To be or not to be: Foreign firms in India

There has been lot of attention on the issue of presence of foreign firms in India for the past few weeks owing to the judgment delivered by Bombay High Court in the long pending case of Lawyers Collective v Bar Council of India, WP No. 1526 of 1995. In the early 1990s, just after first phase of liberalization of Indian economy, 3 foreign firms, White & Case, Chadbourne & Parke and Ashurst Morris Crisp applied before Reserve Bank of India (RBI) to open liaison offices in India (not full-fledged law firms), the aims of these liaison offices were to ‘collect information’, ‘establish business contacts’ basically to provide non litigious legal support. It is interesting to note that these law firms applied before the financial authority in the country to enter the market but not the local or the national Bar Council, this was to comply with the then foreign currency regulations (the Foreign Exchange Regulation Act, 1973), RBI granted permission to these three law firms to set up liaison offices putting very tight conditions such that these offices could not enter into contracts with any Indian clients and even the cost of running these offices should come from outside India, thus for all practical purposes these offices were to just facilitate business relationship with Indian clientele who might use the expertise of these firms for work outside India.

Lawyers Collective is a pressure group which opposed opening of liaison offices of foreign law firms in India, it filed a writ petition before Bombay High Court. It claimed that even for non litigious legal issues like ‘drafting documents, reviewing and providing comments on documents, conducting negotiations and advising clients on international standards and customary practice relating to the client’s transaction etc.’ one needs to comply with the Bar Council regulations and the Advocates Act 1961.

The main issue framed by the Court was whether liaison offices in India could carry on the practise in non litigious matters without being enrolled as Advocates under the 1961 Act? To answer this question the Court looked at the width of jurisdiction of Advocates Act and meaning & purpose of ‘non litigious matters’. Section 29 of the Advocates Act which lays down who can practice law in India it is stated that advocates are the only class of persons ‘entitled to practise the profession of law’. Also section 33 of the Advocates Act 1961 lays out the field of practise of advocates which is ‘Except as otherwise provided in this Act or in any other law for the time being in force, no person shall, on or after the appointed day, be entitled to practise in any Court or before any authority or person unless he is enrolled as an advocate under this Act.’ So the case hung on the issue as to whether the expression ‘practise in any Court or before any authority or person’ would include non litigious legal matters or it would fall under the bracket of ‘practise the profession of law’.

The court looked into the statements of Objects & Reasons of the Advocates Act (this is usually done to purposively interpret any section especially when the judge finds that a strict/literal interpretation may not deliver justice), and came to the conclusion that Bar Council should have regulatory authority and primacy on how to ‘practise the profession of law’ and that is the reason that the 1961 Advocates Act was brought about, thus the expressions ‘to practise the profession of law’ in section 29 of the 1961 Act is held to be wide enough to cover the persons practising in litigious matters as well as persons practising in non litigious matters, one illustration provided by the court to bolster its decision was that of ‘an advocate who is debarred for professional misconduct can merrily carry on the practise in non-litigious matters on the ground that the 1961 Act is not applicable to the persons practising the profession of law in non litigious matters.’ The court reasoned that such an argument which defeats the object of the 1961 Act cannot be accepted. Thus the court held that liaison offices of such foreign law firms although practicing only non litigious issues would fall foul to section 29 of the Advocates Act and that RBI should not have granted the permission. The court also asked the Central Government to take decision on issue relating to the foreign law firms practising the profession of law in India as expeditiously as possible.

Before the judgment in October Union Law Minister in an interview to IBLJ had said as above but at many levels such a judgment was not unexpected noted legal writer Jayant Krishnan in ‘Globetrotting Law Firms’ points out that traditionally Indian law fraternity has been less than welcome about ideas on liberalization of law sector. Some were afraid that this judgment would affect the ‘best friend relationships’ that many Indian law firms have with foreign law firms, but these relationships are nothing but an informal process of letting the client know that in such countries you may visit such firms for legal help under that jurisdiction (very much like referral system), such an arrangement would ultra liberal stretch of imagination to fall within purview of practicing profession of law, but then who knows. A set back of some sort would be brakes on proposed LPO JVs between Indian and foreign law firms, most Indian firms would now move ahead alone in such ventures.