Back‘Foreign law firms are likely to create jobs than take away jobs’
‘Foreign law firms are likely to create jobs than take away jobs’
PremiumLegal angle: Stuart Popham, senior partner at Clifford Chance Llp., worldwide
New Delhi: Stuart Popham is the senior partner at Clifford Chance Llp., worldwide, one of the top law firms in the world. Earlier this month, Popham was part of a high-level delegation to China and India led by United Kingdom’s Prime Minister Gordon Brown. Their itinerary included meetings with senior government officials and key players from the business community, to help pave the way for further cooperation among the three countries. Popham spoke to Mint over telephone on the deliberations during the visit and on the subject of the opening up of legal services in India to foreign competition. Edited excerpts:
We did meet the officials of the law ministry. All I can say is that it was a very useful and informative meeting. We were able to exchange information and answer questions. I’m sure you are aware there is a court case in the Bombay high court (related to liberalization of the legal services sector). In some respects, the discussions at the meeting depends on the outcome of the case. The British Law Society filed an affidavit in that case in Bombay. We were able to give a copy of that to the minister.
What makes the Indian legal services market attractive to foreign law firms?
I think there are four reasons. The first is a lot of our existing international clients like to use the same firm in each country because their transactions (not only corporate matters) spread across many borders or their regulations apply around the world. A lot of our clients are saying to us, “Please come to India and help us in India".
Secondly, India is a rapidly developing economy. It’s already developed but it is expanding rapidly. In such an economy, there is a lot of demand for lawyers and a lot of work to be done by lawyers. We see it as a huge business opportunity.
Thirdly, we are getting a lot of applications from Indian qualified lawyers to come and work with us in Europe, America and Asia and then return to Asia like their cousins in IT, medicine and other such occupations. They are saying, can we open offices for you in India.
Finally, with the expansion of the economy, many Indian businesses are now looking to transact business across the world. They are asking us to come to them in India. It’s more expensive for them to ask us to act for them in London because they have to fly to London and pay the London costs.
It would be much easier for those businesses to have lawyers who have experience working in Germany, Japan and America or are qualified to give advice on those countries.
There have been talks in the legal fraternity that foreign firms have been entering into loose agreements with Indian firms to forge associations in anticipation of the opening up of the legal services sector. The word in the legal circles in India is that Clifford Chance and AZB and Partners have forged a tie-up. Is this true?
(Laughs) I would call it loose talk, without substance. We have spoken to many Indian firms and exchanged work with many firms over the years. We have heard that understandings have been reached by others, but I don’t know how much truth there is in all these references.
Are foreign firms interested in practicing litigation in India or stay restricted to corporate law practice?
I think it is highly unlikely that foreign firms would wish to practise in court. I have not heard of any firm ever wanting to do so. It is so unlikely that it is not worth considering. For the 970,000 Indian lawyers who practise litigation, the opportunity for a foreign firm to come is good for them. We won’t compete against them, but we might want to employ them. They won’t even notice we are in India unless they see an advertisement for a job. Some other firms might notice. It is a very big market here in India and it will expand very quickly. I think foreign law firms are likely to create jobs rather than take away jobs. Forty years ago, Clifford Chance opened in Paris with three English lawyers and one French lawyer. Now there are 12 English lawyers and around 180 French lawyers. So, it would make no sense for us to employ only English lawyers. We would want to create jobs for Indian lawyers.
Could you approximately estimate in percentages how much litigation and how much corporate advisory work is carried on by the top firms in the UK?
No figures are published, but if you took the four largest of the magic circle’ you might guess that around 20% is litigation, and then the balance is sub-divided between corporate, securities, banking work together with tax and real estate.
What sort of relationship has existed between Indian and foreign firms so far?
For many years, Indian firms have referred clients to British firms and vice-versa. Sometimes, the partner of the Indian firm may leave and move to another firm taking the work with him. It’s quite personal. Sometimes, businessmen going into India work with an Indian firm since they are already there and they don’t need us to introduce them.
Some members of the legal fraternity in India argue that when foreign firms enter the legal services sector, there should be reciprocity. What scope do you think there is for Indian firms abroad?
There is already complete freedom for an Indian firm to open in the UK to practice Indian law. It is also very easy for Indian lawyers to transfer their qualifications to become an English solicitor, not a barrister. If they have practiced in India for two years, then they have to appear for a two-hour exam on account and ethics and then they are English lawyers. I recently received an invitation from the law firm Fox Mandal Little inviting me to a party to celebrate the opening of their London office. So, reciprocity is already there for everybody to see.
From your experience in other jurisdictions, what is the general strategy a foreign firm employs when it enters the legal services market of another country?
Each firm will have to make up its own mind. In Germany, for instance, when the market opened up there were a number of mergers. But, in America there haven’t been any. Clifford Chance is one of the only firm to have merged with an American firm (which we did eight years ago) to access the American market. But lots of other (UK) firms have office in New York and Washington, DC, but haven’t merged with American firms. I think if two or three large Indian firms were to merge with international firms that might be a message for lots of firms to do so. But if the two or three at the top don’t, then maybe nobody will. There are some very entrepreneurial Indian lawyers and they will want to make use of the opportunity to work as a regional centre. India, at the moment, is missing many opportunities to influence the region and use its legal tradition to win much business. But because the law market in India is only domestic they miss out that opportunity. When the market liberalises, it would be as much for Indian lawyers to look outwards and work in the region, as it would be for international firms to look in. It’s a two-way street.
Pay scales in Indian law firms have been recently increased. Do you think this could be in anticipation of liberalization of the legal services sector?
In an open market, one maybe able to command a higher salary because of competition. But what that tends to mean is that more people would then qualify as lawyers. When there is more demand for lawyers, then there is supply and the salaries go up; when work turns down a bit, the salaries go down. This is similar to the increase in salaries in India in the IT sector. It’s just a market force.
Could the increase in pay scales by top Indian firms be understood as a move made by them to stop Indian lawyers and law graduates from going abroad?
A lot of Indian lawyers are saying they want to get international experience because that makes them different and maybe, more valuable. So that’s why they are leaving India to get some experience elsewhere. Many lawyers do this in other countries; this is a part of the internationalizing.
If you were to compare law firms in India and China, what are the differences in terms of professionalism, legal expertise and work ethics?
(Laughs) Many of the Indian firms are much longer established. I cannot compare. But perhaps, Chinese firms have benefited from having a more open market, from gaining the experience of international transactions, and the fact that they are often working with or on opposite sides from international firms in commercial transactions and have been able to gain wider experience.
Clifford Chance LLP is a part of the magic circle of law firms in the UK. Could you explain the concept of the “magic circle" firms in the UK?
No one quite knows where the term magic circle derived when used with law firms. It is commonly used to describe the largest four of the London based firms, Allen and Overy, Clifford Chance, Freshfields and Linklaters together with Slaughter and May. It is a form of "premier league" of law firms and refers to quality, size /geographical reach and profitability.
Once the legal services market opens up, could such a trend develop among law firms in India?
There is no reason why a similar grouping with some form of generic title would not develop in India. In New York, you may come across a reference to "white shoe firms".
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