Wednesday, June 27, 2007

Liberalisation of the Legal Profession

As most of you are aware, there have been whispers (some loud, others less so) in respect of the impending liberalisation ( primarily meaning permitting foreign lawyers to pratcice in India) of the legal profession in India. Despite innumerable deadlines, most of them imaginary, liberalisation has not happened. It appears that over the last year there has been a signifcant effort by the UK Law Society and the English City Firms, supported by the UK Government to press for the liberalisation of the legal profession. News reports indicate that a joint committee of Indian and UK lawyers are negotiating the terms of the liberalisation under the ageis of the UK-India Trade Comittee.

On the UK side, there has been a significant amount of information available to the public (through press reports, presentations made before the UK parliament, etc ) regarding the reasons for the negotiations and the extent of liberalisation (very shortly, UK firms want to be able to set up on their own without having to enter into joint ventures with Indian firms). Worryingly (but not surprisingly) there has been no concrete information on the Indian side (except a few statements of denial by the Chairman of the Bar Council). I understand that the Commerce Ministry had posted a paper on its website last year, but I have not been able to find that paper. Again from sporadic news reports, I understand that India is represented by the Chairman of Bar Council of India, the vice-chairman of the Bar Association of India and Rajiv Luthra of Luthra & Luthra on the joint committee. I am not aware if there are more people on this committee.

What worries me is the complete lack of public debate in India. There has been no effort (atleast not publicly known) by anyone to study the impact that any such move may have on the vast legal profession. Opinions (ranging from- it will not affect litigating lawyers, it will be great for young lawyers, to it will be disastrous and render many lawyers jobless) vary about the effect, but these opinions are merely based on intuition and hope (or cynicism). For example, no effort has been made to draw lessons from the impact on the accounting profession in India following the entry of the multinational accounting firms. Such a study could through light on the potential impact on the legal profession (though the two professions are not organised in the same manner) if foreign firms are permitted to enter into India. There have been one or two opinions in news papers by chartered accountants warning the legal profession! One of the opinions warns that there has to be internal liberalisation allowing the profession to be better organised and ready for any external competition.

Given the emotions that this issue has raised in the past, I have a feeling that it will be difficult to have a reasoned public debate. It is therefore vulnerable for special interests to influence the outcome, one way or the other. Consequently, I fear that we may be presented with a fait accompli, and then we will have the usual efforts to rationalise whatever has happened. For example, will the bar council regulate foreign firms practicing in India. Will there be different practice rules? Issues like advertising and sharing profits with people other than advocates will become challenging for foreign firms who are not subject to such restrictions.

Also, what is the process for any such liberalisation. It probably requires a modification to the Advocates Act and rules thereunder. Even if the statute is amended, will the bar council be able to make rules given popular emotive opposition?

Based on sources close to the negotiation (this sounds like investigative journalism now) I understand that the Indian negotiators have made proposals which sound ( to me) completely unrealistic and probably constitutionally invalid. One of the proposals is said to have been that only those Indian law firms that have been registered for 10 years should be permitted to enter into joint ventures with foreign law firms (Article 14 anyone?).

Personally, I am not sure if liberalisation is a good thing or not. I have not studied the issue in any detail to decide one way or the other. There will clearly be certain benefits (better training, better organisation, etc) and some burdens.

I hope that some of you will take the time to give some thought to this issue and post comments which will hopefully generate a larger reasoned debate in the country.

10 comments:

Ritwick said...

I'm sure foreign firms will be welcomed by every Indian corporate lawyer - except equity partners of entrenched firms like AZB, Amarchand, JSagar etc. People like the Shroffs, the Luthras, the Duas, the Zia Modys etc. have been lobbying to keep foreign firms out because if foreign firms come in, they'll lose all their MNC clientele. Everyone knows Indian clients pay shitall. For every additional year the foreign firms are kept away, its a few more crores in their bank accounts.

I haven't understood why the common lawyer on the street should have a problem with the entry of MNC firms. It won't make a bit of difference to their lives.

Protima said...

I have a very simplistic (and therefore open to correction!) understanding of this issue. Liberalization of the services sectors is occuring as a part of the obligations that India has under international trade agreements like GATS but the actual process of implementing our obligations will be by way of changes within the regulatory framework existing currently. So any steps that will be taken should be done in a manner that the existing public policies are not ignored, domestic interest and needs are given importance and provisions are made to strengthen domestic business to make them capable of competing with international players. All of this will have to be done in a way that we do not overstep or violate the boundaries of our international obligations, subjecting us to future negotiations and/or complaints. Studying other service sectors where liberalization has already occured and results are there for all to see will be a huge asset, as suggested in the post. I think there is a need for practicing lawyers, legal scholars and public policy interest groups to organize themselves and begin a series of round tables to throw light on what lies ahead on the road to liberalizing the legal regime in India. Each round table can be first conducted at a regional level, and a national body can then convene to study the results of the regional rounds. Needless to say, every effort of this nature will have to involve, or at least invite to be involved, members of the committee that is actually working towards the process of setting up a framework of liberalizing the legal profession.

Aditya Swarup said...

I totally concur when you say that there hasnt been much public debate in this country on this issue. As a law student, I would like such firms to enter the Country.
Now that you have brought up the issue, i hope people start talking about it.

Srinivasan said...

