Regulatory and Judicial Review of Entry of Foreign lawyers and Law firms in India

Introduction

There has been an ongoing debate in India regarding whether International Lawyers/ International Firms can practice law and whether they can advice the clients in India.  Under Advocates Act, 1961, the Bar Council of India recognizes law degree on reciprocal basis and legal academics can teach and engage in legal research without any bar. However, foreign national are prohibited from practicing in India as per the said Act.  In accordance with section 24 of the said act certain conditions have been mentioned for persons who may be admitted on the State roll of advocates.

QUALIFICATIONS FOR PRACTICE OF LAW IN INDIA

Section 29 of the Act clearly specifies that only 'advocates' as defined under the Act are entitled to practice the profession of law in India. An advocate is defined as a person who enters into the rolls of a State Bar Council under the provisions of the Act. Persons may enroll with a State Bar Council if:

(a) He/she is a citizen of India

(b) He/she has completed 21 years of age.

(c) He/she has obtained a degree in law from any University in India recognized for the purposes of the Act by the BCI or has obtained such other foreign qualification in law as is recognized by the BCI for the purpose of admission as an advocate.

However, Section 24(1)(c)(iv) lays down an exception that subject to other provisions of the Act, a national of any other country may be admitted as an advocate on the rolls of the State Bar Council, if Indian citizens who are duly qualified are permitted to practice law in that other country. Further, provisions pertaining to reciprocity as provided under Section 47 of the Act stipulate that where 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.

CASE LAWS

There have been various cases which have been filed in the court of law in India dealing with the same subject matter.

1.       Lawyers' Collective v. Bar Council of India & Ors

In 2009, the Bombay High Court (State of Maharashtra, India) pronounced a judgment on the matter,where RBI had granted permission to White & Case, a foreign law firmu/s 29 of Foreign Exchange Regulation Act (FERA) to open a liaison office in India.

Facts of the case:-

Foreign Law Firms (namely White & Case, Chadbourne & Parke and Ashurt Morris Crisp) had sought permission from RBI under S. 29 of Foreign Exchanges Regulation Act, 1971 (“FERA”), since repealed, to set up a liaison office in India to conduct the activities of, amongst other, “coordination, communication between its head office, clients, various governments; establish business contacts, explore foreign investment opportunities in India and other administrative functions”. The RBI granted permission under FERA, with certain restrictions, such as, the liaison office shall not enter into contracts on its own name; its expenses shall be met by its head office.

Subsequently, A Public interest Litigation (PIL) was filed before Bombay High Courtcontending that such permission was in contravention to section 29 of the Advocates Act.  

Issues Raised:-

(a) Whether RBI had the authority to grant permission to foreign law firms.

(b) Whether such permission will be in violation of section 29 of the AdvocatesAct, 1961 wherein, it has been clearly specified that Advocates to be the only recognized class of persons entitled to practice law.

(c) Whether the above-mentioned Act will apply on persons practicing in non- litigious matters.

Held:-

Hon’ble Bombay High Court had stated that the expression ‘to practise the profession of law’ as specified under Section 29 of Advocates Act, 1961 is wide enough to cover the persons practising in litigious matters as well as non- litigious matters and, therefore, to practise in non-litigious matters in India, the respondents (foreign law firms) were bound to follow the provisions contained in the 1961 Act.

In the case, the Hon’ble High Court was of the view that as the foreign law firms were not enrolled under the Advocate Act, 1961 they could not open liaison offices in India.  It was further held that the RBI was not justified in granting permission to the foreign law firms to open liaison offices in India u/s 29 of FERA . It had been clearly stated that u/s 29 of FERA, RBI has power to grant permission for carrying on “activities of a trading, commercial or industrial nature”. There is a fundamental distinction between professional activity and the activity of a commercial character. As the liaison activities of the foreign law firms related to the profession of law, no permission could be granted to the foreign law firms under section 29 of FERA.

The Bombay High Court had held that such permission could not have been granted as it was contrary to the Advocates Act and the BCI Rule.

2.       A.K Balaji v  Bar Council of India and Ors

Pursuant to this case some other issues were raised before the Madras High Court (State of Tamilnadu, India) in the year 2012.

Facts of the Case:-

A PIL had been filed to seek direction to Union of India, RBI and BCI to take action against 32 foreign law firms which had been allegedly practicing in India.

The main issue which had been addressed in the said matterwas the principle of reciprocity and to whether Foreign Advocates shall be allowed to fly-in-fly-out in India to provide legal advice to its Clients.

Held:-

The Court had restrained foreign law firms and lawyers from practicing as an Advocate in India. However, it stated that foreign lawyers could visit India for a temporary period to render legal advice.

The court had adopted the concept of flying in and flying out (FIFO) wherein, the foreign legal experts shall visit India, to offer advice to their clients on their laws as there is no specific provision in the Advocates Act to prohibit a foreign lawyer from visiting India for a temporary period to advice his or her clients on foreign law.

Appeal to Supreme Court

Bar Council of India and Ors v. A.K Balaji (SLP(C) -17150-17154/2012)

Bar Council of India in this case has appealed against the said judgment of Madras High Court and prayed that foreign lawyers and law firms shall not be allowed to render legal advice in seminars or conferences or even participate in arbitration proceedings.

Global Indian Lawyers (GIL) v. Bar Council of India( SLP (C)-11263/2015)

Another appeal had been filed before the Supreme Court by the Global Indian Lawyers (GIL) group of interveners who have challenged this view of Bombay High Court.

