Entry Of Foreign Law Firms-a Boon Or Bane For Indian Lawyers    

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

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.

In many ways thus this will be beneficial for the general practicing lawyers of this
country and even more for those who will enter the profession in future. There is a
good chance that liberalization will result in drastic increase in the per capita
earnings for a common lawyer in India.

The Trade-off is in our favour:

Liberalization in GATS envisages a contact between developing and developed

nations which is slated to materialise through a set of trade-off. The experience tells
us that every sector of Indian economy which has been opened up has come out
stronger and become more competitive in the long run. This will be even true for the
legal services as Indian legal system has already had some limited but valuable legal
exposures. Moreover, Indian legal system will do well to imbibe in themselves
certain aspects of the work culture of the west. A case in point will be the emphasis
given in the west on 'corporate legal compliance', avoidance of litigation and
recourse to arbitration. This might help us solve many of our chronic problems and
create a leaner and more professional and flexible legal system.

In conclusion:

The present author is extremely positive what the future holds for a liberalized legal
sector in India and how exposure to foreign law firms and lawyers can only be
 advantageous for us especially in the field of emerging laws like cyber law, space
law, international commercial arbitration, mass torts, etc. Drawing an analogy from
the software sector, India is the primus inter pares amongst the developing countries
of the world and thus the best choice of market for the investment of foreign capital.
Thus, even if the apprehensions expressed are not unfounded they are simply
misplaced especially because we as a nation, if everything goes well, stand to gain
immensely from the resulting arrangement.

I will now suggest a number of lessons we can witness from those jurisdictions that
have dealt with foreign law firms. What have been the benefits and what have been
the problems? What lessons can we all learn so that we can safeguard the Indian Bar
from the entry of foreign law firms?

Looking at the present and resulting impact on the jurisdictions that have permitted foreign
law firms to establish and practice we see a number of benefits. This includes :

• It has created a stronger and more competitive legal profession in each country;

• It brings specialization in international corporate law;

• It assists foreign law listings;

• There has been an increase in capital markets availability;

• It has made available the expertise of international law firms in project financing,
refinancing and rescheduling of international debt;

• It gave domestic lawyers the access to the multi-jurisdictional knowledge and

technical expertise of the international law firms; and

• High level of foreign direct investment in the host country and facilitated
investment overseas by local firms.

• Legal services is a key component of the more successful economies

What is needed to safeguard the Indian Bar from Foreign Law Firms?
Each jurisdiction has its own solution but all recognize the need for some degree of market
access with a commercial presence. In my opinion, the elements common to all jurisdictions
that could be applied to safeguard the Indian Bar are:

• Only those persons duly qualified and certified as advocates should be allowed to
call themselves by those titles

• Certain legal areas should be reserved to nationally qualified advocates. These

areas include drawing up court documents, court advocacy/ rights of audience,
conveyancy and probate.

• Registration of all foreign law firms providing legal services

• Foreign lawyers in India should not be permitted to practice Indian law unless, they
have first re-qualified as an Indian Advocate or unless they practice through a joint
venture or formal alliance with an Indian firm in areas of permitted Indian law

• If there is a formal alliance or joint venture arrangement then there should be a

requirement that the foreign firm and the Indian firm agree on a written plan to
transfer legal and other related skills, expertise, know-how or technology to the
Indian law firm

• Rules on advertising need to be changed so that Indian Advocates and firms are
permitted to make clients aware of their expertise and therefore capture domestic
and international work

• Indian firms should be permitted to employ foreign lawyers

• Foreign law firms should be permitted to employ, give partnership and share
profits with Indian lawyers

India is not only a growing economic power but also the world's largest democracy. The
future of many countries in the region may depend on how the legal profession in this
country develops. The future of democracy and the rule of law in the fastest and the largest
growing economic region of the world may depend on our commitment to making the legal
profession in India the most responsive, educated and forward thinking of all nations. The
debate on the entry of foreign law firms should be based around that question.

___________________________

* The author is a first year law student at the Rajiv Gandhi National Law
University, Punjab and can be reached at krrish.kush@gmail.com

1. See General Agreement in Trade in Services included in Annex 1B of the final

text of the Uruguay Round agreement. It also includes various other types of supply
of services but one that concerns this essay is relevant to legal services is the one
that has been mentioned in the main text. 

2. Bibek Debroy, Beyond The Uruguay Round: The Indian Perspective on GATT,
Response Books A division of Sage Publications India Pvt. Ltd., 1996. 

3. The increasing participation of developing country members in world trade shall

be facilitated through specific commitments.....relating to (a) the strengthening of
their domestic services capacity and its efficiency and competitiveness, Inter alia
through access to technology on a commercial basis (Article IV. 1). 

4. Adapting from Australian suggestions, The Law Commission recommended full

licensing and limited licensing approaches. According to IBA guidelines to practice
in a host country a foreign lawyer will have to apply for a license. The conditions for
the issue of license may include, 

(i) prohibition against appearing and pleading in any court in the host country
unless specifically authorized and 

(ii) restriction in preparing documents or performing other services whose

performance is specifically reserved by the host country for performance by
its local members. 

5. 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. 

6. 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. Supra n. 5. 

8. See Generally, Samuelson & Nordhaus, Economics, 17th edn. 2001. 

9. See Generally Competition Policy and Professional Services by Pritthis Mehta.