Can foreign law firms enter India now?11 min read . Updated: 03 Mar 2015, 01:23 AM IST
Special interests could indefinitely stall reform of legal services, despite government’s best intentions
For nearly two decades, Lalit Bhasin, president of the Society of Indian Law Firms (Silf), has been one of the most consistent, visible and hardline opponents of the entry of foreign law firms into India.
To the legal world, in India and abroad, it was therefore significant and puzzling, in roughly equal measure, when on 14 December Bhasin wrote an opinion piece in The Business Standard that Indian law firms were now “much better placed to face the entry of foreign law firms, although in a phased manner, subject to the approval of the regulatory body, the Bar Council of India (BCI)". He suggested a timeline for the foreigners’ entry over a period of five-seven years.
On 27 February, news agency PTI reported that the Narendra Modi government was serious about pushing the legal liberalization agenda and had started talks with BCI to that purpose.
For foreign law firms, which have been clamouring to enter India for decades, it might appear as though the stars have finally aligned and their prayers have been answered. But as they have learnt the hard way by now, in India few things ever come easy.
Liberalization of the Indian legal market is nearly as old as the liberalized economy, and it is closely linked with Silf, which, alongside the law ministry and BCI, has been a favourite lobbying target of foreign lawyers seeking entry.
Silf was set up in 2000 against the backdrop of the 1990s boom, which brought with it swelling pocketbooks, especially for the promoters of corporate law firms.
Many Silf members initially came together to fight against strictures from the Bar Council of Delhi (BCD), which had sent notices to Delhi firms with listings in an international legal directory. The council claimed this was in violation of the Advocates Act, 1961, lawyer advertising restrictions. In 2008, BCD relaxed its rules to allow advocates to have simple websites; advertising remains forbidden, though many firms bend those rules.
Silf is now an organization with a voluntary membership of more than 100 law firms, styling itself as the apex body of law firms in India on its website.
It’s a powerful group with office-bearers including senior partners from pretty much all Indian law firms. Amarchand and Mangaldas and Suresh A Shroff and Co. Delhi managing partner Shardul Shroff is associate president, there are four senior vice-presidents (Dua Associates founder Ranji Dua, Luthra and Luthra founder Rajiv Luthra, Rajinder Narain and Co. managing partner Ravi Nath, and AZB and Partners’ Mumbai managing partner Zia Mody), 11 vice-presidents, seven general and joint general secretaries, three assistant and associate secretaries, and two treasurers, as well as 20 members in its executive committee.
It also claims chapters in seven cities, but the real Silf action has always been in Delhi.
Initial and recurring ideas for Silf activities have included evolving standards of industry-wide training programmes and providing inputs for laws and regulations, akin to a lobby group like the Federation of Indian Chambers of Commerce and Industry. While Silf does organize a cricket tournament and sponsors and hosts conferences and other events, most other initiatives never really took off.
One member, who declined to be named because he was still a part of Silf, said that he had soon lost interest in the organization’s activities, many of which boiled down to having “a cup of tea with someone from a ministry" (though he admitted that Silf was “not a total waste of time" and has provided some value, in particular raising the profile of the profession abroad at conferences thanks in part to Bhasin’s tireless leadership).
“But to oppose foreign law firms was part of the mission from the start," noted the Silf member.
But even without Silf, the road to liberalisation would be bumpy. In February 2000, thousands of Indian lawyers, backed by bar associations and BCI, marched to Parliament House with placards and slogans. They were protesting the government’s planned amendments to the Civil Procedure Code and, in particular, plans to allow foreign entities to enter India by amending the Advocates Act, without having held proper consultations with the bar (the police tear-gassed and lathi charged the lawyers).
H.R. Bhardwaj, law minister from 2004, was generally perceived to have been converted into a liberalization proponent, with the gentle prodding of lawyers such as Som Mandal, managing partner of FoxMandal Little, as it was then called.
By 2007, there was genuine optimism, particularly in the UK, that liberalization was on the horizon after moderately promising talks between the Law Society of England and Wales—the statutory lawyers’ representative organ—and Silf (though an optimistic report in the Law Society Gazette noted presciently that “there have been countless false dawns over the last few years when it comes to opening up the Indian market").