In the context of "liberalisation" of law practice by allowing foreign firms, it is also important to bear in mind the role of legal professionals may predominantly vary from country to country. In an interesting study done in 1969, analyzing the role of legal professionals in India with respect to their counterparts in Western nations, Marc Gallanter argues that the lawyers in India are primarily concerned with the conceptualism, litigation appeals
as opposed to the expansionist view taken by American lawyers by involving themselves in business advise, negotiating, shaping the regulatory environment (before it is put in place)and broad social planning. See Link
It would be interesting to know from practicing lawyers, how far has legal profession changed in India since 1969.

Protima said...

In my limited understand (and therefore one that is open to being corrected) liberalization of the legal system has to take place as a result of the obligations that India has under the multilateral trade treaty, GATS. However the changes that need to be made to make us compliant will mean changes within the national regulatory framework, with a delicate balance of compliance with our international obligations and internal public policy. As suggested in the post, a study in the accounting industry will help assess the parameters within which positive changes should be implemented. But in parallel there needs to be a study within the legal profession to see what changes have taken place in the profession, what needs to be done to strengthen the domestic practice environment to enable an equal competetive scenario with international firms and the most practical way to implement changes that are best suited to the legal environment in India. The practicing, teaching and public policy think tank interests have to organize themselves as soon as possible at a regional and a national level to start series of dialogues on this front. Involving people from the commission will be crucial because they will be able to get a sense of the direction in which they recommendation for changes should be. I know this sounds simplistic, but any change has to take place in a practical manner, and that will not be possible unless there is a smooth flow of information from the legal community to the committee that is implementing/preparing plans to implement the changes.

Raman Jit Singh Chima said...

Hasn't the considerable growth of commercial law firms (ranging from general practice ones such as Amarchand Mangaldass, Luthra & Luthra, Trilegal etc along with the numerous boutique firms) put an end to the idea that the Indian legal professions is solely dominated in the manner that Marc Gallanter found it in 1969? My own personal view is that while the legal profession has dramatically changed thanks to the opening up of the economy in 1991, the Bar Council of India never adapted itself much to these changes, especially the growth of commercial law firms since they don't affect the traditional constituency that the Bar Council has focused on.

Arun Thiruvengadam said...

One scholar who has published recent academic work on the Indian legal profession, focusing in particular on the increasing importance of the corporate law firms in the 1990s, is Oliver Mendelsohn of La Trobe University.

In a recent piece, he focuses on corporate law firms in Mumbai in particular: Oliver Mendelsohn, The Indian Legal Profession, the Courts and Globalisation, South Asia: Journal of South Asian Studies, Vol. 28, no.2, August 2005.

Anonymous said...

Hi Harish,

Regarding the paper published by Commerce Ministry, I have a copy of the same and would be happy to forward it to you. Do let me know your email ID. You can mail me at rishi.gautam@freehills.com

In addition there is an interesting debate going on the website of legalweek. I am sure you would find it interesting. the link to this debate is http://www.legalweek.com/Navigation/27/Articles/1029301/Editor's+Comment+That+passage+to+India.html

Anonymous said...

The owners of Indian law firms ("Owners") have been reported tyo cite the following reasons for supporting their cause of non-opening up of Indian legal sector:

(i) The Indian partnership does not allow expansion beyond 20. So Indian firms suffer a number limitation as opposed to foreign firms.

(ii) advertisements are prohibited. So unfair advantage to foreign firms who wont face such limitation (at least in their home jurisdictions).

(iii) foreign firms have easier (and cheaper) access to capital.

(iv) sharing of revenues with non-advocayes in India is not possible.

Although, I can debunk all of the above four in detail, i am hard pressed for time so will only say that with LLP bill becoming law the first (and biggest) point goes out of window. Advertisement restrictions would equally apply to foreign firms in India and in relation to their Indian practices and the Indian lawyers working with them.

There is no capital requirement for law firms, unless you count computers and office equipment as capital. In any way human beings are the capital for all law firms. Lawyers rather than machines need to be invested into. I rather nod discuss the pathetic low salaries provided to Indian lawyers (until very recently at least). Anyways banks provide loans and the real estate in most cases is a personal property of the family owning the law firm.

Even foreign firms have restrictions on non lawyers being partners. In any way the foreign firms can easily be made subject to such requirements.

The real reason is entirely different. I undertsnad that the take home of Owners (of top firms)is more than even top performing partners of Magic Circle.

Owners are known to prefer a JV model so that they can get the first bite at the cherry and capitalise the profits for themselves. I am also confident that if JV model comes into play, the Owners will advocate a Press Note 18 like provision too!

However, with the recent exodus of Indian lawyers to foreign firms, I wonder how long can Owners be able to sustain practices without quality being affected.

Anonymous said...

Don't you think it makes sense to permit foreign law firms (or firms of accountants) to operate in India only on a reciprocal basis? If the GATS is to mean anything, then lawyers in India should correctly have access to markets in Europe and N. America. I think the expatriate Indian communities are a potentially huge market for existing Indian law firms to service.

That said, it makes sense to examine the process by which the Europeans and N. Americans regulate foreign law firms. Do they have different regulations for international and domestic firms? And so on..

Foreign law firms are coming. With a spineless government (regardless of the political party forming the government) enamoured of all things foreign, it is inevitable.