Abhay Mahajan, 5th Year student of Amity Law School, affiliated to GGSIPU, Delhi
ABSTRACT
Cross-border transactions in India are of recent vintage as they began in right earnest only since its economy was opened up in 1991. While the initial thrust was by way of inbound acquisitions by foreign companies, the later period witnessed frenetic activity by Indian companies engaging in outbound acquisitions. The goal of this paper is to analyze through qualitative methods and interview-based evidence the impact of globalization on the Indian legal profession.
This paper finds that the Indian legal profession has undergone a major shift within the span of two decades. Through constant interaction with international law firms and international clientele, there has been a transfer of knowledge, systems and practices to Indian law firms, such that they are able to undertake a larger role in cross-border transactions. The boundaries between international law firms and Indian law firms in this space are being redrawn on an ongoing basis.
However, the Indian legal profession also faces crucial challenges that need to be addressed before it can fully benefit from the effects of globalization. The lawyers’ role is shifting from that of a legal technician to one of a “trusted advisor” with commercial flair and managerial skills to effectively handhold the client during the deal-making process. Given that cross-border transactional practice is relatively recent in India, this study finds the lack of widespread availability of these skills and the required sophistication within the corporate legal profession in India, which generates significant pressure on star lawyers. From a normative perspective, this paper finds a greater need for policy reforms that would grow the cross-border market in India, and for rapid institutionalization of India’s corporate legal profession.
Introduction
India has the world’s second largest legal profession with more than 600,000 lawyers. The predominant service suppliers are singular attorneys, family based partnership firms. Most of the firms are involved in the issues of domestic law and majority work under country’s adversarial litigation system. The origination of legal services as a ‘noble profession’ instead of services brought about formulation of stringent and prohibitive regulatory machinery. These regulations have been legitimized on the grounds of public policy and ‘dignity of profession’. The judiciary has strengthened these standards, which can be reflected in observation of Justice Krishna Iyer as follows, Law is not a trade, not briefs, not merchandise, and so the heaven of commercial competition should not vulgarize the legal profession. However throughout the years courts have perceived ‘Legal Service’ as a ‘service’ rendered to the consumers and have considered that lawyers are responsible to the customers in the instances of deficiency of services. In the case of Srinath v. Union of India ((AIR 1996 Mad 427))Madras High Court held that, in view of Sec. 3 ((Section 3- Act not in derogation of any other law.—the provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force))of Consumer Protection Act, 1986, consumer redressal forums have jurisdiction to deal with claims against Advocates. Sec. 2 (U) of Competition Act, 2002 defines the term ‘Service’ along the lines of Consumer Protection Act, 1986. Along these lines it might be inferred that legal services are getting to be subject of trade related laws where consumerism and market forces should be given adequate space.
The Indian legal system has experienced a huge change lately. The enthusiasm of foreign law firms to open shop in India is in this manner, hardly surprising. Introduction to foreign law firms must be favorable and we as a country stand to gain immensely from the resulting arrangement.
These new Law Firms primarily engage and loan instrument, writing infrastructural contracts, power contract, drafting of project finance, contracts, finalizing transnational investment, joint venture and technology transfer contracts. This is discerning shift in the disposition of emerging legal sectors towards settling disputes through ADRs rather adversarial litigation mode of dispute resolution Globalization has thus expanded the internal and external demand for legal services. Today in legal services is on inevitable fact. At the same time significant for progressive development of legal profession in India in this era of Globalization.
