Legal fraternity should be more pragmatic

LEGAL EYE

Permitting the entry of foreign law firms is now on the Government's fast-track. In an initiative taken by the Law Ministry last month, the Minister announced his intention to liberalise the legal sector at the earliest, permitting foreign firms not only to advise and practise foreign law, but also to negotiate and draft contracts governed by Indian law and advise generally on the same, excluding issuing formal opinions.

The Ministry also circulated a draft proposal to leading Indian law firms to which responses were expected in 10 days and extensions refused. The Indian law firms were vehement in their opposition at a dinner discussion hosted by the Ministry. That the winds of change were blowing was reinforced two days later when the Bar Council of India (BCI) in proceedings before the Supreme Court on advocates' rights to advertise, submitted that they had no objection to websites. But the Law Minister had further plans effectively excluding the BCI.

In the Lawyer's Collective writ petition pending since 1995 before the Bombay High Court, the Law Ministry is believed to have stated on affidavit all of the above, and that foreign lawyers will be subject only to FEMA regulations.

The Law Ministry has therefore decided to "drop the pilot" and assume the role of the regulator for entry and functioning of foreign law firms. The profession's reaction is, expectedly, that this is a kind of apartheid "" no other service or industry has two regulators.

The driving forces have been WTO pressure, foreign investor and lawyers' demands, particularly the aggressive campaign by the UK legal fraternity. Ministers and mayors have come wooing, while the magic-circle law firms are enticing the cream of young Indian legal talent.

Effectively, thanks to the Bombay High Court order in the Lawyer's Collective case, foreign law firms have not been able to follow their clients to set up shop in India.

In the meanwhile, Indian law practice has transformed itself to meet the changing needs of the domestic industry and inflow of foreign investments.

The trend since the nineties has been corporatisation of practice, notwithstanding sundry organisational and regulatory restrictions. The top law firms vie with each other for the number of Fortune 500 Companies on their client list. But the beneficiaries of liberalisation appear reluctant to open up their own sector.

Law firms have represented that their evolution is still nascent, and its too early to take on the onslaught of foreign firms. Indian firms need to be de-regulated, liberated from the unlimited liability structure and be permitted to advertise and market themselves as their global counterparts do, in order to achieve a level playing field.

It has been urged that to compete with the deep pockets of global players, Indian law firms should be permitted to raise funds in capital markets, and given financial incentives similar to those which benefited the Indian IT industry in its growing years.

If at all such entry is permitted it has to be carefully phased, with safeguards and sectoral caps as in telecom, retail and defense sectors. The initial ventures have to be collaborative, with due regard to the sector's sensitivity and proximity to the judiciary. And most importantly, there has to be reciprocity.

Would the Government be ill-advised to disregard the domestic professions' concerns and forge ahead without any consensus or providing adequate safeguards? The Commerce Minister has already clarified that the legal services is not an item for negotiation in the next round of WTO talks. He has also agreed to a consultative approach, but alerted the profession how far can calibration act as insulation against external and domestic needs.

While the efforts by the legal fraternity to protect their turf are not unjustified, there is need to pragmatise the approach. Looking back, India's economic liberalisation has been the catalyst in corporatising the legal profession, from a family- and clan-dominated closed circle to a service-oriented profession.

For every old firm which has revamped itself, there are new ones which have come up. The quality and standard of law schools have been transformed beyond recognition.

Our firms are on the globalised track "" they need to gear up to face challenges for which access to knowledge capital, resources, branding are imperative. It is the Government's obligation to harmonise these with the opening the flood-gates to competition. If that can be ensured, options for opening up will work out with ease, and we can expect that future generations of lawyers will have it even better.

Kumkum Sen is a Partner at Rajinder Narain & Co

kumkumsen@rnclegal.com