India: Globalisation Of Legal Services (...And Indian Perspective)

Globalization, be it technological or political or economic, has brought about a revolution in international trade with increasing participation and involvement of countries & greater access to domestic economies.

The last decade has been a mini-revolution in legal service sector with the best legal impact on corporate legal arena. Activities in project financing, intellectual property protection, environmental protection, competition law, corporate taxation, infrastructure contract, corporate governance and investment law were practically obscure before the 90's. The number of law firms capable of managing such work was also very limited. Even though globalization is not new, but in the purview of legal services, it is now gaining momentum due to the growth of the Internet, automation of legal processes, developments in data security and emerging technology tools. It is clear that need of professional service has been tremendous in the legal service sector.

In recent years the number of law firms, in-house firms and individual lawyers with expertise in providing legal services in corporate field has increased exponentially. These are defining times in the disposition of emerging legal sectors towards settling disputes through ADR (Alternate Dispute Resolution). Globalization has extended the inward and outward demand for legal services. Domestic law firms are expanding their services beyond local jurisdiction; joining forces with foreign counterparts and forming intercontinental mergers, obliterating traditional boundaries on the geographical scope of the practice of law. As law firms continue to expand their presence globally, globalization will continue to reshape the landscape of the legal industry in the coming years.

India has been putting efforts to liberalize its legal services sector, to allow foreign law firms and lawyers, the right to operate in India. Global integration in the legal profession would help India in increasing her 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.

MAJOR ISSUES DETERRING THE OPENING-UP OF INDIAN LEGAL SERVICE SECTOR

The legislator and the Bar Council of India's approach is not been clear on the opening-up of the legal service sector in India. The over-riding view is still against foreign law firms setting up offices in the country as apprehension abounds about probable stiff competition from foreign firms, owing to their better infrastructure, better knowledge and developed skills of legal drafting and documentation. Hence, the Indian government did not enter the successive rounds of negotiation as mandated by the WTO rules.

The provisions of the Advocates Act, 1961 and BCI regulations are too stringent, Section 24 of the former being a key deterrent. The section states that only advocates recognized under the act can practice law and a person shall be qualified as an advocate on a state roll, if the person is a citizen of India and has obtained a law degree from a BCI recognized college/ university. Subject to other provisions of this Act, a national of another country may be permitted to practice law, if citizens of that country, duly qualified, are allowed to practice law in that country. Similarly, as per Section 33 of the Act or any other law for the time being in force, no person shall, on or after the appointed date, be entitled to practice law unless he is enrolled as an advocate under the Act.

Foreign law firms in the country have been subject to controversy since 1995, when firms like Ashurst of UK and White and Case and Chadbourne and Parke of the US, set up liaison offices in India and were granted permission under the Foreign Exchange Regulation Act, 1973, to start liaison activities only and not active legal practices. In 1955, the Lawyers Collective, a public interest trust set up by the advocates to engage in the freelegalaid, movedthe Bombayhighcourtchallenging the right of foreign law firms to practice law in India. Their main contention was that practicing law should include not only appearance before the court as pleaders, but also drafting legal documents and advising clients. The Central Government, on the other hand, contended that the Advocates Act prevented foreign lawyers from practicing law in court, and from giving advice to clients.

Nevertheless, the government had the intention of opening-up the legal service sector in India. Attempts had been made where foreign lawyers and foreign law firms had been allowed to establish their offices in India. In the year 2009, the Bombay High Court held that foreign lawyers and law firms could establish their offices in India only after being enrolled as advocates under the Advocates Act, 1961. Later, in February 2012, the Madras High Court held that foreign lawyers and law firms cannot practice law in India, neither on the litigation nor on the non- litigation side, unless they fulfilled the requirements of the Advocates Act and the Bar Council of India Rules. It had, however, held that they might visit India on a 'fly in and fly out' basis for advising clients on foreign law. It had further held that there is no restriction against them coming to India for conducting arbitration proceedings in disputes involving international commercial arbitration.

Recently, the Hon'ble Supreme Court held that foreign law firms cannot 'practice'or open offices in the country, but allowed foreign lawyers to visit India on a 'fly in and fly out' basis for rendering legal advice to their clients on foreign law. Some of the notable excerpts from the judgment of the Hon'ble Apex Court are as under:

"Ethics of the legal profession apply not only when an advocate appears before the Court. The same also apply to regulate practice outside the Court. Adhering to such Ethics is integral to the administration of justice... The professional standards laid down from time to time are required to be followed. Thus, we uphold the view that practiceoflawincludeslitigationaswellasnon-litigation." (the Hon'ble Supreme Court relied on the judgment in the case of Pravin C. Shah versus K.A. Mohd. Ali to hold this) "We have already held that practicing of law includes not only appearance in courts but also giving of opinion, drafting of instruments, participation in conferences involvinglegaldiscussion. Thesearepartsofnon-litigation practice which is part of practice of law. The scheme in Chapter-IV of the Advocates Act makes it clear that advocates enrolled with the Bar Council alone are entitled to practice law, except as otherwise provided in any other law. All others can appear only with the permission of the court, authority or person before whom the proceedings are pending. Regulatory mechanism for conduct of advocates applies to non-litigation work also."

