Liberalisation of the Indian Legal Sector: Small Step or Giant Leap?

Anticipating the liberalisation of legal services in India has been criticised as being akin to waiting for Godot. This remark indeed reminds one of the long-drawn journeys which began more than a decade ago in 2009 when the Bombay High Court in Lawyers Collective v. BCI¹ held that India’s Central Bank and banking regulator, the Reserve Bank of India, was not justified in granting permission to foreign law firms to open liaison offices in India. The decision held that even non-litigious matters in India require compliance with Section 29 of the Advocates Act, 1961². This meant that even transaction documents could be drafted only by persons who were enrolled as “advocates” in India, which — amongst other things — requires Indian citizenship and a law degree from an Indian university. Following the same trend, the Madras High Court in A.K. Balaji v. Union of India³ also prohibited foreign law firms and foreign lawyers from practising law in India, both on litigation and non-litigation matters. Both the above judgments were challenged in the Supreme Court, whose decision proved to be the final nail in the coffin. In BCI v. A.K. Balaji⁴, the Supreme Court reiterated that foreign law firms/companies or lawyers cannot practise law in India. Here, however, a few narrow exceptions were carved out — the Supreme Court held that there was no bar for foreign law firms or lawyers to visit India on a “fly-in and fly-out” basis for advising Indian clients on foreign law or international legal issues, provided such visits are not on a regular basis. The Supreme Court also clarified that foreign lawyers and firms are not debarred from participating in international commercial arbitrations, provided they comply with the code of conduct applicable to Indian advocates.

What seemed to be a dark end was met with a slim ray of light in 2023 when the Bar Council of India (BCI) promulgated the BCI Rules for Registration and Regulation of Foreign Lawyers and Foreign Law Firms in India, 2022⁵ (the “Rules”). However, this light flickered immediately, with the Society of Indian Law Firms (SILF) lamenting that the Rules would “lead to loss of livelihood for Indian lawyers.” In fact, a plea was filed before the Delhi High Court in Narendra Sharma v. BCI⁶ challenging the decision to allow entry of foreign lawyers and firms into India. This back-and-forth re-emerged through the recent UK-India Foreign Trade Agreement (FTA) which, yet again, overlooked the legal industry. Disappointed, Law Society President Richard Atkinson remarked:

“This is a missed opportunity for a significant breakthrough in terms of market access for lawyers in both India and the UK. Legal services is an enabling sector, supporting other sectors in their own trade and investment decisions and operations. It is also a part of the high-growth sectors identified in the Government’s industrial strategy. We call on the UK Government to renew its support for legal services trade between the two countries.”⁷

Perhaps, it was with an intent to resolve this tussle that the BCI sought to amend the Rules (Amended Rules). The long-due attempts of liberalising the Indian legal industry, despite being met with SILF’s criticism of being premature, has been welcomed by some of the leading Indian law firms. In our preliminary understanding, international players in the market will not only enhance healthy competition but also boost India’s status as an international arbitration hub. Keeping this in mind, BCI via its recent press release reasserted that the regulatory framework aims to strike a balance between global integration and the protection of Indian legal practitioners. Here, we highlight some key features of BCI’s recent amendments to see if this is a balance well struck.

Finding the right balance

Global integration of the legal market

(i) Opening of legal profession in India to the extent of non-litigious issues

BCI has opened up the legal profession in India to foreign lawyers and foreign law firms, limited to the practice of foreign law, to handle diverse international legal issues in non-litigious matters which includes legal consultancy, legal documentation, representation in arbitration proceedings and other non-litigious legal activities related to foreign law. This could be made possible post Pravin C. Shah v. K.A. Mohammed Ali⁸ which held that rights of an advocate envelope a lot of acts to be performed that extends beyond the advocate’s mere appearance in the courtroom. Section 8 of the Amended Rules accordingly explains the nature and extent of law practice by foreign lawyers and foreign law firms. It inter alia includes activities like:

1. Engaging in corporate legal matters such as joint ventures, mergers and acquisitions, intellectual property matters, drafting of contracts and other related transactional work.

2. Representing clients in both institutional and ad hoc international arbitration cases conducted in India.

3. Providing legal opinions and advice concerning the laws of their country.

(ii) Indian foreign law firm

Previously, Indian advocates, as per Section 29 of the Advocates Act, 1961, were the only recognised class of persons entitled to practise law. However, Section 2 of the Amended Rules seeks to create additional categories of persons (and entities) that can similarly engage in the litigious or non-litigious practice of law. It is interesting to note that while some concepts like Indian Foreign Law Firms (IFLF) are entirely new, others have nonetheless been defined for better clarity. The below table sets out the additional categories of persons now entitled to practice in India:

(iii) Principle of reciprocity

Principle of reciprocity has been borrowed from Section 47 of the Advocates Act, 1961. It states that if any country prevents citizens of India from practising the profession of law or subjects them to unfair discrimination then India would similarly prohibit persons belonging from that country from practising. Similar provisions can also be traced within the Amended Rules which state that registration would be permitted only for lawyers/firms from those jurisdictions that offer comparable rights to Indian lawyers. In practice, this means that processes like registration, renewal, nature and extent of practice for foreign law firms and lawyers would depend on reciprocal recognition of qualifications and compliance with rules governing Indian participation in such foreign jurisdictions. In other words, the treatment provided in India to foreign lawyers would be similar to the treatment provided to Indian lawyers in those foreign countries. This would ensure equitable treatment and corresponding obligations for all parties involved.