Globalization brought about a revolution in international trade with increasing participation and involvement of countries & greater access to domestic economies. The implication of the same on the legal service sector has been both quantitative and subjective. The previous decade has been mini-revolution in legal service sector with the best legal impact on corporate legal arena. Activities in project financing, intellectual property protection, environmental protection, competition law, corporate taxation, infrastructure contract, corporate governance and investment law were practically obscure before 90’s. Numbers of law firms fit for managing such work were not many. It is apparent that need of professional service has been tremendous in the legal service sector. In most recent years Law Firms, in house firms and individual lawyers expertise in providing legal services in corporate part has expanded by a few times. These new Law Firms basically engage and loan instrument, writing infrastructural contracts, power contract, drafting of project finance, contracts, finalizing transnational investment, joint venture and technology transfer contracts. This is perceiving movement in the disposition of emerging legal sectors towards settling disputes through ADR. Globalization has therefore extended the inward and outer demand for legal services. Today in legal services is on inescapable truth. At the same time significant for dynamic advancement of legal profession in India in this era of Globalization.
A spectre of liberalisation is haunting the Indian legal fraternity. As we have entered the year 2008, intense changes have been compelled to be achieved in the legal fraternity by opening up the business sector for the passage of foreign law firms and legal counselors into India. There is an apprehension swarming the legal community from the time in 1994 when the General Agreement on Trade in Services (GATS) incorporated the recommendation of opening up transnational markets in legal services.
It is regularly declared that India can possibly get to be one of the world’s great legal centers in the 21st century, close by London and New York. It has innate advantages in its common law traditions and English language capability. On the other hand, until as of late India had not perceived the part that advisory legal services have to play in attracting foreign investment and developing a broader-based services economy.
Legal Service Sector
The term legal service division is totally, distinctive sort of service when contrasted with software programming, medical practice or other professional services. In spite of the fact that its traditional base is derived not only from statutes and the existence of statutory bodies but also from conservative and traditional mindset that inhibit development of cross border services supply. Indeed, even all around the world legal services sector is fundamentally shackled by jurisdictional limitations such of the necessity for a degree from the nation where the service is to be imparted.. Some local considerations apply just to specific parts of legal service and not to others. Where the local considerations are essential they must be protected and special cases made, just for worldwide business sector access. Thus on the one hand there is the need to be part of a global fraternity and to make beneficial commitments that promote trade in services and on the other hand there is need to preserve national interest.
Foundation of Globalized Legal Services
India being a signatory to the General Agreement on Trade in Services (GATS) which is an organ of the World Trade Organization (WTO) is under a commitment to open up the service sector to member nations. There are 12 sectors classified by GATS for which commitments may be made one of them is Business Services. Business Services is further divided into 6 types of services, which include professional services. The Professional service sector further divided into 11 services, which include Legal Services. India has made only specific commitments in relating to engineering services. India has made no commitments in the legal services sector at present. These commitments will bring Trade in the legal services which will play crucial role benefiting consumers countrywide.
‘Services’ would incorporate any service in any sector with the exception of service supplied in the exercise of governmental authorities as defined in GATS. “A service supplied in the exercise of governmental authorities” is likewise characterized to mean any service that is supplied neither on a commercial basis nor in competition with one or more service suppliers.
Legal profession is likewise taken to be one of the services which is incorporated into GATS. With the liberalization and globalization approach followed in India, multinationals and foreign corporations are progressively entering India. Foreign financial institutions and business concerns are additionally entering India in a genuinely substantial number. Their business exchanges in India are clearly administered by the Indian law and foreign law firms (FLF’s) and foreign legal consultants (FLC’s) being not completely familiar with the Indian enactment require the help of require the assistance of lawyers enrolled and practicing in India. This has prompted the thought of entry of foreign legal consultants and liberalization of legal practices in India with regards to the rules advanced by the International Bar Association (IBA) and the GATS. On the off chance that this thought is to be put into practice, the Advocates Act, 1961 which administers legal practice in India should be amended.
