Since economic liberalization, Indian economy has grown stupendously, however both liberalization and growth elude the legal sector till date.
In 1991, economic reforms of liberalization and globalisation were implemented in India. These very reforms are credited for the stupendous economic growth we witnessed in the recent years. However, liberalization in legal sector is still awaited and there is little being done about it. This paper argues why liberalization of legal sector is a requisite and how it could be implemented. Bar Council of India must use its powers under Section 49 (1) (ag) of the Advocates Act, 1961 to change the rules to bring liberalization in the legal profession in India and let foreign firms and lawyers practice in India.
India along with China is seen as one of the most desired destinations for law firms to operate in the coming years. In pursuance of this, the UK government and other leading countries have tried to convince the Government of India to liberalize the legal sector. However, they could not change the stiff stance of Bar Council of India which is unequivocally opposed to the idea, without providing any rationale for the same. China on the other hand, has been seeing progress on this front. International firms have expanded their presence in China in both a competitive and collaborative way enabling local firms to expand overseas and create leading global law firms. In the A.K. Balaji case, even the Supreme Court missed the opportunity by not ordering Bar Council of India to bring in the amendments in the Advocates Act, 1961 that would open the legal profession to foreigners. The court in this case read Section 29, which says only ‘advocates’ can practice in India, combined with Section 24, which mentioned criteria to be adjudged as an ‘advocate’, and held that foreign firms cannot practice in India and are allowed only on a ‘fly in and fly out’ basis which permits ‘casual visits’ by foreign firms to advise clients on foreign laws. The ‘fly in and fly out’ basis as permitted by Supreme Court will not bring the benefits, whether in the legal or economic sphere, that could be brought by liberalization.
ARGUMENTS AGAINST LIBERALIZATION
Many people oppose liberalization on the grounds that legal profession is not a business and therefore should not be put on sale; this is ironical because they themselves want to protect their business by not letting foreign firms enter. Some oppose the idea on the ground that it will place incumbent lawyers on an uneven playing field in comparison to well established foreign firms. Some also fear that the best talent would be recruited by these firms and they would be left with the less talented. Many others sayit would be against India’s national interest to liberalize legal sector.
Recently, Society of Indian Law Firms (SILF) recognized the need to liberalize the sector and asked the government to carry out reforms for the same. This shows the changing mindset of the legal fraternity and its willingness to welcome foreign peers in the market. The onus of globalizing the legal arena now rests with the government.
BENEFITS OF LIBERALIZATION
The liberalization of the legal sector will lead to a competitive arena where even the established players will strive to match the legal prowess of foreign firms. This will lead to more choices and better quality of services available to consumers at competitive rates, since consumers always seek better quality. International trade of legal services will surely help India to penetrate into the global legal sector. It will also aid in development of India in fields such as arbitration and conciliation as they will become more familiar to practices of foreign lawyers and firms. Indians might also get to practice in countries where they are currently restricted if we let the foreign firms enter our legal market. The quality of service could improve if we work along foreign firms who have more experience and expertise in international laws. Thus, Indian legal service sector has to gain and not lose with the entry of foreign peers.
Liberalization will increase the career opportunities for law graduates as foreign firms will be willing to employ local lawyers at lucrative salaries. It might help resolve the problem of unemployment in the legal sector and prevent brain drain as they could work for world class foreign firms while remaining in India. It will also bring FDI and help in building good relations with other countries which might help in enhancing trade. In the report, ‘Managing Request-Offer Negotiations under the GATS: The Case of Legal Services’, which was a part of OECD study on trade in services, MG Grossostated international trade in legal services as a catalyst to foreign investment, which also acts as security in an indigenous business environment. Investment in the service sector of India is much needed and legal services could be one of those as it is associated with high demand. A2004 World Bank study, ‘Sustaining India’s Services Revolution: Access to Foreign Markets, Domestic Reform and International Negotiations’ showed a direct relationship between liberalization and growth of various sub-sectors of India. The services liberalized in 1990s showed faster growth than services that were still kept confined to local service providers. Therefore liberalization promotes national interest as opposed to the views of some overprotective people who mistake protectionism as national interest.
Regarding the fear that all bright minds will be taken over by foreign firms, we need to understand that they can employ the most talented students without coming to India in the countries where they already operate. Therefore, it is better that a bright lawyer be employed in India rather than in Singapore or elsewhere. There is also a fear that pseudo colonialism will follow liberalization and Indian firms will be unable to face the tough competition from foreign firms. However, such competition is necessary for potential overall growth of the profession. It will help India make a name in international legal profession.
With the onset of liberalization, our Legal Process Outsourcing (LPO) will also develop to a great extent. In some countries such as US there is lack of trust in Indian firms with regards to confidentiality and quality. When foreign firms start practicing in India, more services will be outsourced to India because these firms will already have a trust base in their countries. Work will be outsourced to them and they will employ Indians to research and work for them. It will also establish credibility of Indians in global legal sector.
Given all these benefits, the liberalization should be done in a planned manner unlike in 2005 when the UK JETCO (Joint Economic and Trade Committee) report suggested liberalization of the sector but no fruitful conclusion could be arrived at due to lack of coherent planning. The government along with Bar Council of India and State Bar Councils must be brought on the same page so that proper implementation is carried out and maximum benefits are harnessed. Liberalization should take place in a phased manner. Lalit Bhasin, president of SILF, recently suggested liberalization to be implemented in four phases, so that foreign players can enter the arena without disturbing the market drastically.The first phase, according to him, should only permit online services before letting firms advise clients on international law in the second phase. They should be permitted collaborative advice mechanism in the third stage and only in the last stage be allowed to practice in domestic laws. However, four phases seem too many and several firms also might not want to enter such a market where there are a large number of restrictions. However, there seems no harm in merging first two phases. Firms can be allowed directly to advise clients on foreign law and at the same time collaborate with Indian firms on Indian law. When they gain expertise on the subject, they shall be allowed to practice and directly recruit Indian employees without any compulsion for joint venture.
However, some regulations are necessary for the liberalization process. It should not create a monopoly in legal market and regulations must ensure fair treatment to all. Some rules need to be there to maintain the dignity and nobility of legal profession. As far as the question of level playing field is concerned, entry of major foreign firms can be restricted for a certain time after liberalization. SILF is opposed to the idea of entry of Big Four namely Deloitte, PwC, EY and KPMG. This concern is justified keeping in mind the fact that Indian firms might not be able to compete with them and they might take huge chunk of market share. However, in the long term, when Indian firms becomemore competent, the whole market should be liberalized.
The future of Indian legal services looks not very promising if we continue to maintain status quo. Liberalization will stimulate a number of new developments. By opening our legal sector to other countries, we can build good international relations in other areas as well which will ultimately lead to increased FDI.Foreign investors are now averse of investing due to legal complexities but once they get the opportunity, they will readily invest in India considering the huge demand of legal services in the country. By engaging with foreign firms on regular basis in India, the potential of Indian lawyers will be harnessed to a greater extent as they will get to compete with better lawyers. It will also help mitigate migrations in the legal field by encouraging legal professionals and aspirants to work with top quality law firms in India itself. Liberalization is necessary for the development of legal profession in India to make it competitive, at par with global standards. John Carre said, ‘There is one thing worse than change and that’s the status quo’, therefore we need to break the status quo and amend the Advocates Act, 1961 to liberalize the legal sector.