India to Welcome International Law Firms in Landmark Decision
The Bar Council of India announced last month that foreign law firms will be invited to set up offices in the country for the first time. This has come after decades of campaigning and advocacy from international law firms, as well as the Law Society of England and Wales.
Such firms will now be able to provide legal advice on their home country's laws as well as international law in non-contentious matters through these new offices. Both lawyers and law firms will need to register with the Bar Council in order to practice, with their licences valid for up to five years and open to extension.
Previous Status of Foreign Firms in India
Under the Advocates Act 1961 in India, foreign law firms were previously not able to open offices or to practice law in India concerning litigious or non-litigious matters. Foreign lawyers were only permitted to offer legal advice to Indian clients on international issues pertaining to offshore laws or to conduct proceedings concerning international commercial arbitration. Regardless, they were required to follow the Bar Council of India’s regulations while operating on this “fly-in fly-out” basis.
This had been upheld through various rulings and the Reserve Bank of India reiterated the regulation in November 2020, asking banks not to approve any application from foreign firms intending to establish offices to practice law in the country. This allowed them to maintain the monopoly Indian firms and lawyers have over the country’s commercial practices. Removing foreign competition for legal business also allowed Indian firms to charge clients more for their services.
India’s Economic Potential
As one of the fastest-growing economies in the world, the Indian market is incredibly profitable. The country registered record deals in 2022, with mergers and acquisition activities of US $152 billion. A range of factors makes India a profitable investment location such as their young, cheap and educated workforce, large market size and high return on equity. The Advocates Act therefore prevented foreign firms from expanding their practices into this key market and benefitting from the high-value deals taking place. It also greatly hindered the expertise they were able to bring to their multinational clients who were investing in the country.
The new rule changes allow foreign commercial firms to take advantage of a more than a billion-dollar legal market and get involved in transactional and advisory work in the country. It breaks the monopoly Indian firms and lawyers have over the country’s commercial practices, allowing foreign firms to expand their practices into a key market of the next generation and bring their deep experience in the field to India. International firms such as DLA Piper, Baker McKenzie and Herbert Smith Freehills – who currently advise Indian clients or those seeking advice on Indian law from their offices in London or Singapore, are expected to take advantage of this widened access and immense potential.
It is important to note that foreign lawyers will not be able to advise on local law or appear in Indian courts, which offers some protection for Indian lawyers. This has done little to address the concerns of the Society of Indian Law Firms and local firms, however, who have expressed fears about increased competition for legal services in the country. This is aggravated by the fact that the Bar Council prohibits Indian law firms from advertising their services online or offline. They anticipate “backroom manoeuvring, public petitions” and the like as a result of this decision, threatening their practices.
Nevertheless, they can be comfortable in the knowledge that their current services have the benefit of lower costs and greater expertise for clients. Moreover, international firms are unlikely to rush into setting up offices as these processes will be carefully planned out and considered.