Under Article I.2 of the GATS, trade in services has been characterized as supply of services by a service supplier of one member through the commercial presence in the territory of any other member ((See General Agreement in Trade in Services included in Annex 1B of the final text of the Uruguay Round agreement. It also includes various other types of supply of services but one that concerns this essay is relevant to legal services is the one that has been mentioned in the main text. )). 1 It is a general belief among global economists that GATS is comprehensive in nature and along these lines will make an integrated global market in services. This in any case, is by all account not the only side of the coin and despite the fact that GATS goes far in incorporating developing nations in the global market, the primary fear or apprehension this gives rise to is that such consideration would not be on equivalent terms ((Bibek Debroy, “Beyond The Uruguay Round: The Indian Perspective on GATT,” Sage Publications India Pvt. Ltd., 1996.)).
There are however sure inherent checks in the framework, which if followed can, as it were, to a great extent allay the fears of an apprehensive legal community ((The increasing participation of developing country members in world trade shall be facilitated through specific commitments…..relating to (a) the strengthening of their domestic services capacity and its efficiency and competitiveness, Inter alia through access to technology on a commercial basis (Article IV. 1, GATS).)).
It is critical to see the circumstance in context. The Bar Association and the professional fraternity in general have communicated their anxieties loud and clear. The possibility that mists the minds of the lawyers is a set of manifold apprehensions.
Some of these are as per the following:
- Monopolization, creation misuse of predominant positions by large foreign law firms with tremendous infrastructure and international clout.
- Foreign lawyers giving services in India especially in super specializations like Intellectual Property Rights, International Commercial Arbitration, Mass Torts, etc.
- Loss of wealth of the legal services sector to the foreign nation.
- Possible changes and breakdown in the structure of professional ethics mainly due to the conflicting practices in vogue in the foreign countries.
The Law Commission of India in 2000 had think of some significant recommendations going for the protection of Indian legal services sector. The Law Commission recommended full licensing and limited licensing approaches. According to International Bar Association guidelines ((Standards and Criteria for Recognition of the Professional Qualifications of Lawyers (Agreed/ Adopted at IBA Council Meeting in Istanbul, June 2001).))to practice in a host country a foreign lawyer will have to apply for a license. The conditions for the issue of license may include:
- Prohibition against appearing and pleading in any court in the host country unless specifically authorized and
- Restriction in preparing documents or performing other services whose performance is specifically reserved by the host country for performance by its local members.
However, there is an inborn blemish in such framework as that thoroughly vanquishes the points of liberalization, and does not permit trade of thoughts. In addition, it will soon get to be prey to legal manipulations.
Without a doubt Australia has made the absolute most significant proposals in arrangements on GATS. Their negotiating proposal proposed constrained licensing at a regulatory approach that allows foreign lawyers and law offices to practice in their nation of origin area, third nation law (where qualified) and international law in a host nation without needing to fulfill the more burdensome requirements in connection to giving a right to practice host country law ((A working paper by Dr. Madhava Menon presented at Bar Councilors’ seminar on “Trans-National Legal Practice and GATS: Issues and Challenges”, 26th October, 2002. )).
The Australian correspondence further proposed sub categorisation of the meaning of ‘legal services’. As indicated by them it is more suitable to characterize and incorporate territories of law and sorts of services into the definition condition itself, instead of characterizing the services supplier as foreign lawyer, advocate, foreign legal consultant or any other term. On the other hand, argument against it presented states that such categorisations are illogical and can’t succeed over the long haul. Making such categorizes in legal services division will endanger the flexibility endeavoured to be achieved by GATS.
Benefits to Customers by Trade in Legal Services
The developing legal service sector is just as useful to all consumers of legal services, without segregation. In the period of consumerism and competition law, customers right to free and fair competition is principal and can’t be denied by some other consideration. Trade in legal services concentrates on advantages accruing to consumers from legal service sector, especially the nature of service accessible as for specific fields.
Furthermore, the services available to consumers of India are only domestic legal service providers. Corporate legal activities are recent phenomenon in India and solution of some complicated legal issues can only be granted by professional International Law firms hence allowing them shall be beneficial for satisfaction of consumers in India Many countries across the globe resort to Legal Process Outsourcing (LPO) and gain best of the legal services and solutions at competitive prices. Existing regulations deprive consumers to derive benefit, which ultimately effects development.
