14 May 2012 | By Joanne Harris
21 February 2014
The corridor of uncertainty diminishes following another pro international arbitration judgment from the Indian Supreme Court
2 June 2014
11 June 2014
8 September 2014
9 May 2014
International law firms are having to fight tooth and nail for the right to practise in India
India has been high on foreign firms’ lists of target countries for decades, but has also been a source of frustration. While the global legal market has been steadily opening up to international players - South Korea is the latest to allow foreigners in - India has remained stubbornly closed. And if some of the country’s lawyers got their way, it would become even harder for international firms to do business there.
At present the international firms operate ’India desks’ from their home jurisdictions. When Indian advice is required, they turn to Indian firms; when foreign advice is needed for Indian clients, they pick it up. Naturally, there is a need for lawyers to see clients for both inward and outward deals on the ground, so foreign lawyers ’fly in and fly out’ of India to do so.
But this way of doing business has always been controversial in some quarters of the Indian legal profession. In late 2009 the Bombay High Court ruled against foreign firms in a case brought by a group of Indian advocates, the Lawyers Collective, finding that the foreign firms should not have been allowed to set up liaison offices in India. The ruling led Ashurst to close its Delhi branch and international firms were forced to look for alternative ways of working in India.
However, less than a year after the Bombay decision, a further challenge to foreign law firms was launched, this time in the Madras High Court in Chennai.
The petition, filed by lawyer AK Balaji, asked the Indian government, the Reserve Bank of India and the Bar Council of India (BCI) to “take appropriate action” against a large group of named foreign firms plus “any other foreign law firms or foreign lawyers who are illegally practising the profession of law in India and forbear them from having any legal practice, either on the litigation side or in the field of non-litigation and commercial transactions, in any manner within the territory of India”.
The case took far less time to reach court than the 14 years between the filing of the petition and judgment in Bombay. In February this year Chief Justice Eqbal and Mr Justice Sivagnanam handed down their decision, which clarifies that “fly-in, fly-out” does not contravene India’s Advocates Act 1961.
The petition argued that there was “absolutely no scope” for foreign lawyers to practise law in India under the act or to enrol as advocates with any state bar, thus escaping regulatory oversight in the country. It also suggested that by flying in and out, foreign firms were earning client money while on visitors’ visas and were violating income tax laws.
The petitioner said foreign law firms treated the practice of law as “nothing short of a trade or business, far different from the nobility attributed to it by Indian lawyers”, noting that Indian firms are prohibited from advertising and marketing their services, whereas international firms routinely do so. He argued that even though Indian lawyers are able to practise in the UK and US, doing so incurs a significant cost and time burden.
The foreign law firms named as respondents by the petitioner included all of the magic circle, Ashurst, Eversheds, Norton Rose, Slaughter and May and a large group of US firms, including Arnold & Porter, Covington & Burling, Shearman & Sterling and White & Case. Australia’s Clayton Utz and Freehills were also named.
The firms’ responses to the petition were fairly uniform. All the firms pointed out that they did not have offices in India and did not practise Indian law; nor did they have any intention of practising Indian law. They also noted that, contrary to the petitioner’s claims, it remains fairly straightforward for Indian lawyers to set up representative offices in the UK and US or to requalify as UK solicitors or US attorneys.
The respondents also made the argument that restricting the fly-in, fly-out practice could have a detrimental effect on the Indian economy. Speaking for eight US firms, counsel Abhishek Manu Singhvi said that advising on foreign law was not banned by the Advocates Act.
“According to the learned counsel, by the present writ petition,” said the judgment, “the petitioner wants a ban by way of judicial legislation on the entry of foreign law firms in India, especially when there is no statutory ban in this behalf. This, he states, would have serious consequences on foreign investment in the country in this ever-expanding era of global economy.”
The growing importance of arbitration to India was also discussed by the court. The Indian government has stated that it wants to make India a hub for arbitration, but counsel pointed out that if foreign lawyers were not allowed to come into the country to advise on international issues related to a dispute, the arbitrations would have to go elsewhere.
“We find force in the submission made by the learned counsel appearing for the foreign law firms that if foreign law firms are not allowed to take part in negotiations, for settling up documents and conducting arbitrations in India, it will have a counterproductive effect on the aim of the government to make India a hub of international arbitration,” agreed the judges, who also called this a “far-fetched and dangerous proposition”.
Similarly, the judges agreed that if foreigners were banned from coming into India to advise on their own laws, this would create a “manifestly absurd situation”, as Indian lawyers are trained only in domestic law and not in any foreign law.
Concluding, they dismissed the petition and said there was nothing in Indian legislation preventing international firms from flying in and out, nor anything stopping an outsourcing company such as Integreon, which was named in the petition, from providing non-legal services out of India.
The decision was welcomed by the foreign firms as well as a number of Indian lawyers. Dua Associates partner R Senthil Kumar, who acted for the group of US firms led by White & Case, thinks in principle most Indians accept the practice.
“The bulk of people in law firms who actually have a practice that involves foreign laws are okay with foreign lawyers flying in and out to practise foreign law,” Kumar says.
