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NOTE

TO:

Gaurav Pachnanda, Senior Advocate to the Supreme Court of India

FROM:

Alex Thibodeau

DATE:

12 July, 2016

ISSUE:

Foreign Lawyers in the Indian Legal Market

BRIEF INTRODUCTION
This note considers the history and context behind the liberalization of Indias legal
market. While being multi-faceted in many ways, this issue can be divided into two very
distinct schools of thought. One side supports aggressive liberalization as a move toward
a more globally competitive India that will attract foreign investments. Those historically
against legal liberalization have actually softened their stance in the last year but continue
to demand an approach that will protect the domestic legal market from being crushed
under a landslide of international competition. First, I will provide background on the
topic as a whole. Second, I will discuss both of the primary view points on this topic,
including their similarities and differences. To this point, there are two opposing High
Court decisions on the matter, the older of which relies on a repealed statute. Finally, I
will discuss the likelihood of full integration and lay out the chronological timeline leading
up to the recent discussions.

BACKGROUND
Despite decades of pressure from the foreign law firms, the issue of allowing
foreign lawyers to practice within the Indian legal market has become relevant and
plausible within the last year. The move toward a liberalized legal system in India has

taken significant steps forward recently, despite continuing disagreement about the
boundaries and methods that should be used in that process. On 5 July 2015, a meeting
between the relevant parties produced a set of rules that will likely eventually govern the
inevitable influx in foreign law practice. Other than foreign markets, the Modi
government is perhaps the strongest proponent of legal liberalization.1 In contrast, the
Society of Indian Law Firms (SILF) and their president, Lalit Bhasin, have been
consistently and categorically opposed to the idea for the last two decades. Due to the
considerable influence that SILF holds within the Indian legal world, the Bar Council of
India (BCI)the regulatory body for domestic legal practicehas taken their concerns
quite seriously.
SILF has existed since 2000 and was created in response to the legal expansion of
India in the 1990s. In its inception, SILF maintained a relatively liberal agenda and fought
against what they perceived to be the unjust enforcement of advertising restrictions under
the Advocates Act of 1961 (1961 Act).2 The 1961 Act was a legislative document created to
govern both the legal practice and its practitioners in India. Until recently, it continued
to serve as the primary legal justification for denying foreign lawyers and foreign law firms
from practicing under Indian jurisdiction.3
Another important piece of law that formerly served as an impediment for legal
integration was the Foreign Exchange Regulation Act of 1973 (1973 Act) which establishes
restrictions for foreign businesses, including law firms, from setting up shop in India

1
http://www.legallyindia.com/Law-firms/modi-gov-t-pushes-for-opening-of-indian-corporate-
law-to-foreign-firms-in-talks-to-bci
2
Advocates Act (1961), Central Government, https://indiankanoon.org/doc/262262/
3
http://www.livemint.com/Politics/Y1W6WftQGES2pGatn2SKaO/Can-foreign-law-firms-enter-
India-now.html

without specific consent. Both the 1961 and 1973 Acts were the principal arguments in
one Bombay High Court case from 1995.4 A move toward liberalization of the Indian
markets led to the repeal of the 1973 Act in 1999, when it was replaced by another piece
of legislation that will be discussed at length in the next section. This led to a clarifying
decision in the Madras High Court when a tangentially similar issue appeared in 2010.5
Both cases will be discussed later in this analysis. While a Supreme Court appeal on this
issue is possible, the recent discussions between SILF, BCI, and the multiple government
ministries seem more likely to produce a legislative outcome than a judicial one.

PRINCIPLE STATUES
There are two primary instances where the legislature has spoken to the preclusion of
foreign lawyers. The Advocates Act of 1961 states, in relevant part:
"The function [] of the Bar Council of India shall be to recognize on a reciprocal
basis foreign qualifications in law obtained outside India for the purpose of
admission as an advocate under this Act."6
As a prerequisite for being allowed to practice in India, the 1961 Act stipulates that
reciprocity is required. Later in the Act, the concept of reciprocity is explained further.
"[A] national of any other country may be admitted as an advocate on a State roll,
if citizens of India, duly qualified, are permitted to practise law in that other
country [ . . . ][and if] he has obtained a degree in law from any University outside
the territory of India, if the degree is recognised for the purposes of this Act by the
BCI."7
Section 29 of the Act goes on to establish advocates as the only class entitled to practice
law, while section 30 claims the right of any advocate enrolled in the State roll to practice.

