The Poison Capsule: Why The Entry Of Foreign Law Firms Is A Death Warrant Against Indian Legal Fraternity

• The Government and the BCI are making a huge mistake by letting foreign law firms into India. The Indian legal fraternity is yet to overcome radical domestic challenges.

For an easy understanding of the massive downsides of this move on the Indian legal system, it is better to address these concerns in order:

First—Foreign law firms will bring a high-end international standard, a technologically penetrative ecosystem that, as we speak, is growing by leaps and bounds which assists in getting legal solutions that were once unimaginable without human input. [Also, the cost-cutting through less reliance on Associates or Paralegals.] Surely, Indian law firms would not prefer to lag in catching this fastest train of efficiency. Even, the BCI is fully aware of this dimension of “competition”. Ever-growing capabilities of Artificial Intelligence, which has unimaginable horizontal applications across sectors, are already making its presence felt in the legal field. The legal sector is particularly sensitive to such change, as research reports on the subject underlie that high language-efficient models pose a serious challenge to the legal profession. The move of the BCI to allow foreign firms throws the pragmatic adoption of technology by the Indian legal sector out of the window. Now, the suicidal race for a no-human-input ecosystem will have a full takeover. Remember, the ripple of heightened integration will also force the litigating chambers to adopt the style. [Else, they will be perished by obsolescence.]

The consequences will be enormous. India has a huge lawyer base, the BCI vision statement 2011-12 puts the figures of enrolled advocates around 12 lakhs, along with thousands joining the profession each year and mushrooming of colleges providing legal education to mostly middle or lower-class background students. These marginalised lawyers or law students constitute the majority of first generations in law. Unless the BCI aims to assign these working professionals to redundancy, this move and its breathtaking sweep require serious rethinking. If all that requires to be done by lawyers is already in oversupply, what will these young lawyers do?

Second—High-paying clients are the only gods worshipped by law firms. Indian law firms, especially small to medium size, cannot face the challenge of foreign law firms, their brand-appeal to native colonial mindset, the sheer scale of their operation worldwide, and their ability to outspend and out pay their staff lawyer is well beyond the capacity of local Indian firms. Naturally, there will be a race among local lawyers to shift to these firms. Brain drain will logically follow. Apparently, decision-makers have not found it important to protect Indian law firms. Nonetheless, any country especially a developing one cannot risk the slaughter of its nascent law firms which are not yet capable of competing at the global level. Every Government pays due regard to the vulnerability of local industry. In case we forget to do the same for the Indian legal sector, the result will be the unintended total dominance of foreign law firms.

Working in the legal industry is not like finding rocket-science-level engineering solutions. As lawyers understand, their work is to protect the client’s legal interests, in court or outside, to ensure compliance with rules & regulations, and to advise or consult on prospective legal issues. In short, although everything touching our daily lives is someway regulated by law, does not ipso facto means that they have market value for the legal industry. In other words, the law sector is more prone to “market saturation” scenarios than any other industry. A couple of thousands of well-off clientele means the whole earth in the legal world. This along with fewer new opportunities can permanently relegate the local Indian law firms to secondary positions.

Take this example: Out of the 100 biggest law firms in the world in 2021, on a revenue basis, the overwhelming majority, around three-fourths, is dominated by United States-based lawyers, followed by United Kingdom’s and China’s, other nation-lawyers have an almost negligible presence. Of course, these are international law firms that operate across jurisdictions. This example only points out the obvious—even being the second largest economy China does not dominate or mark a dominating presence in the international legal field. The answer lies in the West’s legacy advantage over developing countries. Their institutions have acquired eminence over centuries. Their dominance is a product of their historical hegemony, especially over Asian countries.

These facts show us clearly that the Indian legal sector does not at par vis-à-vis their Western counterparts. A prudent solution demands that India should not open up until its domestic legal sector is ready for global competition. However, that would be another matter, if India wishes to kowtow to foreign hegemony.

Third—On 19/3/2023, the BCI issued a press release titled “True facts about BCI rules regarding entry, rules, and regulations of foreign lawyers and law firms in India” to clarify misgivings or apprehension that “[this decision] is not going to impact at all Advocates practicing in India.] Old wisdom used to say that there is no smoke without fire. These statements are not cast in stone. There is no unending commitment to keep the Indian legal field exclusively reserved for Indian citizens only. The BCI though top authority under the Advocates Act, does not have a final say in the matter. The Central Government will take a call on that. Nonetheless, there is a high possibility that in the future due to the increased monetary prospect of the rising Indian economy foreign law firms might lobby to enter Indian domestic legal activities as well. There is a language connection that works well for British or American law firms or lawyers.

Indian legal system is a colonial heritage of the British Raj. English is the premium language of business of top courts in India. Indian laws are more accessible to English-proficient lawyers than it is to our native language speakers. The British or American lawyers are very good at their native language: English. The BCI cannot, therefore, invoke Japanese, Korean, or Chinese examples to portray these apprehensions as plain misgivings.

