ENTRY OF FOREIGN LAW FIRMS IN INDIA

The Indian legal profession has undergone a significant change in recent years. The interest of
foreign law firms to open shop in India is therefore, hardly surprising. Exposure to foreign law
firms can only be advantageous and we as a nation stand to gain immensely from the resulting
arrangement.

Introduction: While the distinction between a barrister and a solicitor, as is seen in UK and other
countries is not seen India, an invisible barrier does seem to exist in the legal realm today; top-drawer
corporate and commercial work is done by city-based law firms that employ the services of advocates
who predominantly specialize in transactional work. The other part of the spectrum is the litigation
lawyers who do practice in courts, from the lowest level to the highest level. Since these FLFs are
targeting the transaction side of business, it is the law firms that are opposing them the most. The
legal profession in India is often nepotistic and it is these family run law firms that are making the
loudest protest against the entry of FLFs.

The legal history of the debate: Under section 7(1) of the Advocates Act 1961, foreign law degrees
are recognized by the Bar Council of India on a reciprocal basis, and legal academics can teach and
engage in legal research without any bar. However, foreign nationals are prohibited from “practicing
law” in India as per the same Act. (It will be argued that this is an unnecessarily harsh measure, and
having standardized bar examinations, as is done in the USA or UK, is a better solution.)

In 1994, two New York-based and one London-based law firm had sought permission from the
Reserve Bank of India (RBI) to begin liaison office activities in India to advise and assist non-Indian
clients in connection with their activities in India and outside India. The three law firms, White &
Case (NY), Chadbourne & Parke (NY) and Ashurst Morris Crisp (UK) were granted permission
under the Foreign Exchange Regulation Act (FERA) to start liaison activities. However, in 1995,
Lawyers’ Collective, a public interest trust set up by lawyers to provide legal aid, moved Bombay HC
challenging the right of foreign law firms to “practice law” in India. The High Court had held that the
practices engaged by these firms amounted to “practicing the law” and hence were not to be
permitted. The FLFs had challenged this judgment to the Supreme Court, which remanded the case
back to the High Court to hear and decide. It is at this stage that proceedings currently lie.

The Entry of FLFs: Despite the resistance to their entry, foreign law firms have tie-ups and associate
offices in India with whom they continue to work. So, even if they have not set up offices in India,
they have liaison offices or India departments that effectively do the work: the London-based Clifford
Chance and Baker & McKenzie, both have 180 lawyers each for India-related practice! These firms
have also started recruiting from Indian law firms: top London firms like Clifford Chance, Linklaters
have been recruiting from the National Law School of India University campus for some years now.

There has been a change in the government’s policy as well. The Government has shown interest in
making Limited Liability Partnerships (LLPs) a reality in India and has taken efforts to have an
enactment in place to govern it. This would enable such law firms (as well as accounting firms) to
come into operation. The Bar Council is also looking into the requests for relaxing the constraints on
advertising the legal profession.

Liberalization and the global Indian legal market: With estimates of annual growth ranging
between 7 and 9 per cent, India’s economy is one of the fasting-growing in the world. Even more
importantly, the type of economic activity that FLFs are likely to profit from- such as large cross
border deals- is growing even faster. A greater number of foreign clients are now involved in Indian
transactions, too, which is why these firms want to establish a stronghold in India, to better serve their
clients. It is ironic that the once colonial India remains one of the only countries not conquered by the
big London/New York firms.

There are numerous arguments to the opening up of the Indian market: increased professionalism may
be the primary one, but reciprocity and international law obligations is definitely a strong one as well.
India being a signatory to the General Agreement on Trade in Services (GATS) which is an organ of
the World Trade Organization (WTO) is under an obligation to open up the service sector to Member
Nations and the legal profession is also taken to be one of the services which is included in GATS.
The entry of large MNCs into India has created a niche for foreign-Indian legal collaboration which
can only take place if the Advocates Act is amended.

