Two-year itch

The entry of foreign firms into India has become a saga of classical proportions. And as Kian Ganz finds, it is one that is
set to run and run


Dani Gaura
Dani Gaura

Last December the Bombay High Court ruled against Ashurst, Chadbourne & Parke and White & Case in the Lawyers Collective case, restating that foreign lawyers are not ­permitted to practise in India.

Ashurst had to close its liaison office in Delhi, but with the case finally off the court books business continued as usual for ­foreign firms for the most part.

But only three months later, in March this year, a petition hit the High Court in the southern Indian city of Chennai and again put international practices on tenterhooks.

The case, filed by a local advocate, accused 31 foreign firms of still operating illegally in India. The list of respondents includes all four UK magic circle firms as well as top US and international players, plus legal process outsourcing (LPO) company Integreon, which built and is operating Clifford Chance’s legal offshoring centre near ­Gurgaon.

The case is currently limping its way through the Madras High Court, attracting only modest political interest.

This is on top of the seemingly ambivalent attitude of India’s law minister Veerappa Moily towards the issue. The mantra that the Indian legal market will liberalise ’in two years’ has become a familiar joke ­repeated by every jaded foreign lawyer in India. Yet there is plenty of optimism too, with many players having an interest in ­liberalisation.

The politicians

As the regulator of all Indian lawyers, the Bar Council of India (BCI) has considerable symbolic power to allow foreign firms into the country. But the intentions of new BCI chair Gopal Subramanium are hard to read.

He is also the country’s solicitor general and quite different from the usual BCI semi-political animal, having been invited to take the chairmanship as an ex officio member.

Since taking the tiller in April Subramanium has not been afraid to rock the boat or shake things up in the name of reform; but even if he had the will to let foreign law firms into the country – and there is scant evidence that he does – he would probably face a tough time pushing it through.

On top of that, a statutory amendment of the Advocates Act 1961 would probably ­ultimately be necessary to liberalise the market in a meaningful way.

The Law Ministry’s support is therefore vital, although even under the generally progressive leadership of Moily there are few votes in allowing foreigners in to ­practise law. It is also unclear how long it would take a redrafted Advocates Act to clear the legislature.

The legal fraternity

The opinion among the Indian legal ­fraternity generally is that most litigators do not have much to fear from liberalisation.

True, imagining a foreign law firm eking out a living in district and higher courts, or competing with the giants of the Indian bar at the Supreme Court, is an unlikely ­scenario for anyone who has had first-hand dealings with the judicial infrastructure in India; and if liberalisation were to happen it is likely that the government would not allow ­foreigners to litigate anyway.

Nevertheless, the generally unquestioned consensus of litigators is that foreign firms will not be good for the bar. In fact, in the early 1990s, when foreign firms first approached India ­seriously in various ­guises, it was Delhi litigators who marched on parliament en masse and demanded that the government intervene.

If anything, senior Indian law firm ­partners are the ones who have the least to gain from allowing foreign law firms access to the market, and that is understandable. Many successful and large Indian law firms are still effectively near sole ­proprietorships and business is going well. Why invite ­someone in who will make your life more difficult if you do not have to?

“My only fear is that these guys could offer a lot of money and destabilise us ­temporarily, as they did when they hired people for the UK market [several years ago]”, says one senior partner at an Indian firm. “But I think eventually they will not succeed in the ­market.”

The Society of Indian Law Firms (Silf) is one of the main voices speaking out against the entry of foreign law firms and the only body representing law firms in India. It was founded, in part, to protect the interests of law firm owners in the country and part of its remit specifically includes opposing ­liberalisation of the market.

Yet not everyone is happy about its ­existence.

“When Silf was started up we didn’t all agree with why it was created,” recalls one law firm partner in the ’pro’ camp.

Brothers Cyril and Shardul Shroff, who jointly run India’s largest firm Amarchand & Mangaldas & Suresh A Shroff & Co, have been highly influential opponents of letting foreign firms in. They argue that domestic firms need more time to modernise, although they accept that foreign firms’ entry is inevitable eventually.

