THOUGH most sectors of the Indian economy have been thrown open for foreign direct investment, there are still some segments that do not welcome any foreign investments.

One such is the legal profession, where the regulator, industry bodies and law firms have been vehemently opposed to the idea of foreign law firms — and individual lawyers — setting up operations in India.

But 25 years after India embarked on the path of economic reforms, even the legal profession is reconsidering its strong opposition to the entry of global law firms and lawyers.

Earlier this month, senior officials from five different ministries got together along with officials of the Bar Council of India (BCI) and members of a few other lobbies to decide on this contentious issue. And a few days ago, the BCI finally appeared to have given in to pressures and agreed to the entry of foreign firms and lawyers, but subject to tough conditions.

The BCI drafted new rules, which would enable foreign players to set up shop in India. The Society of Indian Law Firms (Silf), a collective of top corporate law firms, and also a vociferous opponent to the entry of foreign law firms, appears to have softened its position and is willing to allow them to come on board.

But the lawyer’s lobby wants ‘a level playing field’ for Indian law firms and lawyers. This would include allowing Indian firms to advertise and promote their services. Silf has also set up a high-level committee to sort out differences. The society is also keen that the BCI and the government go about bringing changes in a gradual manner, instead of hurrying through with the new law within a few months.

The Bar Council of India finally appeared to have agreed to the entry of foreign firms and lawyers, but subject to tough conditions

The Silf also wants reciprocity agreements to be signed with different governments, to enable Indian lawyers to practice law abroad. The lobby is also opposed to accountancy firms increasingly taking up legal work in India. After the BCI released the draft rules, the Silf expressed opposition to the speed with which the regulator wants foreign firms to enter India.

“The Bar Council has directly jumped to stage three of our proposal,” said Lalit Bhasin, president, SILF. “Internal liberalisation was a pre-condition before opening of the sector.”

The BCI, however, has laid tough conditions for the entry of foreign firms and lawyers. The regulator is willing to allow foreign lawyers to practice in India, or for law firms to set up offices in the country to practice non-Indian law.

All such lawyers and firms have to register with the BCI; registration fees for the foreign entities are pretty stiff: $25,000 for individuals, and a whopping $50,000 for law firms. They would also have to keep security deposits - $40,000 for law firms and $15,000 for individuals.

The BCI has said that foreign lawyers can do non-Indian law transactional legal work and even hire Indian lawyers or get into partnerships with them.

One of the primary reasons for the Indian government to push legal bodies to accept foreign law firms and lawyers was the need to boost India’s ranking in the World Bank’s Ease of Doing Business list. India ranks 130 out of 189 countries.

While the government has succeeded in slashing red-tapism in several industries, foreign investors face a host of challenges in other areas, including getting their grievances addressed in courts.

Legal cases can — and do — drag on for years. And both the central and state governments often contribute to the delays by making appeals to higher courts.

The Narendra Modi government, which has been wooing global investors, wants to change India’s image and project it as an ideal destination for FDI.

Hence the need to improve the Ease of Doing Business rankings.

SEVERAL high-profile cases involving top international firms — including Vodafone — have tarnished India’s reputation as a hub for FDI. But the fact remains that India is today the third-highest recipient of FDI and the government is keenly aware about the need to clean up the system.

Earlier this month, it decided to make Delhi a global hub for international arbitration on the lines of London and Singapore. The government is expected to announce this next month as it wants arbitration cases involving the government or Indian companies to be handled within the country.

At present, many of the arbitration cases between Indian entities and international companies are taken up in Singapore or London. Last year, an international arbitration centre was promoted in Mumbai.

Arbitration is seen as a cost-effective and speedy method to resolve commercial disputes. Last year, the government amended the Arbitration and Conciliation Act, 1996, to ensure that arbitration becomes a preferred mode of settlement of commercial disputes. The government now wants Delhi to emerge as a hub for international commercial arbitration.

The possible entry of international law firms has added excitement to the profession, as many lawyers expect to join these firms at hefty salaries.

The last few months has seen a lot of churning happening, especially in some of the old and traditional law firms. Partners have abandoned the practice, the partnerships have split, new (and younger ones) inducted. The country’s largest law firm, Amarchand Mangaldas Suresh A Shroff & Co split two entities — Cryil Amarchand Mangaldas and Shardul Amarchand Mangaldas.

Veteran lawyers have been poached upon by rivals. Global recruit firms have also joined in the race, helping in hiring the top legal brains for the new international firms that are being setup.

In recent years, India has also emerged as a major hub for legal process outsourcing (LPO). In cities like Bangalore — the IT and technology hub of the country — thousands of lawyers and advisers have already started working for international firms.

Major law firms from the US depend on LPOs in India for a multiplicity of needs — ranging from doing research, drafting contracts, providing patent services — for their clients in the US. They prefer Indian LPOs because of the relatively low-cost of these services.

Published in Dawn, Business & Finance weekly, July 25th, 2016

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