As long as the basic principles set out by International Bar Association, that is, fairness, uniform and
non-discriminatory treatment, clarity and transparency, professional responsibility, reality and
flexibility are met, the entry of the FLFs should not pose any problems.

So far as reciprocity is concerned level playing field and uniform code of conduct will have to be
worked out. For example, there is a cap of 20 on the number of members of any law firm. However,
with the introduction of LLPs this problem might be solved. Further, many western nations allow
their lawyers to advertise whereas in India the lawyers are not allowed to do so. Local restrictions
often exist: for example in California the FLF's were only permitted to deal in laws not specific to
California. Even in countries like Singapore, Hong-Kong and Japan the FLC's are restricted to
servicing only foreign firms. These practices, rules and regulations of other jurisdictions need to be
studied thoroughly before being incorporated into the Indian system. Reciprocity should be clearly
defined and must be effective. Also, the “single window services" concept of the FLFs, that is,
services which not only include legal but also accountancy, management, financial and other advice to
their clients may be problematic in terms of information being passed on to the wrong people. The
code of ethics would need review to bring international legal practice under its purview.

Conclusion: The Indian legal profession has, in recent years, undergone a significant change,
emerging as highly competitive and ready to move along with the ongoing wave of globalization. The
interest of foreign law firms to open shop in India therefore is hardly surprising, since India offers a
full range of legal services, of comparable quality, at literally a fraction of the price that would
otherwise have to be paid. The rather conservative and so to speak "protectionist" stand of the Bar
Council of India on the matter has, however, prohibited foreign law firms from operating in India. A
number of the more established ones, perhaps unable to resist the immense potential of the Indian
legal markets, and in anticipation of the "globalization of legal services" under the aegis of the WTO,
are slowly (and quite discreetly) establishing their presence in India, this in a considerable number of
cases taking the form of their entering into associations with Indian firms, and in the process, literally
operating in India indirectly, despite the prohibitions against the same.

The fact remains that India is in the process of globalizing its economy. In the process, the legal
market opening up to competition from the international legal market is rather inevitable. Instead of
deliberating about the advantages and disadvantages of the legal markets being opened up to foreign
firms, it is perhaps more sensible to accept that the entry of foreign firms in India is only a matter of
time. This should be seen as an opportunity: for the law firms, of competition, and for the graduates,
as a wider range of employment options.
2nd ARTICLE

Introduction

A specter is haunting the Indian legal fraternity-the specter of liberalisation. As we have entered the
year 2008, drastic changes have been forced to be brought about in the legal fraternity by opening up
the market for the entry of foreign law firms and lawyers into India. There is an air of apprehension
crowding the legal community from the time in 1994 when the General Agreement on Trade in
Services (GATS) included the suggestion of opening up transnational markets in legal services.

It is often asserted that India has the potential to become one of the world's great legal centres in the
21st century, alongside London and New York. It has innate advantages in its common law traditions
and English language capability. However, until very recently India had not recognized the role that
advisory legal services have to play in attracting foreign investment and developing a broader-based
services economy.

India being a signatory to the General Agreement on Trade in Services (GATS) which is an organ of
the World Trade Organization (WTO) is under an obligation to open up the service sector to member
nations.

'Services' would include any service in any sector except services supplied in the exercise of
governmental authorities as defined in GATS. "A service supplied in the exercise of governmental
authorities" is also defined to mean any service that is supplied neither on a commercial basis nor in
competition with one or more service suppliers.

Legal profession is also taken to be one of the services which is included in GATS. With the
liberalization and globalization policy followed in India, multinationals and foreign corporations are
increasingly entering India. Foreign financial institutions and business concerns are also entering
India in a fairly large number. Their business transactions in India are obviously governed by the
Indian law and the foreign law firms (FLF's) and foreign legal consultants (FLC's) being not fully
conversant with the Indian legislation require the assistance of lawyers enrolled and practicing in
India. This has led to the idea of entry of foreign legal consultants and liberalization of legal practices
in India in keeping with the guidelines evolved by the International Bar Association (IBA) and the
GATS. If this idea is to be put into practice, the Advocates Act, 1961 which governs legal practice in
India needs to be amended.