What Foreign Lawyers Want?
To start with, up what the foreign law firms might want from the Indian profession. There are various key zones that UK legal advisors’ state they might want to practice if allowed to enter India. These are:
- Foreign firms don’t wish to access to those parts of the Indian customarily served by nearby local Indian lawyers. UK firms have no enthusiasm for this zone, yet wish to concentrate on prompting internal and outward investors in the international business community. The law society agrees that court appearances ought to be confined to broadly nationally qualified lawyers.
- That English solicitors be permitted to offer English law advisory services (that is not advocacy/ court work) in India without having to become members of the Indian Bar.
- That these advisory services will cover home title, third country and international law.
- That English solicitors be permitted to enter into partnerships with and be able to employ Indian lawyers in India.
- That English solicitors be permitted to build up branch offices in India to offer advisory services in English law.
The law society acknowledges that the behavior of foreign lawyers in India ought to be directed by the Bar Council of India and that foreign lawyers ought not be permitted to appear as advocates in Indian courts without first re-qualifying as Indian lawyers.
Ethical Issues
There is a substantial apprehension that clashing ethical practices pervasive in foreign law systems will significantly disturb the balance in our law. One such illustration will be the charging of contingency fees. Be that as it may, it is presented that since licenses for practicing are constantly made subject to morals, it is for all intents and purposes unthinkable for foreign lawyers and law firms to rupture the ethical code as they run the danger of being barred. One can likewise consider relaxing certain practices in some fields like US allows charging of contingency fees by patent attorneys, while Australia has come up with a new law by which some particular lawyers and firms take contingency fees in insurance cases. The danger of ethical breach is less at the top and more at the base of the professional pyramid. One can barely expect the foreign law firms to be interested in anything underneath the highest point of such a structure ((A working paper by Dr. Madhava Menon presented at Bar Councilors’ seminar on “Trans-National Legal Practice and GATS: Issues and Challenges”, 26th October, 2002.)). Moreover the foreign legal firms (FLF’s) have ‘single window services’ meaning services which not only offer legal but also accountancy, management, financial and other advice to their clients. The multidisciplinary associations will take into account the needs of the clients in the aforementioned distinctive fields. Such associations may endanger the morals of the legal profession as private data may be passed out of the organization to the non-lawyer professionals. This would preferentially influence the clients as well as the lawyers since the autonomy of the lawyers would be compromised. Once the foreign legal firms (FLF’s) and foreign legal consultants (FLC’s) are permitted passage into India, the Bar Council of India will need to make principles and regulations additionally for such multidisciplinary associations. The code ethics needs review to bring international legal practice under its domain.
The foreign law firms may look for permit for full and consistent legal practice like that of Indian lawyers or they may seek a constrained routine of consultancy for foreign partners on home country laws. Likewise, the rules and regulations will must be encircled to meet both these circumstances. The FLF’s who plan to seek regular legal practice may have been subjected to migration and citizenship laws. The individuals who look for restricted practice may go into partnerships with the home country law offices with no investigation from the organized legal profession. It is in this way essential that a transparent, fair and accountable framework be developed to manage and control the internationalization of legal practice.
A number of the more established ones, perhaps unable to resist the immense potential of the Indian legal markets, and in anticipation of the ‘globalization of legal services’ under the aegis of the WTO, are slowly (and quite discreetly) establishing their presence in India, this in a considerable number of cases taking the form of their entering into associations with Indian firms, and in the process, literally operating in India indirectly, despite the prohibitions against the same. An issue that has therefore started to attract the attention of not simply Indian lawyers, but also law school graduates, is the likely consequences of the entry of foreign firms in India. Shall this help an already growing Indian legal market, or shall it only mean a job loss for Indian law graduates?
