Since liberalising its markets in 1991, following a bailout by the International Monetary Fund, India has become one of the fastest- growing economies in the world. More recently, last September, following an economic slowdown, and faced with mounting pressure from both domestic and international corporations to make pro-foreign investment a priority, the Indian government led by prime minister Manmohan Singh announced a package of economic reforms. These were aimed at opening up the retail, domestic airline and media sectors to increased foreign investment. The response to these reforms, together with more in the pipeline, was euphoric both from foreign and domestic investors. India’s industrial bigwigs were confident that India’s image as a hub of foreign investment had been restored.
It all presents rich pickings not just for Indian corporate law firms (of which a handful dominate) but also for foreign law firms, whose domestic markets are lacklustre by comparison. A 2010 report by legal research group RSG Consulting predicted that the top 100 Indian companies would spend $479m in legal fees that year, with the average Indian company expected to spend $2.5m, and foreign clients $1.3m on India-related work.
And yet the current restrictions on foreign lawyers practising in the country remain a major obstacle, and wholly out of step. Some blame the current restrictions on the handful of foreign law firms that first started showing an interest in the Indian market in the early 90s. Ashurst, Chadbourne & Parke and White & Case set up liaison offices in the country. In a case brought by Lawyers Collective in 1995, the Mumbai-based legal organisation argued that these firms had exceeded the terms of their liaison licences and were actually providing legal services from their offices, in breach of the Advocates Act 1961, which states that only Indian citizens with a law degree from a recognised Indian university may practise law in the country. It took the Indian courts almost 15 years to decide that the law firms in question were in breach of the act, leading to all three firms closing their offices.
Vocal opponents of liberalisation include the Bar Council of India as well as the Society of Indian Law Firms (SILF). In 2009 the then president of SILF, Lalit Bhasin, commented that ‘the problem is that in India the legal profession is not a business, and it is not up for sale’. His emotive comments reflected the concerns of lawyers who fear that Indian law firms, which are not able to market themselves in the same way as UK and US law firms, would not be able to compete on an equal footing. In addition, the Bar Council of India frequently cites as a major barrier to liberalisation a lack of reciprocity in terms of Indian law firms being able to practise in the UK.
Ironically, the Bar Council of India represents the interests of advocates – a group least likely to be affected by liberalisation of the legal system. Foreign lawyers are unlikely to want to encroach on their less profitable bread-and-butter local litigation work. Pro-reformists argue that Indian law firms would be forced to sharpen up their act were they to face international competition, while those against liberalisation point to an increasing corporatisation among the biggest law firms in India.
Some sensitivity also remains following the entry of the Big Four accountancy firms into the Indian market in the 90s. Many local accountancy firms, faced with far more stringent marketing restrictions, were simply unable to compete. In autumn 2011 there was hope that liberalisation might be on the agenda, following a visit by the then justice secretary, Kenneth Clarke, to India, with talk of a ‘timetabled roadmap’ for greater access to the Indian legal services market. However, this failed to materialise.
Nankunda Katangaza, head of international policy at the Law Society, explains that the Society has prioritised deregulation of legal services in India for a long time. Until now these negotiations have been carried out with the Bar Council of India. Katangaza says that although the Society ‘will continue to do what it can in terms of influencing attempts at liberalisation’, it is now taking a more collaborative approach to allow its members as much access as possible to the Indian market, without actually establishing there. In line with this approach, last October a joint visit to India was organised with the lord mayor of London to promote the UK’s financial and professional services sector. During the visit the Society met with the Bar Council of India and the recently formed body for general counsel, the Indian Corporate Counsel Association.
Part of the problem is that most of India’s legal profession is unrepresented. SILF, as its name suggests, represents law firms, but there is no statutory body to represent the majority of Indian lawyers. Neither does it represent the views of Indian corporates, which are increasingly competing on the global stage. A survey by YouGov, in association with Allen & Overy, last June ‘to gauge the opinions of 100 C-suite executives and 100 general counsel from India’s largest companies on the topic of liberalising the Indian legal market’, as well as ‘the opinions of 101 Indian partners and associates from India’s top 50 law firms’, found that 96% believed that India’s legal market should be liberalised.
Surprisingly, the biggest support for liberalisation came from partners in law firms. At the time of the report, Jonathan Brayne, the chair of Allen & Overy’s India Group, commented that the report ‘shows that India’s leading lawyers welcome the opportunities that liberalisation would present for both their clients and their own careers’. Anand Prasad, a founding partner at Indian law firm Trilegal, believes the survey was fairly accurate in terms of where the real opposition to liberalisation lies – namely with the more ‘entrenched’ law firms, which hold sway in the Indian legal market.
Chris Parsons at Herbert Smith Freehills says the ‘driver for change will [in fact] come from within parts of the legal community. Competition needs to be seen as part of a healthy, thriving environment.’ Geraint Hughes, head of Clifford Chance’s global India group, is similarly vocal in his support of what he calls a ‘phased liberalisation’: ‘We believe that greater liberalisation in the Indian legal sector would be beneficial for Indian business, for India’s role on the global economic stage and for India’s domestic legal sector.’