Under Article I.2 of the GATS, trade in services has been defined as supply of service by a service
supplier of one member through the commercial presence in the territory of any other member.1 It is a
general belief among global economists that GATS is inclusive in nature and thus will create an
integrated global market in services. This however, is not the only side of the coin and even though
GATS goes a long way in including developing nations in the global market, the primary fear or
apprehension this gives rise to is that such inclusion would not be on equal terms.2

There are however certain inherent checks in the system, which if complied with can to a great extent
allay the fears of an apprehensive legal community.3

It is important to see the situation in context. The Bar Association and the professional fraternity in
general have expressed their apprehensions very loud and clear. The thought that clouds the minds of
the lawyers are a set of manifold apprehensions. Some of these are as follows :
• Monopolization, creation and abuse of dominant positions by large foreign law firms with
tremendous infrastructure and international clout.

• Foreign lawyers providing services in India especially in super specializations like Intellectual
Property Rights, International Commercial Arbitration, Mass Torts, etc.

• Loss of wealth of the legal services sector to the foreign nations (least important).

• Possible changes and breakdown in the structure of professional ethics mainly due to the conflicting
practices in vogue in the foreign countries.

This essay does not discuss on reasons behind such fears. However, it must be remembered that
GATS in itself provides us with a few solutions. The Law Commission of India in 2000 had come up
with some valuable suggestions aiming at the protection of Indian legal services sector.4 However,
there is an inherent flaw in such system as that totally defeats the aims of liberalization, and does not
allow exchange of ideas. Moreover, it will soon become prey to legal manipulations, and the proverb
of cases being fought outside court will find an ironic application.

Undoubtedly Australia has made some of the most valuable suggestions in negotiations on GATS.
Their negotiating proposal proposed limited licensing at a regulatory approach that permits foreign
lawyers and law firms to practice their home country land, third country law (where qualified) and
international law in a host country without having to satisfy the more burdensome requirements in
relation to giving a right to practice host country law.5

The Australian communication further proposed sub categorisation of the definition of 'legal services'.
According to them it is more appropriate to define and include areas of law and types of service into
the definition clause itself, rather than defining the service provider as foreign lawyer, advocate,
foreign legal consultant or any other term. However, it is submitted that such categorisations are
impractical and cannot succeed in the long run. Making such pigeon holes in legal services sector will
endanger the flexibility endeavoured to be achieved by GATS.

What Foreign Lawyers Want?

First, we need to establish what the foreign law firms would like from the Indian profession. There are
a number of key areas that UK lawyers' state they would like to practice if permitted to enter India.
These are :

• Foreign firms do not wish to access those parts of the Indian market traditionally served by local
Indian lawyers. UK firms have no interest in this area, but wish to focus on advising inward and
outward investors in the international business community. The law society agrees that court
appearances should be restricted to nationally qualified lawyers.

• That English solicitors be permitted to offer English law advisory services (that is not advocacy/
court work) in India without having to become members of the Indian Bar.

• That these advisory services cover home title, third country and international law.

• That English solicitors be permitted to enter into partnerships with and employ Indian lawyers in
India.

• That English solicitors be permitted to establish branch offices in India to offer advisory services in
English law.
The law society accepts that the conduct of foreign lawyers in India should be regulated by the Bar
Council of India and that foreign lawyers should not be permitted to appear as advocates in Indian
courts without first re-qualifying as Indian lawyers. UK lawyers would also have the additional
regulation and monitoring of the Law Society of England & Wales.