On September 14, 2015 the petitioner before the Bombay High Court, the NGO Lawyers Collective, argued before the Supreme Court that the petition filed by Global Indian Lawyers (GIL) should be dismissed as the same is not maintainable. They contended that they should not be allowed to challenge the Bombay High Court verdict after a gap of six years to which they were not even a party therefore, the bench should decide the maintainability of its appeal, at the threshold stage.

Supreme Court on 14 September, 2015 decided to grant leave in two appeals against the Madras High Court judgment and the Bombay High Court judgment against foreign law firms.

Current Judicial Scenario

An application had been in July 2017 by the Ministry of Law and Justice, India for urgent hearing by Hon’ble Supreme Court on the issue of entry of foreign lawyers and law firms in India. The aforesaid matter had been listed for hearing the contentious issue of entry foreign law firms and lawyers in India in the month of January, 2018

On 1^stFebruary, 2018, Supreme Court heard the parties and reserved the its Judgment. In the case now taken up by the Supreme Court, the Petitioners have argued on the following points:

(a) That the Advocate Act, 1961 applies to individual lawyers and not law firms

(b) That the Advocate Act, 1961 does not prevent an Indian lawyer from becoming dual qualified.

(c) That the expression practices the profession of law under the Advocate Act, 1961 implies only Indian Law.

 In view of the contentions forwarded by the petitioner, the two-Judge Bench of the Supreme Court raised an intriguing concern while remarking- “If we bar the foreign law firms and lawyers would that not stop India from becoming the hub of activities? Even the Madras High Court has taken exception to the Bombay High Court judgment in respect of international commercial arbitration services on a fly-in and fly-out basis?”

Indian Government View

With a view to pushing the liberalization of the Indian legal market, the Union of India had only moved an application in the Supreme Court in the matter BCI vs. AK Bajaj & Ors for an early hearing of the matter. 

The application states that the Bar Council of India (BCI) has already drafted the Rules for the entry of foreign lawyers, but is waiting for the outcome of the case. It had further specified that the matter being utmost importance in the present time, it is necessary to be decided at the earliest possible.

The government has also recommended a phased entry for foreign lawyers spread over a period of five to seven years. This process will be enabled by:

(a) Domestic reforms. These include the removal of restrictions on marketing and advertising of legal services, entering into fee-sharing agreements and using corporate entities like LLPs to practice law which shall enable competition amongst Indian and Foreign Lawyers.

(b) Opening international arbitration and mediation services to foreign lawyers.  Recognition to the right of foreign lawyers to temporarily enter India on a “fly-in and fly-out” basis to conduct arbitrations and advise their clients on foreign and international law. However, there exists a need to amend the said Act to address some of the loopholes in the Act (for example, the issues of “reciprocity” and the regulation of the “practice of foreign law).

(c) Allowing foreign lawyers to provide non-litigious and advisory services on issues of foreign and international law.Recent reports have suggested that India is likely to follow Singapore’s model of liberalisation by giving access to a limited number of foreign law firms in select areas of law through licenses and joint ventures (with local firms).

Although the nuances of the proposal are still being worked out, BCI have expressly stated that they will not support foreign direct investment in the legal sector or allow multi disciplinary practices to provide legal services in India.

In order to embark liberalization in the legal market,the Governmenthas revoked a ban on the practice of law from special economic zones (SEZs), by issuing a notification in the Gazette of India amending the Special Economic Rules governing Special Economic Zones on 3 January 2017.

Vide the amendmentthe Special Economic Zone Rules could make Legal and accountancy services from foreign entities possible in the Special Economic Zones.Under Rule 76 of the SEZ Rules, “services” has been defined which includes various services including Professional Services. Although Legal services and accounting is a Professional Service, the earlier Rules had explicitly exempted it from the ambit of ‘Services’. That means, according to the earlier Rules, legal and accountancy services are excluded from ‘services’ which can be outsourced from overseas entities in the Special Economic Zones.  However, vide this amendment, the said amendment has been undone.

However, Bar Council of India (BCI) have been in opposition to their entry as if the same has been allowed it would be a risky proposition for Indian legal market since the SEZ rule amendment does not explicitly mention foreign law firms at all.

BCI’s View

The Bar Council of India (BCI) have already drafted rules that may allow foreign lawyers to practice in India, if ratified. The rules are yet to be discussed before the law ministry. Following are the key highlights of the rules:-

(a) Foreign lawyers and law firms shall be allowed to set up offices in India after registering with the BCI and paying the required registration fees.

(b) Foreign lawyers would be allowed to do all non-Indian legal transactional work and hire Indian lawyers or go into partnership with Indian lawyers — activities that are all currently forbidden under the Advocates Act 1961 that only allows persons who are Indian nationals to practice law in India.

CONCLUSION

Bar Council of India: BCI have agreed ‘in- principle’ with the government’s proposal to gradually open Indian Legal Market to Foreign Lawyers but however, the same should be done on reciprocal basis.

Government of India; The governmenthas amended SEZ rules related to restriction on hiring of foreign lawyers and accountants for the smooth functioning of International Financial Services Centres and further is willing to amend the BCI Rules in order to clear the stand of Foreign Laws Firms. The Government of India every now and then has been taking efforts to liberalise the legal market, alongside the law ministry.

Supreme Court of India: Further, the hearing in the aforesaid matters has ended on 2^ndFebruary, 2018 with the Supreme Court reserving its verdict on the issue, which will be landmark judgment about entry of foreign lawyers/ law firms in India.