Plans to liberalise India’s legal services market met with mixed reaction
In March, the Bar Council of India (BCI) announced tentative plans to liberalise the country’s legal services sector by opening up the market to foreign entrants. This would be facilitated through a ‘fly in and fly out’ basis, to allow foreign lawyers to advise on matters of international and foreign law, with a ban on most services providing advice on Indian law.
Further, the invitation to practise – at least to some degree – would depend on whether there’s a reciprocal arrangement for Indian lawyers and law firms to provide services in the host jurisdiction of those keen to enter the Indian market. Despite these limitations, several major firms have reportedly already expressed an interest in setting up offices in India.
The process to allow foreign lawyers and law firms to practise in India began in 2007, when the BCI began a consultation on the matter. However, the debate on this issue had been ongoing for at least a decade before that.
Paul Marmor, Co-Vice Chair of the IBA Law Firm Management Committee and Head of Litigation at Sherrards Solicitors in London, describes the BCI’s plans as ‘an incredibly important development’ and a ‘seminal moment in time’ that will ‘help put the Indian Bar on a much higher footing on the global map as Indian commercial law firms increasingly look to widen their footprint outside of India to develop their practices’.
However, he adds that opposition from Indian firms is likely to be both strong and vociferous, while the steps that foreign firms will have to undergo to get a licence to practise are likely to be onerous, cumbersome and expensive. ‘I have lived through the noise and chatter of this possibility for the past 20 years but have also experienced […] opposition in India, particularly among local firms involved in the litigation process who feared losing their livelihoods’, says Marmor. Given the level of opposition previously encountered, Marmor is ‘far from certain that this transition of the Indian legal sector will be a smooth and free-flowing process’.
This represents a breakthrough for those looking to develop much stronger links in India from a legal industry perspective
Paul Marmor
Co-Vice Chair, IBA Law Firm Management Committee
While Marmor believes that the announcement represents ‘a breakthrough for those looking to develop much stronger links in India from a legal industry perspective’, he says ‘the Indian legal sector is going to be able to export its offering to a much greater degree, and benefit from this development, given the need for reciprocity’.
Ramesh K Vaidyanathan, Co-Chair of the IBA Asia Pacific Regional Forum and Managing Partner at Indian commercial law firm Advaya Legal, says the BCI’s plans are a step forward and should lead to more cooperation, information sharing and healthy competition, creating better value for clients. The long-term effects of these rules, he says, will depend on how Indian law firms adapt and innovate in response to the challenges and opportunities brought by the changes.
But Vaidyanathan adds that the BCI’s approach ‘doesn't go far enough for a disruptive impact’. While in his view the move gives hope and much needed clarity on the overall regulatory approach towards the entry of foreign law firms in India, ‘foreign lawyers in India can only work on non-litigious matters such as giving legal advice, contract drafting, international arbitrations, and dealing with intellectual property issues’. Vaidyanathan adds that ‘they can’t appear in Indian courts or do other specific tasks like conveyancing or title investigation so they’ll need to partner with Indian lawyers in order to offer a full range of services in India’.
Such entry, he says, is subject to registration and is largely contingent on reciprocity with countries where Indian lawyers are also permitted to practise. This means that only select foreign applicants may be granted entry at the BCI’s discretion after the body considers the impact on the Indian legal market and relations with the applicant’s home country.
‘The rules admittedly aim to make India an attractive location for international commercial arbitrations by allowing foreign clients to have their own lawyers involved’, says Vaidyanathan. ‘Although this is good news for foreign clients, it’s not enough [of a change] for India to compete with other popular seats for arbitrations.’
A result of the proposed changes would be that foreign clients and multinational companies would not be able to choose foreign law firms for work in India unless they have a local presence and proven expertise because they cannot provide complete legal services, Vaidyanathan says. Individual advocates practising in litigation or before Indian authorities, however, are untouched by this development and, believes Vaidyanathan, may in fact benefit from more appointments.
Despite the odds, foreign law firms that opt to independently establish themselves in India ‘are certain to give Indian law firms increased competition, potentially attracting clients willing to pay for top services’, he says. These firms may also seek to hire from the Indian talent pool by offering attractive salaries and job opportunities, raising the overall bar for Indian practitioners. Big Indian law firms, however, ‘would prefer to collaborate or merge instead of compete, which is the most harmonious way forward and the inevitable trend we predict’, says Vaidyanathan.
Stephen Revell, Co-Chair of the IBA Law Firm Management Committee, believes the BCI’s announcement has been ‘massively overhyped’. He says that these plans may never happen given the level of opposition, and adds that ‘allowing foreign law firms into India has been talked about for decades but nothing has ever happened. This latest announcement and the reaction to it does little to suggest that anything actually will – although it is obviously an encouraging move at one level.’