But even with India’s legal services under pressure to open up under the World Trade Organization talks, Bhasin, who was then general secretary of the Bar Association of India, had remained negative about liberalization without a level-playing field. In particular, he said that Indian law firms were not allowed to advertise or exceed 20 partners, unlike their foreign counterparts. These days, larger Indian firms have got around the limit, such as by linking multiple 20-member partnerships to each other.
By 2009, after Bhardwaj was dropped from the Congress’s cabinet and replaced with M. Veerappa Moily, the liberalization process quickly slowed; BCI was not enthusiastic about it in meetings with Moily.
In 2009, the Bombay high court decided a writ petition against three foreign law firms for having illegal representative offices in India, which had been dragged to court 14 years earlier by Mumbai-based non-governmental organization the Lawyers Collective.
Any momentum that still existed went by 2010, when Chennai advocate A.K. Balaji filed a writ petition in the Madras high court against 31 foreign firms, claiming they were practising illegally in India. A ruling in 2012, for the most part, exonerated the foreign law firms and provided some legal clarity by allowing foreign lawyers to fly into India to advise their clients on deals.
However, BCI appealed to the Supreme Court where the case languishes, with the majority of foreign law firm respondents having been deleted from the case because BCI could not find a way to serve them with court papers.
Several high-profile delegations from the US, the UK and elsewhere have included contingents negotiating for liberalization. Former senior partner of international law firm Clifford Chance, Stuart Popham, vowed in 2010 when visiting India with the UK’s prime minister that the firm would have an office in India by 2012. Optimism remained in 2011 despite another UK delegation failing to achieve anything of note.
Overshadowed by the pending Balaji decision and an ineffective government, most efforts petered out, but three years later, in September 2014, UK’s law minister Shailesh Vara, a Gujarati by origin, began lobbying the Modi government, which has ambitious economic reform plans after having won a clear mandate in the general election last year.
On 12 November, the government held a national services conclave to improve and reform the country’s services sectors. It was there that the commerce ministry first unveiled a proposal “for a phased opening up of the sector in non-litigious services and international arbitration", according to a Hindu Business Line report citing an unnamed government official.
After the conclave, Bhasin on 17 November met with commerce ministry joint secretary Sudhanshu Pandey “on the subject of...allowing foreign law firms to enter India", according to a letter sent by Bhasin to Pandey on 12 December.
According to three lawyers with knowledge of the events who did not want to be identified, the government had made a strong case for the entry of foreign law firms to Bhasin and BCI chairman Manan Kumar Mishra.
One person with knowledge of the meeting said the opening up of the legal sector within two years was almost presented as a fait accompli. “They were told in no uncertain terms that this is something that will happen, like it or not, so get your act together, it will happen either with you or without you," the person said.
According to two people, the administration was gearing up to make an announcement on the issue during US President Barack Obama’s visit to India in January. However, Bhasin negotiated a delay in the process by promising to make a public announcement that Silf was no longer opposed to the entry of foreign law firms.
Bhasin declined to comment on the meeting. Pandey did not respond to an email seeking comment.
After the ministry meeting with Silf and BCI, J Sagar Associates founder Jyoti Sagar—who retired in 2013 but remains active in the firm, legal community and liberalization talks—was briefed by Silf to write a “note on phased sequential approach for entry of foreign legal consultants/law firms into India", which Bhasin said has been submitted to the commerce ministry.
Silf’s note proposed a three-phase (rather than two-phase) entry of foreign law firms into India.
Phase I would entail “reforming the environment for domestic firms", including permitting basic advertising and marketing, streamlining conversion of law firms to limited liability partnerships (Llps), and “ceasing of all ‘surrogate practice’ of Indian law in India (and outside of India) by foreign firms through various devices and structures".
This would be followed by phase II—foreign lawyers and foreign law firms may be permitted to have a presence in India subject to conditions, being “permitted to practice their ‘home country’ law only". Phase II would operate for “a minimum of seven years", after which there would be “an assessment of readiness of Indian law firms".
