we recruit from the IITs (Indian Institute of Technology) and other institutions to study law,” says partner Lakshmi Kumaran, who has an academic background in physics.
Still, “the numbers of lawyers that possess scientific knowledge are not enough to keep up with the demand,” says Raghu Cidambi, legal and strategy adviser at Dr Reddy’s Laboratories Ltd, expressing concern that badly argued cases can lead to bad law in new legal areas.
While a growing imbalance in the demand and supply for legal services is one reason why rates could be going up, Kumaran argues that his firm has not taken advantage of this. Any boost in his firm’s revenues, he insists, should not be attributed to an increase in fees but to an increase in number of legal matters taken up by “working faster”.
Salaries are also rising because firms need to retain and woo young lawyers.
“It is a natural corollary that if we pay our associates well, we will attract better talent and for this, we need to generate revenue,” says Trilegal’s Prasad. “We can’t cut costs on building better infrastructure either, as it could affect our brand name.” Trilegal, for instance, has an office gym.
Opening up the sector for foreign law firms could help reduce the gap in demand for services and current supply, but that process is expected to take its course. Still, “liberalization of the legal service sector in India is next on the cards due to mounting international pressure,” notes Bharti of Juri-speritus.
“The floodgates may soon open allowing foreign firms to practise in India and more new trends will set in.”