4
Lawyers Collective v Bar Council of India W.P. No. 1526 (Bombay HC, Judgment 1995).
5
AK Balaji v The Government of India, W.P. No. 5614 of 2010 (Madras HC).
6
Advocates Act, 1961, 7(1)(ic).
7
Id. at 24(1)(c)(iv).

Subject to the provisions of this Act and any rules made thereunder, there shall,
as from the appointed day, be only one class of persons entitled to practise the
profession of law, namely, advocates.8 [ . . . ][E]very advocate whose name is
entered in the State roll shall be entitled as of right to practise throughout the
territories to which this Act extends."9
Additionally, the Foreign Exchange Regulation Act of 1973 provided restrictions for
foreign companies attempting to establish a place of business in India. Despite no longer
being current law, it is the law relied on in Lawyers Collective v Bar Council of India in
1995. The 1973 Act stated, in relevant part:
[A] person resident [or a company] outside of India, which is not incorporated
under any law in force in India, or any branch of such company, shall not, except
with the general or special permission of the Reserve Bank of India, [] carry on in
India, or establish in India a branch, office, or other place of business for carrying
on any activity of a trading, commercial, or industrial nature, other than an activity
for the carrying on of which permission of the Reserve Bank has been obtained
under 28 [. . . .]10
Meanwhile, 30 of the repealed 1973 Act provided a similar RBI permission requirement
regarding an individuals ability to be employed.
As mentioned above the 1973 Act was replaced by the 1999 Foreign Exchange
Management Act (FEMA), which was instated after revisions to the 1973 Act began to
create redundancies. The purpose of FEMA was to open up the Indian markets more
generally, not only in respect to the practice of law. The idea was to manage the entry of
foreign investments rather than regulate them as FERA did.
In 2000, regulation 24 was added to FEMA through a legislative notification and
gave an opening for foreign law firms to enter the country. The provision allows a non-


8
Id. at 29
9
Id. at 30.
10
Foreign Exchange Regulation Act, 1973, 29(1)(a)

resident Indian or person of Indian origin resident outside India [to invest] by way of
contribution to the capital of a firm or propriety concern in India.11
This change in both legislation and ideology seems to have served as the catalyst
for the discussions that have led up to today. This is further indicated by the case law that
exists after the instatement of FEMA, specifically, A.K. Balaji v. The Government of India.

PRINCIPLE CASE LAW


In Lawyers Collective v. Bar Council of India, the issue under dispute was that
the Reserve Bank of India had given permission to foreign law firms to open liaison
offices in India under 29 of the Foreign Exchange Regulation Act of 1973, which was
valid law at the time.12 The permission agreement was given under a significant list of
conditions including exclusive permission of the bank to approve ventures, a restriction
on compensation, limitations on borrowing capacity, and a prohibition on land-transfer.
Additionally, substantial reporting requirements were also required under the agreement.
The petitioner argued that the permission was bad in law because:
1. Respondents activities were legal in nature and 29 of the 1961 Act requires
that they be enrolled as advocates;
2. Nationals of foreign states intended to practice any profession in India can
be granted under 30 of the 1973 Act, but not under 29.
Furthermore, even if RBI had applied 29 of the 1973 Act correctly, petitioner argued
that failure to be enrolled under issue (1) would have prevented RBI from being allowed


11
Foreign Exchance Management Act, Reg. 24, Investment in Firm or Proprietary Concern in
India (2000).
12
Lawyers Collective v. Bar Council of India W.P. No. 1526 (Bombay HC, Judgment 1995).