Citing calls from Clifford Chance’s international and Indian clients to access international legal services in India, Hughes says: ‘We support a strategy that would allow firms to practise international law from India in order to support the business community and to complement the undoubted strength of the legal community in India.’
Overcoming the obstacles
Even so, foreign lawyers are finding ways of building practices in India without actually having a presence on the ground. Initially, this was achieved through ‘best friends’ associations with specific Indian law firms. Notable among these were tie-ups between Linklaters and Talwar Thakore & Associates; Allen & Overy and Trilegal; and Clifford Chance and AZB & Partners. With liberalisation pretty low on the current government’s agenda, most of these tie-ups, with the exception of Linklaters, have dissolved. Hughes at Clifford Chance explains that with liberalisation ‘far from imminent’ his firm ‘needed to see the relationship with AZB in a fresh light. Both firms agreed that our mid- to longer-term interests were better served by loosening the ties of the best friends arrangement to allow for greater freedom of manoeuvre in the dynamic Indian market. We have always enjoyed strong relationships with local law firms and we continue to develop those as well as working with AZB’.
One firm not to have secured a tie-up with an Indian law firm, despite having a dedicated India practice for some time, is Herbert Smith Freehills. Its India group chair, Chris Parsons, explains that the firm felt that it would be difficult to maintain relations with one particular law firm when there was no clarity as to when liberalisation would occur, no matter how well intentioned the relationship.
He adds that its links with Indian law firms are very much client-driven: ‘We wanted our Indian clients to know that we will work with their preferred firm’. It is an approach that has proved fruitful to date. Most recently, the firm advised United Spirits, India’s biggest liquor company, on the English law aspects of a deal involving the £1.24bn purchase by Diageo of a 53.4% stake in the Indian drinks company. Parsons explains that the firm has ‘a virtual India office’; although it does not have a presence there, it has the mindset of one that does, by making sure that it has teams in India regularly.
Saionton Basu, co-head of Penningtons’ India group, is one of three dual-qualified lawyers in the group, which numbers the Tata Group, Syndicate Bank and the Bharti Group as well as several high-net-worth individuals among its clients. Basu came to Penningtons in early 2011 to help build its India practice. The group now uses a flexible network of Indian law firms on the ground to take account of the current restrictions on law firms practising there. This approach is one that, Basu explains, is working well for the firm, as it allows his clients to have access to the right lawyers in different parts of the country. His firm assisted Tata Motors on its €500m capital raising, as well as Kales Group BV on its Indian joint venture. Basu is pragmatic about what the future holds: ‘It’s hard to say whether things will change’. He highlights a trend among Indian companies to invest overseas, which he believes will accelerate over the coming years, and will deflect pressure to actually have a presence in India.
Wragge & Co provides an example of what a regional law firm, which may not have the referral weight of a magic circle firm, can do to build its presence in India. The firm has only recently entered into a loose association with Ajit Mishra, who set up the City Law Practice in Delhi last year after leaving the London office of Fox Mandal, one of the first Indian law firms to launch in the City.
Baljit Chohan, head of the India group at Wragge & Co, explains that although the tie-up was purely opportunistic, the firm had been looking to build its India practice for some time. Although Chohan and his colleagues had been making visits to India, they were not regular enough to be sufficiently fruitful. ‘We already knew and trusted Ajit, and this tie-up provides us with a sales voice in India.’ The tie-up will also lubricate introductions for Indian corporates seeking business outside the country, with their legal work done from a lower cost base ‘which we are able to offer from Birmingham’. And Wragge’s UK and US clients can access local knowledge on the ground in India.
According to Trilegal’s Prasad, cost plays a big part in his Indian clients’ decisions on who to instruct internationally. Prasad maintains that the Indian legal market is unlikely to open up for at least five to 10 years, and that UK firms should have a medium- to long-term strategy for their India practices, by meeting with a cross-section of the Indian legal community, and not ‘putting all their eggs in one basket’.
Parsons, along with other foreign lawyers, will have welcomed a ruling earlier in 2012, in which the Chennai High Court held that foreign firms were entitled to practise in India on a ‘fly-in, fly-out’ basis when advising clients on non-Indian law. The same ruling also allowed them to act in commercial arbitrations and be involved in legal process outsourcing (LPO) companies. The same court, however, also emphasised that the earlier ruling concerning the Advocates Act 1961 was good law. Namely that ‘foreign law firms or foreign lawyers cannot practise the profession of the law in India… unless they fulfil the requirement of the Advocates Act 1961 and the Bar Council of India Rules’. So for now at least, liberalisation remains a pipedream. ‘Evidence doesn’t suggest that liberalisation is high on the government’s agenda at present, and we do not expect to see any significant shift in policy in the near future,’ Hughes explains.
Most commentators agree that the current law minister is more concerned with improving the efficiency of India’s notoriously slow court system, something that, if successful, is more likely to garner votes in the next election. Having lectured regularly in India, Parsons is pragmatic in the face of continuing restrictions for foreign lawyers. ‘We’re patient. It will happen in due course. Elections are due to take place in 2014, and nothing is likely to happen before then,’ he says.
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