The Indian government has taken an important legislative step toward opening up the country’s legal market to foreign firms. Last month the Indian parliament finally passed a bill allowing the formation of limited liability partnerships.

Originally introduced in January 2006, the bill itself will not liberalise the legal services market. However, assuming the necessary secondary regulations are passed, it will enable Indian law firms to form LLPs with no limit on partner numbers and allow foreign firms to form their own India LLPs.

Ordinary partnerships in India remain limited to a maximum of 20 partners.

In addition, foreign and Indian law firms will be able to form LLPs with a requirement that only one partner be resident in the country.

The international division of the Law Society of England and Wales has been at the forefront of efforts to persuade India to free up its legal services market. Alison Hook, the Society’s head of international, said: ‘There are tax and other issues to be dealt with separately by the Ministry of Finance in order to give effect to the Act. These subsidiary steps could take a further six months, minimum. Nevertheless, an important legislative piece of the jigsaw is in place.’

Hook will travel to India later this month with a trade delegation led by business secretary Lord Mandelson. ‘We will aim to start a conversation with the Indian government about how they will implement the LLP act for lawyers,’ she said.

Alex Pease, head of Allen & Overy’s India Group until 1 January, described the LLP legislation as ‘significant’. However, he warned that full liberalisation is still some way off: ‘This is the beginning of the creation of a legal framework that will allow foreign firms to set up in India, but it would be rash for any foreign firms to imagine that the bill is enough in itself. I am optimistic, but experience has taught me that there are many false dawns in this arena.’