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Lawyers in India are reluctant for their government to open the door to foreign firms. But the time may have come, says Neil Rose



When the Indian government moved to remove barriers to foreign lawyers last September, ‘the entire Indian bar [was] shocked, surprised and deeply hurt’, according to Lalit Bhasin, president of the Society of Indian Law Firms (SILF).



The reason for the hyperbolic reaction, Bhasin claimed, was because just four days earlier representatives of the Ministry of Law & Justice had made it clear that no decision had been made, and that local lawyers would have six weeks to make representations.



In reality, however, it was probably not that hard for government officials to predict what those representations were going to be. The strength of opposition to foreign firms among some of the larger Indian practices is one of the main reasons that progress on opening up the market has moved like an M25 traffic jam. Nothing illustrates this better than the steps the Indian government took.



Back in 1995, legal proceedings were begun by a little-known group called the Lawyers Collective against City law firm Ashurst, as well as US practices White & Case and Chadbourne & Parke, over allegations that the offices they had in India were illegally practising law. The Bombay High Court ruled that, under the Advocates Act 1961, only Indian-qualified lawyers could practise law in India, but the Supreme Court ordered it to reconsider because it had not taken enough evidence. Nothing happened for more than a decade until the affidavit the government lodged last September, which restarted the case and apparently so upset Indian lawyers across the country.



The case is back in court later this month and the argument turns on the section in the act that says only ‘advocates’ are ‘entitled to practise the profession of law’, and whether that refers to all law, including foreign and international law. If so, as SILF argues, then only Indian-qualified lawyers can advise on it and the foreigners stay out. If not, as the government contends, the door is open.



Lalit Bhasin says he fears that the much more commercial approach of foreign firms threatens the Indian profession’s ‘well-developed ethos, culture, tradition and noble heritage’. Arguing that there is no reason to disturb the long-standing system of referrals, Bhasin says that, though Indian lawyers are technically the equal of any others, the greater resources of foreign firms ‘would play havoc with India’s legal profession’.



By any standards India is enticing – a £500 billion economy with GDP rising by around 8% a year, it is the world’s second fastest-growing economy after China, and second only to China as the most attractive venue for foreign direct investment, according to the annual index produced by management consultants AT Kearney. The European Aeronautic Defence and Space Company, for example, intends to invest ¤2.6 billion in India over the next 15 years. Goldman Sachs estimates that India’s GDP will overtake the UK’s by 2015 and the US’s by 2042.



No wonder then that Gordon Brown and Lord Digby Jones, former solicitor, CBI leader and now trade minister, led a delegation of more than 60 business people to India in January, during which Lord Jones raised the issue of legal services. Brown also announced the appointment of a 42-member high-level advisory board for the UK India Business Council.



Clifford Chance senior partner Stuart Popham is the only legal representative, sitting alongside the likes of Sir Richard Branson and the chief executives of British Airways, Rolls Royce and Vodafone. Like other big firms Clifford Chance has to make do with handling India work from Singapore, Hong Kong, Dubai and London, but Popham reckons the Indian barrier is like the Berlin Wall: ‘At some stage it will be pulled down, but it’ll be interesting to see from which side.’ Younger, ambitious Indian lawyers are pushing from their side, he says, because they see the opportunities on offer from linking up with international firms. But while there has been progress, he knows nothing will happen quickly. ‘It’s always been two years away. Now it’s 18 months.’



The situation is complicated, tied up with bigger trade issues for India and with legal services being used as a bargaining chip over agricultural tariffs. Also, according to Sandeep Katwala, head of Linklaters’ India group, letting foreign firms in throws into relief some of the antiquated restrictions on Indian firms, especially in areas such as marketing and partnership size – the old 20-partner cap lives on there. If foreign law firms are going to charge in, the local profession needs to have the tools to compete.