The Indian legal profession has, as of late, experienced a critical change, rising as exceedingly focused and prepared to move alongside the continuous wave of globalization. The interest of foreign law firms to open shop in India in this manner is not really shocking, since India offers a full scope of legal services, of similar quality, at truly a small amount of the value that would some way or another must be paid. The rather conservative and if one may use, “protectionist” stand of the Bar Council of India on the matter has, on the other hand, denied foreign law firms from working in India. Some of the more settled ones, maybe not able to the immense potential of the Indian legal markets, and in anticipation of the ‘globalization of legal services’ under the aegis of the WTO, are gradually building up their vicinity in India, this in a significant number of cases taking form of their entering into associations with Indian firms,, and simultaneously, actually working in India in a roundabout way, in spite of the restrictions against the same. An issue that has consequently begun to pull in the consideration of not just Indian legal advisors, but rather likewise law school graduates, is the conceivable outcomes of the passage of outside firms in India. As to whether this will help an officially developing Indian legal market, or might it just mean job loss for Indian law graduates.
The truth remains that India is currently globalizing its economy. All the while, the legal sector opening up to rivalry from the international legal market is fairly unavoidable. Rather than thinking about the focal points and hindrances of the legal markets being opened up to foreign firms, it is maybe more sensible to acknowledge that the passage of remote firms in India is just a matter of time. On the other hand, this ought not to imply that their operations ought not to be directed, following else they might simply push out the Indian firms. For law school graduates, their vicinity in India could well translate into an expanding scope of openings for work, aside from their vicinity in India altogether affecting the route in which the Indian legal market advances in the 21st century.
Trust the Market
The legal market may be trusted to choose its own particular players and the fittest will survive. This will happen for the most part with respect to the host nation. Notwithstanding even for legal counsellors from regular law framework, it will be troublesome if not impairing to fight cases under statutory law in India. This natural hindrance in fitness will itself make favorable position for the practicing lawyers of the host nation (India) to survive and contend in their host nation.
The price advantage
The rule that drives outsourcing in India is the low cost service supplied by Indian service providers. This point of interest which fuelled our software boom stays even in the legal services and a cutting of expenses by European, Australian, or American attorneys can’t represent a risk to the expense advantage that we have over these organizations. In addition, the open door expense of coming and honing in India may be too high over the long haul. This element will, as is self-evident, be the most normal controller of foreign lawyers practicing in India ((Prithis Mehta, “Competition Policy and Professional Services”)).
Firms will hire our lawyers
There are couple of choices for the foreign law offices coming to India and our law offices as well. Most Indian law offices will either go in for collaborations or might eventually merge with Indian arms of foreign law firms. This is not to say that there will be no Indian firms surviving autonomously. Fundamental financial aspects requires that for foreign law offices to give competitive services both qualitatively and financially they have to contract Indian legal counsellors as representatives in India and as counsels to show up for them in Indian courts.
From multiple points of view along these lines this will be advantageous for the general rehearsing legal advisors of this nation and significantly more for the individuals who will enter the calling in future. There is a chance that liberalization will bring about intense increment in the per capita profit for a common lawyer in India.
The Trade-off is in our favour
Liberalization in GATS conceives a contact in between developing and developed nations which is slated to appear through a set of trade-off. The experience tells us know that each part of Indian economy which has been opened up has turn out more grounded and turn out to be more focused over the long run. This will be even valid for the legal services as Indian legal system has as of now had some constrained however important lawful exposures. Besides, Indian legal system will do well to soak up in themselves certain parts of the work society of the west. A valid example will be the emphasis given in the west on ‘corporate legal compliance’, avoidance of litigation and recourse to arbitration. This may assist us with taking care of a large portion of our interminable issues and make a leaner and more expert and adaptable legitimate framework.
What is needed to safeguard the Indian Bar from Foreign Law Firms?
For nearly two decades, Lalit Bhasin, the president of the Society of Indian Law Firms (Silf), has been one of the most consistent, visible and hard-line opponents of the entry of foreign law firms into India.
