Athis refers to “flying in and flying out” foreign lawyers who come to offer advice on foreign law to indian clients. but as the issue is stuck in courts, it could be some time before we get to see them
By V Venkatesan
The question whether foreign lawyers can be permitted to practice in India has been agitating Indian courts for the past two decades, and has still not reached finality. The issues would appear rather simple. One is the distinction between litigious practice and non-litigious practice. Foreign lawyers insist that there is a distinction, and as they are keen on non-litigious practice, which does not involve appearances before judicial forums in India, they should not be subjected to disciplinary control of regulatory bodies like the Bar Council of India (BCI).
The second is the distinction between the practice of Indian law and foreign law. Foreign lawyers say that as they want to practice foreign law in India (rather than Indian law), the question of subjecting themselves to regulatory bodies in India does not arise. While foreign lawyers seem to be clear about what they want, those who oppose their entry into India are not so clear on the grounds of their challenge.
This has made the case before the Supreme Court all the more interesting, even as it has been pending for the past three years. On April 6, the Supreme Court Bench comprising Justice Anil R Dave and Justice Kurian Joseph sought a response from BCI, which is the supreme regulatory body for lawyers practicing in India. Interestingly, the BCI is an appellant in one case and a respondent in another before the Supreme Court.
CASE DESCRIPTIONS
In the first case, the BCI has appealed against the Madras High Court’s judgment, delivered on February 21, 2012 (Bar Council of India vs AK Balaji). In the second case, the BCI is a respondent in the appeal filed by the Global Indian Lawyers Association (GILA) against the Bombay High Court’s judgment in the case of Lawyers Collective vs Bar Council of India, delivered on December 16, 2009. Together, there are more than 41 respondents, which include many foreign law firms as well.
Foreign lawyers insist they shouldn’t be subjected to Bar Council of India rules as they are only keen on non-litigious cases in India and want to practice foreign law.
On April 6, the Anil Dave-Kurian Joseph Bench briefly heard the arguments of the counsels representing both the BCI and some foreign law firms and adjourned the case to July 20. For those familiar with the two high court cases, the arguments were repetitive, and it was not clear what the Supreme Court’s intervention could achieve.
Meanwhile, in an interim order issued by another bench in which Justice Dave was a member (sitting with Justice RM Lodha, who has since retired), the Supreme Court had clarified on July 4, 2012, that the expression “to practice the profession of law” under Section 29 of the Advocates Act, 1961 (AA) covers the persons practicing litigious matters as well as non-litigious matters, and therefore, to practice in non-litigious matters in India, the foreign law firms shall be bound to follow the AA.
FERA INVOLVED
The order had also restrained the Reserve Bank of India from granting any permission to foreign law firms to open liaison offices in India under Section 29 of the Foreign Exchange Regulation Act, 1973 (FERA). By restraining RBI from granting such a permission, the Supreme Court has, at least for the time being, found force in the Bombay High Court’s reasoning in the Lawyers’ Collective case that the RBI could not give such permission as foreign law firms are not covered under FERA.
AK Balaji, the petitioner before the Madras High Court, sought a direction to the central government, the RBI, the BCI and the Bar Council of Tamil Nadu to take appropriate action against 32 foreign law firms or foreign lawyers, who, he alleged, were illegally practicing in India.
He also sought a direction to forbear them from having any legal practice either on the litigation side or in the field of non-litigation and commercial transactions.
Balaji argued before the court that the procedure for Indian lawyers to practice in foreign countries is far more cumbersome and very costly, and there are also very many restrictions like qualifying tests, prior experience, work permits, etc., but no such procedures are contemplated in the AA with respect to foreign lawyers who intend to practice in India. The Act simply provides that a foreigner may be admitted as an advocate, if Indian nationals are permitted to practice law in his/her country.
Besides, he argued that in the absence of enrolment in any of the state bar councils in accordance with the provisions of the AA, the foreigners are not entitled to practice law in India on account of the bar contained under Section 29 of the AA.
He further argued that under the guise of LPO (Legal Process Outsourcing) and conducting seminars and arbitrations, foreign lawyers are visiting India under visitors visa and are earning money from their clients in India. By doing so, they also violate the provisions of income tax laws and immigration laws, and also cause loss of revenue to our country’s exchequer; they have also opened up offices in India and are actively doing legal practice in the fields of mergers, take-overs, acquisitions, amalgamations, etc, he said. Balaji’s other argument was that the legal profession in India is a noble profession, and not treated as a business venture. Here, lawyers are barred from advertising, canvassing and soliciting work, whereas foreign law firms are glaringly advertising through their websites, he said.
