Allowing foreign law firms in is correcting a time warp

Justice Geeta Gopi of the Gujarat High Court had an out-of-the-box take on the recent decision of the Bar Council of India (BCI) to allow foreign lawyers and firms to practice in India.”I am happy that now foreign lawyers are coming to India. At least they will treat litigants better…They will be made to sit in the office. Forget offering water or tea, you (advocates) don’t even allow them inside your chambers,” she said.

Continuing to admonish lawyers, Justice Gopi added: “A farmer’s clothes are always dirty... A mechanic’s clothes are always oily. You cannot judge them by the clothes they wear..……now there will be tough competition for you all. Then I am sure, you will yourself call litigants to your offices, offer not only tea but even food.”   

Justice Gopi has, in a derisive way, pointed out what ails the justice system in India – it is expensive and out of reach for the common man; and manned by lawyers who are snooty and overbearing, but mediocre in knowledge and practice.

More opportunities

While reforms in the economy opened up the country to foreign capital after 1991, the legal profession has been jealously guarding its turf. Foreign legal entities were kept out and it was only in March 2018 that the Supreme Court, while upholding the ban, allowed foreign lawyers to visit India on a temporary basis and advise their clients. With the new rules, foreign lawyers and firms can now register themselves and set up a practice in India.

The BCI has however clarified that only ‘non-litigious’ practice will be permitted and that foreign lawyers cannot appear in court or other judicial fora. But it is a foot in the door. The Bar Council’s intent currently is to allow foreign law firms to set up consultancies for foreign clients to carry out transactional and corporate work aimed at acquisition, mergers, and the setting up of joint ventures. Their expertise can also be put to use in guiding the flow of foreign direct investment (FDI), and possibly make India “a hub of International Commercial Arbitration.”

There are obvious advantages for the country. India will now open up to specific areas of international law – like maritime law and laws governing air transportation. For the consumers of the justice system, the litigants, as Justice Gopi pointed out, more talent and competition will bring better services. And finally, lawyers will many more and exciting opportunities as international law firms begin poaching from Indian firms and recruiting in India.

International arbitration

But it is in the area of international arbitration and dispute redressal that India is decades behind its peers. India attracted the highest-ever foreign direct investment (FDI) last fiscal in FY2022 of $85 billion. Foreign investment needs to be in step and compliant with local laws; and then invariably there are disputes with the government and with local partners.

It is because we shut out international arbitration, disputants had to look elsewhere. Cairn Energy for instance fought out a dispute on retro-taxation with the Government of India in the Permanent Court of Arbitration, The Hague, Netherlands for years before securing a $1.23 billion award in its favour in December 2020. More recently, a dispute between Amazon and Future Retail on the latter’s contractual obligations was decided in favour of Amazon by the Singapore International Arbitration Centre (SIAC).
Singapore has emerged as a hub for international arbitration because of its business-friendly laws, and its positioning as a commercial capital of South Asia. In 2021, the SIAC adjudicated 469 cases and the sum in disputes it handled was a hefty $6.5 billion.

A recent study by the School of International Arbitration (SIA), Queen Mary University of London, showed that the five most preferred seats for arbitration are London, Singapore, Hong Kong, Paris, and Geneva. The study also showed that international arbitration was the preferred method of resolving cross-border disputes for 90% of respondents, either on a stand-alone basis (31%) or in conjunction with Alternate Dispute Resolution methods (59%). There has been a late realization by the Bar Council that the country has missed out on being a hub for commercial dispute resolution. But, better late than never.

Meanwhile, there are sections of the bar that have sounded an alarm. The All India Lawyers’ Association for Justice (AILAJ) said the BCI has compromised the interests of the Indian legal system and traded it for the Free Trade Agreement with the UK. The AILAJ feels a lot of those at the bottom of the pyramid – junior and first-generation lawyers and women advocates – might worsen. The Society of Indian Law Firms (SILF) feels it is not a level playing field, and the Indian legal sector needs reforms before they’re ready to compete with foreign firms.

As the world integrates increasingly towards a global village, these ‘protectionist’ formulae have no place in a sector that should be at the centre of the churn. India began coupling itself to the world economy with the reforms of 1991. The Bar Council has woken up three decades too late.

Foreign lawyers can now set up a practice in India

With new rules, foreign lawyers and firms can now register themselves and set up a practice in India. In March 2018 the Supreme Court allowed foreign lawyers to  advise their clients