LIBERALIZATION OF INDIAN LEGAL SERVICES SECTOR

India has been putting in efforts to liberalize its legal services sector in order to allow foreign law firms and lawyers the right to operate in India. The global integration in the legal profession would also help India in increasing its share in the global services trade. Few Indian firms have set up their branches across other jurisdictions like UK and US, likewise, post-liberalization, the foreign firms and lawyers will be allowed to set up their branches in India and employ Indian lawyers or enter into partnerships with Indian firms, provide legal advice on foreign law, etc.

Basically, legal services in India cover activities such as counseling done by solicitors, drafting and pleading done by advocates and notarial activities done by public notaries under Advocates Act 1961; advisory and arbitration. The legal service, like many other professional services, is a sector where regulatory barriers are rather high. But the NDA led government has relaxed the foreign direct investment (FDI) norms in many sectors such as defence, banking, railways, civil aviation, broadcasting, construction and medical devices, so if the FDI norms in the legal service sector are also relaxed, the liberalization of this sector would act as an accelerator for international investment in India.

But liberalizing the legal services market will have its own pros and cons in the following areas:

Costing:

• Pros- Although both the foreign firms and Indian firms may charge similar fees from their respective clients and may pay similar salaries to their respective employees, but the expenses involved in travel, building the infrastructure, etc of the foreign firms can be avoided by the Indian firms. As a result the overall cost incurred by Indian firms would be comparatively lesser.
• Cons- But when it comes to specialized advisory services like legal services for 3G licensing etc. foreign law firms may charge a premium price.

Quality:

• Pros– With entry of foreign firms and lawyers into Indian legal services market, the Indian firms will strive to become more competent by expanding the range of services they provide, employ more and best talent which may include partnerships with foreign legal professionals and provide better quality services to clients.
• Cons- With the potential growth in competition, Indian firms might need to make their presence more prominent in   the Indian market. But the Advocates Act 1961 does not permit Indian firms to advertise or solicit their work     in any form of media unlike foreign firms which are allowed to advertise in an extensive and flexible manner. As a result, it will create a non-level playing field unless the Bar Council of India (BCI) amends its rules.Moreover, the probability of Indian firms expanding their range of services by getting into partnerships with foreign firms and lawyers would be less because the foreign entrants may not always prefer to use the services of Indian lawyers alone and they would want to bring in experts from different places.

Areas of Interest:

• Pros– It has been observed that foreign law firms and lawyers mostly engage in providing services with regard to corporate documentation, mergers and acquisitions, advisory work on public and private international law, and all other kinds of non-litigation work. Whereas, a majority of Indian legal professionals and firms engage in litigation work. So their areas of interest won’t clash with each other
• Cons- To permit the foreign firms and lawyers to provide services in their area of interest in India, the lawyer has to be admitted by BCI as an advocate as per the Advocates Act 1961. However, due to the prevailing law which disallows foreign lawyers to practice in India liberalizing the legal service sector will have obstacles for the Government.

The US and the UK have been pushing India to open up the legal services sector to foreign firms. But if this sector is made open to one country then it has to open up to other member countries of World Trade Organization (WTO) because the “most favored nation” clause of the General Agreement on Trade in Services (GATS) does not allow favoring any country. As a result there would be ease of access for lawyers coming from different member states, with different backgrounds and training, which could lead to deterioration in the quality of legal services provided in India and it might also undermine the authority of the BCI. Currently the entire question of liberalizing this legal sector is uncertain and only time will tell whether the Indian legal sector will accept the advent of foreign legal professionals and law firms in India.

Harini Daliparthy

Legal Associate

The Indian Lawyer