Editorial & Opinion

Entry of Foreign Law Firms In India: Are We Finally There?

Entry of Foreign Law Firms In India: Are We Finally There? 1
This article is contributed by Rajesh Begur 
Founder and Managing Partner
ARA Law, Mumbai,  [email protected] 

Entry of foreign law firms (“FLF’s”) in India has been debated ad nauseum for over two decades now! Today the discourse is not as to why we should do it, but how we should do it. I distinctly remember when ARA LAW started its operations in India, way back in 1996, I responded to some of our foreign law firm friends that the legal sector is likely to open up in three years, with an express caveat in the same breath that my answer would be the same if you were to ask me the same question after three years. As predicted way back in 1996, the position is as uncertain as it was then, despite various developments over the last years.

Image result for legal firms

Last year, the Apex Court in Bar Council of India v.  A.K. Balaji and Ors had restricted FLF’s from setting up offices in India and only allowed them to practice on a “fly-in fly-out” basis. The judgment emphatically held that under the Advocates Act 1961, a foreigner is not entitled to “practice profession of law”. It made clear that FLF’s practising law under the guise of different entities was a flagrant violation of the said Act.

Going by the recent trends, I am afraid that the noble legal profession shall soon be infiltrated by the “Munna bhais” masquerading to be qualified lawyers and throwing an open challenge to the entire Indian legal system.On a lighter note, it may not be unforeseeable to witness doctors practicing law as “consultancy” services in near future! Strong regulatory models and anti-abuse provisions are immediately needed in place to govern the following forms of “surrogate law firms” in India:

Indirect presence ofFLF’sin India

It’s a well-known fact that many FLF’s have been providing services to their clients on Indian laws in the form of questionable relationships with the domestic firms. It’s high time that the same are brought within the purview of regulators and strict provisions are put in place to regulate such practices.

Multi-disciplinary practices of Accountancy and Auditing Firms

Multi-disciplinary practices by accounting and auditing firms is not permissible under the Advocates Act, 1961. Undeterred by the express prohibition, enough and more accounting firms are practicing and thriving in India right under the nose of the existing regulators including ICAI, ICSI, etc. It is to be noted that a clear restriction was also placed by the Bar Council of Delhi on 3rd May, 2019 on the four big global audit firms on provision of legal services.

Camouflaged activities of LPOs

It’s been seen that legal process outsourcing (LPO) now a days are not limited to working on “outsourcing” model but are directly providing advisory services to the clients. While I acknowledge that an “LPO” can’t be equated to the corresponding “BPO” model, but strict compliance with the defined scope of permissible activities is must in order to ensure that they do not act as a substitute mechanism for practice of law in India.

Platforms providing legal technology services

Like other fields, legal sector is also fast witnessing an infusion of technology, more significantly for advisory services. While online legal service marketplaces are gaining a foothold for offering cost-effective services to clients, it may be noted that these platforms are operating in a legal vacuum. Systems need to be in place for proper governance and supervision of these legal tech-based services.

One thing which is clearly visible from the abovementioned scenario is that the lack of regard to the “Rule of Law”. Ineffective implementation mechanism are the major reasons for the mushrooming of “Munna bhais” in the legal sector.

Although the concept of Rule of Law is embedded in our Constitution, blatant disregard by the legal fraternity themselves is widely prevalent today there are no consequences of breach or any fear of law. It is a funny paradox that the protectors of law themselves are using the loopholes in law to the best of their personal advantage, with an unacceptable disregard to the “Rule of Law”. What Indian legal fraternity needs today is good governance, which can only be established if Rule of Law is applied across the board and an effective implementation machinery is set up.

Much prior to the entry of FLF’s, the Government (“GoI”) needs to realize that there is a crying need  is to create a level playing field domestically. Set out below are some of the suggestive measures needed to bring out the reform in the domestic market in addition to those above:

1.Proper regulation of alternative business structures which allow non-lawyers to exercise ownership/investment interest in related to legal services;

2.Regulatory framework for governing the use of technology and tech platforms for providing legal services;

3.Proper governance of non-litigious services;

4.Regulatory clarity on availability of LLP structure for providing legal services;

5. Extension of right to advertising and allowing solicitation with proper guidelines;

6. Clarity on scope of services that can be offered by FLF’s in an international arbitration case, and

7. Need for a strong regulatory body, amongst other things.

Interestingly, after opposingthe entry of FLF’s for over two decades, a number of organizations have seemingly agreed to allow the entry of FLF’s  in India. While I concur with the approach, I hope the phases do not act like unnecessary buffers in the smooth entry of FLF’sin the market. Also, it would be imperative for the GoI to ensure that, while implementing the “phased” entry of the FLF’s, its approach is in sync with the interests of mid-sized and small-sized firms (which form the major chunk of the domestic market!) and not only for the advantage of the small group of large and influential corporate law firms.

To sum up, while the GoI’s reaffirmation of its goal of ease of doing business and its pro-liberalization stance on entry of FLF’sis laudable, a methodical process and organized systems for said entry need to be the core concern so as to ensure that the GoI’s vision truly meets its expectations and aspirational needs of approximately 70,000 law graduates every year and 1.2 million registered advocates in the country!

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