Ethical Issues:

There is a valid fear that conflicting ethical practices prevalent in foreign legal systems will greatly
disturb the balance in our law. One such example will be the charging of contingency fees. However,
it is submitted that since licenses for practicing are always made subject to ethics, it is practically
impossible for foreign lawyers and law firms to breach the ethical code as they run the risk of being
barred. One can also think of relaxing certain practices in some fields.6 The risk of ethical breach is
less at the top and more at the bottom of the professional pyramid. One can hardly expect the foreign
law firms to be interested anything below the top of such a structure.7 Moreover the foreign legal
firms (FLF's) have 'single window services' meaning services which not only offer legal but also
accountancy, management, financial and other advice to their clients. The multidisciplinary
partnerships will cater to the needs of the clients in the above-mentioned different fields. Such
partnerships may endanger the ethics of the legal profession as confidential information may be
passed out within the partnership to the non-lawyer professionals. This would prejudicially affect not
only the clients but also the lawyers since the independence of the lawyers would be compromised.
Once the foreign legal firms (FLF's) and foreign legal consultants (FLC's) are allowed entry into
India, the Bar Council of India will have to make rules and regulations also for such multidisciplinary
partnerships or single window services. The multidisciplinary partnerships may look attractive but the
crucial question is whether the quality of services and accountability of systems can be maintained?
The code of ethics needs review to bring international legal practice under its purview.

The foreign law firms may seek license for full and regular legal practice like that of Indian lawyers
or they may come for a limited practice of consultancy for foreign partners on home country laws.
Accordingly, the rules and regulations will have to be framed to meet both these situations. The FLF's
who intend to come for regular legal practice may have to be subjected to immigration and citizenship
laws. Those who seek limited practice may enter into partnerships with the home country law firms
without any scrutiny from the organized legal profession. It is therefore necessary that a transparent,
fair and accountable system be evolved to regulate and control the internationalization of legal
practice.

The Indian legal profession has, in recent years, undergone a significant change, emerging as highly
competitive and ready to move along with the ongoing wave of globalization. The interest of foreign
law firms to open shop in India therefore is hardly surprising, since India offers a full range of legal
services, of comparable quality, at literally a fraction of the price that would otherwise have to be
paid. The rather conservative and if one may use the word, 'protectionist' stand of the Bar Council of
India on the matter has, however, prohibited foreign law firms from operating in India. A number of
the more established ones, perhaps unable to resist the immense potential of the Indian legal markets,
and in anticipation of the 'globalization of legal services' under the aegis of the WTO, are slowly (and
quite discreetly) establishing their presence in India, this in a considerable number of cases taking the
form of their entering into associations with Indian firms, and in the process, literally operating in
India indirectly, despite the prohibitions against the same. An issue that has therefore started to attract
the attention of not simply Indian lawyers, but also law school graduates, is the likely consequences of
the entry of foreign firms in India. Shall this help an already growing Indian legal market, or shall it
only mean a job loss for Indian law graduates?
The fact remains that India is in the process of globalizing its economy. In the process, the legal
market opening up to competition from the international legal market is rather inevitable. Instead of
deliberating about the advantages and disadvantages of the legal markets being opened up to foreign
firms, it is perhaps more sensible to accept that the entry of foreign firms in India is only a matter of
time. However, this should not mean that their operations should not be regulated, since otherwise
they may just push out the Indian firms. For law school graduates, their presence in India could well
translate into an increasing range of job opportunities, apart from their presence in India significantly
influencing the way in which the Indian legal market evolves in the 21st century.

Trust the Market :

If we go by conventional wisdom and modern economics, the above-discussed regulations are a passé.
The market may be trusted to decide its own players and the fittest will survive. This will happen
mostly with regard to the host country law. 8 It has to be understood even for lawyers from common
law system, it will be difficult if not impairing to fight cases under statutory law in India. This
inherent impairment in competence will itself create an advantage for the practicing lawyers of the
host country (India) to survive and compete in their host country.

The price advantage:

The principle that drives outsourcing in India is the low cost service supplied by Indian service
providers. This advantage which fuelled our software boom remains even in the legal services and a
slashing of fees by European, Australian, or American lawyers cannot pose a threat to the cost
advantage that we have over these firms. Moreover, the opportunity cost of coming and practicing in
India might be too high in the long run. This factor will, as is obvious, be the most natural regulator of
foreign lawyers practicing in India.9

Firms will hire our lawyers:

There are few options before the foreign law firms coming to India and our law firms too. Most
Indian law firms will either go in for collaborations or might eventually merge with Indian arms of
foreign law firms. This is not to say that there will be no Indian firms surviving independently. Basic
economics requires that for foreign law firms to provide competitive services both qualitatively and
financially they need to hire Indian lawyers as employees in India and as counsels to appear for them
in Indian courts.

