Arrival of Foreign Law Firms: An Electric Storm Strikes The Indian Legal Fraternity Overnight

On 10^th March 2023, out of nowhere, the Bar Council of India [BCI], a statutory body tasked with regulating and looking after the “interests” of “Indian” lawyers, gave approval to foreign law firms to establish their shops under their direct management in India.

Soon after the decision, sharp reactions were expressed stressing the obvious ominous consequences that would follow. Those few with keen eyes saw the decision coming for quite some time for they knew it was more a question of when and not if; those with disbelief at the decision did not anticipate the quickness of the action but their assessment was wrong as sometimes big things happen rather suddenly, and there were those who out of childlike joy were fast to embrace the move without fully realising its underlying prospective consequence capable of annihilating centuries old unique Indian legal tradition.

Irrespective of the motive, the BCI has set in motion the most significant change in Indian legal history. The most striking aspect of announcing this move is the absence of any exhaustive wide-open deliberation with relevant stakeholders of the Indian legal fraternity before bringing this massive change. In one go the entire regime governing the role of foreign law firms has come into being.

The damaging prospect of this decision is not only limited to Indian law firms, big or small, as the Societyof Indian Law Firms (SILF) has already expressed its grave apprehensions regarding the decision to the BCI. [At another reported instance, one major practitioner in a leading Indian law firm went so far as to paint a horrifying picture by saying “Indian law firms will be killed.”]

No doubt, the consequences of this move will be far-reaching and will reverberate across the legal profession extending way beyond the upscale offices of law firms; soon the litigation lawyers will also feel the effect of this change. The State Bar Council of Delhi has also come out in opposition to this move asking for a stay of the gazette notification. Under these circumstances, those who are calling for a reversal of the decision deserve our rapt attention.

• The case for opening up to foreign firms as made out by the BCI in the Gazette notification issued on 10/3/2023:—

The decision came in the form of a Gazette notification, under the heading, “Bar Council of India Rules for Registration and Regulation of Foreign Lawyers and Foreign Law Firms in India, 2022.”

Reminding the readers of the noble ends of the legal profession by invoking well-respected Judge of the top Court, V.R. Krishna Iyer, quoting his views, that: “no commercial competition or procurement [should be] associated with the Legal Profession”; [it]…is not treated as a commercial activity or service … Law is not a trade, and briefs no merchandise so the leaven of commercial competition or procurement should not vulgarize the legal profession.” This extract comes from the judgment, Bar Council of Maharastra v. M.V. Dabholkar [1975]; this was a case where the top court came down heavily on the ungraceful solicitation of work by the lawyers. [Quoting the great socialist Justice to boost up the case for the red-carpet welcome of Western law firms was certainly an attempt at dark humour.]

The first part of ten paragraphs of the notification offer both reasons for bringing about these rules and explains why there was such a radical change of hearts of the BCI, which was initially against the entry of foreign law firms in India.

The reasoning of the decisions sounds very familiar; the following platitudes were employed to highlight the radical need to bring such a change. “Globalisation”; the world being a “global village”; “international clients”; “rapid rise in international trade and commerce”; need for “globalization of legal practice and internationalization of the law”; “cross-country business”. In short, due to changes at the international level, an urgent need is manifest to embrace the change by opening up the doors. Globalisation became both the prime reason and implied justification for the move.

Paragraph 4 of the notification gives a detailed explanation of the BCI’s change of position from “[initial] opposition.” To further explain the necessity to bring such a change, as given in paragraphs 5 to 7 of the notification, the BCI referred to consultations with various stakeholders in India and the development of the legal interpretation of legal practice in the decisions of the Madras High Court and Bombay High Court; also including the Supreme Court judgment on the subject.

Particularly, three cases ruled on the legality of works offered by foreign law firms in India.

