Liberalisation of the Indian Legal Sector
As the world adapts to unprecedented levels of migration, the legal industry must too adapt to the global changes in the legal landscape, according to the Bar Council of India (BCI).
In 10 March 2023 the BCI published its new ‘Rules for the Registration and Regulation of Foreign Lawyers and Foreign Law firms in India’, which included the lifting of the prohibition on foreign lawyers working in India.
Historically, the presence of foreign lawyers and law firms into India was opposed by the BCI and the Government. Discussions started to take place around 2007, with the primary argument against the entry of foreign law firms into India being a potential diversion of business opportunities away from local firms. Other points of contention surrounded the difference in education, training and legal process between Indian and foreign lawyers; large foreign law firms’ potential financial influence on state decision-makers; and the risk of reduced employment opportunities for young Indian lawyers.
The recent decision of the BCI came against the backdrop of the decision made by the Supreme Court of India in Bar Council of India v A.K Balaji, 13 March 2018. In the case, the Bar Council of India appealed judgments of the Madras High Court and the Bombay High Court questioning whether foreign law firms and lawyers were permitted to practise in India.
Numerous foreign law firms and law professionals had begun practising in non-litigious areas of the law in India. Their practice remained outside the purview of the Advocates Act 1961 and their Bar Council of India. As foreign lawyers remained outside the purview of the legislation, they enjoyed various advantages that the Indian lawyers did not.
The Supreme Court disposed of both appeals and set the record straight on how foreign law firms were to be treated by the Bar Council of India.
The Supreme Court in its judgment reiterated the Madras High Court judgment of 2012 which stated that foreign law firms and foreign lawyers cannot practise litigious and non-litigious matters unless they fulfil the requirements of both the Advocates Act 1961 and the Bar Council of India Rules.
However the Madras High Court in its judgment held that there is no bar in the Act, nor in the rules, for foreign lawyers visiting for a temporary period on a fly-in and fly-out basis for the purpose of providing their clients in India with legal advice regarding foreign law or on diverse international legal issues.
Further, the court pointed out that, having regard to the aim and object of international commercial arbitration as stipulated in the Arbitration and Conciliation Act 1996, foreign lawyers cannot be debarred from coming to India and conducting arbitration proceedings in respect of disputes arising out of a contract relating to international commercial arbitration.
The Madras High Court judgment also clarified circumstances surrounding arbitration, where the court confirmed that foreign lawyers cannot be prevented from visiting India and participating in an arbitral proceeding arising out of a contract relating to international commercial arbitration.
The very essence of this rule was based on reciprocity. The Rule also provided that foreign lawyers must be “procured” for their advice in a foreign country by the client.
The entry rules usually restricted foreign lawyers from practising in any forum where evidence is taken under oath, and litigation before courts and tribunals remained off-limits. By virtue of these Regulations, foreign law firms were prevented from having offices in India.
Lifting of the Rules and the Principle of Reciprocity
Following consultation with multiple stakeholders, including the Government of India, Ministry of Law, Ministry of Trade and Commerce and the Bar Councils of all of the States, a decision was made to open the legal industry to foreign lawyers and law firms.
The BCI states that the provision allowing foreign lawyers and law firms entry will function in a restricted manner and clarified that it will not have an adverse impact on workflow to Indian lawyers because of the fundamental principle of reciprocity. In summary, the BCI relies on a reciprocal relationship between Indian lawyers and their foreign counterparts. Primarily, that principle relies on foreign lawyers/law firms providing complementary opportunities to Indian lawyers to advise on local legal matters.
To ensure that ethical and professional standards are upheld, the BCI has implemented specific regulations for foreign law firms operating in the country. These regulations require foreign law firms to register with the BCI, with registration remaining valid for a period of five years, after which firms may renew. Foreign lawyers may only advise on non-litigious matters, such as joint ventures, mergers and acquisitions, transactional and corporate work, drafting of contracts, and similar matters. Foreign law firms or lawyers are not permitted to appear before any courts, tribunals or any other statutory or regulatory authorities. They are prohibited from conducting any work pertaining to conveyancing of property, title investigation or other similar works, and are only allowed to advise their clients on foreign or international law matters located abroad.
This new policy is anticipated to promote beneficial relationships between foreign and Indian lawyers, allowing international businesses investing in India to procure legal advice from their preferred firms. The new regulatory shift is predicted to have a liberalising impact on the legal market in India, leading to increased competition, accessibility to international expertise, and more encouragement for cross-border transactions. Several countries - including Australia, the United States of America, the United Kingdom, and Singapore - which view India as a critical market for legal services, have welcomed the decision. The main objective is to promote increased competition in the legal sector, benefiting both clients and the global economy.
Indian enterprises engaged in international markets or those planning to expand into markets outside of India will now have accessible legal recourse to advice on foreign and cross-border laws on their doorstep. Foreign investors and businesses operating in India, particularly in areas such as infrastructure, energy, manufacturing, and information technology that rely heavily on foreign expertise for innovation and R&D will also benefit from better access to international lawyers and law firms to help them collaborate with international markets through M&As and joint ventures, among other deals.
Indian lawyers and law firms will gain new opportunities to work on international deals and transactions, and gain exposure to global markets and clients, ultimately enhancing their skills and expertise.
These rules will open the flow of foreign direct investment into the legal industry and the potential for India to become a centre for international commercial arbitration. Almost all Indian sectors already have some form of foreign direct investment. It is therefore time for the legal industry to open to funds from other countries, thus creating better opportunities and a world class infrastructure to cater towards alternative dispute resolution similar to LCIA and SIAC.
Multinational companies and other international commercial entities have not previously favoured India as a jurisdiction for international arbitral proceedings because India did not permit parties in arbitration using lawyers from their home country. Jurisdictions such as London, Paris, Singapore or Dubai were therefore the jurisdiction of choice for arbitral proceedings.
The new BCI regulations will promote India as a preferred venue for these international arbitration proceedings, assisting India in its aim of becoming a centre for international commercial arbitration.
The UK, which is home to some of the world’s largest law firms and maintains strong economic ties with India, is particularly interested in improving its strategic relationship with the country and has advocated for increased market opportunities. Given the long-standing economic ties between the two nations, allowing UK law firms to operate in India is expected to enhance this connection further.
Singapore, with a thriving legal sector, has ousted the UK in recent years, gaining market share by serving Indian clients on non-litigious and international commercial arbitration work. Singapore, which is rapidly trying to expand its presence in India, has also welcomed this decision. Allowing foreign law firms to operate in India presents UK law firms with fresh prospects for business and entry into a substantial and growing market.
The new regulations have the potential to transform the Indian legal sector, particularly providing the opportunity for India to become the next hub for arbitration. The entry of foreign lawyers should bring in expertise, knowledge, foreign investments, and technological developments that will enhance the legal sector in India, along with introducing some healthy competition while adhering to the Indian ethical and professional standards, and at the same time provide equal opportunities to work in harmony.