Draft Advocates Act Bill: Centre paves way for foreign law firms to enter India

Draft amendments to the Advocates Act published by the union ministry of law and justice on Thursday propose to give powers to the central government to make rules governing the entry of foreign law firms and foreign lawyers and allow the Bar Council of India (BCI) to regulate law firms.

Previously, the BCI would make rules and regulations for the entry of foreign law firms and lawyers. Also, there was no provision to regulate law firms. Consultations on the amendments are open till the end of February.

The Advocates Act has long governed the registration and regulation of legal practitioners in the country. It also creates the BCI and other state bar councils.

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“Both these potential amendments to the Advocates Act can, when looked at together, indicate that we are one more step closer to accepting foreign law firms into the country," said Alok Prasanna co-founder, Vidhi Centre for Legal Policy. “Based on my initial assessment, these amendments look like the Indian government is trying to pave the way for a regulatory ecosystem for foreign law firms. The central government may allow them to operate in India, and the Bar Council of India will make the regulations for all law firms."

Centre has overriding powers

The proposed amendments include an addition to section 49 of the Advocates Act, which enlists the powers of the BCI to make regulations. The addition says the BCI has powers "to recognize and regulate the law firms including such firms operating in more than one State".

The draft bill also has an addition to section 49A, which details the powers of the central government to make rules under this law governing the entry of foreign law firms or foreign lawyers in India.

Section 7 of the draft amendment bill also enlisted the registration and regulation of law firms as a function of the BCI.

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“An additional dimension arises with the entry of foreign law firms, where BCI’s role in their regulation could either ensure a level-playing field for domestic firms or, conversely, stifle competition through restrictive entry barriers," said Tushar Kumar, an advocate practicing in the Delhi High Court.

The draft bill clarified that under the new Advocates Act, the central government had the power to make rules, and the BCI had the power to make regulations. This assumes importance because of a crucial addition of section 49B, which provides powers to the central government to give directions. The provision said that in case any regulation made by BCI does not align with the central government's rules, then it will be void.

“The central government may play the role of the doorkeeper, and the BCI, the umpire... [It] is a constitutional body, while the BCI is a statutory one, and any law made by a statutory body cannot override the law made by a constitutional one. That is the difference between making different kinds of subordinate legislation," said Prasanna of Vidhi Centre for Legal Policy.

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Prasanna said regulatory bodies such as Securities and Exchange Board of India (Sebi), Telecom Regulatory of India (Trai) and BCI regulate the field in question, while the central government generally makes rules to manage the regulatory bodies. “The central government will decide how many people are in the organisation, and what their remuneration may be, and other things like that. On the other hand, regulators will make regulation allowing or restricting activities of the regulated entities," he said.

Govt nominees on BCI

The central government is also likely to have an enhanced role in the operation of the BCI. As per the draft amendments, three members of the BCI will now be nominated by the central government. Previously, there was no such law to include central government nominees before these proposed amendments.

“By assuming the power to frame rules governing foreign law firms and nominating members to the BCI, the government will exert considerable influence over the legal profession’s governing body, potentially compromising its ability to function as an independent regulator," said Kumar, who practices in the Delhi High Court.

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“While a structured and transparent policy framework for the entry of foreign law firms is necessary for India’s integration into the global legal market, placing such rule-making authority in the hands of the executive, rather than the legal fraternity itself, risks politicization and undue governmental control," said Kumar.

To be sure, law firms are already regulated as corporate entities, commonly as partnerships under the Partnerships Act, 1932.

Foreign investors in mind

Law firm partners explained that the additional regulatory oversight in the draft Advocates Act amendment may be because foreign lawyers are not recognised as “advocates" under the Advocates Act, and therefore beyond the purview of the BCI.

“This thought is strengthened by the draft (Advocates Amendment) Bill proposing to amend the definition of “legal practitioners" to include law both foreign and domestic law firms with the Central Government, rather than the Bar Council of India being given the power to frame rules governing the entry of foreign law firms and foreign lawyers in India," said Shaneen Parikh, partner (head-international arbitration), Cyril Amarchand Mangaldas, a tier-I law firm.

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“This is a positive move and ought to make for a more attractive legal market and India a more attractive foreign investment destination with investors having the comfort of legal advisors from their jurisdiction readily available to render advice," Parikh said.

The draft amendment also prohibits lawyers, either individually or a group, to strike or boycott from work, and create hindrance in the work of the courts. In case a legal practitioner does so, they will be referred to the BCI's disciplinary committee, the draft says.

No to strikes

But the draft bill also proposes that advocates may participate in a strike only when it does not impede the administration of justice such as strikes intended to bring attention to legitimate concerns about professional conduct, working conditions, or administrative matters. This may include symbolic or one-day token strikes as long as clients' rights are not violated and court proceedings are not disrupted, the proposed law said.

Advocates will also have to pay a fee to shift their registration from one state bar council to another. Under the draft, advocates who wish to transfer from their state bar council have to apply for such a transfer with the BCI, and only after payment of fees will their transfer be authorised.

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