Foreign law firms and lawyers

The Bar Council of India’s (BCI’s) decision to allow foreign law firms to set up office in India and offer corporate law and merger and acquisition (M&A) services can be seen as a significant step in modernising business in recognition of the increasingly global nature of corporate activities in the country.

What are the new rules?

• The broad contours of the rules allow foreign law firms that register with the BCI to practise on a reciprocal basis, and limited the scope of work to transactional and corporate work, such as M&As, intellectual property matters, and drafting contracts.
• Foreign law firms or lawyers cannot, however, appear for clients in Indian courts, tribunals, or other statutory bodies.
• Given that advisory and contractual work rather than litigation forms the bulk of the corporate legal services anywhere in the world, the latter restriction is unlikely to irk.

Exceptions –

• Interestingly, the BCI’s decision stands against serial legal challenges to the entry of foreign law firms in India and those have been upheld by various courts, with an exception for “fly-in-fly-out” services.
• The latest notification specifies that the principle of reciprocity will not be applicable if a foreign service works on a “fly-in-fly-out” basis to advise an Indian client. The restriction here, however, is that such services cannot establish offices in India and their practice cannot exceed 60 days in any 12-month period.

Challenges –

There are several issues to be sorted out before this rule can be put into practice.

• For one, permissions are contingent on whether Indian lawyers will be permitted similar opportunities to practise in countries from where law firms are coming here. The BCI’s move suggests that such agreements may be imminent in trade agreements currently under negotiation.
• For another, the BCI will need to formulate specific regulations to ensure that foreign lawyers do not stray into Indian legal territory. The experience of Singapore, which has over 150 foreign law firms, suggests that this can be an intensive exercise. Regulators in the island-nation examine time sheets and conduct surprise visits, actions that demand extensive resources and a degree of deep expertise.

Impact –

• Impact of legal industry —
  • • On a wider perspective, the impact on the domestic legal industry is not immediately clear, though most large law firms rule out the kind of consolidation that took place after the entry of foreign accounting firms because of the restrictions on their activities.
    • They suggest instead that a referral system between foreign law firms and Indian litigators may be possible.
    • One point of concern may be an all-round rise in legal fees since foreign law firms will need to attract and retain talent, which could raise transaction costs for small and medium firms.
• Arbitration hub —
  • • The biggest gain from the BCI’s decision could be the emergence — at last — of India as a meaningful destination for arbitration. Although India has several arbitration centres, most foreign corporations tying up with Indian companies or accessing domestic services prefer overseas centres such as Singapore or the UK for arbitration, and this raises transaction costs.
    • The BCI has, in fact, made an explicit reference to this in the introduction to these regulations, stating that “these rules will also help address concerns expressed about [the] flow of foreign direct investment in the country and making India a hub of international commercial arbitration”.

Conclusion –

As such, such moves considerably enhance the ease of doing business in India.

Source – Business Standard

QUESTION – Recently, the Bar Council of India laid out new rules for the foreign law firms and lawyers to operate in India on a limited scale. What are the new rules and discuss the challenges and its impact on India’s legal industry.