Luthra & Luthra founder and managing partner Rajiv Luthra, on the other hand, says that liberalisation is an eventuality, as India is a signatory to the General ­Agreement on Trade in Service (Gats), meaning Indian legal services will ­ultimately become global.

“But the laws and rules that we currently have tie our hands behind our backs,” he adds. “Our rules should be on a par with the rest of the world’s so we get a level playing field, and only then open up the market.”

Silf chairman Lalit Bhasin, who also heads law firm Bhasin & Co, is easily the most outspoken anti-liberalisation lawyer in India.

“We had a meeting with the law ­minister on this issue recently and everyone spoke with one voice – all the leading ­representatives of law firms were present,” he says.

The truth is, though, that while Silf ­officially numbers more than 80 law firm members, a small number normally ­dominate proceedings. Those fully in favour of liberalisation have only a few avenues open to them.

“When we raise [liberalisation] at Silf it seems from time to time that we’re in ­something of a minority, or at least in a minority of the people at the meetings,” says one member of the organisation who is in favour of foreign firms entering India.

Only Trilegal, which has a best friend relationship with Allen & Overy (A&O), has backed liberalisation.

“It and FoxMandal Little used to speak out,” one partner recalls.

No way in

As managing partner of FoxMandal, Som Mandal was for a long while the unofficial spokesperson of the liberalisation ­proponents in the Indian profession. He had a strong relationship with former law minister ­Hansraj Bhardwaj, who was ­himself slowly turned into a supporter of the entry of ­foreign law firms.

“I think FoxMandal made every possible attempt to bring about ­[liberalisation], and nearly got it,” says one Indian managing partner.
But since the change in government in May 2009 Mandal has been conspicuously quiet and has not responded to repeated recent calls and emails requesting his views on the subject.

This is perhaps symptomatic of a ­widespread apathy and sense of futility on the part of the reformists.

“Even an internal view that might exist within Silf is stifled,” says one strongly pro-liberalisation partner. “There’s no organisation other than Silf that can speak on behalf of law firms, and none of us busy lawyers have the time to set up anything like that.

“When the choice is to go out and service a client or set about a political lobbying exercise [in favour of foreign law firms], the decision clearly has to be to do the client’s work.”

Trilegal partner Anand Prasad has a ­similar outlook. “We’d like to see the Indian legal market open up at the earliest ­opportunity,” he says. “But we’re really not doing much about it – there’s no formal process we can participate in, so the ­decision-making process isn’t clear.”

Keep on knocking

Even someone such as AZB & Partners founding partner Zia Mody, who was the leading engineer of the firm’s best friend relationship with Clifford Chance late in 2008, is only “very softly pro”, in the words of one Indian lawyer.

One reason that Mody is not on a soapbox or campaigning could be a fear of drawing the ire of the anti-liberalisation lobby, although AZB co-founding partner Bahram Vakil is more outspoken.

“I’ve always been pro, but I’ve been in a tiny minority in this,” he says, adding that he represented White & Case more than 10 years ago when the Lawyers Collective case first caused a storm.

Generally speaking, the new generation of law firm owners tends to be in favour of ­letting in the foreigners.

Induslaw’s founding partner Gaurav Dani, for example, believes strongly that foreign firms should be allowed in.

“It will provide us with good, healthy competition, which will help us improve our systems,” he says. “It will do something similar to what ­happened in the accountancy profession, and the reality is that ­foreign firms are ­needed because of the ­current dominance of four or five firms in our market.

“The future for the Indian legal sector is firms that are institutional rather than ­family-run – and the market’s big enough to take it.”

For everyone sitting on the Indian side of the Advocates Act this will be a reason to smile. For those abroad, it might still elicit a tear or two.

And in the absence of a new player or script, the situation could remain this way for a lot longer than the fabled two years.

Kian Ganz is publishing editor of LegallyIndia.com