To the legal world, in India and abroad, it was therefore significant and puzzling, in roughly equal measure, when on 14 December 2014 Bhasin wrote an opinion piece in the Business Standard that Indian law firms were now “much better placed to face the entry of foreign law firms, although in a phased manner, subject to the approval of the regulatory body, the Bar Council of India”. He suggested a timeline for the foreigners’ entry over a period of five to seven years.
On 27 February 2015, the PTI reported that the Narendra Modi-led government was serious about pushing the legal liberalisation agenda and had started talks with the Bar Council of India (BCI) to that purpose.
For the foreign law firms, who have been clamouring at varying decibel levels to enter India for decades, it might appear as though the stars have finally aligned and their prayers have been answered. But as foreign law firms have all learned the hard way by now, in India few things ever come easy
Each jurisdiction has its own solution but all recognize the need for some degree of market access with a commercial presence. In my opinion, the elements common to all jurisdictions that could be applied to safeguard the Indian Bar are:
Every jurisdiction has its own answer yet all recognize the requirement for some level of market access with a commercial presence. The components regular to all purviews that could be applied to shield the Indian Bar are:
- Only those persons duly qualified and certified as advocates to be permitted to call themselves by those titles
- Certain legal areas should be reserved to nationally qualified advocates. These ranges incorporate drawing up court documents, court advocacy/ rights of audience, conveyancy and probate.
- Registration of all the foreign law firms providing legal services ought not be allowed to practice Indian law unless, they have first re-qualified as an Indian Advocate or unless they practice through a joint venture or formal alliance together with an Indian firm in territories of allowed Indian law
- If there is a formal alliance or joint venture arrangement then there ought to be a prerequisite that the outside firm and the Indian firm agree on a written plan to transfer legal and other related skills, expertise, know-how or technology to the Indian law firm
- Promoting should be changed with the goal that Indian Advocates and firms are permitted to make clients aware of their expertise and therefore capture domestic and international work
- Indian firms should be permitted to employ foreign lawyers
- Foreign law firms should be permitted to employ, give partnership and share profits with Indian lawyers
Conclusion
It is extremely positive to see what the future holds for a liberalized legal sector in India and how introduction to foreign law firms and lawyers must be beneficial for us particularly in the field of developing laws like cyber law, space law, international commercial arbitration, mass torts, and so on.
Opening up of legal services sector is going to lead to a flow of expertise in sectors where local firms and lawyers are deficiently delivering services. Accepting ‘trade’ facet of legal services would develop the profession qualitatively.
The Raghavan Committee has summed up the impact of the current administrative regulatory system in professional services. The legislative restrictions as far as law and self regulation have the consolidated impact of preventing opportunities and development of professional firms, restricting their desire and ability to compete globally, Preventing the nation from acquiring point advantage of India’s considerable expertise and precluding consumers from opportunity on free and informed choice.
I recommend various lessons we can witness from those jurisdictions that have dealt with foreign law firms. Taking a look at the present and coming about effect on the jurisdiction that have allowed foreign law offices to set up and practice we see various advantages. This incorporates:
- Creation of a stronger and more competitive legal profession in each country;
- It brings about specialization in international corporate law;
- It assists in foreign law listings;
- There has also been an increase in capital markets availability;
- It has made accessible the expertise of international law offices in task financing, renegotiating and rescheduling of international debt;
- It gave domestic lawyers the access to the multi-jurisdictional knowledge and technical aptitude of the international law firms; and
- High level of foreign direct investment in the host country and encouraged investment overseas by local firms.
- Legal services are a key component of the more fruitful economies.
India is a developing economic power as well as the world’s largest democracy. The eventual fate of numerous nations in the locale may rely on upon how the legal profession in this nation creates. The eventual fate of vote based system i.e. democracy and the rule of law in the speediest and the biggest developing economic region of the world may rely on upon our dedication to making the legal profession in India the most responsive, educated and forward thinking of all countries.