Need for Liberalisation of the Indian Legal Market

Guiding Businesses

Need for Liberalisation of the Indian Legal Market

Globalisation and the opening of the domestic economies by the respective countries have been one of the greatest phenomena of the last few decades. The inclusion of foreign players in the domestic economies has led to a significant economic boost, especially for developing countries. In the year 1990, India, as part of its substantial economic reforms, has opened up its domestic market and liberalised trade practices in the country. Since then, the Indian economy has grown sharply, and a major contributor to this has been the service industry. In view of this, it is fascinating to observe that the Indian legal services market is still a well-regulated market and has refused to accept the changes brought in by liberalisation and globalisation.

The Bar Council of India (BCI) has been reluctant in opening the Indian legal market to international law firms to protect the Indian legal professionals. They fear that it will hamper the prospects of Indian lawyers as they may not be able to compete with the specialised services that would be provided by the foreign firms. However, the demand for India’s legal market has been growing strongly with many foreign and multinational companies investing in India and many Indian companies entering into cross-border transactions with foreign companies. This has put constant pressure on the Indian authorities to open the legal market to international law firms.

2  International agreements and Indian Legislations

2.1  General Agreement on Trade in Services:

India being a member of WTO and a signatory to the General Agreement on Trade in Services (GATS) is under an obligation to liberalise and open its service sector to member countries. Consequently, the legal profession is also taken to be one of the services included under GATS.

2.2  Indian Laws and Regulations:

Legal services in India are largely covered by the Advocates Act 1961, and the Bar Council Rules 1975. BCI is the main regulatory authority for the legal profession. Various provisions for restrictive practices in the legal profession are:

  • According to section 24 of the Advocates Act, 1961, for a person to be eligible for enrollment as an Advocate, he must be a citizen of India, not less than 21 years of age and must have an LLB degree. Thus the act prohibits the foreign nationals from working as legal professionals in India. Moreover, international firms prefer to bring in experts and practitioners from various different countries.
  • Also, a combined reading of section 24, 29 and 33 of the Advocates Act, 1961 provides that only a natural person can practice law in India. This means that no legal service provider can be incorporated as a company and continue the legal practice in India.
  • Section 47 provides for provisions relating to reciprocity; it stipulates that if any country prevents Indian citizens from practicing the profession of law or subjects them to unfair discrimination in that country, then no subject of that country shall be entitled to practice law in India.
  • Furthermore, an Advocate in India cannot enter into a partnership or any other arrangement with a non-advocate. This restricts various foreign firms which provide all kind of services like accounting, taxation, etc. across different jurisdictions.
  • Another restraint in this regard is Rule 36 of the BCI rules which restricts Indian firms to advertise their existence through any form of media. As most international firms have extensive advertisements and websites, this creates an imbalance between Indian and foreign firms.

3  Need for Liberalisation of Indian legal market – Advantages and disadvantages

Historically, liberalisation and globalisation have been extremely beneficial for the Indian economy. Thus there exists a strong case for reciprocating the same in the legal service market as well.

3.1 Advantages of opening a legal market to International law firms

  • Firstly, allowing International firms in the Indian market would lead to increased competition among legal practitioners. This competition would result in improved capacity and quality of services, thereby leading to the growth of the Indian legal market.
  • This will also provide Indian lawyers with the opportunity to work with international fraternity and could lead to more employment opportunities with better pay and working conditions.
  • Apart from the legal professionals, it would also benefit the clients as foreign firms would be willing to provide the best services at minimal costs to attract and build a client base in India. Moreover, for several services, travel costs would be reduced, which would ultimately reduce the cost of services.
  • Since several Indian law firms have established offices in various jurisdictions outside India, it would only be fair to reciprocate the interest by allowing the foreign firms to practice in India.
  • The specialised advisory from foreign firms is required in many cases such as cross border transactions or compliances relating to different jurisdictions. Since foreign firms possess expertise in some areas of law which are not so well developed in India, it would be the interest of all to allow these firms to provide direct service in such cases.
  • With increased cross border deals and outsourcing activities involving both Indian and International clients, it is pertinent to allow both Indian and international firms to work together without restrictions.
  • Allowing foreign firms in the Indian market would consequently have a positive impact on other sectors as well. This could provide more stability for international players to invest in India.
  • Another benefit of allowing foreign firms would be increased professionalism in Indian law practices in comparison to their international counterparts.
  • It is also provided that foreign firms in India won’t hamper the working of Indian lawyers who practice before the court of law in India. These foreign firms would mainly concentrate on corporate or commercial transactional work and avoid functioning as litigators before the court of law in India because of various factors such as language and cultural problems, a dearth of knowledge of the Indian legal system and also the absence of litigating experience in Indian courts.

