A Look at Recent Developments Having an Impact on India’s Legal Services Sector

  • April 11, 2023
  • Shuva Mandal

India’s economic growth is a spontaneous generator of business for law firms and the country seems to have regained its mojo despite the impact of the pandemic, continuing global geopolitical tensions and high inflation. We are expected to be one of the fastest-growing large economies in 2023, by various estimates.

Apart from the inherent attractiveness of India’s domestic market, the implementation or tweaking of various policies (e.g., the Production Linked Incentive scheme, the opening of the space sector to the private sector and encouragement of public-private partnerships, regulations around drones, etc.) has been a major force of economic activity. There is also the fact that multiple new technologies (AI/ML, drones, 5G, IIoT, 3D printing, etc.) have matured rapidly, creating new use cases in business, healthcare, retail, defence, space, agriculture, mining, governance, etc.  In turn, these have evolved as new ventures. 

For law firms and lawyers, such a multi-faceted business expansion is a growth enabler. The slowdown in certain sectors (IT and edtech, for example) has led to the unfortunate consequence of layoffs. This trend is visible not just among newer ventures but also applies to unicorns and more-established enterprises. This too is a driver of growth for professionals in the legal sector.

Factors that will impact Indian law firms

Three specific triggers will shape the fortunes of law firms and lawyers in the next year or so, which are as follows: –

  • The operationalizing of Grievance Appellate Committees (GACs);
  • The Bar Council’s decision to allow foreign law firms/lawyers to practice in India (under certain conditions); and
  • The trend of global enterprises from different sectors establishing and growing their captives (GCCs) in India.

Grievance Appellate Committees

The Grievance Appellate Committees (GACs) were constituted under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, to make the internet and social media platforms (the so-called “intermediaries”) safer and more trusted and the platform or service providers and users more accountable. 

Social media users who have complained to social media firms such as Meta, Twitter, Google etc. and have not received a satisfactory response from the firms’ designated grievance officers can appeal to the GAC which is a digital platform operational w.e.f. March 1, 2023. After due consideration of every appeal, the GAC will either uphold or overrule the decision of the social media intermediary’s grievance officer; it may also recommend that the intermediary take different actions altogether from what was recommended or taken by the grievance officers.

To comply with the new rules, social media intermediaries will need to ensure that adequate legal professionals are allocated to review user complaints, advise grievance officers and represent the social media intermediary before the GAC. This is important because non-compliance can result in significant financial liabilities (including legal costs and penalties).

Conditional permission for foreign lawyers or law firms to operate in India

The Bar Council of India recently permitted foreign lawyers and law firms to practise in India in non-litigation matters around foreign law, diverse international law and arbitration. Of course, this is subject to reciprocity i.e., Indian lawyers or firms being allowed to practice in those jurisdictions.

Although it is too early to predict the specific impact of this decision and how long it might take for these to show up, it can be said that this move will eventually affect both revenue and cost structures for Indian law firms. As foreign firms establish a presence in India, we can expect the following changes: –

  • Indian firms will see a reduction in referrals from foreign firms (a significant source of business for many firms); and
  • Some Indian legal professionals will move to foreign firms. The entry of foreign firms will also raise the general compensation level in the industry, putting further pressure on the profitability of firms that rely more on corporate advisory. Indian firms will also have to look at ways to keep their partners and staff engaged and money may not be the only avenue to do so.

But given that new laws are coming up around complex new technologies such as AI, space etc., it is a good thing that India will get access to global specialists. This will also help India’s lawmakers frame more effective legislation in the days ahead.

More Global Capability Centres in India

Given India’s large technical talent pool, many global corporations established their captive centres in India over the past decade or so. The mandate of these GCCs was to develop and support the IT needs of the enterprise. This was seen as an alternative to IT outsourcing, and a more effective way to ensure that confidential information remains within the company’s direct control.

Buoyed by the success of their captives and given that IT/Digital was becoming deeply embedded within every business, enterprises from more industries began to increase their investments to scale up their GCCs. Innovation, product design, UX, R&D, analytics, AI, etc. have all been included in the expanded mandate for GCCs.

If the parent company has a relationship with a certain law firm, then the latter may be incentivised to establish operations in India sooner than they may otherwise have planned. Therefore, this is another factor that plays a role in determining the growth of some law firms and lawyers in India.

Conclusion

It is difficult to predict how each of these trends will shape the legal services India sector; this depends on which force is dominant and how long it takes for their respective impact. But it is fair to say that the next few years will belong to those law firms that are prepared to adapt and respond to these and other forces shaping the industry.

Image Credits:

Photo by Sora Shimazaki: https://www.pexels.com/photo/serious-ethnic-lawyer-discussing-new-case-with-colleague-5668798/

Apart from the inherent attractiveness of India’s domestic market, the implementation or tweaking of various policies (e.g., the Production Linked Incentive scheme, the opening of the space sector to the private sector and encouragement of public-private partnerships, regulations around drones, etc.) has been a major force of economic activity. For law firms and lawyers, such a multi-faceted business expansion is a growth enabler. 

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BCI Allows Foreign Lawyers and Foreign Law Firms to Practice Law in India

  • March 15, 2023

The Bar Council of India (BCI) has released rules allowing the entry of foreign lawyers and law firms in India. Along with prescribing the eligibility criteria for practicing law in the country, the rules list out the matters which may be handled by foreign lawyers and foreign law firms.

