False dawn?

As momentum builds towards reform, the Indian Supreme Court will soon rule on whether foreign lawyers have the right to practise in India. Ekwall Singh Tiwana outlines the long-running debate

The debate on whether foreign lawyers should be allowed entry into the protective legal market of India has been raging for nearly two decades. 

So far the Indian legal services sector has been virtually closed to outsiders. In the summer of 2016 the Bar Council of India (BCI) produced a detailed report for the Ministry of Law and Justice on the draft rules for the registration and regulation of foreign lawyers in India. The report was heralded as a significant development in gradually allowing foreign lawyers and firms to practise law in India.

Getting round the restrictions

Despite facing stringent restrictions on practising in India, overseas law firms began setting up liaison offices with Indian partners in the early 1990s. This was allowed as the participating foreign legal firms had been given an annual licence by the Reserve Bank of India (RBI). Ashursts was the first law firm to take advantage of this licence in 1994, and Chadbourne & Parke and White & Case followed. There was a great deal of opposition to these liaison offices by Indian lawyers and the Bar councils that represented them. The fear was that Indian law firms would be taken over, lose their best legal brains, and that wages and costs would spiral out of control.

Lawyers Collective of India action

The Lawyers Collective of India brought an action against Ashursts and White & Case, culminating in a decision by the Bombay High Court which ruled against the practice of law by foreign firms in India (Lawyers Collective v Reserve Bank of India, Chadbourne, Ashurst, White & Case, and Others (2009)). The decision led to Ashursts, amongst other law firms, closing their Indian offices.

In July 2012 the Supreme Court of India asked the RBI not to grant permission to, or register foreign law firms to set up liaison offices in India. In the same year, in the case of AK Balaji v the Government of India, the Madras High Court confirmed that foreign lawyers could not practise law in India but this was subject to two exceptions: they may do so on a fly-in and fly-out basis; and in the context of international arbitrations. The decision in this case is under appeal and the impending judgment by the Indian Supreme Court is now of crucial importance.

Liberalisation proposals

The Indian government, in consultation with the BCI and the Society of Indian Lawyers (SILF), has given the go-ahead to a proposal allowing foreign law firms to enter India on a reciprocal basis. As a signatory to the General Agreement on Trade in Services (GATS), India has an obligation to open up the legal sector and there has been governmental recognition of this over the last two or three years. In 2014 the Ministry of Commerce in India suggested a two-phase strategy to entry for foreign law firms in the country as follows:

  • Phase 1: This would include domestic regulatory reforms with the simultaneous opening of international srbitration and mediation services in foreign and international law.
  • Phase 2: This includes the opening up of non-litigious and non-representational services in Indian law.

The momentum for liberalisation and reform of the Indian legal services market has now gathered pace, led by a rising band of business leaders who want a legal system which caters to the global commercial world. India’s economy is growing rapidly and the reforms in this sector have to keep pace with the requirements of stakeholders in the development of India, now a significant player on the world stage.

Step in the right direction

The 2016 BCI report was taken as a step in the right direction. At the time of its release, it was emphasised that the BCI, which in the past has strongly resisted reform, had taken a leading role in contributing to the report’s findings and instigating the steps required to ensure a steady path to foreign lawyers entering the market. The BCI drafted the rules for registration of foreign lawyers in India which would allow foreign lawyers to practise in the country under the instructions of the Ministry of Law and Justice. Some of the major reforms envisaged include the following:

  • foreign lawyers and law firms to register with BCI to set up their offices in India and practice foreign law;
  • foreign lawyers to be permitted to do all non-Indian transactional legal work;
  • foreign lawyers not permitted to do litigation work or appear before Indian courts or tribunals;
  • foreign lawyers not permitted to provide any legal advice relating to Indian courts, tribunals, statutory authorities;
  • foreign lawyers and law firms allowed to hire Indian lawyers or go into partnership with Indian lawyers;
  • foreign lawyers allowed to participate in international arbitrations held in India;
  • registration fee for foreign lawyers to be $25,000 per individual lawyer;
  • registration fee for foreign law firms and partnerships to be $50,000; and
  • renewal fees of $10,000 for individuals and $20,000 per firms.

A phased entry for foreign lawyers over a period of approximately five to seven years is recommended. This first phase would have allowed foreign lawyers to practise in India covered by the BCI draft rules within one year.

The second part of the timetable suggested bringing about domestic reform in various applicable legislation such as the Advocates Act 1961, the Limited liability Partnership Act 2008 and the Education Acts. The amended legislation would have allowed more partners to be part of the law firm, the removal of restrictions on advertising and the initiation of educational reforms to ensure the availability of good young Indian lawyers.

The last phase would have been policy changes which would be necessary for the expansion of foreign law firms to allow them to practise law in India, and to form joint ventures and collaborations with Indian lawyers.

The central purpose of these reforms was to strengthen the legal system in order to attract foreign investment and development in India. The vision has always been for India to emerge as a legal service provider to the world in the Asian and African region because of its location. The reforms would have followed the best practice systems by other jurisdictions including the UK, Singapore and the US.

State opposition leads to spectacular u-turn

The anticipated reforms were welcomed by the overseas legal community and were praised by political and business leaders in India and other countries. However, shortly after the publication of the report the BCI made a significant u-turn in relation to its own proposals and draft rules. At the end of September 2016, the BCI stated it did not have the support of its own state Bar councils and opposed the involvement of private organisations such as the International Council for Arbitration. In a six-page letter, the BCI outlined its opposition to the reforms which read:

‘The BCI and state Bar councils and the legal fraternity cannot and shall not accept such outside interference [referring to the private bodies] at any cost and this will have strong and immense far reaching repercussions and reactions from the lawyers.’

Opposing liberalisation, the BCI went on to say that Indian lawyers could not successfully compete with foreign law firms as they are not financially sound enough to compete at international level and that overseas firms would recruit all the best young talent and leave them exposed and vulnerable. The BCI added that all the concerned parties should await the Supreme Court decision in AK Balajai which will make a definitive decision on whether foreign lawyers and law firms have the right to practise in India (see Legally India report).

In making this spectacular u-turn the BCI has unnecessarily made liberalisation a major political issue and has created a major obstacle for foreign lawyers to entry into the market. In the past there was a lack of political will by the Indian government and its associated ministries which delayed the liberalisation process, a position bolstered by the federal and state Bar councils. In the last few years significant stakeholders including the Ministry of Commerce and businesses have encouraged reforms to open up the market. It seemed for a short time so did the Indian lawyers. Unfortunately, this can only be described as another false dawn. The matter will be left for the Supreme Court to decide. One hopes that the decision will be in favour of reform and give a platform for India to become a leading provider for legal services in Asia.

Contributor Ekwall Singh Tiwana, No5 Chambers

Author details: 
Ekwall Singh Tiwana

Ekwall, No 5 Chambers, has advised companies and partnerships in relation to the legal and financial obstacles in establishing businesses in India. He has also been instructed by Indian companies on setting up business structures in UK and Europe.