1|P ag e

2015

Opening Doors for

Foreign Law Firm

Abhinav Trehan
11llb003
1/1/2015

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Opening Doors for Foreign Law Firm

Introduction
In the Globalization world where 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 York1
With India emerging as a top destination for multinational companies and corporate disputes
on the rise2. While there has been divided opinion on the issue of opening up, many
developments over the years have brought up the need to liberalise the sector some of them
are Increasing trans- national deals, specialized advisory, reciprocity interests 3
In the early nineties, it appears that some US and UK based 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(FERA), since repealed, to set up a liaison office in India to conduct the activities of,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 , 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.
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.
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.
1

http://www.legalserviceindia.com/article/l158-Foreign-Law-Firms-In-India.html
http://timesofindia.indiatimes.com/india/Allow-us-to-work-in-India-Foreign-law-firms-toSC/articleshow/46830584.cms
3
An IIMB MANAGEMENT REVIEW Initiative - http://tejas.iimb.ac.in/articles/23.php
2

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RBIs 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.

Qualification for practising law in India

The Advocates Act, 1961 specifies that only advocates as defined under the Act are entitled
to practice the profession of law in India.
An advocate is defined as a person who enters into the rolls of a State Bar Council under the
provisions of the Act
The Advocates Act 1961 does not deal with or refers to the practice of foreign law. It neither
regulates nor prohibits the practice of foreign law in India. Then, can we ban something, not
covered under the Act.
Under Section 7(1) of the Act, the Bar Council of India recognizes foreign law degrees 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 Act.
Requirement of qualifying All India Bar exam introduced in the year 2010
(i) An advocate enrolled under section 24 of the Advocates Act, 1961 shall not be entitled to
practice under Chapter IV of the Advocates Act, 1961, unless such advocate successfully
passes the All India Bar Examination conducted by the Bar Council of India;
(i) Bar Examination shall be mandatory for all law students graduating from academic year
2009-2010 onwards and enrolled as advocates under Section 24 of the Advocates Act, 1961

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Principal of Reciprocity
The Act also lays certain provisions on reciprocity:
Subject to the provisions of the Act, a national of any other country may be enrolled as an
advocate with the State Bar Council, if duly qualified Indian citizens are permitted to practice
law in that other country.
In case any country restricts Indian citizens from practicing the profession of law or the
Indian citizens are prone to unfair discrimination in that country, then no person or national
of that country shall be entitled to practice law in India.
WTO Prospective
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.4
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. 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 terms5

http://www.manupatrafast.com/articles/PopOpenArticle.aspx?ID=b079546b-f512-43fa-964d3f6970127a26&txtsearch=Subject:%20Civil
5
Bibek Debroy, Beyond The Uruguay Round: The Indian Perspective on GATT, Response Books A division of
Sage Publications India Pvt. Ltd., 1996.

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Indian government is unwilling to lose regulatory control over its legal services. There is
resistance from within the legal fraternity including large law firms on opening up the sector ,
GATS could limit the scope of national policy as WTO has the powers to impose trade
sanctions in case of non -compliance.
Cross border supply - Services rendered from territory of one country to that of another
without movement of the service provider, e.g. legal plans sent by internet or wire or satellite,
electronically provided legal advice, etc.
Consumption abroad Citizens of one country travel abroad to visit the supplier in order to
consume a service (e.g. a foreigner comes to India to consume the services of a Indian lawyer
or a law firm). 6
Movement of a natural person the temporary stay of natural persons travelling as individual
professionals or as employees/partners of a foreign established law firm to do business.7
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 and
these advisory services cover home title, third country and international law. The 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.
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. 8 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
6

http://lexport.in/Articles/ArticlesNews21.pdf
http://lexport.in/Articles/ArticlesNews21.pdf
8
US allows charging of contingency fees by patent attorneys, while Australia has come up with a new law by
which some particular lawyers and firms take contingency fees in insurance cases.
7

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of such a structure. 9 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 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.
Commercial Restriction
FDI in legal services is not permitted ,International law firms are not allowed to establish
offices in India and Indian advocates are not permitted to enter into profit sharing
arrangements with the persons other than Indian advocates
Advocates Act 1961 does not permit foreign law firms to operate in India ,Foreign Law firms
are prohibited from giving any legal advice that could constitute practicing of Indian law
under the Advocates Act 1961
Foreign Law firms are barred from practicing domestic law due to barriers such as
qualification requirements
Pros and cons of Indian Legal Profession:
The Indian legal profession will have the following advantages:

Increase in competency, professionalism and expertise among the Indian lawyers/law

firms
Improvement of the quality of the legal services
Increase in the employment avenues for the Indian lawyers
Impressive pay package and better work conditions/culture
Increase in the internship opportunities for the students
Many corporate lawyers already welcome the idea of international law firms being
allowed.

A working paper by Dr. Madhava Menon presented at Bar Councilors' seminar on Trans-National Legal
Practice and GATS: Issues and Challenges, 26th October, 2002.

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Indian lawyers and law firms are already making their presence felt in international
forums like WTO and foreign arbitrations

Cons

Domestic restrictions have stunted development of legal profession in India

Ability to compete effectively against foreign firms has been hindered due to the
current restrictions
Only a few firms in India having the expertise to handle commercial work for
multinationals
Indian legal education still needs to adapt to a global governance architecture
Lawyers will have to acquire interdisciplinary legal learning and knowledge in the
areas of comparative law, intellectual property, corporate governance, human rights,
international trade and alternative dispute resolution

Current Legal Position

Interim Order of the Supreme Court of India of 4th July 2012 in Bar Council of India v. A.K.
Balaji 10

Reserve Bank of India should not allow foreign law firms to open liaison offices in
India
Practice of law comprises of consultation, legal drafting, litigious and non litigious
matters
To practice non litigious matters, foreign law firms to be bound by the provisions of
the Advocates Act, 1961

The Bar Council of India, the statutory body regulating the legal profession in India, has
decided not to permit foreign lawyers into India subject to: a more detailed and rational
scrutiny in the light of opinions, and points of view of different stakeholders Several
issues related to the presence of foreign lawyers and law firms in India require clarity and
hopefully the Supreme Court s final ruling will ponder on them.

10

[S.L.P. (CIVIL) NOS. 17150Z17154 OF 2012]

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Bibliography

http://www.legallyindia.com/Law-firms/will-the-entry-of-foreign-law-firms-benefityoung-lawyers-rational-realities-expectations-and-opportunities

A working paper by Dr. Madhava Menon presented at Bar Councilors' seminar on TransNational Legal Practice and GATS: Issues and Challenges, 26th October, 2002.

http://lexport.in/Articles/ArticlesNews21.pdf

http://www.legalserviceindia.com/article/l158-Foreign-Law-Firms-In-India.html
http://articles.economictimes.indiatimes.com/2015-07-24/news/64817197_1_foreignlaw-firms-advocates-act-legal-sector
http://www.thehindu.com/news/national/bci-agrees-to-centres-propsal-to-open-uparbitration-legal-services-to-foreign-law-firms/article7368041.ece
http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Foreign_law_firms_debarre
d_from_practicing_in_India.pdf
http://www.nishithdesai.com/fileadmin/user_upload/pdfs/What_now_for_foreign_law
_firms-.pdf
http://www.manupatra.co.in/newsline/articles/Upload/15A34032-2127-4DB2-9F75CEAF7E06D52E.pdf
http://www.manupatrafast.com/articles/PopOpenArticle.aspx?ID=b079546b-f51243fa-964d-3f6970127a26&txtsearch=Subject:%20Civil