In 1991, when India opened its economy to foreign investment, Finance Minister Manmohan Singh quickly allayed fears that this could harm Indian industry. Singh said in his famous budget that year, “We should not remain perpetual prisoners of fear of the East India Company because nothing has changed in the last 300 years.” He said that India is capable of dealing with foreign investors. on its own terms, and that Indian industry had matured and was ready to compete with foreign investment.
he was right. This is reflected in the fact that almost all sectors are now open to Foreign Direct Investment or FDI. Perhaps the only segment that has survived for such a long time has been the Indian legal services industry.
That door has opened, though not fully, with the Bar Council of India finally paving the way for foreign lawyers and firms to set up shop here. It is a protected opening, with access restricted to corporate work on a transactional or reciprocal basis.
For now, foreign lawyers cannot appear before tribunals other than statutory or regulatory boards, as per the Bar Council of India’s rules for registration and regulation of foreign lawyers and foreign law firms in India. Essentially, this would mean allowing only in-chamber practice or work in areas such as international legal issues and arbitration issues.
This liberalization comes in the backdrop of the India-UK Free Trade Agreement, which has been underway for some time. The two countries have been in talks for long to allow UK lawyers and law firms to set up a foothold in India, whose economy is estimated to be among the world’s top three.
The UK legal services industry sees the Indian market as potentially attractive given the country’s domestic growth, the presence of many foreign companies and the growing number of arbitration cases in addition to cross-border transactions. Before the BCI rules were unveiled, the best foreign lawyers could expect would be to move in and out of India for short periods, in line with a ruling by the Indian Supreme Court.
The new rules could help ease the need for many companies with an international presence or foreign partners and business links to spend money to meet with foreign lawyers in other jurisdictions to overcome such restrictions. There is also promise of tapping Indian legal talent as foreign firms or lawyers have begun to grow their operations here by partnering with boutique or mid-sized law and legal advisory firms, especially in the commercial and regulatory sectors.
It also has the potential to promote a standard framework for commercial arbitration and best practices, and over time to create an enabling environment for a globally competitive and credible international arbitration hub. The Singapore International Arbitration Center (SIAC) has emerged as the go-to center for many Indian companies, given its location, efficiency and speed. The relaxation of rules by the BCI now provides both an opportunity and a challenge.
But it may also be a little early to celebrate. For one, the BCI and the government will have to overcome possible resistance by a large body of lawyers. There may also be a legal hurdle in the Advocates Act of 1961, which sets norms for legal practice. Perhaps that’s why the council and the government have left the door wide enough to get a free trade agreement off the ground, with the expectation that rules will be relaxed later as has happened in many other areas.
Opening up of the Indian legal services sector should also provide an opportunity to reflect on the country’s contract enforcement system, the speed of arbitration and litigation, and the cost to the economy. Certainly India’s lawyers and law firms have the talent and capability to meet this challenge.
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