to grant such a permission on 29. Petitioner further justified this by arguing that the
1961 Act is a complete code that requires that you read 24 and 29 of the Act together,
which amounts to an enrollment requirement for the practice [of] the profession of law,
not only litigation.
Respondent argued that the permission given by RBI was within the scope and
ambit of powers vested in the Bank under 29(1)(a) of the 1973 Act. Additionally,
respondent argued that the limitations and restrictions placed on the foreign law firms
keep it within the realm of good law.13
The Bombay High Court found that, [i]t is evident that the liaison activities were
nothing but practicing the profession of law in non-litigious matters. Furthermore, citing
the language of 29 of the 1973 Act, the Court found that foreign law firms engaged in
practising the profession of law in the foreign countries cannot be said to be engaged in
industrial, commercial, and trading activities [in India]. The liaison activities [ . . . ] in
India being activities related to the profession of law, no permission could [rightfully] be
granted under 29 of the 1973 Act.14 The Court further cited the objects and reasons
statement within the 1961 Act as evidence of the universality of the requirement
specifically not being limited to the realm of litigation. However, following the 1999 repeal
of the 1973 Act, this holding may require a bit more scrutiny since it relies heavily on the
restrictive language of the repealed Act. In this matter, the Bombay Court does not specify
the explicit practice of foreign law within India.


13
Id.
14
Id.

More recently, the matter of A.K. Balaji v. The Government of India reaches an
alternative conclusion to a related question.15 In this case, it is a petition for a writ of
mandamus against foreign law firms and foreign lawyers from the United Kingdom,
United States and Australia who are accused of practising law in India under the guise of
consulting and legal process outsourcing.
Petitioner first addresses the lack of reciprocity noting that the writ petition, prima
facie, stated that law graduates from India are not allowed to practice within the United
Kingdom, United States, Australia and various other foreign nations. Furthermore, the
procedure for an Indian lawyer to practice in foreign countries would be far more
cumbersome and very costly, citing the requirements of qualifying tests, prior
experience, and work permits. Petitioner argued that these impediments are not
contemplated within the Advocates Act of 1961 when considering reciprocity. It is argued
that while a presumed legal bar exists under 29 of the 1961 Act, foreign lawyers are
earning significant money from Indian clients conducting seminars and arbitrations
under the guise of LPO. Finally, petitioner argued that there is no disciplinary authority
or regulatory control since if they do not fall under the authority of the 1961 Act but are
still allowed to practice within the profession.
However, ultimately the Court finds that the presence of foreign law firms at the
negotiation table furthers the governmental interest of making India a hub of
international arbitration. Contrarily, if they chose to deny the presence of foreign firms,
the Court argued that it would serve to push the location for international arbitrations to
other countries. The difference in outcome could largely be credited to the existence of


15
AK Balaji v The Government of India, W.P. No. 5614 of 2010 (Madras HC).

FEMA (1999) and the subsequent repeal of FERA (1973), on which Lawyers Collective
Court relied. As mentioned above, the entire purpose of FEMA was to manage the entry
of foreign investment, rather than regulate or restrict it. Therefore, a substantial
governmental interest was enough for the Madras High Court to uphold the legality of
non-litigious practice of foreign law, where the Bombay High Court chose not to address
it. However, foreign lawyers remained (and continue to remain) banned from the practice
of Indian law following this decision.

RECENT RULES AND RESTRICTIONS


Preceding the July 5th meeting with the Society of Indian Law Firms (SILF), Indian
Corporate Counsel Association (ICCA), Federation of Indian Chambers of Commerce and
Industry (FICCI), Secretary General Bhuyan and other Governmental Ministriesthe Bar
Council of India (BCI) drafted a proposed set of rules that would allow foreign lawyers to
practice in India if ratified by the legislature later this year.
The rules would grant permission to foreign lawyers and law firms to set up offices
in India after registering with the BCI and paying registration fees ($25,000 for individual
lawyers and $50,000 for law firms), in addition to a security deposit ($15,000 for
individual lawyers and $40,000 for law firms). The permission would also allow foreign
partnerships with Indian firms and the provide the ability to hire Indian lawyers who are
licensed to practice domestically.
Additionally, it would enable foreign firms located in India to engage in any foreign
legal work, but the prohibition on the practice of Indian law would remain intact. Foreign
lawyers would still be prohibited from practice within courts, tribunals, boards or