"Visit of any foreign lawyer on fly in and fly out basis may amount to practice of law if it is on regular basis. A casual visit forgivingadvicemaynotbecoveredbytheexpression 'practice'. Whether a particular visit is casual or frequent so as to amount to practice is a question of fact to be determined from situation to situation. Bar Council of India or Union of India are at liberty to make appropriate rules in this regard."

"We may, however, make it clear that the contention that the Advocates Act applies only if a person is practicing Indian law cannot be accepted. Conversely, plea that a foreign lawyer is entitled to practice foreign law in India without subjecting himself to the regulatory mechanism of the Bar Council of India Rules can also be not accepted. We do not find any merit in the contention that the Advocates Act does not deal with companies or firms and only individuals. If prohibition applies to an individual, it equally applies to groupofindividualsor juridical persons."

"If the matter governed by particular rules of an institution or if the matter otherwise falls under Section 32 or 33, there is no bar to conduct such proceedings in prescribed manner. If the matter is governed by an international commercial arbitration agreement, conduct of proceedings may fall."

"The BPO companies providing range of customized and integrated services and functions to its customers may not violate the provisions of the Advocates Act, only if the activities in pitchandsubstancedonotamounttopractice of law. The manner in which they are styled may not be conclusive. As already explained, if their services do not directly or indirectly amount to practice of law, the Advocates Act may not apply. This is a matter which may have to be dealt with on case to case basis having regard to a fact situation."

"In case of a dispute whether a foreign lawyer was limiting himself to "fly in and fly out" on casual basis for the purpose of giving legal advice to their clients in India regarding foreign law or their own system of law and on diverse international legal issues or whether in substance he was doing practice which is prohibited can be determined by the Bar Council of India. However, the Bar Council of India or Union of India will be at liberty to make appropriate Rules in this regard including extending Code of Ethics being applicable even to such cases." (the Hon'ble Court modified the Madras High Court's observation on the bar against foreign lawyers visiting India on a fly in and fly out basis to hold that the expression "fly in and fly out" will only cover a casual visit not amounting to practice)

"If the Rules of Institutional Arbitration apply or the matter is covered by the provisions of the Arbitration Act, foreign lawyers may not be debarred from conducting arbitration proceedings arising out of international commercial arbitration in view of Sections 32 and 33 of the Advocates Act. However, they will be governed by code of conduct applicable to the legal profession in India. Bar Council of India or the Union of India are at liberty to frame rules in this regard."

In a nutshell, visit of any foreign lawyer on fly in and fly out basis may amount to practice of law if it is on a regular basis. A casual visit for giving advice may not be covered by the expression 'practice'. Whether a particular visit is casual or frequent to amount to practice, is a question of fact to be determined from situation to situation. Bar Council of India or Union of India are at liberty to make appropriate rules in this regard. The Hon'ble Apex Court, however, permitted foreign lawyers to conduct arbitration proceedings in disputes involving international commercial arbitration, after following the code of conduct applicable to the legal profession in India. Rules of institutional arbitration will apply to them, the court said. It also modified provisions of the Advocates Act, 1961, debarring foreign lawyers completely for conducting international commercial arbitration in the country. The Hon'ble Bench clarified that such visits must not amount to advocacy (which also comes under the definition of 'practice of law') under the Advocates Act, 1961. The SC held that the prohibition (on practicing law) applicable to any person in India other than an advocate enrolled under the Advocates Act certainly applies to any foreigner also. So foreign lawyers or law firms cannot practice in India without fulfilling the requirements of Advocates Act and the BCI rules. Upholding the Madras and Bombay High Courts' judgments with certain modifications, the SC bench defined 'practice of law' to include litigation as well as non-litigation; not only appearance in courts but also giving of opinion, drafting of instruments, participation in conferences involving legal discussion amount to practice, the top court clarified. The top court rejected the plea that a foreign lawyer is entitled to practice foreign law in India without subjecting himself to the regulatory mechanism of the BCI rules. The Advocates Act applies equally to firms and individuals, the judgment stated. Justice Goel, writing for the bench, said "BPOs, LPOs, etc. providing range of customized and integrated services and functions to its customers would not be allowed to provide services, which, in pitch and substance, amount to advocacy, but they can render all other services".

The SC judgment came on a batch of appeals and crossappeals led by BCI challenging the conflicting judgments by the Madras High Court and the Bombay High Court on entry of foreign law firms. The BCI had opposed any move to allow foreign firms in India. It argued that foreign lawyers could not be allowed even to chip in for seminars and conferences.

Many countries including Singapore and China have opened-up their legal service sectors. Hence fly in and fly out is not a complete solution. It is a personal opinion, that the Supreme Court could have taken a more pragmatic approach on the issue. Several analysts also feel that the decision of the Hon'ble Apex Court could dampen India's prospects of foreign investments, as availability of quality legal service is what large and sophisticated investors would expect. While the ruling does not permit globalization of the legal sector for now, it shifts the onus on the government to do so!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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