The BCI was contacted by Global Insight for further comment, but had not responded at the time of publication.
Revell says the Society of Indian Law Firms, an umbrella body of top Indian law firms, is likely to contest the move. There are concerns the move would be inconsistent with India’s Advocates Act 1961, which is the legislation that underpins the rules about how lawyers and law firms operate in the country – namely, that only Indian citizens can practise law in India – and the decisions of the Indian Supreme Court. ‘If changes are going to be made, then existing legislation appears to need to be amended, which could take years’, says Revell. ‘If I was a foreign law firm thinking of setting up in India, I’d need much greater clarity about the range of services I can offer, what the impact of “fly in and fly out” would be, how long the licence to practice may last, and when the changes might come into effect.’
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IBA and ICC International Court of Arbitration presidents discuss importance of rule of law
On 9 May at the IE Law School in Madrid, IBA President Almudena Arpón de Mendívil Aldama participated in a ‘fireside chat’ and Q&A session with the President of the ICC International Court of Arbitration, Claudia Salomon. The ICC International Court of Arbitration is the world’s leading arbitral institution. For the past 100 years it has helped to resolve international commercial and investment disputes.
Arpón de Mendívil pointed out illegal and unconstitutional changes and other infractions of the rule of law which needed to be addressed, underlining the benefits that a strengthened justice system can deliver: ‘For every dollar invested in justice, there is a six dollar return benefit in terms of reduced risk of violence. Institutions like the IBA and the ICC [Court] have a very significant duty in terms of bringing awareness to the importance of the rule of law’. She referenced various IBA projects dedicated to championing the rule of law, including by the IBA’s Rule of Law Forum.
During the exchange, the IBA President urged lawyers to take action to prevent a ‘transition from a rule of law to a rule of lawlessness’.
Arpón de Mendívil pointed out illegal and unconstitutional changes and other infractions of the rule of law which needed to be addressed, underlining the benefits that a strengthened justice system can deliver: ‘For every dollar invested in justice, there is a six dollar return benefit in terms of reduced risk of violence. Institutions like the IBA and the ICC [Court] have a very significant duty in terms of bringing awareness to the importance of the rule of law’. She referenced various IBA projects dedicated to championing the rule of law, including by the IBA’s Rule of Law Forum.
Salomon stated that access to justice was at the core of the ICC Court’s mission. ‘We have been unwavering in that purpose and the commitment to provide a global, independent, neutral institution, not tied to any geography, not subject to shifting political winds, where parties have an avenue for recourse.’
Watch the video here
IBA and IFAC announce Memorandum of Understanding
The IBA and the International Federation of Accountants (IFAC) have announced a Memorandum of Understanding (MoU) that formalises and demonstrates a commitment to closer cooperation between the two organisations and the legal and accountancy professions.
This MoU provides a framework for expanding the cooperation between the IBA and IFAC, with a particular focus on anti-corruption and how the professions can work more closely together in the fight against money-laundering and economic crime, with key stakeholders such as the United Nations and Financial Action Task Force. Other areas of cooperation include maintaining the reputations and integrity of the accountancy and legal professions; ensuring that initiatives to regulate both professions are proportionate and fit-for-purpose; and enhancing the strength of the IBA and IFAC’s collective voice on global policy issues so that the legal and accountancy professions are in the best position to serve the public interest.
The MoU builds on the organisations’ previous collaborations which include co-presenting side events at UN anti-corruption conferences. Kevin Dancey, IFAC Chief Executive Officer, remarked: ‘I hope that our relationship, at the global level, inspires and encourages professional accountancy organisations and bar associations to develop stronger bilateral relationships in their jurisdictions to increase their impact in the public interest and achieve shared goals.’ Read more here
New IBA report outlines regulatory frameworks for Fintech in 39 jurisdictions around the world
A new report from the IBA Banking Law Committee (BLC) provides an overview of the regulatory frameworks for financial technology (‘Fintech’) in 39 jurisdictions across Africa, Asia Pacific, Europe, North America and South America. The report, entitled Fintech: how is the world shaping the financial innovation industry?, addresses how different regulators are dealing with the application of technology and innovation to banking and financial services as well as society’s present concerns.
Carlos Maria Melhem, BLC Membership Officer and a partner at Allende & Brea, said: ‘Technology and innovation applied to the banking and financial business have shown a significant positive impact around the world not only in terms of financial inclusion but also in many other aspects critical for the development of countries’.
