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It is important to appreciate that even today, there are several restrictions on Indian lawyers and law firms that actually do not encourage the growth of large-sized firms in India.
The first among those is limit of number of partners that a firm can have. Even under the amended Companies Act, a firm can have a maximum of 100 partners whilst it is much better than the original limit of 20 partners. It will constrain the growth of the truly large-scale and global Indian firms. Further, law firms need to be unlimited liability partnership. The Bar Council of India does not permit law firms to have limited liability partnership.
Thirdly, there are restrictions on law firms having website as it is treated as a form of advertising. In the first instance, there are several other instructions that need to be liberalised and sufficient time given to the law firms to recognise themselves before the liberalisation of the legal market is contemplated. There is a need to create a level playing field before foreign firms are allowed to enter and practise in India.
In addition to the above mentioned, partnership firms in India are not treated as an industry, and consequently the banking system has limitation on the extent and number of loans or working capital limits that it can extend to law firms.
Insurance companies in India offer a very limited value of professional indemnity not exceeding Rs 500 million per firm. This is unfairly low compared to the global market.
Significantly, in the course of discussions by committee set up by the ministry of corporate affairs to explore the possibility of opening the legal sector, the foreign law firms refused to submit themselves to the jurisdiction of the Bar Council of India Conduct Rules and the Advocates Act. Any international firm setting up a domestic office would be required to submit to Indian law and Indian law disciplinary rules.
An avoidance device to ring-fence international law firms from professional misconduct liability and indemnity of misconduct in the territory of India are a serious mismatch and are not a level-playing field. Until some of these issues are resolved, the question of opening up of legal sector to foreign law firms is premature.
Pallavi Shroff
Senior partner, Amarchand Mangaldas