If, after the assessment, “it is considered appropriate", phase III would begin, which would allow foreign law firms to practice Indian non-litigation law, subject to strict controls on their numbers, as well as “reciprocity"—the “ability of Indian lawyers to practice in the foreign jurisdiction on similar terms and conditions".
Sagar declined to comment on the note when contacted.
On 14 December, Bhasin wrote his first opinion column disclosing this phased approach over five-seven years, which he repeated in an interview to The Business Standard on 22 February.
Kaviraj Singh, general secretary of the nearly four-year-old Indian National Bar Association (INBA) and vice-chairman of the American Bar Association’s India section, alleged that Bhasin was representing a few family law firms seeking to stop liberalization by adopting delaying tactics and by preventing an open debate on the topic.
“If you slow (liberalization) down and you say, ‘first let us achieve this target’, no one is going to open it. India will become an irrelevant place," Singh commented, adding that INBA had sent a representation that Prime Minister Modi should allow a foreign consulting regime after holding discussions with all stakeholders.
Despite its long history of influence in this debate, non-law firm lawyers may, yet again, end up proving to be a bigger factor in the government’s reform plans than Silf.
BCI chairman Mishra, first elected in 2012, had always been publicly opposed to the entry of foreign law firms, insisting on reciprocity to allow Indian lawyers to practice abroad. Indian lawyers are permitted to practice in a number of countries, usually subject to passing local admissions tests.
In November 2013, according to emails and meeting minutes seen by Mint, Mishra had met with a number of Silf members, including Bhasin, to “consider the matter with regards to issues of common interest for law firms and BCI".
They discussed BCI’s stand in the Balaji petition against foreign firms that was pending in the Supreme Court, in which BCI was one of the respondents, and they tabled talks around “recognition of law firms by BCI, practice of law by chartered accountants, websites, firm brochures, Llps, etc.".
The talks with Silf stopped in April 2014, when Mishra’s term as BCI chairman ran out and he joined the Bharatiya Janata Party. According to an email seen by Mint, Bhasin said that “nothing much came out of" a meeting with Biri Singh Sinsinwar, who took over the BCI chairmanship from Mishra.
When Mishra was re-elected as BCI chairman in November 2014, Silf intended to schedule a new meeting with Mishra on 26 December 2014, which was eventually cancelled.
Mishra, BCI and Silf are now in close discussions with the law ministry, confirmed Bhasin and Mishra.
“Government is waiting for the opinion of Indian lawyers," Mishra commented via email. “We are thinking in positive direction, but it all depends on the attitude of foreign countries: how they reciprocate? It can’t be one-sided. We can’t put our lawyers or law firms in loss."
“Since our government is depending on BCI in this regard, we are seriously working out," he said, adding that BCI was also holding discussions with Australia, would write to the Law Society of England and Wales, and would visit the US in April with a delegation, including either Indian law minister or government representatives.
The Balaji case pending in the Supreme Court would be solved, said Mishra, once BCI and government “arrive at some conclusion".
However, Delhi High Court Bar Association president Rajiv Khosla claimed that neither Silf nor the BCI chairman had any specific powers in this situation. “If the government wants to do something, first they must give it black and white to the Bar Council of India; BCI should send it to all bar councils of different states, and the state bar councils must have meetings with (local) bar associations," Khosla said.
Without consultations with bar associations on the exact scope of the regulations and amendments, and without appropriate governmental guarantees that foreign law firms would not be allowed to encroach on court and litigation practice, he promised that lawyers at the bar would not be happy.
“Then another demonstration will be there." Khosla was referring to the protests of 2000 when, he said, 40,000 lawyers, including Khosla himself, marched to Parliament and got then-law minister Ram Jethmalani to back down on the issue of allowing foreign law firms into India.
As other governments in history, it’s clear that this one is seriously interested in opening up the legal market. But the real question is whether it will be powerful, determined and sensitive enough to see the reform through, despite the thicket of vested interests that has successfully resisted all change to date.
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