Need for Liberalization of the Indian Legal Market
Written by Jalaj Agarwal
Senior Editor at Law & Order
Fifth Year, B.A. LLB. Symbiosis Law School, Pune.
Disclaimer: Please note that the views expressed below represent the opinions of the article's author. The following does not necessarily represent the views of Law & Order.
The Indian economy has developed tremendously in the last three decades owing to the globalisation and liberalisation of trade practices and services in India. It has further led to the overall growth of the Indian goods and services market. However, over the years the Indian legal service market has remained a closed market for foreign players thereby restricting the effects of liberalisation over this profession. This article first discusses the laws and regulations restricting the inclusion of foreign nationals. It then analyzes the need for liberalisation of the legal market by comparing the advantages and disadvantages associated with the change. The author also suggests some suggestions for allowing foreign firms in the Indian market without causing prejudice to the Indian players. In conclusion, it is provided that with the on-going wave of globalization it is imperative that the Indian legal market is also opened for foreign players to ensure the overall development of the legal industry.
Keywords: Globalization, liberalisation, Indian legal Profession, Bar Council of India, foreign firms
Globalization and the opening of the domestic economies by the respective countries have been one of the greatest phenomena of the last few decades. The inclusion of foreign players in the domestic economies has led to significant economic boosts, especially for developing countries. In the year 1990 India, as part of its substantial economic reforms, opened up its domestic market and liberalised trade practices in the country. Since then, the Indian economy has grown sharply and a major contributor to this has been the service industry. In view of this, it is fascinating to observe that the Indian legal services market is still a highly-regulated market that has refused to accept the changes brought in by liberalisation and globalisation.
The Bar Council of India (BCI) has been reluctant in opening the Indian legal market to international law firms in order to protect Indian legal professionals. They fear that it will hamper the prospects of Indian lawyers as they may not be able to compete with the specialised services that would be provided by the foreign firms.
However, the demand for India’s legal market has been growing strongly with many foreign and multinational companies investing in India and several Indian companies entering into cross-border transactions with foreign companies. This has put constant pressure on the Indian authorities to open the legal market to international law firms.
International agreements and Indian Legislations
1. General Agreement on Trade in Services:
India being a member of the World Trade Organisation (WTO) and a signatory to the General Agreement on Trade in Services (GATS) is under an obligation to liberalise and open its service sector to member countries. The legal profession is included as one of the services under GATS.
2. Indian Laws and Regulations:
Legal services in India are largely covered by the Advocates Act, 1961 and the Bar Council Rules, 1975. BCI is the main regulatory authority for the legal profession in India. Various provisions for restrictive practices in the legal profession are:
● According to section 24 of the Advocates Act, 1961, for a person to be eligible for enrolment as an Advocate he must be a citizen of India, not less than 21 years of age and must have an LLB degree. Thus, the Act clearly prohibits foreign nationals from working as legal professionals in India.
● Also, a combined reading of Sections 24, 29 and 33 of the Advocates Act, 1961 provides that only a natural person can practice law in India. This means that no legal service provider can be incorporated as a company and continue the legal practice in India.
● Section 47 provides for the principle of reciprocity, which stipulates that if any country prevents Indian citizens from practicing the profession of law or subjects them to unfair discrimination in that country, then no subject of that country shall be entitled to practice law in India.
● Furthermore, an Advocate in India cannot enter into a partnership or any other arrangement with a non-advocate. This restricts various foreign firms that provide a wide range of services such as accounting, taxation, etc. across different jurisdictions.
● Another restraint in this regard is the restriction on Indian firms to advertise their existence through any form of media. As most international firms have extensive advertisements and websites this creates an imbalance between Indian and foreign firms.
Need for Liberalization of Indian legal market – Advantages and disadvantages
Historically, liberalisation and globalisation have been extremely beneficial for the Indian economy, thus there exists a strong case for reciprocating the same in the legal service market as well.
Advantages of opening the legal market to International law firms:
● Firstly, allowing International firms in the Indian market would lead to increased competition among legal practitioners. This competition would result in improved capacity and quality of services, thereby leading to the growth of the Indian legal market.
● This will also provide Indian lawyers the opportunity to work with international fraternity and could lead to more employment opportunities with better pay and working conditions.
● Apart from the legal professionals, it would also benefit the clients as foreign firms would be willing to provide the best services at minimal costs to attract and build a client base in India. Moreover, for several services, travel costs would be reduced which would ultimately reduce the cost of services.
● Since several Indian law firms have established offices in various jurisdictions outside India, it would only be fair to reciprocate the interest by allowing the foreign firms to practice in India.
● Specialised advisory from foreign firms is required in many cases such as cross-border transactions or compliances relating to different jurisdictions. Since foreign firms possess expertise in some areas of law that are not so well developed in India, it would be in everyone's interest to allow these firms to provide direct service in such cases.
● With increased cross border deals and outsourcing activities involving both Indian and International clients, it is pertinent to allow both Indian and international firms to work together without restrictions.
● Allowing foreign firms in the Indian market would consequently have a positive impact on other sectors as well. This could provide more stability for foreign players to invest in India.
● Another benefit of allowing foreign firms would be increased professionalism in Indian law practices in comparison to their foreign counterparts.
