Once bitten twice shy – has their experience in the ’90s made US firms overly cautious?
US firms are in danger of being shut out of the burgeoning Indian market following a series of strategic alliances between some of the UK’s top firms and local Indian leaders.
Over the past year the race to secure a deal with a top Indian firm has kicked into a higher gear. In January Clifford Chance formed a best friends relationship with Indian firm AZB & Partners, while last month both Lovells and Clyde & Co broke into the market via formal alliances with Indian firms Phoenix Legal and ALMT Legal respectively.
The trend is expected to continue in the second half of 2009. “I think there’ll be five or six more alliances struck before December,” predicts ALMT partner Sameer Tapia.
But so far US firms have been all but invisible. Although several of the US’s leading international firms are active in the Indian market, they have been conspicuous by their absence from these deals. And with the Indian market on the cusp of liberalisation, there is a risk that US firms will be left behind in the race for prominence in the subcontinent.
“UK firms have been more active this time than the last time around,” agrees Chadbourne & Parke Washington DC-based partner Rohit Chaudhry, who heads the firm’s India practice.
When Chaudhry says “the last time around” he is referring to the early 1990s, the last time that international firms made a serious play for the Indian market. Chadbourne, White & Case and Ashurst all opened offices, kicking off a dispute with the local bar that is still ongoing. The experience of being burned so badly almost two decades ago still resonates in the US market and may be one of the factors contributing to the lack of appetite for a return to India.
Another major factor has an even longer history. “It’s fair to say that the majority of Indian lawyers feel a cultural affinity with the UK,” says Lovells Asia and Middle East head Crispin Rapinet. “That’s partly because of the colonial past, but particularly because the Indian legal system is derived from the English legal system. It’s a competitive advantage.”
Rather than form alliances, most US firms, such as Chadbourne, have preferred to work with a range of Indian firms, although a notable exception is Jones Day, which has a link with P&A Associates.
“There are enough law firms that don’t have alliances to work with on deals,” says Chaudhry. “I don’t think we’d form an alliance just because others are doing it.”
That said, Chaudhry concedes that the level of referrals it receives from those firms it has worked with in the past which now have alliances with UK outfits, including AZB, has “slowed down”.
That should be a worrying sign for the top US firms, but so far they remain bullish.
“Skadden [Arps Slate Meagher & Flom] views India as an extremely important growth market for the forseeable future,” says Skadden partner Michael Gisser. “We’ve been building client relationships there for more than 15 years. Rajeev Duggal, formerly with Citigroup in Asia, has recently joined us to head our Singapore office with a strong focus on India. In addition, many lawyers in the US and Europe spend a significant amount of time on Indian matters.”
Gisser says Skadden’s role in India will continue to be as international counsel, working with the leading local firms.
“We’re not developing plans for an Indian office now, although we’re closely monitoring regulatory developments,” he adds.
No one knows how quickly that regulatory position will change – the joke remains that full liberalisation is two years away. But by the time it does happen – and most observers believe it is indeed only a matter of time – it will be UK firms that are in pole position.
“US firms have lost a lot of visibility in the Indian market and arguably squandered the lead they once had over their UK counterparts in the 1990s,” argues Kian Ganz, editor of Indian legal market website Legallyindia.com. “Although many international US firms have large India practice groups and continue advising on transactions here, UK firms have made far more visible inroads by building relationships with firms on the ground.”