With the onset of globalisation, legal issues are inevitably emerging from multiple jurisdictions. However, India's desire to liberalise and integrate with the global economy does not correspond with the liberalisation of its legal service sector.
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AS the British politician of Indian descent Rishi Sunak has ascended to 10 Downing Street, London, there are high hopes that negotiations for the long-awaited ambitious India-United Kingdom free trade agreement will be expedited, and an agreement can be reached in the early months of 2023.
As trade in "services" is at the centre of the negotiations, the legal fraternity from the UK, represented by the Law Society of England and Wales, is pushing for the opening up of the Indian legal service sector and the removal of restrictions for foreign lawyers to practise in India. After more than 20 years of economic reforms, it appears ironic that while India's tech service sector has achieved global recognition through liberalisation and become a cornerstone of the country's gross domestic product, the Indian legal service market has remained aloof from the world.
“After more than 20 years of economic reforms, it appears ironic that while India's tech service sector has achieved global recognition through liberalisation and become a cornerstone of the country's gross domestic product, the Indian legal service market has remained aloof from the world.
The reason behind this is the intransigent attitude of the regulating authorities, particularly the Bar Council of India ('BCI'), and their paranoia about exposing Indian lawyers to international competition. This article analyses the state of the Indian legal service sector, and the restrictions inhibiting foreign lawyers and firms from practising in India; it presents a case for its liberalisation in the backdrop of the India-UK free trade agreement.
India shelters one of the largest legal service sectors in the world, with more than 14 lakh registered lawyers across the country. The chief service providers are individual lawyers and small or family-based law firms handling issues concerned with domestic laws. After the introduction of economic liberalisation in the 1990s, foreign direct investment started pouring into India, especially in the service sector. India also became a member of the World Trade Organization, and took up the commitment to end the tariff barrier for trade in services under the General Agreement on Trade in Services.
However, the Indian legal service sector, though a combination of statutory rules and regulations, has been made to remain insulated from economic reforms due to the fear that opening it up will increase competition in the market, and Indian lawyers and firms will not be able to compete against their international counterparts.
The reason behind the imposition of restrictions on advertising by law firms and advocates is the perception of legal services as a "noble profession" rather than a service or business. The judiciary has also endorsed this principle, as Justice V.R. Krishna Iyer remarked in the Supreme Court's judgment in Bar Council of Maharashtra versus M. V. Dabholkar (1975) that, " Law is no trade, briefs no merchandise and so the leaven of commercial competition or procurement should not vulgarise the legal profession." However, over the years, there have been significant changes, and the judiciary has recognized legal services as services and held lawyers accountable to the client in case of their inefficiency.
The chief barrier to the entry of foreign law firms into the country is the Advocates Act, 1961, the principle legislation governing the practice of law in India. Section 29 of the Act states that only advocates recognized under the Act can practise law in India. As per Section 24, to be eligible to be an advocate on the state roll, a person must be a citizen of India and must have obtained a law degree from a BCI-recognised college or university.
“The chief argument of the BCI is that a sizeable majority of Indian lawyers, especially those working in non-metro and subordinate courts, operate in inadequate working conditions; exposing them to foreign competition from more competent international firms and lawyers would be self-destructive. Moreover, there are fears that foreign firms will sway those lawyers whom Indian law firms generally recruit, as they would be able to offer better pay and opportunities to them.
The rule is subjected to an exception that a national of another country may be permitted to practice law if duly qualified citizens of India are allowed to practise law in that other country. Thus, limiting the legal profession to Indian advocates only, the act and other domestic regulations, including the BCI rules, the Indian Partnership Act, 1932, and the Companies Act, 2013 also contain limitations for practising law. These restrictions includes a bar on advertising and soliciting for any purpose, partnership, and fee share, apart from the restriction on the entry of foreign law firms in India.