Foreign law firms debarred from practicing in India

A long-pending and contentious litigation , petitioning against allowing foreign law-

firms to set up liaison office in India has been finally concluded at the Bombay High
Court (“High Court”) write Kabeer Shrivastava and Rajesh Simhan.
Introduction
The High Court has ruled that permissions granted by the Reserve Bank of India (“RBI”) to
some foreign law firms in early nineties to set up liaison office in India, is not valid in law.
High Court has also held that practice of law in India, both non-litigious and litigious,
requires prior enrolment under the Indian Advocates Act, 1961 (“Advocates Act”). In this
context, the High Court has observed that a person can be said to be practising in non-
litigious manner “when he represents to be an expert in the field of law and renders legal
assistance to another person by drafting documents, advising clients, giving opinions,
etc.” This judgment of the High Court could have far reaching implications not only in
respect of foreign lawyers practising law in India but also in respect of other professionals
such as Company Secretaries or Chartered Accounts who are not enrolled to ‘practise’ law as
Advocates and may render advise on various aspects of corporate and taxation law.
Facts of the case
In the early nineties, it appears that some US and UK based law firms (“Foreign Law
Firms”) applied to the Foreign Investment Promotion Board for permission to operate in
India, which permission was denied. Foreign Law Firms (namely White & Case, Chadbourne
& Parke and Ashurt Morris Crisp) then sought permission from RBI under S. 29 of Foreign
Exchanges Regulation Act, 1971 (“FERA”), since repealed, to set up a liaison office in India
to conduct the activities of, amongst other, “coordination, communication between its head
office, clients, various governments; establish business contacts, explore foreign investment
opportunities in India and other administrative functions”. The RBI granted permission under
FERA, with certain restrictions, such as, the liaison office shall not enter into contracts on its
own name, its expenses shall be met by its head office etc. In 1995, Lawyers’ Collective
(“Petitioners”), a public trust, filed a writ petition in the High Court against the Foreign Law
Firms and RBI. Some other interested parties joined in the proceedings, either in support or
against. The issues petitioned before the High Court were:

• The RBI could not grant Foreign Law Firms permission to set up liaison office in
India under FERA; and

• Foreign Law Firms could carry out liaising activities in India only upon due
enrolment as ‘Advocate’ under provisions of Advocates

Act. Petitioners argued that RBI has no power under S. 29 of FERA to allow any foreign law
firm to practice law in India, since practice of law is not in the nature of trade, commerce or
industrial activity (for which, RBI is empowered to allow setting up of liaison office). By
citing a plethora of judgments, from Indian Supreme Court as well as American and
Australian courts , Petitioners contended that the practice of law includes practice in both
litigious as well as non-litigious manner. Supreme Court of India has held that “The right to
practice, no doubt, is the genus of which the right to appear and conduct cases in court
may be a specie”.

RBI argued in defense that it acted within the scope of its authority under S. 29 of FERA and
it was not concerned with the provisions of the Advocates Act. Foreign Law Firms argued
that the constitutional powers of the Parliament vested under relevant entries of VII
Schedule , which only allows Parliament to legislate to regulate practice of law in Supreme
Courts and High Courts. Therefore, as such, the scope of the Advocates Act does not
transmute into practice of law in non-litigious manner which is otherwise covered under
provisions of another entry of the Constitution. Government of India (a defendant in this
matter) stated that practice of foreign or international law involving drafting legal documents
or giving opinions does not require enrolment with the Bar Council.