Despite hopes that the Bar Council of India was on the verge of ending its opposition to foreign firms during the Lawyers Collective case, Shri Radharkrishnan, secretary to the council, says it has not changed its position. Some solicitors contend that they can pretty much name a small but powerful cadre of Indian lawyers opposing foreign firms, but Katwala reckons opposition is broader than that. ‘I don’t think the current government would respond to three people,’ he says.



The reality is that the vast majority of Indian lawyers are advocates handling non-commercial work, for whom foreign law firms represent no threat. But some believe it is in the interests of the minority who do care to encourage their colleagues to oppose the new British ‘colonialists’ – what Alex Pease, head of Allen & Overy’s India group, calls the ‘British East India Company argument’.



‘Indian lawyers have an honourable history of resistance, and if one wants to deal with India as a country, one must respect its sensibilities,’ he adds. ‘Cultural issues are the ones people quite rightly defend to the last, but I don’t think there’s a great understanding of what City lawyers do.’



At the same time, Toby Greenbury, co-head of the India desk at London firm Mishcon de Reya and a director of the UK India Business Council, says the historic links are important. The acrimony of independence has receded in people’s minds, he says, and what is left is ‘a very warm legacy of social relationships and common roots in the legal system’. Katwala agrees that the similarity of legal systems makes a difference. ‘The in-house lawyers feel a comfort level,’ he says.



One of the fears is that foreign lawyers will want to handle domestic litigation, which in reality is unlikely. If and when India opens up it will probably be to allow foreign lawyers to practise foreign law, maybe in joint ventures with Indian firms. Employment of and partnership with Indian lawyers may take longer. But ahead of that, Linklaters and Allen & Overy have taken the controversial step of forming non-exclusive alliances with Indian law firms – Thawar Thakore & Associates and Trilegal, respectively. Katwala says: ‘One of the reasons [the tie-up] attracted publicity is because we’re putting on the table openly and transparently what other people do.’ There have been questions about whether these arrangements fall foul of Indian law, none of which have yet found traction. ‘If you talk to the Indian corporates, they’re very supportive of deregulation,’ Katwala adds. ‘They perceive it to be easier for them if their lawyers are sitting around the corner.’



Pease says the link with Trilegal makes for ‘a really good sell’ to clients, especially as ‘we are putting them in a position to give the same service clients would get from Allen & Overy all over the world’. Knowledge transfer is a vital part of the arrangement, and indeed is a manifestation of one of the key arguments in favour of opening up – that exposure to the expertise of foreign lawyers will improve the skills of Indian lawyers. The firm has also made it clear that it has no intention of practising Indian law.





Building relationships

More generally, a charm offensive is well under way. Firms have been sponsoring Indian lawyers through the Qualified Lawyers Transfer Test to requalify as solicitors, while earlier this month Allen & Overy organised a two-week course on international financial law at the National Law School of India University, having endowed a professorship last year. ‘There’s no doubt that this is about building reputation and image in the market,’ says Pease, ‘and it has benefits for other foreign firms too. We need to demonstrate good credentials, that we’re here to help and that we won’t just make money and run.’



Last year the Law Society signed a memorandum of understanding with SILF and the Bar Association of India; neither body is a regulator, however, and at the time Bhasin was clear that the tie-up was not linked to liberalisation. There have been other events, such as a SILF seminar on law office management, which included Paul Giles, the chairman of Norton Rose, and Wedlake Bell managing partner Julian Cuppage. Earlier this year the Law Society hosted a reception in London to mark the opening in the capital of FoxMandal Little, one of India’s most prestigious law firms.



Managing partner Som Mandal is a strong supporter of foreign firms’ entry to India, and does not accept that foreign firms will snaffle domestic litigation. ‘Foreign law firms are not interested in litigation, and in that respect the objections of the Bar Council of India and all other bars, lawyers and law firms fail to stand ground,’ he says, arguing that a sufficient safeguard would be to limit foreign firms to practising the law of their home jurisdiction. ‘The availability of foreign lawyers would greatly minimise costs to Indian businesses... We are positive that Indian lawyers will not be scared to face competition once the government decides to open the door.’



