Foreign Legal Firms In India? New Frontiers Or A Floodgate?

PERCEIVED RISKS:

Two of the notable risks perceived by the legal community and practicing advocates is the additional strain that the notification poses. A group of 125 law firms has sought for the proposal to be placed on hold observing the need for a level-playing field. There are fears that enabling foreign firms to operate on a fly-in and fly-out basis could result in denial of opportunity for local talent. Besides, allowing foreign law firms to operate in India is perceived as a dilution of control over the legal profession. Foreign firms may bring in their own practices and standards, which may not align with the Indian legal system.

In a country of 1.3 million lawyers which easily crowns us among the top-three globally, entry of foreign firms is likely to be perceived as creating additional competition. Allowing foreign law firms to operate in India is perceived as resulting in uneven competition. Moreover, domestic firms may not have the resources or expertise to compete with foreign firms, leading to the potential loss of business and jobs.

Lawyers are also apprehensive given that the average cost of arbitration in the eventuality of an international consultant could increase and thereby increase the cost of compliance for clients. For justified reasons, small firms are likely looking at an increase in operations given the possibility of poaching from well-established international law firms. To many legal practitioners, dealing with international law firms are in an ethical dilemma given the concerns of confidentiality of client information leading to potential legal and ethical issues.

ARBITRATION DESTINATIONS:

Industry estimates project the global M&A market potential to $4.1 trillion and forecast it will grow further in Asia. Legal advisory market size in 2022 was estimated at $669.2 billion and is forecast to touch a trillion dollars by 2032. In 2021, companies spent 0.23% of their revenues on legal services. When it comes to resolving commercial disputes, countries such as Singapore, London, Hong Kong, Paris, or Geneva are considered as preferred destinations by businesses for an arbitration.

To shed more numbers, a study by the Singapore Ministry of Law estimated that the total economic impact of the legal sector in Singapore was approximately SGD 3.3 billion (approximately $2.4 billion) in 2018. This includes both the local and international legal sectors, which includes international arbitration. London’s chamber of commerce and industry (LCCI) estimated arbitrators as having resolved disputes worth $ 70.2 billion in 2020 in the city. Similar positive projections have been estimated by Japan, South Korea, and Hong Kong which suggests that countries are actively considering international arbitration as a significant contributor to economy. It also highlights the importance of international arbitration to the legal services sector in these cities, as a driver of growth and innovation.

UNLOCKING NEW AVENUES:

Enabling foreign law firms in India could have two major advantages. First, for a country like India which boasts of the world’s largest workforce of lawyers, a cultural exchange of sorts could empower us with international exposure. While the entry of foreign legal firms is perceived as a risk, there is a probability that competition may lead to an increase in the quality of legal services as well as motivation to render better services to clients. We could also witness much awaited increase in pay standards applicable to both law firms as well as individual lawyers.

Secondly, by enabling foreign firms to rely on trust-worthy legal advice, the country could be looking at increasing the confidence barometer among domestic and international business houses. Foreign law firms bring with them expertise in specific areas of law, such as intellectual property, international trade, and finance. This can be beneficial for Indian clients, as they would have access to the best legal advice and representation for their needs. The presence of foreign legal firms can also signal to foreign investors that India is open for business and willing to embrace international standards. This can help to attract foreign investment into the country.

The BCI’s announcement which comes on the back of intense discussions since September last year could culminate in India signing its first FTA with a G-7 country (United Kingdom). The notification is replete with ensuring clear classification of the legal reciprocal arrangement and is poised to create a win-win situation.