Judgment
The High Court held that:
Since Foreign Law Firms’ parent provide legal advice to clients all over the world, their
liaison office in India, even though

functioning as coordination and communication channels, would also be conducting activities

in relation to providing legal advice. In other words, the activity of liaison office are
“inextricably linked” to the head office of Foreign Law Firms. RBI’s authority under S. 29 of
FERA is limited to granting permission to foreign entities to set up a branch or liaison office
in India for carrying any activity of trading, commercial or industrial nature. Based on
judicial precedents , the High Court held that since the practice of law is a profession and not
a business, trade or commerce, as covered under the scope of S. 29 of FERA. Therefore, the
RBI has no authority to grant permission to foreign law firms to establish liaison office in
India.

The objects of the Advocates Act is inclusive and is meant to regulate persons practicing law
in any part of India as well as persons practicing the profession of law in any court, including
Supreme Court. If it were to be held that practice of law did not include non-litigious
practice, the purpose of Advocates Act would fail since any professional misconduct of an
advocate while conducting non-litigious practice would not be punishable. High Court also
directed the Government of India to act expeditiously in relation to the issue of foreign law
firms practicing the profession of law in India, as this issue has been pending for over 15
years.

Analysis
This judgment establishes with sufficient substance that under the Advocates Act, practice of
law in India, includes litigious as well as non-litigious practice. The Advocates Act does not
differentiate practice of foreign law or Indian law, when mandating that no person shall
practice law in India without enrolment under the Advocates Act. Jurisprudence in India and
abroad is clear in this respect and activities in relation to providing non-litigious advice
cannot be left unregulated on the grounds that the Advocates Act has limited application only
to litigious practice. The constitutional provisions of Entries 77 and 78, though specifically
limited to legislation for practice in High Court and Supreme

Court, can very well be said to include the practice of law generally in India. The extension
of Parliament’s constitutional powers to regulate practice of law in non-litigious manner can
squarely fall within the concept of ‘pith and substance’ widely recognized under
constitutional jurisprudence of India. The Advocates Act provides for enrolment criteria for
persons to register as Advocates with Bar Councils. Non-Indian nationals could enroll as
‘Advocate’ under Advocates Act if their country of nationality allows duly qualified Indian
Advocates to practice law on a reciprocal basis and if they fulfill certain other eligibility
criteria such as educational qualification, minimum age etc. This eligibility criteria for
enrollment as advocate or attorney or solicitor, is applicable in other jurisdictions as well.
Sharing our firm’s own experience, we have opened offices to practice Indian law in two
foreign locations — Palo Alto (Silicon Valley) and Singapore. California state allows setting
up of foreign law firms to practice foreign law in California, only after due enrolment with
the State Bar of California. Similar provisions exist in Singapore where a foreign lawyer is
required to enroll with the Attorney General of Singapore before starting the practice of
foreign law in Singapore. Instead of just complying with those countries foreign exchange
laws, we specifically requested and obtained enrolment with the State Bar of California and
Attorney General of Singapore respectively. The High Court ruling seems to imply that such
practice must also be carried out in India. While the judgment brings in some clarity on the
subject, a number of questions are still left unanswered. Take for example, the situation of a
foreign lawyer giving advice on foreign law, while in India for a temporary period. In that
event, could a foreign lawyer be said to be ‘practicing’ law in India? So the question that
remains unanswered is that where does one draw a distinct and unambiguous line to establish
a professional practice to be ‘practice’ of law?

Prima facie, 'practice' would involve an element of continuity of certain activity. Some of the
benchmarks to establish 'practice of law' in India may therefore include:

1. Length, continuity and frequency of stay of a foreign lawyer in India;

2. Whether any fixed workspace is available at the disposal of a foreign lawyer or a law firm
in India;

3. The kind of activity and nature of work performed in India.

Therefore, in our view, sporadic or a short visit of a foreign lawyer should not tantamount to
practice of law in India. It would now be for the Central Government/ Bar Council to
legislate and frame appropriate rules in consultation with all the stake holders, inrespect to
entry of foreign law firms in India. Until such time, India would be closed to practice of any
law, without due enrolment under qualifications prescribed under the Advocates Act.