Get the sequence right

The issue of allowing foreign lawyers to work in India has gained a certain immediacy following the law ministry's filing of an affidavit in the Bombay High Court, which argues that no change in the Advocates Act is required before opening up "" because the Act covers only Indian lawyers. Without going into the merits of the argument (and there is bound to be a counter-view), which will be decided by the court, it is worth pointing out that what the affidavit states is the ministry's understanding of a technicality, the position being that so long as foreign lawyers practise only foreign law and service overseas clients, all that is required is Reserve Bank permission to operate, and the normal torts law rather than the Advocates Act will govern their conduct. The issue that merits debate is not how the purview of the Advocates Act is defined, or whether the Act is attracted if foreign lawyers do not practise at the Bar and merely provide advisory services. The larger issue is under what conditions and in what sequence the legal services market in India should be opened up to all comers, and whether and in what manner India will benefit from allowing overseas law firms to set up shop in the country.

Indian law firms argue that allowing foreign law firms to enter the Indian market in today's context places them at a disadvantage because of the rules in place. Indian law firms, which are constituted as partnerships, cannot have more than 20 partners "" a stipulation that restricts their size and scope of activities, while also making it difficult to hold on to good legal talent because more partnerships cannot be offered. No such restrictions apply to law firms in other countries; indeed, some of the leading international firms have hundreds and even perhaps thousands of partners. To the extent that size matters, therefore, it will become an unequal contest. Indian law firms make the additional point that they cannot advertise their services, or even run a website, whereas these restrictions do not apply to the big international law firms. The argument put forward is that the government should first level the playing field, create the conditions in which domestic law firms can expand, give them time to do so, and only then allow the entry of international law firms. There is obvious merit to this argument on sequencing, so long as there is a clear time-frame for change, for it hardly needs to be stated that no government should put domestic players at a disadvantage through legislative action.

But there is also the question of whether opening up the law services market will benefit the country "" and it would seem that the answer is in the affirmative. Indian legal costs are a fraction of what exist in other countries; so the big international law firms will find it worthwhile to offshore some of their activities to India, thus creating new opportunities for Indian lawyers and also giving them a larger field of play. The technicality here is that this comes under the ambit of trade in services, which properly is governed by the rules of the World Trade Organisation. India has not offered to open up legal services under the Doha Round of negotiations, and opening up unilaterally will take away the country's negotiating card.

The bottom line, however, should be what suits the country, not the technicalities. If it is in the country's interest to attract international law firms to set up shop in India, the logical thing to do would be to first change the laws that inhibit Indian law firms, negotiate bilateral deals with the major countries if nothing is possible within the World Trade Organisation's framework, and then open up in the optimal way possible, as quickly as possible.