Sooner or later, the demand for further opening will come from foreign law firms, as noted earlier foreign Governments want the least restriction on trade in service. There is a mad race to treat every foreign presence as divine. Consider this: what happens if the United Kingdom announces a no holds barred approach to legal services by opening up its markets fully to Indian lawyers and law firms? It will make the BCI restrictions almost impossible to maintain on reciprocity principles. Misgivings are right and the assurance given by the BCI is largely ineffective.

Forth—Reciprocity with other countries sounds like a fine principle but in practice, it has little value. True reciprocity cannot be established overnight. Hardly anyone with mature intellect would imagine a substantial penetration of Indian law firms in Western markets. A report says that the Indian legal market’s worth was 1.4 USD in 2017; this slice is also shared by foreign consultancy firms. Slowly, Indian law firms were making their footprints in international markets. This move’s other disastrous implication has crushed incentives for local Indian law firms to build up capacities. In simple terms, we are inviting behemoths of the West to start working with us; when our hard-working but diminutive workhorses are not allowed to graze in a foreign land. As a result, the behemoths would gain in size; but our horse will die from starvation. From any objective standards, this move clearly demonstrates a lack of intellectual in-depth analysis beforehand. Facts do not support the assumptions of the BCI.

Fifth—As noted earlier, the BCI’s decision endeavours to make India a hub of “international commercial arbitration.” This is a laudable aim. However, is this move, the entry of foreign law firms, going to transform India into a global hub? The plain answer is a big NO. Any acute observer of legal developments would surely pin the problem with Indian arbitration on bold-but-baseless misadventures in the name of genuine litigations; out-of-date arbitration laws vis-à-vis global developments; slow integration of judicial decisions; and hyper-creative judiciary which sometimes dwells way beyond the legal remit. The attitude towards dispute resolution creates the condition of swift arbitration. India lacks such environments; therefore, it is not a global hub of arbitration.

For example to highlight the insufficient attention given by lawmakers, in a recent Supreme Court five-judge bench judgment, it was held that an arbitration agreement without proper stamping is not valid. Justice Joseph wrote for the majority, and by following a textual approach could not find any other solution. Again, this is not the fault of the judiciary to read the law and apply it with full faith; the lawmakers deserve the blame for not making a new act, [the Arbitration and Conciliation Act, 1996] immune to the British-era law, [the Stamp Act 1899]. The recent Amazon-Futrue Group dispute is another example where despite the arbitral arrangements beforehand the matter was litigated up to the hilt before the Supreme Court. The solutions for making India a global will have more to do with the legal system; infrastructure; responsive adjudicatory mechanism. The case of the BCI in its notification falls on this count. At least, more material is required to see the benefits of the entry of foreign law firms but at present, there appears to be none.

Sixth—Inequality runs deep in India. Still, a low-medium income country with significant young demography who are finding it harder day by day to climb the ladders of upward mobility. Premium law education is limited to National Law Universities or other expensive private law colleges. Advent of foreign law firms will demand more from law students, in case they wish to join them. To train young law students in ways of international laws so that they may opt for qualification to practice across jurisdictions is not feasible for any law college which faces a financial crunch to even impart equality education on domestic Indian laws. A student who graduated from a District College law graduate cannot stand on equal footing with a well-groomed top law college graduate. The language gap further highlights this disparity. It is a matter of great dislike, but a bitter reality that the world of top-class corporate law firms is not accessible to lawyers or law students proficient only in their native language. The BCI’s decision has imprinted this silent supremacy of the elite class on the face of the entire Indian legal fraternity going forward.

The dangerous implication of this move will create a two-class system, between haves and have-nots, if materialized, will cut right through the egalitarian conception of the Indian Constitution. The BCI should have worked on this aspect before taking the decision, even if in case persists with this pernicious decision, it must come up with a new education policy for law students across the nation. The policy must make clear what is demanded of law students in today’s age. The aspirational young lawyer or student must not be sat with any disadvantage just because of their financial conditions.

~ Conclusion ~

Words of wisdom come from the strangest of places. “Look at the stars. The Great Kings of the Past look down on us from those stars,” a line from the movie The Lion King. Replace, “the Great Kings”, and put “founding fathers of India and Indian jurists” and you can sum it up all by yourself. Can we justify the move of the BCI as a measure that furthers the cherished goals of our republic? What would Justice Iyer think of the blatant commercialisation of the legal profession under the aegis of Western law firms? Remember the BCI invoked Justice Iyer’s words to pitch its case.

The die is cast. But it is still not too late. For the future of the Indian legal fraternity, the BCI must wipe the slate clean, rescind its notification, and engage ALL stakeholders for wider consultation.