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Globalization and the Indian Legal Fraternity

Written by: Arihant Panagariya - I am a student of Government Law College, Mumbai. I am currently in the third year of the five year course.
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It was the year 1995, three very reputed and established law firms-
White and Case (NYC), Chadbourne & Parke (NYC) and Ashurst Morris Corp (UK) were granted permission to set shop in India under the Foreign Exchange Regulation Act by the Reserve Bank of India. However, it was then challenged in the court by Lawyers Collective, a public interest trust set up by lawyers to provide legal relief and aid. They argued that the term " practise the profession of law " would include not only court visits or giving legal advice , but also drafting legal documents and advising clients on international standards and transactions . The High Court agreed that "it would certainly amount to practise of law " and thus ordered the government to conduct an inquiry. The Foreign law firms then challenged the judgment in the Supreme Court which reverted the case back to the High Court. This is where the proceedings currently lie.

It is the year 2008 now. The opening of the legal market in India has become a very hotly debated topic. There is huge international pressure on the Indian Government to liberalize the legal sector. Even before the liberalization has taken place, Indian law firms are effectively the unofficial suppliers of legal services to those clients of major international law firms which have already entered India through informal tie-ups. Foreign majors such as Allen & Overy, Jones Day and Linklaters have already set afoot in India through client referral tie-ups with Trilegal Partners, P&A Law Offices, and Talwar Thakore & Associates, respectively. These also involve training, consultation, and joint marketing. It was recently reported that even White & Case, Ropes & Gray, Ashurst Morris Corp have already initiated talks with a pool of law firms in the country for possible alliances. This is just the beginning of the influx of the global law majors. It's only a matter of time before the market is opened up and enough for people to realize the benefits and advantages of the foreign law firms.

Before I put forward my case for the foreign law firms, I will discuss something which is very basic. There is a clear distinction between a Barrister and Solicitor abroad, especially in countries like the United Kingdom. A Barrister is the legal representative who can appear in the courts and present the case. A Solicitor is more of a legal advisor to his/her clients in work relating to transactions and domestic or international standards. With this distinction, I move on to the point that there are two marked fields in law. The first is transactional work which includes advising the clients, drafting of legal documents and counselling . This work is done primarily by the city-based law firms which are hired by individuals as well as big corporates. The second field includes pleading and representation in courts . Most of us call it 'litigation'.

India is second only to the US in the number of qualified lawyers at around 600,000 with approximately 75,000 newly qualified lawyers emerging every year. This is an astonishing figure, but what's even more nerve-wracking is that more than 90% of these are into litigation work. This is in sharp contrast to countries abroad where about 15% of the lawyers are into court-related work. As I mentioned the two different fields in law, the foreign law firms have given their assurances to the Indian concerned societies and people that they will only work in the transaction related work. They will not enter the courts and represent their respective clients .Therefore, when the Indian Law firms say that they are averse to the foreign firms, it is still understandable, but when the same concern is shown by the Indian lawyers working in courts, it is not quite justified. The foreign law firms will not hurt them and they will not be under any competition with them.

The Indian Legal Market is the fastest growing market in the world. Also Indian Companies are making cross border transactions like never before. Take the case of Tata which acquired Corus and also major car brands (Jaguar and Land Rover), Daiichi buying out promoter's shareholding in Ranbaxy, and Vodafone's entry in Indian Telecom Market. These are all large scale cross border transactions with a lot of financial complications, challenges in transfer of intellectual property, and other tricky domestic legal ramifications.

This is where the foreign law firms come into the picture. With their vast experience of handling such high profile cases, their supreme command over the subject , the diversity which comes from people from different origins . It is their intense knowledge, their unmatched quality of work which puts them in another league itself. Their offices which are present in more than ten jurisdictions is an example of their expertise and skill.

Foreign Law firms with their unparalleled analytical skills and Indian Firms with their local knowledge will turn out be a remarkable combination. Indian Lawyers can understand and gain knowledge from foreign lawyers. The entry of foreign law firms will give rise to competition in the domestic legal market which in turn will increase the productivity and efficiency of the domestic law firms. They will need to put their best foot forward as they will be pitted against the finest and the most reputed of law firms. This will give rise to professionalism in this line of work. One central concept that forms part of the basis of the free market economic theory of western capitalism is that workers who work hard and play by the rules will be rewarded and will move ahead, and that those who do not, should be allowed to enjoy the fruits of their own poor performance.

Apart from the revolution in work ethics, it also will bring huge changes in the revenue collection generated by the firms. In addition, there will be bags of options for the young law graduates. They can choose to work in the best of the firms and plus will be heavily paid for it. It will give them a chance to become a global lawyer in the true sense. They can stay in India and work for any country-related work. There will be huge income generation for the government with massive foreign investment coming in. Besides, when these global law firms will have their offices in India, the government spending will decline considerably as they will have to pay less than what they used to. Therefore, it will create a win-win situation for both.

I feel the law segment is not sacrosanct. In India, majority of the fields have been opened up. These include the Telecom, IT, Finance, Pharmaceuticals, Auto sector. Say, some foreign companies are doing well in India. We cannot get rid of them just because the countries to which they belong impose certain restrictions on Indian Companies. The issue is whether a certain set of policies will benefit the Indian people.

All these sectors which have opened up have witnessed enormous growth and benefited each and everyone. Likewise, the agriculture sector which has not been opened up is still struggling. We need to liberalize the legal sector to nurture our legal sector and our lawyers. India is where the world wants to be. The legal market provides some exciting opportunities to everyone.

In comparison, other countries are liberalizing their legal market. China, which has a socialist background, is also opening up its legal arena. Korea is also following the trend, keeping itself not too far behind the other countries. Japan is a prime example of opening its market at a snail's pace. It took more than 20 years to fully liberalize its legal sector. India is the only important market without the shadow of the big US and UK firms. It's not necessary to do away with the restrictions in one go. We can do it slowly and surely. What is important is that when it is fully functional, it will do well to the Indian Lawyers in general.

Moreover, India being a signatory to the General Agreement on Trade in Services (GATS) is under an obligation to open up the service sector to member nations and the legal profession is also taken to be one of the services which is included in GATS. The entry of foreign law firms is inevitable. Sooner or later they will enter the market. It's important that the domestic law firms are prepared to take them head on and be ready for the competition.

However, It would not be a pushover for the foreign law firms. There are certain loopholes which need to be filled in before the inescapable happens. Indian Law firms under the Partnership Act, are allowed to have only 20 partners. This makes them incapable to expand their firms and have a presence in markets other than India. The Law firms are not permitted to take any kind of financial support from the banks. Moreover, the Indian Law firms are prohibited to engage in any form of advertising, be it websites, brochures, television. In this case, the foreign law firms will have an upper hand as they are allowed to form Limited Liability Partnerships (LLP's) They have complete freedom in advertising wherever they want and take any financial support in way of bank loans. Due to these aspects, it gives a feeling that the foreign law firms will have an unfair advantage over the Indian law firms.

The Government needs to make some changes in the legislation. It has shown interest in making Limited Liability Partnerships a possibility. There are strong indications that it is also looking into the requests for relaxing the constraints on advertising in the legal profession. If this all works out, it will help in creating a level playing field. It also has to make sure that the principles set by the International Bar Association are followed. Also Bar Exams can be taken like in US or other countries. There is a general feeling that this is a much better solution.

There are certain needs which need to be looked into. Foreign Law firms will make an entry Into the Indian Market sooner or later. I conclude that the foreign law firms will transform the Legal sector and will certainly be a boon for the Indian lawyers.

The author can be reached at: arihantp@legalserviceindia.com / Print This Article

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