RBI Directs Banks Not To Grant/Renew Permissions To Foreign Law Firms For Opening Liaison Offices In India

The Reserve Bank of India has directed the banks not to grant fresh permissions/ renewal of permission to any foreign law firm for opening of Liaison Office in India.

The RBI notification referred to a Supreme Court judgment which held that advocates enrolled under the Advocates Act alone are entitled to practice law in India and that foreign law firms/companies or foreign lawyers cannot practice profession of law in India.  

"As such, foreign law firms/companies or foreign lawyers or any other person resident outside India, are not permitted to establish any branch office, project office, liaison office or other place of business in India for the purpose of practicing legal profession. Accordingly, AD Category – I banks are directed not to grant any approval to any branch office, project office, liaison office or other place of business in India under FEMA for the purpose of practicing legal profession in India. Further, they shall bring to the notice of the Reserve Bank in case any such violation of the provisions of the Advocates Act comes to their notice.", the notification reads.

The Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations defines 'Liaison Office' means a place of business to act as a channel of communication between the Principal place of business or Head Office by whatever name called and entities in India but which does not undertake any commercial /trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel;

The Supreme Court, in a judgment delivered in 2015 [BCI vs.  AK Balaji] had held that foreign law firms cannot set up offices in India or practice in Indian Courts. However, it was clarified that they can advice Indian clients on a "fly in and fly out" basis, not amounting to regular practice. "Visit of any foreign lawyer on fly in and fly out basis may amount to practice of law if it is on regular basis. A casual visit for giving advice may not be covered by the expression 'practice'. Whether a particular visit is casual or frequent so as to amount to practice is a question of fact to be determined from situation to situation. Bar Council of India or Union of India are at liberty to make appropriate rules in this regard.", it was observed.

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