● A defensive approach also propagates that allowing foreign firms in the Indian market would not lead to the downfall of the Indian lawyers who practice before the court of law as these firms would mainly concentrate on corporate and/ or commercial transactional work. This rationale emerges from various factors such as language and cultural problems, the dearth of knowledge of the Indian legal system and also the absence of litigating experience in Indian courts.
Disadvantages of opening the legal market to International law firms:
● The biggest disadvantage associated with the opening of the Indian legal services market is the possibility of domestic law firms being overshadowed by their foreign counterparts in terms of performance and finances.
● Since the major foreign firms operate at an extensive level they predominantly function as large business organizations and could easily swipe up the opportunities for the Indian legal professionals.
● These organizations with their size, power and influence may promote the commercial interest of their big-name clients affecting the judicial system.
● Another concern is the risk of the employability of fresh graduates and young legal professionals. Since there is a noticeable gap in legal education and skills in India and some foreign countries, these foreign firms may be more than willing to hire individuals from outside India.
However, it is important to note that the inability of the Indian law firms to compete with foreign firms is largely a result of its own unnecessary limitations and weak education curriculum.
Restraints like precluding Indian law firms from advertisements and entering into an arrangement with non-lawyers hamper the growth of Indian firms in comparison to the foreign counterparts which remain free from these limitations.
Suggestions for opening markets to international firms
In order to implement liberalisation in the Indian legal market, it is important to first try and put the Indian firms on an equal footing with their foreign counterparts to reduce any competitive disadvantage between the two. For this, a two-fold approach is required to be adopted according to the author. The first approach provides for opening of the legal market for foreign firms in a phased manner and the second approach deals with the steps to upgrade the practice by Indian firms.
1. Phased Manner Approach:
The Indian Legal Markets can be opened in a three-phase manner:
● In the first phase, it is required to liberalise the Indian laws and regulations. The laws restricting the opening of the Indian legal market such as Sections 24, 29, 33 and 47 of the Advocates Act, 1961 need to be amended to allow foreign nations to be able to practice in India. Various other rules by the BCI such as the restraint on advertising and limiting the number of partners, etc. need to be removed to encourage international firms to practice freely in India.
● In the second phase, the entry of foreign firms initially can be restricted by adopting various measures. These measures can include clearly defining the areas of law/ services which can be provided by the foreign firms, maintaining the ratio of foreign to Indian legal professionals in the Indian market and/or granting licenses to foreign firms according to the specific market requirements.
● In the third phase, foreign firms can be allowed to expand their practices in India. This can be done by systematically removing the restrictions on their practice and also allowing them to form joint ventures in India. Harmony should be developed between Indian firms and their foreign counterparts.
2. Recommendations for India legal Practitioners:
There are various recommendations for Indian legal practitioners to ensure they are able to better compete with International law firms.
● Professionalism is one of the key factors for practicing legal professionals. As a part of Indian law firms are family-run organizations, they lack behind in maintaining the same level of professionalism as compared to the other corporate firms. In order to develop and compete with foreign firms, it is imperative for Indian firms to improve in this regard.
● Indian firms should equip themselves with specialized skills as this will help them to differentiate themselves from their foreign counterparts.
● Indian firms may also merge with their Indian counterparts to balance the economies of scale with global firms. This can help them to compete with foreign firms on economic levels.
● Indian firms should also invest in developing soft skills and provide skill training to Indian law students to counter the skill set of international law firms.
India, unlike other common law countries, has not shown much positive signs for liberalizing the Indian legal market. The BCI has opted for a protectionist approach due to the fear of competition from the international law firms as they believe that the Indian practitioners will not be able to compete with foreign nationals on an equal footing. However, as discussed above such competition is a welcome change for the overall growth of the Indian legal market.
The liberalization of the legal profession will have many-fold benefits for the industry player including the clients themselves. The quality of services offered would improve, better career opportunities will be provided to law graduates, clients will have more options at competitive prices and furthermore, the liberalization of India legal market will also help India to achieve a global name in the legal profession.
Thus with the ongoing wave of globalization and liberalization, it is imperative that the Indian legal profession move on from its protectionist stand and open its legal services market for foreign players. Instead of deliberating on the disadvantages of this approach, it is more sensible to develop and implement measures for the inclusion of foreign firms in Indian in a systematic manner so that it does not lead to undue disadvantages to the Indian players. Today, the Indian legal profession is highly competitive and is ready to grow along with its foreign counterparts in a globalized world.
 WTO, Legal Services, https://www.wto.org/english/tratop_e/serv_e/legal_e/legal_e.htm  Section 24 of the Advocates Act 1961  Section 24, 29, 33 of the Advocates Act 1961  Section 47 of the Advocate Act 1961  Rules 47-51, Bar Council Rules, 1975 (As amended in 2009)  Rule 36, Bar Council of India Rules, 1975 (As amended in 2009)
● The Advocates Act, 1961
● Bar Council of India Rules, 1975
● Chhina, Amanpreet, Liberalisation of Indian Legal Services: Politics and Challenges, Oxford University Commonwealth Law Journal (2012).
● Mondaq, India: Liberalisation of Legal Services In India, https://www.mondaq.com/india/performance/617532/liberalisation-of-legal-services-in-india
● Sarthak Sarin, Liberalisation of the Indian legal sector: An imperative need of the day, https://www.indialawjournal.org/archives/volume3/issue_1/article_by_sarthak.html