SC Shuts The Door On Foreign Law Firms And Lawyers

Coming straight to the nub of the matter, let me begin at the very beginning by pointing out that the Supreme Court on March 13, 2018 in a landmark judgment titled Bar Council of India v AK Balaji and others has finally drawn the curtains by refusing permission to foreign law and firms to practise in India which clearly implies that the door on foreign law firms and lawyers to practice law in India have been shut at least for now. But at the same time, it must also be remembered that the Supreme Court has also by this landmark judgment opened a small window for them by allowing them to give legal advice to their clients on foreign laws on “fly in and fly out” basis. This clearly means that they cannot set up permanent offices here but can come to India and render advice on casual basis. In other words, the Supreme Court by its landmark judgment has ensured that foreign law firms and lawyers are free to give advice to their Indian clients on “fly-in and fly-out” mode as long as this was a casual basis and didn’t amount to a full-fledged practice.

                                    While craving for the exclusive indulgence of my esteemed readers, let me inform them that a Bench of Supreme Court comprising of Justices Adarsh K Goel and UU Lalit has categorically turned down the plea of 32 law firms of UK, USA, France and Australia seeking its approval to practice in India and deal with issues relating to foreign laws. It is certainly a great setback for all these countries as they had approached the Supreme Court with lots of high expectations that they would be allowed to practice law in India. The Apex Court also asked the Centre and Bar Council of India (BCI) to make specific provisions to regulate participation of foreign lawyers in international arbitration proceedings in the country. Now the ball is exclusively in the court of the Centre and Bar Council of India to act accordingly as asked by the Supreme Court.

                                      For my esteemed readers exclusive indulgence, let me also inform them that the Bench of Apex Court in its landmark judgment was categorical in laying down that, “We hold that the expression ‘fly in and fly out’ will only cover a casual visit not amounting to practice. In case of a dispute whether a foreign lawyer was limiting himself to ‘fly in and fly out’ on casual basis for the purpose of giving legal advice to clients in India regarding foreign laws or their own system of law and on diverse international legal issues or whether in substance he was doing practice which is prohibited can be determined by the Bar Council of India. However the Bar Council of India or Union of India will be at liberty to make appropriate Rules in this regard including extending Code of Ethics being applicable even to such cases.”   

                                   Going forward, the Bench further goes on to say that, “Conversely, plea that a foreign lawyer is entitled to practice foreign law in India without subjecting himself to the regulatory mechanism of BCI Rules can also not be accepted. We do not find any merit in the contention that the Advocates Act does not deal with companies or firms and only individuals.” It must be recalled here that the foreign firms had contended that there was no bar on a company carrying on consultancy or support services in the field of protection and management of intellectual, business and industrial proprietary rights. They said a person not appearing before courts or tribunals and not giving legal advice could not be said to be practicing law.

                                      But it is noteworthy that the BCI said that the decision of Bombay and Madras High Court to allow visit by a foreign lawyer on ‘fly in and fly out’ basis to give advice on foreign law or to conduct arbitration in international commercial arbitration was erroneous. It said that non-litigious practice was included in the practice of law which can be done only by advocates enrolled under the Advocates Act. The BCI has a valid point.

                              Interestingly enough, the case of foreign law firms entering India found its way to the Supreme Court in July 2012 when the Bar Council of India filed an appeal against the Madras High Court judgment. The Madras High Court in its judgment titled AK Balaji v Government of India and others dated February 21, 2012 had held that no foreign law firm or lawyer can practice in the country without complying with the Advocates Act and had allowed such lawyers to ‘fly-in, fly-out’. The Bench of Chief Justice MV Eqbal and Justice TS Sivagnanam had held that, “We find force in the submission made by the learned counsel appearing for the foreign law firms that if foreign law firms are not allowed to take part in negotiations for setting up documents and conduct arbitrations in India, it will have a counter productive effect on the aim of the Government to make India a hub of International Arbitration”. The Madras High Court did weave in some flexibility for foreign lawyers by –

1.  Allowing foreign lawyers to visit India temporarily and advise their clients on foreign law aspects and diverse international legal issues – this came to be referred as the ‘fly in and fly out’ rule.

2.  Permitting foreign lawyers to conduct arbitration in India, if such arbitration relates to international commercial disputes.

3.  Permitting foreign players to become business process outsourcing service providers for only ancillary non-practice related services such as secretarial support, transcription services or travel desk support.