Even though Indian lawyers are allowed to practice in the UK and the US, the same is subject to enormous conditions and restrictions and subject to passing of further tests conducted in the respective countries. Therefore, it is not reciprocity in the real sense, as permitted under Section 47 of the AA, he argued.
The central government had taken the stand before the Madras High Court that foreign law firms are not required to register themselves before any statutory authority, nor do they require any permission to engage in non-litigation practice. The central government conceded that many accountancy and management firms are employing law graduates, which is contrary to AA, and there is need for regulation to plug this loophole.
The central government, however, warned that if the foreign law firms are not allowed to take part in negotiations, settling up documents and arbitrations in India, it would have a counter-productive effect on the aim of the government to make India a hub of international arbitration. Many arbitrations, with Indian judges and lawyers as arbitrators, are held outside India, where both foreign and Indian law firms advise their clients. If foreign law firms are denied entry to deal with arbitrations in India, then India will lose many of the arbitrations to Singapore, Paris and London, the government told the Madras High Court, which agreed with this contention.
UNCLEAR STAND
Indeed, the center favored amendment to Section 29 of the AA, to permit foreign law firms to practice law in India in non-litigious matters on a reciprocity basis with foreign countries. Yet, the government supported the BCI’s stand that the provisions of AA would apply with equal force to both litigious and non-litigious practice of law, and it is only persons enrolled under Section 24 of the Act who can practice before Indian courts.
The central government, in the Lawyers’ Collective case, told the Bombay High Court that persons practicing in non-litigious matters are not governed by AA. Yet, the government opposed permitting foreign law firms from opening their branch offices in India. Before the Madras High Court, the government supported BCI’s stand that if the foreign law firms are allowed to practice in India, there shall be no control in the matter of practice and consequently, Indian advocates would be discriminated against.
The issue of foreign lawyers practicing in the country is a bone of contention for the Indian judiciary
The credit for bringing clarity to the issue goes to Abhishek Manu Singhvi, who told the Madras High Court in the Balaji case that the question was whether foreign lawyers could come to India for the purpose of offering legal advice to their clients here on foreign law and whether any provision of law prohibits practice of foreign law in India. Agreeing with Singhvi, the court answered the first question in the affirmative and found none to affirm the second.
The Madras High Court accepted Singhvi’s contention that international arbitration was going on big time in India as well as in almost all the countries across the globe. India is a signatory to the World Trade Agreement, which has opened the gates for many international business establishments based in different parts of the world to come and set up their respective businesses in India. In such a scenario, these international establishments entering into trade agreements would require to consult legal experts on the implications of such agreements on their country’s laws, and advocates practicing Indian law would not be competent to offer them advice on their laws.
Therefore, this makes it absolutely necessary for foreign legal experts to visit India, stay here and offer advice to their clients on their respective laws, and there is no specific provision in the Act prohibiting a foreign lawyer from visiting India for a temporary period to advise his or her clients on
foreign law.
Thus was born the Madras High Court’s endorsement of FIFO—flying in and flying out—to refer to the breed of foreign lawyers who come and go after offering advice on foreign law to their Indian clients.
In the Lawyers Collective case, 12-14 foreign law firms, who were permitted by the RBI to open their liaison offices in India were arraigned as respondents. Here, the division bench of the Bombay High Court held that the liaison activities were nothing but practicing the law in non-litigious matters.
Establishing a liaison office in India by a foreign law firm and offering liasoning activities cannot be permitted since it is opposed to AA and BCI Rules, the Bombay High Court had held. The Madras High Court agreed with this view.
The Supreme Court’s interim order also seems to support this view. The only question is whether it will approve FIFO, endorsed by the Madras High Court. Considering that foreign lawyers are free to use other communication channels to offer legal advice on foreign law to Indian clients, a challenge to FIFO appears vulnerable.