Mandal adds: ‘It has to happen – even those who oppose it admit that.’ He reckons that, after a limited liberalisation period, mergers could start happening five to eight years later.



The long-running and intensive lobbying on legal services, led by the Law Society, is clearly starting to have an effect, especially now the UK government has taken an active interest. A spokesman for UK Trade & Investment says: ‘This is an area where we’ve had a lot of contact with the Indian government and it is quite sympathetic.’ Alison Hook, the Law Society’s international director, adds: ‘Although there will inevitably be an appeal to the Supreme Court of whatever judgment comes out of the Bombay High Court, a proper debate has now begun in India on liberalisation as a result of the action taken by the government of India to revive the Lawyers Collective case.’



Hook also had to file an affidavit of her own in the case in an attempt to ‘clarify some misunderstandings’ contained in other affidavits about the rights Indian advocates enjoy in England and Wales, and counter the submission in one of them that the assurances of foreign law firms they will abstain from the practice of Indian law in India are ‘worthless’.



She told the court: ‘No major international law firm would put multi-million-dollar contracts at risk by failing to ensure that they were immune from legal challenge on the grounds of a failure to use properly qualified legal advisers in the jurisdiction concerned.’



The question of reciprocity – the rights that Indian lawyers enjoy to come and practise freely in England and Wales – has always been a tricky one. When liberalisation was being pursued through the World Trade Organisation (now on the backburner), it was in the rules that reciprocity could not be part of the negotiations. But it has been in the background. ‘There was a time, two years ago, when a lack of reciprocity was one of the reasons held out as to why English lawyers shouldn’t be allowed in,’ Popham recalls. ‘It wasn’t true then, but it’s demonstrably not true now.’



There are now four major Indian law firms with offices in London – ALMT Legal, FoxMandal Little, Lexindia and Singhania & Co – and as Tata Group’s recent purchase of Jaguar and Land Rover shows, the work is flowing both ways. Mandal says his new base in the capital is staffed by one partner and two associates – all general corporate/commercial lawyers – aided by former High Court judge Sir Gavin Lightman, who is acting as an adviser. The office offers Indian law advice and is aimed at ‘hand-holding’ Indian companies heading to London, and international players looking to India. In that, FoxMandal Little could find itself competing with City firms, but Mandal says they will just as often be working alongside them.



Toby Greenbury predicts that Tata’s expansion will encourage other Indian companies to follow suit. For firms the size of Mishcon de Reya, he says there is a real opportunity to have an impact at the mid-cap level of companies worth £10-150 million – where, in fact, he believes most of the action will be. ‘[The big firms’] cost base is such that they can’t really make a profit out of £10 million deals,’ he says, observing that Indian companies are still very cost-conscious. ‘They’re likely to think that our fees are high, so what will they make of the magic circle’s?’



Ashurst has been at the heart of the storm over the past 14 years, maintaining its liaison office in New Delhi throughout the Lawyers Collective case. Senior adviser Ian Scott says having ‘eyes and ears’ there has been ‘very useful for us, particularly in the early days when information [such as about government policy] wasn’t as publicly available as it is now’. While, of course, being careful not to practise law, the liaison office’s presence has also helped in making contacts and ‘to ensure advice is received in the required manner and timescale’, he adds.



The irony of all this is that foreign lawyers will be training up a profession that is ripe for massive expansion alongside its clients. ‘Indian lawyers represent a huge challenge to us in the long term,’ says Alex Pease. ‘But at the end of the day you either believe in free trade or you don’t – there are always risks associated with opening up markets, for them letting us in but also for us in sharing our know-how with them. It’s a question of whether you believe that, in doing so, trade increases for the benefit of all. Looking 30 years ahead, Allen & Overy could easily have its headquarters in New Delhi.’



Neil Rose is editorial consultant to the Gazette