What’s the problem?
Foreign lawyers agree that to date there have been few issues on the ground in India.
“We’ve not encountered people having difficulties with us being in India on that basis,” reports Herbert Smith executive partner Chris Parsons, who heads the firm’s India group. “On the contrary, we’ve found Indian lawyers to be very welcoming and I hope pleased to see us and others.”
But at the end of April the BCI filed an appeal to the Supreme Court of India. Indian legal news websites reported that the BCI’s counsel, Ardhendumauli Kumar Prasad, said the issues should not have arisen in Madras as they had already been dealt with in Bombay - something that the Madras judges disagreed with. The BCI did not answer The Lawyer’s request for comment on the matter.
Quite how long the case will take to get to appeal is uncertain, with the Indian court system not renowned for being particularly speedy.
Another possible aspect of appeal could come from Clifford Chance, which was grouped in the case alongside Ashurst, Bird & Bird, Clyde & Co, Eversheds and Linklaters. Partner Sumesh Sawhney says the judgment was unclear on whether foreign lawyers are banned from practising non-Indian law in India.
“If that’s the case, we consider it to be unnecessarily and unreasonably restrictive and we believe it would be a misreading of the Advocates Act, which we don’t believe was ever intended to address the question of the practice of non-Indian law,” says Sawhney. “We’re currently considering whether an appeal to get clarity on these points is appropriate.
“What also remains to be addressed by the Indian authorities is the bigger issue of collaboration and partnership between Indian lawyers and international law firms, and of international firms advising on Indian as well as non-Indian law.”
Clasis Law partner Sakate Khaitan says he welcomes the judgment as a clarification of what many firms are already doing. Clasis formed an association with Clyde & Co in April 2011 and has its own London office in the UK firm’s City building. Khaitan himself is based at the UK office and is dual-qualified in India and the UK, but agrees with the Madras judges that Indian lawyers working in India are not in a position to provide foreign advice.
“I don’t know of any Indian lawyer residing in India and practising Indian law who has the ability to advise on UK or US law as proficiently as an international firm,” Khaitan states.
He adds that stopping the fly-in, fly-out practice would not benefit India on a global scale.
“It would be very difficult for a lot of the multinational clients operating in India if the Supreme Court were to stop fly-in, fly-out. Clients would need to travel, making it more expensive for Indian corporates,” Khaitan points out.
While in the short term he thinks it would benefit firms with UK offices, such as Clasis, ALMT Legal and Fox Mandal, ultimately Khaitan, like much of the market, hopes the Supreme Court upholds the Madras judgment.
Road to nowhere?
However, the longer-term goal of an opening-up of the Indian market and permission for international firms to launch offices there still seems a long way off.
“We continue to believe that the removal of restrictive barriers in the Indian legal market will bring direct benefits to the Indian economy and to Indian businesses and bring positive advantages to the profession domestically, and we look forward to a time when the Indian government is ready to take concrete steps in this direction,” says Clifford Chance’s Sawhney optimistically.
Everybody wants to be in India, but a battle continues to be fought over the extent to which foreign lawyers can work there. A recent judgment in the Madras High Court was set to rubber-stamp the practice of flying in to offer foreign advice, but with an appeal pending, what does it mean for international business in this key market?
AK Balaji v The Government of India, Ashurst, White & Case & Ors - the counsel
For the petitioner
ARL Sundaresan, senior counsel, for R Ezhilarasan and N Karthikeyan
For the respondents
The Government of India and the Reserve Bank of India
M Ravindran, additional solicitor general assisted by P Chandrasekaran SCGC
The Bar Council of India
PS Raman, senior counsel for K Venkatakrishnan
The Bar Council of Tamil Nadu
A Navaneethakrishnan, advocate general for SY Masood
PT Asha for Sarvabhauman Associates
Ashurst, Linklaters, Clifford Chance, Eversheds, Clyde & Co and Bird & Bird
Arvind P Datar, senior counsel, and R Muthukumarasamy, senior counsel for M Rishi Kumar
Kelly Drye & Warren
White & Case, WilmerHale, Shearman & Sterling, Hogan & Hartson, Davis Polk & Wardwell, Akin Gump Strauss Hauer & Feld, Paul Weiss Rifkind Wharton & Garrison and Pillsbury Winthrop Shaw Pittman
Abhishek M Singhvi for Dua Associates partner R Senthil Kumar and counsel Rahul Balaji
Wilson Sonsini Goodrich & Rosati, Arnold & Porter, Covington & Burling, Perkins Coie and Mayer Brown
AL Somayaji, senior counsel, for Dua Associates partner R Senthil Kumar and counsel Rahul Balaji
Integreon Managed Solutions
Sriram Panchu, senior counsel for BN Suchindran
Slaughter and May
R Yashod Vardhan, senior counsel for Sundar Narayanan of Kachwaha & Partners Herbert Smith and Norton Rose
R Krishnamoorthy, senior counsel for HSB Partners partner TK Bhaskar
Women Lawyers Association
Freehills and Clayton Utz
Advocate KS Natarajan
Freshfields Bruckhaus Deringer and Loyens & Loeff