Entry of foreign law firms in India: A move that may change the landscape

In India, the legal profession is regulated by the Advocates Act of 1961, which prohibits foreign law firms from practicing law or establishing offices here

Dhanendra Kumar

Dhanendra Kumar

Dhanendra Kumar
In a historic move, reminiscent of 1991 reforms, the Bar Council of India (BCI), on 10th March, issued a notification opening the doors for foreign law firms and lawyers in India, to open offices and practice with restrictions, in non-litigious matters and international arbitration, on the principle of reciprocity.

In India, the legal profession is regulated by the Advocates Act of 1961, which prohibits foreign law firms from practicing law or establishing offices here. Section 47 of the Act mentions reciprocity to allow the same. This legislation, on the pattern of most other countries, was enacted to protect the domestic legal industry and ensure that only Indian lawyers were able to practice law in the country. BCI acts as the regulator.

This is a welcome step with several implications. The notification of 10 March (https://bit.ly/3lMz2Qe) elucidates conditions and detailed background, tracing from the Supreme Court decision in Bar Council of India v. A K Balaji, (2018) 5 SCC 379. This notification spells out the registration of foreign lawyers/firms, regulations, eligibility, removal, disciplinary measures, etc.

To remove any ambiguities, BCI issued clarifications (https://bit.ly/3K52ryB). Altogether, both cover several aspects, (i) foreign lawyers and law firms to advise their clients only on foreign laws and international laws, (ii) render advisory work on those laws only to their foreign clients, (iii) function in non-litigation areas only, (iv) not to appear in any Court, Tribunal, Board, Statutory or Regulatory Authority, (v) entry of foreign lawyers only on reciprocal basis, (vi) foreign lawyers permitted to appear for clients in International Commercial Arbitration.

So, what are the implications? India is the fifth largest economy in the world, the fastest growing globally, and rapidly moving to occupy the third spot behind USA and China. This BCI’s liberalisation would help in facilitating further inflows of FDI and technology. It would help the investors to have greater comfort in having legal advice(s) from their own lawyers, although for appearances in courts and tribunals, they would have to engage local lawyers. Secondly, foreign law firms would be able to work in arbitration matters, facilitating the emergence of India as a major international hub for arbitration like London and Singapore, and likewise enabling Indian lawyers to work in this sphere there, bringing immense opportunities for Indian lawyers. With their new offices in India, there would be a need for local expertise in matters pertaining to transactional and corporate work like joint ventures, mergers and acquisitions, intellectual property, drafting of contracts, etc. This will open new opportunities for young and bright Indian lawyers, and reciprocity will also provide them with experience in the global arena. With the new case-load, there would also be requirements for legal compliance, follow-up, economic analysis, consultancies for ex-regulators, policy advisory etc. Infusion of new technologies like AI, ChatGPT, etc. will also be speeded and modernization brought in everywhere. The legal fees and remuneration may go up, and greater competition and brighter young lawyers may be in high demand. There may also be trends of consolidation of boutique law firms etc. 

If we look at the experience of other countries where it has been opened up, there are several instances. In China, Korea, Japan, and elsewhere opening up legal services have benefitted FDI inflows and the local legal industry too. In Hong Kong, the local alliance is more liberal. It has emerged as a significant legal market for finance, shipping, insurance, real estate and dispute resolution. In Singapore too, now a major global hub for arbitration, firms have several options to access local law practice, including qualifying foreign law practices (QFLPs). The UK has already opened up for Indian lawyers, and it is part of the FTA under finalization. It is also hoped that there would liberalization of visas too.

The global legal services market size was valued at around $1 trillion in 2021 and is expected to grow with a CAGR of 5.3 per cent (https://bit.ly/3z1BzcD). In India also it is estimated to be a multi-billion-dollar industry, with over a million lawyers. Thousands come out every year from nearly two dozen National Law Universities (NLUs) and various centres of excellence, several reminding at times Portia in Shakespeare’s famous ‘Merchant of Venice’ during campus recruitment interviews, and now, foreign law firms will also be trooping in too.

We have seen in many instances that Indian businesses have engaged foreign law firms for their matters. Firms like Allen & Overy, Clifford Chance, Linklaters routinely advise their global clients in mergers & acquisitions (M&A) involving Indian parties. Many global law firms like Wilson Sonsini, SYDLEY Austin of USA, as also Cleary Gottlieb UK USA, and others engage with Indian law firms and former ex-regulators as consultants. Even in the initial years of CCI when enforcement began in 2009 and I happened to be the first Chairman, I could see several legal hawks advising local law firms from behind.

While there has been some reservation in some quarters like the Society of Indian Law Firms (SILF) (https://bit.ly/3zuhBXW), it is expected that the matter will be resolved and settled soon. Everyone realises that competition is good for every sector, and in legal services too we can expect this to benefit everybody. In a lighter vein, there is a story in American legal folklore that in a village if there is one lawyer, he starves. A second lawyer comes in and they start to make some money and when the third lawyer comes to the village, they all get rich. Here the idea is not to hit the livelihood of Indian lawyers, but as experienced in other countries who have opened it, provide newer avenues to young lawyers, help in globalisation of the legal service industry and facilitate foreign investment ride on its wings.
Dhanendra Kumar is formerly Executive Director for India at World Bank and Chairman Competition Commission of India, with inputs from Research Associate Aditya Trivedi and Intern Soujanya Boxy

First Published: Apr 16 2023 | 11:59 AM IST

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