Restrict foreign access to the Bar

A court monitored mechanism for a level-playing field should be set up before international firms are allowed to enter the legal services sector in India

Published - March 21, 2013 12:18 am IST

130321- Lead - Foreign Law firms

130321- Lead - Foreign Law firms

“The Economic Survey has strongly batted for the removal of the restrictions on foreign direct investment (FDI) in legal and accountancy services” ( > The Hindu, February 28, 2013 ). Opening up the legal services sector for foreign lawyers is being debated for over 18 years. Predominantly, foreign law firms want to practise as consultants (FLCs) and not in court. Government apathy, unthinking bureaucratic support to foreign law firms, total disconnect with the legal profession, absence of national policy objectives and dubious behaviour by foreign law firms in the past have clouded the whole issue.

Delhi Bar Council challenge

In 1994, Michael Fysh QC appeared before the Delhi High Court to argue a case representing a multi-national company. An objection was taken by the Bar Council of Delhi challenging his right to appear. This incident catapulted the controversy nationally.

The Bar Association of India (BAI), the premier voluntary association of lawyers functioning for over 50 years, immediately reacted as far back as October 5, 1994. A resolution for setting up a Task Force and a High Powered Committee was suggested. The plea fell on deaf ears.

The Bar Council of India consistently passed several resolutions between 2002 and 2007 opposing the opening up of the Indian legal profession to foreign lawyers or foreign law firms while emphasising the absence of specific proposals by the Central government, and has recorded a desire to continue a dialogue and interaction with the Government of India.

The General Agreement on Trade and Services (GATS) emphasises the right of members to regulate trade and services. Briefly, the core concepts of GATS are non-discriminatory and equality of treatment of all members. In an Annex on Movement of Natural Persons, an exception is carved out offering a clear impediment to Indian professionals working abroad.

Bombay litigation

Three large international law firms viz. White & Case, Chadbourne & Parke and Ashurst Morris Crisp applied to the Foreign Investment Promotion Board (FIPB) for starting branches in India. Their applications were rejected.

Thereafter, they successfully applied under the (now repealed) Foreign Exchange Regulation Act 1973 (FERA) for a licence or permission to open a liaison office under Section 29 for “carrying on any activity of a trading, commercial or industrial nature.” They surprisingly did not apply under Section 30 “to practise a profession or occupation.”

A disingenuous stand by high-ranking professional firms through a dubious route. They leveraged their position by employing the kin of powerful serving and retired bureaucrats. The Indian Express was more to the point — “The first set of clearances was granted after a delegation of foreign law firms, under the leadership of the son of the Union Minister of Law, met officials of the RBI.”

An NGO called ‘Lawyers Collective’ filed and succeeded in a public interest litigation (PIL) in the Bombay High Court challenging these permissions.

The legal profession and the public owe a debt of gratitude to the crusading and dedicated efforts of Indira Jaising, Anand Grover and, later, Chander Uday Singh representing the “Lawyers Collective” which exposed the attempt of the foreign law firms to gain a backdoor entry with government support in the lucrative legal services sector bypassing the Advocates Act.

Most countries, including Australia, Hong Kong and South Korea, prohibit foreign law firms from practising domestic law and also provide for registration under strict regulations for practising foreign or international law.

A case that is referred to in the Bombay judgment arose in the New York Court of Appeals. One Lorenzo Roel started practising Mexican law in New York and contended that as his practice was restricted to Mexican law, he did not practise law in New York. This contention was rejected. The Court held: “… Whether a person gives advice as to New York law, Federal law, the law of a sister State, or the law of a foreign country, he is giving legal advice …”

In the final judgment (Swatanter Kumar CJ and J.P. Devadhar J.) delivered on December 16, 2009, the prima facie view expressed at the interlocutory stage by Chief Justice M.B. Shah and Justice S.H. Kapadia (later CJI) was confirmed. The Bombay High Court held that “the Reserve Bank of India was not justified in granting permission to foreign law firms to open liaison office in India under Section 29 of the Act” and that practising the profession of law under the Advocates Act covered both litigation practice as well as “persons practising in non-litigious matter”.

Nothing could be clearer. Practice of foreign law was covered as non-litigious practice under the Advocates Act. The judgment has not been appealed from and has reached finality, and binds the government.

Madras litigation

Later another petition (PIL) was filed in the Madras High Court by A.K. Balaji. The government contended before the Madras High Court that “the Bar Council of India, which has been established under the Advocates Act, 1961, regulates the advocates who are on the rolls but law firms as such are not required to register themselves before any statutory authority nor do they require any permission to engage in non-litigation practice.”

This is directly contrary to the Bombay judgment which is binding on the government. The Madras High Court while following the Bombay judgment surprisingly deviated from it and made several concessions to the benefit of foreign lawyers which were vigorously supported by the governmental authorities. The Bar Council of India has appealed to the Supreme Court. By an interlocutory order, the Court has only permitted foreign lawyers to visit India for a temporary period on a “fly-in and fly-out” basis for the purposes of giving legal advice to their clients in India regarding foreign laws. In the absence of strict monitoring, this exception is likely to cause grave abuse.

The Law Commission of India, in a working paper in 1999, raised pertinent issues and concerns while recommending amendments to the Advocates Act to prepare a level-playing field for Indian lawyers.

Government apathy and opacity

On September 20, 2004, the U.K.-India Joint Declaration was made in London. The U.K.-India Joint Economic and Trade Committee (JETCO) was set up to provide recommendations on the possibility of opening up legal services in India. It appears that reports were made by the two teams but they are not in the public domain. It is understood that during the JETCO meetings, some Indian delegates were unequivocally informed by the U.K. team that they would emasculate Indian firms and pick and choose the attorneys from Indian firms so as to destroy capabilities and create their own strengths. U.K. firms had no interest in joint ventures with Indian firms which could help assimilate new technologies and know-how and training. It is however gathered that thereafter no significant progress has been made.

The Society of Indian Law Firms (SILF), which consists of firms which specialise in Joint Ventures, international arbitrations and transactional practice, had this to say: “The demand for opening legal services sector in India does not come from Indian business or Indian profession or even foreign multinational companies. Strangely the demand comes from foreign lawyers and particularly those from the U.K. … The problem is that in India the legal profession is not a business and it is not up for sale.”

It is time a resolution to this contentious issue was arrived at. The ball lies in the government’s court. It must start a frank and meaningful dialogue by publishing a position paper containing the national objectives and a proposed mechanism.

In sum, reciprocity, transparency and accountability of foreign lawyers with strict court-monitored mechanism of disciplinary control (one cannot trust the executive in view of its consistent support to foreign law firms) and a level-playing field are essential to be put in place by law. Our law firms should not be eliminated in India as has happened in the accountancy sector but should grow nationally and internationally. A modus vivendi between the legal profession and the authorities is a precondition for fashioning a meaningful mechanism. Foreign Legal Consultants (FLCs) and foreign lawyers being permitted to enter the legal services sector in India without these safeguards would be unacceptable, inopportune and contrary to national interest.

(Anil Divan is president, Bar Association of India.

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