Protection of Indian legal practitioners

(i) Restricted engagement of foreign law firms/lawyers and referral potential for Indian counterparts

The Rules make it clear that the role of foreign law firms and foreign lawyers would strictly stay confined to non-litigious matters; they cannot appear before courts, tribunals or statutory authorities. By this, while the Amended Rules aim to safeguard the domestic legal market for Indian advocates, they may simultaneously broaden its scope through international referrals. Rule 8(3) of the Amended Rules permits Indian advocates and partners of foreign law firms registered in India to take up matters on “referrals” by their respective foreign law firms — which is a big concession from the earlier position, and creates a potential market for Indian lawyers who can take up cases involving global clientele, based on references.

(ii) Fly-in and fly-out conditions

Rule 8(5) of the Amended Rules permit foreign lawyers and foreign law firms to engage in the legal profession on a “fly-in and fly-out” basis, without registration, subject to the following conditions:

1. The practice is strictly limited to providing legal advice to clients in India concerning foreign law.

2. Engagement may be procured by the client either in India or abroad.

3. Foreign law firm or foreign lawyer must not establish, operate or maintain any office, infrastructure or regular presence in India for the purpose of such practice.

4. The total yearly duration of “fly-in and fly-out” visits cannot exceed a total of 60 days.

5. Declaration of “fly-in and fly-out” practice must be made in a BCI mandated form and clearly specify the nature of work, legal areas involved, client details and jurisdictions.

While these conditions ensure that the “fly-in and fly-out” basis for practising law in India is not misused, some foreign law firms have raised concerns about the information that must be shared in these BCI mandated forms. Requirement of extensive data protection laws and confidentiality obligations in foreign jurisdictions may put these firms in a precarious position if required to disclose client-sensitive information.

(iii) Registration

Chapter III of the Amended Rules comprising of Rules 4, 5, 6 and 7 explains the registration process. It includes an extensive list of documents that are required for registration. Further, even the fee structure seems more onerous compared to Indian standards. For instance, the schedule prescribes a registration fee of $15,000 for individual foreign lawyers and $25,000 for foreign law firms (including partnerships, LLPs, or corporations) intending to work in India. Further, an additional registration fee is charged for each multiple foreign jurisdiction which includes $5000 per jurisdiction for individual foreign lawyers and $10,000 per jurisdiction for foreign law firms. In effect, foreign law firms intending to have a presence in India would have to shell out the substantial sums of money, depending upon the number of jurisdictions they are qualified and operate in, for their mere establishment.

Conclusion: Evaluating the future course of action

Overall, the Rules seem to strike a delicate balance; by encouraging India’s entry in a globally connected legal arena, while also ensuring that domestic players are not crippled. This can be best seen from instances such as restricting the practice of foreign lawyers to non-litigious matters, while also envisaging the possibility of collaborations in litigation via IFLF and referrals. Further, possibility of improving India’s position as a preferred arbitration hub are other potential outcomes that India is likely to benefit from. While time will reveal how things ultimately unfold, it is certain that the legal industry stands at the cusp of transformation.

With the liberalisation of the Indian legal sector, while BCI, albeit appreciably, has got the ball rolling, it is still yet to reach the finish line. Admittedly, the Amended Rules put the initial framework in place, but it is also time for some real work to begin. For instance, some of the below mentioned stakeholders ought to take the following next steps forward:

Legislature

While BCI has brought in the Amended Rules, the Advocates Act, 1961 stays unaltered. Amendments may be required to be made in provisions such as Section 29 read with Section 24, which still require Indian citizenship for lawyers to be admitted on the State rolls and practice law. Therefore, in provisions like these, some amendment may be required so as to permit foreign firms and lawyers to operate and be recognised in India.

BCI

At some instances, there are divergent approaches followed in India and abroad. With increasing cross-border engagements, it is necessary for BCI to iron out those differences. For instance, in India, Rule 36 of the BCI Rules states that lawyers are not permitted to solicit work or advertise through direct or indirect means. The rule further includes specific prohibitions on circulars, advertisements, personal communications, and media engagement related to their legal work. In fact, Indian law firms, in the past, have faced repercussions for violating the said Rules. However, there is no such restriction in foreign countries including UK and Singapore, provided the claims are not false and misleading. Therefore, if firms from these jurisdictions were to work in India or if Indian law firms or lawyers were to work abroad it is pertinent that all players operate on a level playing field — which would not be possible given the existing mismatch. Thus, it is pertinent for BCI to clarify the request by Indian National Association of Legal Professionals who recently wrote a letter seeking permission to advertise overseas.

Indian law firms and lawyers

As India opens its doors to foreign law firms, the Indian lawyers and law firms are expected to face an increased competition. While it is too early to predict anything, the future may witness increased collaborations between Indian and foreign law firms where the former benefit from increased global clientele and latter secure a growing presence in India. Further, Indian lawyers, especially those with dual qualifications and foreign LLMs, may find themselves becoming increasingly relevant for global recruiters. That said, it is time for both Indian lawyers and law firms to stay open to the possibilities of global collaborations, competitive thresholds and nuanced practice areas.

Therefore, while the amendments may well raise the bar, the match is far from over. It demands further time and efforts from various stakeholders including the legislature, BCI and Indian law firms/lawyers. As such, while the amendments to the Rules are definitely a step forward towards liberalising the Indian legal industry, whether or not it is a giant leap remains to be seen.