The Supreme Court, in Bar Council of India versus AK Balaji (2013), observed that law in India includes litigation and non-litigation practice. The court held that the regulatory mechanism under the Advocates Act and the BCI Rules apply to advocates performing non-litigious work as well, that is, advocates not appearing before courts in person and foreign lawyers, in order to practise, have to fulfil statutory requirements. However, the Supreme Court allowed foreign lawyers to make casual visits to India on a "fly in and fly out" basis for advising clients on international and foreign law issues. The validity of this narrow leeway to foreign lawyers and firms is based on the frequency of "fly in and out", and is quite costly.
The question arises why regulatory bodies in India are loath to the idea of the liberalisation of the domestic legal service market and oppose the entry of foreign firms. The chief argument of the BCI is that a sizable majority of Indian lawyers, especially those working in non-metro and subordinate courts, operate in inadequate working conditions; exposing them to foreign competition from more competent international firms and lawyers would be self-destructive. Moreover, there are fears that foreign firms will sway those lawyers whom Indian law firms generally recruit, as they would be able to offer better pay and opportunities to them.
These arguments reflect a dire need to relook at the changed realities in the Indian legal services sector. Today, only a handful of fresh law graduates opt to get enrolled under their state bar councils. More skilled graduates, including those who graduated from premium law colleges like the National Law Universities, are increasingly likely to opt for careers in domestic law firms, or taking jobs as in-house counsel. Opening up of the sector will provide the advantage of free market competition to these fresh law graduates as they will have the option of excellent employment opportunities in specialised areas of expertise, and will lead to improved payrolls and working conditions.
“Even though the interest of the foreign firms' market is profit-oriented, they can be advantageous to the Indian legal fraternity by providing opportunities for knowledge-sharing, augmenting employment options for young lawyers, and providing better and advanced legal services to clients who need advice on the matter of international law.
Further, the objection that Indian lawyers cannot compete against their foreign counterparts undermines the skills and ingenuity displayed by Indian lawyers across the globe as academics and professionals. Indian lawyers who will be recruited in these firms as a consequence of liberalisation will also gain niche expertise in international law practices.
Besides, opening up the sector is highly advantageous for clients seeking cross-border legal services through international law firms. The current "fly in and fly out" model results in immense travel costs that clients have to pay to avail of the services of foreign lawyers flying into India. More often, these clients have to use the intermediary channels of Indian law firms or arrange meetings and client councils in some other countries to avoid criminal sanctions in India. Thus, opening the Indian legal market will not only lead to a drastic reduction in these costs, but also provide them with speedier and easy access to the services of foreign law firms.
It can also be argued that if the Indian legal service sector is liberalised, opportunities which are lost due to the shifting of foreign law firms in countries like Singapore and Hong Kong can return. These countries have liberalised their legal services and receive massive revenue in this sector. Even though the interest of the foreign firms' market is profit-oriented, they can be advantageous to the Indian legal fraternity by providing opportunities for knowledge-sharing, augmenting employment options for young lawyers, and providing better and advanced legal services to clients who need advice on the matter of international law.
Also read: India's global economic engagements
The India-UK FTA talks rekindles the debate surrounding the opening of the Indian legal market, which is undoubtedly beneficial for both clients and legal professionals in India. In light of the contentions against the opening of the Indian legal market, a phased-out liberalisation can be the most plausible option.
Firstly, the bar on advertising placed on advocates and law firms should be removed to provide them freedom to participate in advertising their business and help the consumer make an informed choice with respect to the various services in the market. Secondly, the restriction on the entry of foreign law firms can be eased out in a phased manner, with some restrictions on permitted areas of the law and an Indian-foreign lawyers' ratio to prevent the complete takeover of the Indian legal market. Finally, the restriction on the capability of foreign law firms can be eased entirely.
India must not miss the opportunity to open the legal service sector now as it may lead to losing out on a better infrastructure and knowledge base as well as employment opportunities for millennials who are increasingly opting for law as a career.