Quagmire? no, legal mire

With increasing pressure on the Indian government to open up the legal services sector, a heated debate is on about the virtues of liberalising the market. The general feeling seems to be that India is not yet ready for international competition.

Most Indian lawyers feel that the pressure is unjust as it stems from the growth potential in the home countries of international law firms, especially the UK, reaching a saturation point. Opening up of the legal services sector is not a part of the WTO mandate.

However, pressure from the UK stems from the fact that while Indian lawyers are allowed to set up offices in Britain, British law firms aren’t allowed to do the same in India. In the UK, foreign firms can open offices, employ English lawyers, seek clients and market themselves without any restrictions. While the Indian law degree does not enable one to practise English law, all one needs to do is to just take the Qualified Lawyers Transfer Test.

The foreign law firms see India as a virgin play in the global legal scene. Domestic firms also recognise that the sector will be opened up; it is now just a matter of when. That is why they have formed unofficial alliances with top foreign law firms.

Many British and American firms, although not allowed to practise in India at present, have set up surrogate Indian practices based outside the country. They have also established liaison offices to aid their practice. “Liberalising the sector all of a sudden will certainly hit local firms hard as all the big corporate deals will be taken away by the foreign firms,” says a partner of a law firm, under conditions of anonymity. Lawyers feel that the government should liberalise the market in a calibrated manner, giving local firms more teeth to compete against the foreigners.

Existing laws impose severe restrictions on Indian firms. They are prohibited from advertising or even having websites. They are also not allowed to have more than 20 partners. Domestic law firms feel that removing these restrictions will enable them to enhance themselves to face the competition once the sector is opened up. The expert committee report on developing Mumbai as a financial centre opines that opening up India to foreign lawyers will help in three ways: “It will improve the legal knowledge available in the country, particularly on the interfaces between finance and law. It will help global finance firms feel comfortable operating in Mumbai, as they will find familiar global legal firms. It will have the same impact on improving the skills, technology and competitiveness of the Indian legal services industry that permitting FDI had on Indian industrial firms,” the report says. Given these benefits, there is no reason why India should not allow firms from other countries to open shop in India on a reciprocal basis.

—Rohit Viswanath