  1. Introduction
  • The BCI has been empowered to list out a Foreign Lawyer’s[2] permitted area of practice, and if required, do so after consulting with the Ministry of Law and Justice of the Government of India. The Rules currently provide that Foreign Lawyers can practice in non-litigious matters (this includes practice on transactional work, corporate work such as joint ventures, mergers and acquisitions, intellectual property rights, drafting of contracts and other related matters, each on a reciprocal basis)[3] and diverse international legal issues. However, Foreign Lawyers will not be allowed to (a) appear before courts, tribunals or other statutory or regulatory authorities; or (b) be involved in any work pertaining to the conveyancing of property, title investigation or similar work.
  • The key principles under the Rules are that (a) Foreign Lawyers that propose to practice law in India are required to obtain prior registration from the BCI under these Rules; and (b) the primary qualification for Foreign Lawyers to apply for registration in India is that they have the ‘right to practice law’ in their foreign country of primary qualification. However, the Rules have one exception where Foreign Lawyers do not need to register with the BCI. This is if Foreign Lawyers practice law on a ‘fly in and fly out basis’ and: (a) provide legal advice to Indian clients on foreign law and on diverse international legal issues, (b) the Indian client procured such advice from a foreign country, (c) the Foreign Lawyer does not maintain an office in India for the purpose of such practice, and (d) such practice in India does not exceed 60 days in any period of 12 months (whether in one visit or multiple visits to India).
  1. Permitted Law Practice by Foreign Lawyers and Foreign Law Firms

The Rules provide the following inclusive list of what constitutes the practice of law in India for a Foreign Lawyer:

  • Foreign Law: doing work, transaction business, giving advice and opinions concerning the laws of the country of their primary qualification (i.e., foreign laws) and on diverse international legal issues – however, such advice cannot include representation or preparation of documents (including petitions, etc.) relating to procedures before an Indian court, tribunal or any other authority which is competent to record evidence on oath;
  • International arbitration conducted in India which may involve foreign law: as regards any international arbitration case conducted in India in which foreign law may or may not be involved, a Foreign Lawyer can provide legal expertise/ advice and appear as a lawyer for a person/ firm/ company/ corporation/ trust/ society, etc. which has an address, head office or principal office in a foreign country (“Foreign Client”);
  • Appearing before bodies that cannot take evidence for foreign law: provide legal expertise/ advice and appear as a lawyer for a Foreign Client in proceedings before bodies in India (which are not courts, tribunals, boards or statutory authorities) which are not legally entitled to take evidence on oath, and which require knowledge of foreign law of the country of the primary qualification of the Foreign Lawyer;
  • Limits on Indian lawyers at Foreign law firms in India: an Advocate registered with an Indian State Bar Council who is a partner or associate at a foreign law firm registered with the BCI under these Rules, will only be permitted to practice non-litigious matters and can only advise on issues relating to countries other than India.
  1. Registration Application and Registration Fee
  • Registration under the Rules is granted for 5 years, and any application for renewal should be submitted to the BCI 6 months before the expiry of the existing license. A Foreign Lawyer’s application (in the prescribed form) is required to be supported by various confirmations, including an NoC from its regulator in the foreign country, an NoC from the Indian Government and confirmations of their practice of law outside India and of no professional misconduct abroad.
  • Successful applicants are required to pay a registration fee equivalent to the enrollment fee in their home foreign country, but the minimum fee should at least be USD 25,000 with a security deposit of USD 15,000 for an individual foreign lawyer (with the renewal fee being USD 10,000), USD 50,000 with a security deposit/ guarantee amount of USD 40,000 for a foreign law firm (whether as a firm, private limited partnership, limited liability partnership, company or otherwise), with the renewal fee being USD 20,000.
  • A key determining factor for such applications is the principle of reciprocity. The BCI has the discretion to refuse registration of a foreign lawyer/law firm if it believes that the number of foreign lawyers/ law firms from a particular foreign country will become disproportionate to the number of Indian lawyers or Indian law firms allowed to practice in a such foreign country, to protect the interest of Indian law firms / Indian lawyers.

[1] Rule 2(vi) defines ‘foreign law’ as a law, which is or was effective, in the country of primary qualification. The latter term is defined under Rule 2(v) as a foreign country in which the foreign lawyer is entitled to practice law as per the law of that country.

[2] Rule 2(iii) defines a ‘foreign lawyer’ as a person, including a law firm, limited liability partnership, company or corporation, by whatever name called or described, who/which is entitled to practice law in a foreign country.

[3] Rule 8(2) of the Rules.

Image Credits:

Photo by Pavel Danilyuk: https://www.pexels.com/photo/professional-lawyer-writing-on-a-notebook-8112113/

The Rules currently provide that Foreign Lawyers can practice in non-litigious matters (this includes practice on transactional work, corporate work such as joint ventures, mergers and acquisitions, intellectual property rights, drafting of contracts and other related matters, each on a reciprocal basis) and diverse international legal issues. However, Foreign Lawyers will not be allowed to (a) appear before courts, tribunals or other statutory or regulatory authorities; or (b) be involved in any work pertaining to the conveyancing of property, title investigation or similar work.

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