—The writer authored Constitutional Conundrums: Challenges to India’s Democratic Process, published by LexisNexis
“India losing out on $150 billion global legal market”
Many remember him for his tumultuous tenure as the governor of Karnataka and his face-off with the state’s then chief minister, BS Yeddyurappa. But before that, HANSRAJ BHARADWAJ had an illustrious career as a law minister under the UPA government. He was the second-longest serving minster of law since Independence after Ashoke Kumar Sen. During his stint as law minister in UPA-I, he started a consultation process and was building a legal framework to liberalize the legal market. However, that remained an unfinished job. But with the Modi government considering relaxing the norms of functioning for Indian legal firms and opening the market for international law firms, will things brighten up?
SOMI DAS caught up with him on lost opportunities in the legal sector, better legal aid for the poor and arbitration.
What were the initiatives taken by you during UPA I to liberalize the legal market?
As WTO signatories, we are under obli-gation to open up the legal services. When I was law minister, I had taken up this matter with the Law Society of England during the Commonwealth Law Ministers Conference. They were very keen on setting up some law firms in India and to give us their technological know-how. Americans were also very keen. Back home, I sought the Bar Council’s opinion. A visit was arranged for their representatives to talk to the British Law Society and come to a conclusion. At that time, everybody agreed that we will work on a bilateral arrangement where investors would invest in India under limited liability. The parliament enacted the law on Limited Liability partnership (According to the Ministry of Corporate Affairs, this act is a vehicle that enables professional expertise and entrepreneurial initiative to combine and operate in a flexible, innovative and efficient manner, providing benefits of limited liability while allowing its members the flexibility for organizing their internal structure as a partnership) In the meantime, a section of lawyers filed a case and got a stay from the Bombay High Court. It got stuck at that.
Thereafter, I was no longer the law minister. Have we failed to catch up with the international law community in terms of expertise because of our closed legal market?
We have liberalized many sectors like banking, insurance, etc. But legal services have not been opened up because they are controlled by legal bodies. The government has also not taken a keen interest in opening up this sector. As a result, India has no stake in the financial cake of $150 billion which is available in the global legal market. I want our young people to be trained according to world-class legal standards and meet their country’s legal requirements better. If international law firms and law universities were allowed in, that would mean more jobs and better training for our law graduates. If an American law firm comes to India, it is not going to bring their lawyers to fight cases in the Supreme Court. They have to employ Indian lawyers for that.
Will liberalization not affect Indian law firms given that there have been crippling restrictions on them like not being allowed to have more than 20 partners and not being allowed to advertise?
Indian law firms are neither here nor there. They are all small monopoly firms. They are working for their selfish cause. How many lawyers are they employing? What is the situation of our legal fraternity? We are only going backwards. There is no positive development or new thinking. We are totally absent from all the developments taking place in the global legal community. Why have we failed to produce lawyers who can go to any part of the world and compete with others? If today you want to enter into a contract in America and buy a sophisticated technology, who will draft your contract? You have to hire legal brains from outside the country. We are not meeting the standards of international competition. American lawyers are globe-trotting, taking away the entire financial cake available in the legal sector.
Will the advent of international firms lead to a shortfall in the number of independent law practitioners, who often are the only source of legal aid for the not-so-rich?
That’s a different story. Right from Independence, we have been saying that India should have an affordable system of justice that is inexpensive, speedy and accessible for poor people. As far as legal services are concerned, you can’t treat the poor at par with the rich. We can reach out to the poor through legislative intervention. For example, village courts or gramin nyayalayas can be very effective in providing legal aid to the people. These local courts can travel to villages to hear intermediate-level cases and also hear grievances of the people in their dialect, adjudicate and give a verdict then and there without any procedural delay. To accomplish this goal, I passed the Gram Nyayalayas Act. I also strengthened access to legal aid that provides compulsory legal help to children, women, physically impaired and those whose income is below a certain limit.
All this has been stopped for the past 10 years. It saddens me that there is no concern for this section of society.
Why do you think your decisions weren’t followed up?
That’s because successive ministers were not sensitive enough to the cause of the poor. And the vast majority of this country is poor. There is no legal aid available for women now, except for lip-service. I had organized a powerful network of legal aid for women. It was working, but all that has stopped now.
How do we make India a preferred arbitration destination?
We have to make provisions in our laws that show we are sincere when we refer cases for arbitration, so that once a case is referred for arbitration, it is heard in a time-bound manner. It should be less expensive and be completely independent of any interference from the government. We are going outside the country for long arbitration instead of deciding arbitration here itself. It is deliberate because we are not willing to work in our own country. We want foreign law firms to decide our arbitration. We are lagging behind here because we are not willing to face competition from the international legal community.