Plans to liberalise India’s legal services market met with mixed reaction

Neil Hodge Thursday 4 May 2023

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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