The report outlines the laws and regulations governing five different aspects of Fintech: financial innovation; cryptoassets; payment service providers and digital wallets; open banking; and special programmes supporting the fintech ecosystem.
Read the report here
Podcast: AI, law and the legal profession
From chatbots to smart assistants to powerful algorithms, AI is everywhere, bringing with it opportunities and potential benefits, but also ethical and practical concerns. The law is crucial in addressing a technology that has the potential to outpace human development. This Global Insight podcast, drawn from a session at the IBA Annual Conference in Miami, examines issues of ethics, liability and applications of AI to the legal profession, as well as the challenges of implementing regulatory frameworks around AI, something for which many prominent players in this area have been advocating.
Professor Lyra Jakuleviciene, Dean of the Faculty of Law at Mykolas Romeris University in Vilnius, considers the benefits of the use of AI in the court system and use of AI as an auxiliary tool rather than for independent, automated decision making.
Diego Muñoz-Tamayo of Muñoz Tamayo & Asociados in Bogotá assesses the role AI can play in everyday disputes and in enabling greater access to justice.
Riccardo Cajola, author of an IBA report on the use of AI as a professional tool, an Officer of the IBA Bar Issues Commission and a partner at Cajola & Associati based in Milan, focuses on issues that lawyers using AI may encounter. These include questions of legal liability when things go wrong.
Finally, Professor Christian Duve, a tech-focused lawyer at Duve Law in Frankfurt, looks at the EU law on artificial intelligence and its broad definitions of AI.
Listen to the podcast here
IBA’s LPRU interviews Marlen Estévez Sanz in new podcast
The IBA’s Legal Policy & Research Unit (LPRU) has published a new podcast, featuring a conversation with Marlen Estévez Sanz, a partner at Spanish law firm RocaJunyent. The interview, led by Beatriz Martínez, a project lawyer with the LPRU, is conducted in the context of the LPRU’s ongoing project on the representation of women in the legal profession, ‘50/50 by 2030’. Four reports have already been published in connection with this project, each focusing on a separate jurisdiction.
Estévez Sanz has had a prolific international career as an expert in dispute resolution. She combines her role as a lawyer with the presidency of Women in a Legal World – an association that she also founded. She has been recognised by a number of publications, including the s: Top 60 Women in the Iberian Legal Sector and Todojuristas.com’s 100 Leading Women in the Legal Sector.
In the interview, Estévez Sanz discusses subjects such as her experience as a woman within the Spanish legal sector; her firm’s commitment to diversity and its relevant policies; and the role of mentors within a legal career. Estévez Sanz also reacts to the findings of the LPRU’s recent report on gender disparity in the law in Spain.
Listen to the podcast here
IBA and Globe publish second edition of law firm governance book
The IBA, in conjunction with Globe Law and Business, has published the second edition of Good Governance in Law Firms: A Strategic Approach to Executive Decision Making and Management Structures.
In this 315-page book, a multidisciplinary team of contributors – led by Norman K Clark, Member of the IBA Law Firm Management Committee Advisory Board – demonstrate how governance has become a unifying and integrating system for a wide range of critical strategic and business issues. The book begins with an overview of how the concept of governance has expanded to include features such as professional managers and partner remuneration systems.
The report outlines trends in areas including employment disputes, corruption and whistleblowing, flexible working, family-friendly policies, diversity, AI and technology, among many others.
With new insights and substantially updated guidance derived from the recent developments and disruptions of the past ten years, this second edition concludes with an examination of emerging trends that will shape law firm governance in the future.
The book is available on the Globe website. There’s a ten per cent discount for IBA members – please use the code IBA23 at the checkout.
China begins legislative reforms after shift in demographics
In early May at a high-level meeting, the Chinese central government placed population and education among its top priorities for the coming years. The meeting’s timing was uncanny – shortly before, the UN had announced that India had officially overtaken China as the world’s most populous country. India’s population is over 1.425 billion, surpassing China for the first time since 1950 when records began. Meanwhile, China’s total population dropped by 850,000 persons in 2022 to 1.42 billion, marking the first such decline in over 60 years. In the same year, China’s national birth rate fell to a record low of 6.77 births for every 1,000 people – among the lowest globally.
This shift in demographics has attracted headlines. But within China, business conversations have yet to focus on the implications. Vincent Qian, Working Group Liaison Officer (China) on the IBA Asia Pacific Regional Forum and a senior partner at Dentons China, says the demographic shift will take place over a long period of time and its effects will take years to manifest. Qian doesn’t believe the shrinking population will have a major impact on China’s economy in the near future, ‘but in the long run, it will definitely have negative effects’.