statutory authorities for cases within Indian jurisdiction. However, international


arbitrations concerning overseas clients would be allowed under the new rules.
As mentioned in the background section above, the influence of SILF should not
be understated in this matter and the BCI seems to have taken their concerns quite
seriously into account when drafting these rules. It seems as though the government
would be in favor of an immediate integration, but the proposed rules favor the much
more phased integration that SILF has demanded.
The President of SILF, Lalit Bhasin, said in a statement to his organization:
It should be appreciated that the ministry has taken into consideration the
stand taken by SILF for a phased sequential entry of foreign law firms to India.
The draft rules do not entitle foreign lawyers/law firms to practise Indian law.
Moreover, appearances in the law courts is [sic] not allowed.
For many in the international sphere, the proposed changes are common sense and
many consider them long overdue. In any case, most reports agree that the ratification of
the rules, as proposed, would bring rapid improvements to the Indian business climate.
According to Indian business firm Dezan Shira & Associates,
India ranks 130 out of 189 countries in the World Banks Ease of Doing Business
list. Several indicators that determine the World Bank ranking directly relate to
the legal sector, such as enforcing contracts, resolving insolvency, registering
property, and starting a business.
Ideally, the changes allowing foreign integration would bring a much-needed efficiency
and an increased competitiveness to the Indian legal market, which would dramatically
affect the business sector in positive ways.
The proposed rules were discussed on Tuesday, 5 July 2015 and reports indicate
that the talks were productive. In the meeting, SILF highlighted some gaps in the

regulations and agreed to propose their own suggestions within four weeks, despite their
initial request for six weeks leave. The next meeting will be scheduled around August 10.

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TIMELINE
On 14 December 2014, SILF President, Lalit Bhasin, writes an opinion piece in the
Business Standard that Indian law firms are 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 BCI].
On 27 February 2015, the Press Trust of India prints a piece claiming that the Modi
Government is serious about pushing the legal liberalization agenda and are working
with the BCI toward that goal.
In February 2015, SILF publishes Road Map to Reform in the Indian Business Law
Journal, which indicates a two-phased plan for partial liberalization.16
On 30 June 2015, the initial rule proposals were sent to Modi.
In July 2015, the commerce ministry proposed allowing foreign lawyers to arbitrate in
India.
In August 2015, India blamed the BCI in a proceeding WTO for slow progress in
liberalization. In an effort to placate the WTO, SILF held a press conference and
formally stated that its opposition to the phased entry of foreign law firms would end.
On 5 July 2016, the meeting between government ministries and several nongovernmental organisations, including the Society of Indian Law Firms (Silf) and the
Bar Council of India (BCI), passed without any principled resistance by stakeholders to
the allowing foreign lawyers to practice in India.


16
http://www.silf.org.in/news/218/Road-map-for-reform.htm

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Other Helpful Resources


http://www.business-standard.com/article/opinion/liberalising-legal-services-beforethe-door-opens-115070500675_1.html
https://www.linkedin.com/pulse/resurgent-india-2016-liberalising-indias-legal-sectormagic-lawyers
http://finmin.nic.in/the_ministry/dept_eco_affairs/capital_market_div/FEMA_act_1
999.pdf
http://www.americanbar.org/publications/governmental_affairs_periodicals/washingt
onletter/2012/march/indiancourtdecision.html
http://www.india-briefing.com/news/india-closer-allowing-foreign-law-firms-practice12438.html/
UK and US Positions on Foreign Lawyers
http://lawquestinternational.com/update-%E2%80%9Ccan-foreign-lawyers-practiceforeign-law-india%E2%80%9D

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