The Supreme Court of India has stated that foreign law firms should not be allowed to set up liaison offices in India. The 4 July order relates to a special leave petition filed by the Bar Council of India (BCI) against the ruling of Madras High Court in February that foreign firms could “visit India for a temporary period on a fly in and fly out basis” to advise their clients on foreign law.
The BCI’s special leave petition maintains that Madras High Court did not consider a 2009 judgment from Bombay High Court in the Lawyers Collective case, which held that the practise of law includes chamber practice, providing opinion on legal issues and involvement in seminars and legal conferences. The BCI’s key argument is that lawyers who are not enrolled under the Advocates Act, 1961, must not be allowed to practise or advise on law in India, even if they are offering guidance on foreign law.
The Supreme Court clarified that the Reserve Bank of India must not permit foreign firms to open liaison offices under section 29 of the Foreign Exchange Regulation Act, 1973, and that foreign firms “shall be bound to follow the provisions contained in the Advocates Act, 1961”.
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The subject of foreign lawyers present in India has been hotly debated.
Many foreign lawyers welcomed the Madras High Court decision, believing it was a step in the right direction. Chief Justice MY Eqbal and Justice TS Sivagnanam said that foreign lawyers who “do not appear before any courts or tribunals anywhere in India” have generally provided consultancy and support services with regard to the protection and management of intellectual, business and industrial proprietary rights, without rendering legal advice.
The court observed that foreign firms should be permitted to take part in negotiations, particularly arbitration matters in India. Prohibiting this would “have a counterproductive effect on the aim of the government to make India a hub of international arbitration” and would “result in a manifestly absurd situation wherein only Indian citizens … who are enrolled as an advocate under the Advocates Act could practise foreign law”.
Foreign lawyers who had pinned their hopes on this decision have been greatly disappointed by the Supreme Court’s order. Many are desperate to get a foothold in India, lobbying for the country to liberalize its legal market to allow foreign firm entry.
Recently, magic circle firm Allen & Overy commissioned YouGov, an independent market research agency, to conduct a survey on major Indian stakeholders’ attitudes towards opening India’s legal market. Over 300 company executives, general counsel and lawyers in India were polled. A total of 96% believed the legal market should be liberalized, while 79% felt foreign lawyers should be allowed to employ and go into partnership with Indian lawyers and merge with Indian law firms to practise both foreign and Indian law.
Despite the favourable views, there is still strong opposition in India towards foreign firms, with some lawyers arguing that a level playing field must first be established to allow Indian firms to compete successfully with their foreign counterparts.
The Supreme Court order spurred the Society of Indian Law Firms (SILF) to ask accounting and management companies in India to cease providing their clients with legal advice since no one is eligible to do so without first enrolling under the Advocates Act.
“In India we have seen accountancy firms providing legal services to their clients in the matter of drafting of agreements, conveyancing, IPR and a host of other activities,” Lalit Bhasin, the president of the Society of Indian Law Firms, told India Business Law Journal. “These firms are taking away a large chunk of legal work which legitimately and exclusively belongs only to the lawyers.”
Bhasin confirmed that he had met the Minister for Corporate Affairs who will look into the matter.
“The Bar Council of India would be the monitoring body for this purpose,” he added. “Accountancy firms cannot provide legal services of any nature whatsoever as even the lawyers cannot render accountancy services like audit, etc., to their clients by hiring some chartered accountants in their firms.”
For more on these developments, see Legal market report on page 35.
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