The first case that touched on the subject was the Bombay High Court judgment [Lawyers Collective case (2009)], the court confined itself to the legality of the Reserve Bank’s approval to foreign law firms to establish a place of business for liaison work in India, and its interplay with the Advocates Act, 1961, [“the Act”]. The court after detailed consideration junked the approvals granted by the Reserve Bank and held that the Act or the BCI rules do not allow any person not qualified, under the Act, to provide services relating to law. Even if, as contended by the foreign law firms, the services so provided are singularly related to non-litigation matters. The court viewed the “practice of law” means and includes litigation works as well as non-litigation, solicitation or any other related works. As a result, the attempts of foreign law firms to set their foot in direct fashion were nixed.

The second one came a few years later; the Madras High Court [Balaji case (2012)] took the case at the instance of a writ petitioner who found foreign law firms were illegally practicing law in India. The Court held on a similar line as the Bombay High Court that the scheme of the Act debars foreign law firms or lawyers to engage in non-litigation work unless the Act or the BCI rules make provisions for allowing their work. The Madras High Court did not find any objection to limited counselling on foreign law on fly in and out basis. Foreign law firms and lawyers, according to the court, could certainly assist by participating in arbitrational disputes that is concerned with international agreements. Furthermore, the court held that the pragmatic interest of the Business Process Outsourcing [BPO] industry does not fall under the scope of the act.

In the third case, both the above judgments were challenged under the appeal to the Supreme Court, [State Bar Council v. A.K. Balaji (2018)]. With slight modification to the Madras High Court decision, the Supreme Court upheld both decisions. The Supreme Court threw the ball in the court of the Central Government and the BCI to come out with rules to approve the work of foreign law firms in India. Concluding paragraphs of the Judgment show that the Court construed the prevailing fly in and out, BPO, and international arbitration practices in a tight manner. So, as the court said, Bar Council of India or the Union of India are at liberty to frame rules in this regard, unless, the Government or the BCI acted, they eventually did by the notification the doors were pretty much shut on the foreign law firms.

The BCI notification seeks to cast this liberty as an absolute command. Humble readers would beg to disagree.

Be that as it may. After mentioning these judgments and other cases, the BCI in Paragraph 8 of the notification, comments on the situation as exists between India and the United Kingdom, the ongoing negotiations over the modalities for close cooperation on legal services. As stated, there are some general freedoms for Indian lawyers to practice in the United Kingdom, but also some stringent conditions are in place as well.

The most pressing case is made in Paragraph 9, by stating:

… the legal fraternity in India is not likely to suffer any disadvantage in case law practice in India is opened up to foreign lawyers in a restricted and well controlled and regulated manner on the principle of reciprocity as it would be mutually beneficial for lawyers from India and abroad and these Rules are an attempt by Bar Council of India in this direction. These rules will also help to address the concerns expressed about flow of Foreign Direct Investment in the country and making India a hub of International Commercial Arbitration. In case, we sleep over the matter, the legal fraternity of India may be left behind in providing legal/professional expertise in accordance to the rule of law in a manner consistent with the best interests of this fast growing class of clients in India. Let us ensure than an opportunity for creating development and growth for legal profession and in the legal sphere in India is not lost. Many countries have already allowed the foreign lawyers to practice foreign law and diverse international legal issues and arbitration matters in their countries in restricted fields with specific and prescribed conditions.

A cursory glance at rules brought into force by the notification: After making such a passionate case of urgency, the BCI lays out the Rules as the framework under which the foreign law firms will operate in India. Especially Rule number 8 and 9, these two, form the extent to which foreign law firms would be allowed to practice in India. The firms are restricted to practice in non-litigious areas. Their appearance before the any Indian court is barred. Their major work is limited to foreign laws or international laws and appearing for their clients in international commercial arbitration. The rest of the rules explain the registration framework for foreign law firms, [Rules 3-7], other rules make the BCI the sole watchdog in matters of any impropriety relating to foreign law firms, also with the power to inflict penalty if any discipline is breached. [Rules 10-12]

It is rather peculiar when one reads the notification, that preconditions as to minimum years of experience or practice requirements are notably missing. Also, there is no requirement of employing Indian lawyers percentage-wise or in any other way to do the legal work of the firm registered under the rules.

Nonetheless, foreign firms are here, and they have started making their moves by opening offices and making partnerships.