3.2  Disadvantages of opening legal market to International law firms-

  • The biggest disadvantage associated with opening of Indian legal services market is the possibility of domestic law firms being overshadowed by their foreign counterparts in terms of performance and finances.
  • Since the major foreign firms operate at an extensive level, they predominantly function as business organisations; they could easily swipe up the opportunities for the India legal professionals.
  • These organisations with their size, power and influence may promote the commercial interest of their big-name clients affecting the judicial system.
  • Another concern is the risk of employability of fresh graduates and young legal professionals. Since there is a noticeable gap in legal education and skills in India and some foreign countries, these foreign firms may be more willing to hire individuals from outside India.

4   Suggestions

To implement liberalisation in the Indian legal market, it is important to first try and put the Indian firms on an equal footing with their foreign counterparts to reduce any                 competitive disadvantage between the two. For this, a two-fold approach is required to be adopted according to the author. The first approach provides for opening of                 the legal market for foreign firms in a phased manner, and the second approach deals with the steps to upgrade the practice by Indian firms.

4.1   Phased Manner Approach

The Indian Legal Markets can be opened in a three-phase manner:

  • In the first phase, it is required to liberalise the Indian laws and regulations. The laws restricting the opening of the Indian legal market such as section 24, 29, 33 and 47 of the Advocate Act, 1961 needs to be amended to allow foreign nations to be able to practice in India. Various other rules by the BCI such as the restraint on advertising and limiting the number of partners, etc. need to be removed to encourage international firms to practice freely in India.
  • In the second phase, the entry of foreign firms initially can be restricted by adopting various measures. These measures can include clearly defining the areas of law/ services which can be provided by the foreign firms, maintaining the ratio of foreign to Indian legal professionals in the Indian market and/or granting licences to foreign firms according to the specific market requirements.
  • In the third phase, foreign firms can be allowed to expand their practices in India. This can be done by systematically removing the restrictions on their practice and also allowing them to form joint ventures in India. Harmony should be developed between the Indian firms and their foreign counterparts.

4.2   Recommendations for India legal Practitioners

There are various recommendations for Indian legal practitioners to better compete with International law firms.

  • Professionalism is one of the key factors for practising legal professional. As a part of Indian law firms are family-run organisations, they lack behind in maintaining the same level of professionalism. To develop and compete with foreign firms, Indian firms must improve in this regard.
  • Indian firms should equip themselves with specialised skills as this will help them to differentiate themselves from their foreign counterparts.
  • Indian firms may also merge with their Indian counterparts to balance the economies of scale with global firms. This can help them to compete with foreign firms on economic levels.
  • Indian firms should also invest in developing soft skills and provide skill training to India law students to counter the skill set of international law firms.

Conclusion

India, unlike other common law countries, has not shown many positive signs for liberalising the Indian legal market. The BCI has opted for a protectionist approach due to the fear of the competition from the international law firms. This is based on the belief that the Indian practitioners will not be able to compete with foreign nationals on an equal footing. However, as discussed above, such competition is a welcome change for the overall growth of the Indian legal market. The liberalisation of the legal profession will have many-fold benefits for the industry player, including the clients themselves. The quality of services offered would improve, better career opportunities will be provided to law graduates, clients will have more options at competitive prices, and furthermore, the liberalisation of India legal market will also help India to achieve a global name in the legal profession.

Thus with the ongoing wave of globalisation and liberalisation, it is imperative that the Indian legal profession move on from its protectionist stand and open its legal services market for foreign players. Instead of deliberating on the disadvantages of this approach, it is more sensible to develop and implement measures for the inclusion of foreign firms in the Indian in a systematic manner so that it does not lead to undue disadvantages to the Indian players. Today, the Indian legal profession is highly competitive and is ready to grow along with its foreign counterparts in a globalised world.

 

 

 

About the author: Jalaj Agarwal is a final year student at Symbiosis Law School, Pune. He is an avid reader and often delves into research and academic writing. Pursuing his interests in Intellectual Property law, General Corporate and Banking Law; he has written various research papers and blog articles and is the Senior Editor at an online blog platform. Apart from work he is a community-minded person and can be seen feeding or petting stray dogs and working for animal welfare organizations

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