For example, China’s working age population is at risk of an estimated nine per cent drop over the next ten years, hindering economic growth and creating serious social issues, with less funds available for public services such as pensions and healthcare. It’s also expected to dampen international trade and foreign investment into the country.
However, Qian explains that, right now, the more urgent issues among the legal and business communities are post-Covid economic recovery and job creation. ‘So many migrant workers went to their countryside homes during Covid-19 as factories and businesses were shut down’, explains Qian. ‘What I’m concerned about is how the government and businesses can create jobs for those unemployed workers.’
China’s aging and decreasing population will mean businesses and law firms alike will no longer be able to simply take for granted a ready supply of local talent for their business operations
Caroline Berube
Co-Chair, China Working Group of the IBA Asia Pacific Regional Forum
China’s Central Financial and Economic Affairs Commission has acknowledged the country’s demographic challenges. The government will introduce specific measures this year to incentivise childbirth, such as cutting the associated costs of pregnancy, as well as substantial reductions in childcare and pre-school education fees. The government has also vowed to promote female employment and tackle workplace discrimination against women for having children.
In 2021, amendments were made to China’s Population and Family Planning Act to allow couples to have three children and to increase the amount of maternity and paternity leave for new parents. However, more drastic changes are needed to remove barriers preventing the younger generation from having more children. The major concerns for young people in China are high housing prices, stagnating wages, long working hours, high medical care costs and job discrimination against women.
Inevitably, businesses will face more competition in the recruitment market as the talent pool becomes smaller. Businesses have a commercial incentive to enhance employee welfare and provide equal opportunities and better support for female employees, so that they can attract and retain talent. However, all the trends point towards the costs of operating businesses in China becoming higher. ‘Employers have a responsibility alongside the Chinese government to play their part in supporting employees in the best ways they can’, says Caroline Berube, Co-Chair of the China Working Group of the IBA Asia Pacific Regional Forum and Managing Partner of HJM Asia Law & Co in Guangzhou, China. ‘China’s aging and decreasing population will mean businesses and law firms alike will no longer be able to simply take for granted a ready supply of local talent for their business operations.’
The government must also invest in and improve its aged care system. It’s estimated that those aged over 65 now make up nearly a fifth of China’s population. The UN predicts this percentage will rise to nearly 40 per cent by 2050. The business and legal communities in China have spotted new opportunities. ‘Whilst China’s shrinking and aging population are a concern for businesses and law firms alike, it also creates a market [in assisting and helping] the aging population in the healthcare and mobility sectors, for example’, says Berube.
‘China will still be the world’s first or second most populous country for a long time’, says Gavin Sun, an executive partner at DeHeng Law Offices in Beijing. ‘The size of China’s middle class will continue to expand, so the demand for better services and higher standard of living will increase. There’s still huge potential for businesses, particularly in the services industry, such as healthcare, education, entertainment and sports.’
For the manufacturing sector, which is already struggling to recruit workers, a shrinking population will threaten its future growth. However, under the government’s current five-year plan, the manufacturing sector is undergoing a transition – from a low-cost, low-margin and labour-intensive model to one of higher end, higher margin and higher value-add. Here, foreign investment is encouraged to upgrade China’s industrial and supply chains.
Immigration is another tool governments can utilise to tackle demographic challenges. Nicolas Rollason, Chair of the IBA Immigration and Nationality Law Committee and Head of Immigration at UK law firm Kingsley Napley, explains that China opened up its immigration policy in 2017, albeit relatively quietly, but the take up rate has not been high. ‘Similar to Japan, language is a natural barrier to attracting highly skilled migrants to China’, he says. ‘There may be incentives for more low-skilled immigration, but there needs to be much more on offer to attract high-earning talent who want to start a family and bring up their children in China and stay for the long-term instead of expat employees who will leave after a period of time.’
Rollason adds that the problem won’t be solved by changing the immigration policy alone. ‘It is more to do with how you can attract foreign businesses in China, the commercial incentives, and the geopolitical dynamics’, he says. ‘You need to create an environment in which companies are happy to grow business there and feel their businesses, people and intellectual properties are protected.’
Maintaining a competitive wage is another factor relating to the success of a country’s immigration policy, as Yohsuke Higashi, a partner at Japanese firm Mori Hamada & Matsumoto, highlights. ‘The Japanese government has tried to attract high-level talent from abroad, but it has not been so successful’, he says. ‘One of the reasons is that the pay level in Japan may not be as competitive as US companies or other foreign companies. Although the average monthly salary level has been increasing, as the exchange rate of yen weakens, the pay level is getting lower compared to other countries.’
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