Navin Arya (Administrative Head) 17 December 2009

Foreign law firms barred from non-litigious practice in Indi

Foreign law firms barred from non-litigious practice in India

17 Dec 2009, 0048 hrs IST, Almas Meherally, ET Bureau & Agencies

MUMBAI: The Bombay High Court on Wednesday ruled that foreign law firms cannot carry on non-litigious practice in India, which includes drafting of applications, consultancy work or any legal work that does not involve appearing before the courts, unless they abide by the Advocates Act, which governs the conduct of Indian lawyers. The two-judge bench consisting of Chief Justice Swatanter Kumar and Justice JP Devadhar said that a decision by the Reserve Bank of India (RBI) allowing foreign law firms to open liaison offices was not justified.

The ruling means that foreign law firms can function in India only if all the advocates in their offices are enrolled with the bar councils of Indian states or with the Delhi-based Bar Council of India, the apex regulatory body for lawyers. Lawyers possessing a degree from international law schools, which are recognised by the Bar Council of India, can also practice, provided they register themselves, said CU Singh, a counsel who appeared for the Lawyers’ Collective, a society of lawyers and law students that challenged the RBI decision.

The judgement has potentially far reaching implications, said a lawyer who did not wish to be identified, adding that some foreign law firms have ‘best friends’ agreements with Indian counterparts. It isn’t clear if such agreements fall within the ambit of a liaison office, he said.

But the chief of a leading Indian law firm denied such a possibility. The judgement will have no impact on our best friends agreement with Clifford Chance as they are not practising here. Neither do they have any liaison office in the country, said AZB Partner Zia Mody.

Another lawyer said many foreign legal practitioners visit India to meet and advise their clients without setting up any liaison offices here. Such lawyers will also not be able to do legal work for their Indian clients now, if the HC ruling is rigorously interpreted. The Indian government defended the RBI’s decision before the HC.

International firms Ashurst, Chadbourne & Parke and White & Case had opened liaison offices in India after Reserve Bank of India granted them permission under the Foreign Exchange Regulation Act or FEMA, with the condition that these firms would not earn any income in India. Lawyers Collective had challenged the permission granted by RBI to the foreign firms.

The foreign law firms

, the Indian government or the RBI can appeal to the Supreme Court if they wish to. Under India’s Advocates Act, which was enacted in 1961, only an “advocate” can practise the “profession of law”, an advocate being a person with a law degree and enrolled with state bar councils or the Bar Council Of India.

The HC also directed the central government to quickly decide whether foreign law firms can practise in the country as the issue is pending with government for over 15 years. “The court has thrown the ball in the court of the union government. If the decision is delayed, it will result in chaos and restrict the ability of the Indian lawyers to compete with international law firms,” said Hitesh Jain, Partner with ALMT Legal, a firm which has a best friends agreement with Clyde & Co, a UK-based international law firm which works in 120 countries.

“The government must consider the option of allowing foreign law firms to set-up in the country and follow the Singaporean model by having one Indian partner, who has a say in the management’s decision,” said Abhishek Khare of Khare Legal Chambers. The division bench held that doing non-litigious legal work amounts to “practise of law” and is within the purview of the Advocates Act.

Lawyers Collective’s counsel Chander Uday Singh had contended that anybody providing legal service must abide by the Advocates Act. Otherwise the foreign firms would get an “unfair advantage” over Indian lawyers as Indian lawyers could be punished for misconduct under the Advocates Act, whereas there was no law to govern the foreign lawyers.

Counsels for the foreign law firms had argued that non-litigious work such as drafting and consultancy does not amount to practice in accordance with the Advocates Act and as such, it was not applicable to them.

The HC did not agree with this line of reasoning. “Persons practising the profession of law, whether litigious or non-litigious, would be governed by the provisions of the Advocates Act,” it said in its ruling. The court also observed that the RBI was not justified in granting the foreign firms permission to open liaison offices as it violated the Advocates Act.