                                                    To put things in perspective, the Bombay High Court in its judgment dated December 16, 2009 titled Lawyers Collective v Bar Council of India and others (W.P. No. 1526/1995) had said that RBI is not justified in granting permission to foreign law firms. Held that law practice includes work on litigation and the non-litigation side. It firmly said that, “The permissions which have been granted by Reserve Bank of India to run liaison offices (by foreign firms) were illegal and those permissions have been quashed”. Sajan Poovayya who is senior advocate of Supreme Court of India and who represented foreign law firms White & Case and Covington & Burling who were two of the many respondents in the Supreme Court case said that, “Establishment of liaison officers triggered the entire litigation leading to Bombay High Court indicating that no legal services can be rendered in India by a person who has not been enrolled as an advocate under the Advocates Act”.       

                           Be it noted, while tweaking the Madras High Court order, the top court held that, “We hold that the expression “fly-in and fly-out will only cover a casual visit not amounting to practice”. On whether a foreign lawyer has the right to conduct arbitration in India, the top court said that, “If the matter is governed by particular rules of an institution then there is no bar”. Rightly said!

                            Before proceeding ahead, we must know what are the five questions of law which Supreme Court posed. They will clarify what all the Supreme Court was confronted with while dealing with this case. They are as follows: -

1.  Whether the expression ‘practise the profession of law’ includes only litigation practice or non-litigation practice also? ;

2.  Whether such practice by foreign law firms or foreign lawyers is permissible without fulfilling the requirements of Advocates Act and the Bar Council of India Rules? ;

3.  If not, whether there is a bar for the said law firms or lawyers to visit India on ‘fly in and fly out’ basis for giving legal advice regarding the foreign law on diverse international legal issues? ;

4.  Whether there is no bar to foreign law firms and lawyers from conducting arbitration proceedings and disputes arising out of contracts relating to international commercial arbitration? ;

5.  Whether BPO companies providing integrated services are not covered by the Advocates Act or the Bar Council of India rules?

                                  Simply put, the Supreme Court has settled the contentious issue of whether to open up the Indian legal services sector to overseas players once and for all. Let us now examine what it says on the main issues involved. Most of all, it is imperative to know what the Apex Court has said on the core issues. They are as follows: -

1.  Practice of law includes litigation and non-litigation work. Lawyers ethics apply not only when they appear before court, but regulates practice outside court too.

2.  Only advocates enrolled with the Bar Council are entitled to practice law. Those not enrolled can appear only with court’s permission. Prohibition applicable to any citizen other than a lawyer, so applies to any foreigner too. Referring to the Advocates Act and the Bar Council Rules, the Apex Court also said that, “We uphold the view of the Bombay high court and Madras high court in para 63 (i) of the judgment to the effect that foreign law firms/companies or foreign lawyers cannot practice profession of law in India, either in the litigation or in non-litigation side”.               

3.  Foreign lawyers can give advice to Indian clients on a ‘fly-in, fly-out’ basis, casually.

4. If on a regular basis, frequent visits may amount to practicing law.

5. The government and the Bar Council of India will frame rules clarifying the regulations.

6.  Can’t say there’s no absolute bar on a foreign lawyer conducting arbitrations in India. They may be permitted if the matter is governed by international commercial arbitration agreements, but still they are bound by code of conduct for Indian lawyers.  

7. Foreign law firms are not allowed to set up offices in India; foreign lawyers cannot practice in Indian courts.

8. Business Process Outsourcing (BPO) companies providing a range of services to customers like word processing, secretarial support, transcription and proof reading services, travel desk support services and others would not come under the Advocates Act.

                               To say the least, opinion is sharply divided over the Supreme Court’s verdict that foreign law firms cannot set up offices or practices in India but can “fly in and fly out lawyers to offer legal advice”. A lawyer asks cogently that, “How could a visit to the country fall under the interpretation of casual when their entire business is predicated on India?” Ramit Singh who is an advisor to the Indian Corporate Counsel Association points out that, “The Apex Court could have set up a test by way of which the determining factor of permissibility would simply be whether the advice given by a foreign lawyer requires an interpretation of Indian law, directly or indirectly.

                              To be sure, Ramit also adds that, “The next logical step would be pushing through an amendment in the Advocates Act or enacting a new law focused on regulating foreign lawyers.” He further adds a rider saying that however, these steps are dependent on whether the government has the political will to do so. This judgment will have far reaching consequences.

                                 For instance, the Supreme Court order says that the practice of law as covered by the Advocates Act, 1961, is not restricted to Indian laws. Ramit lays bare the truth when he points out that, “This gives teeth to future claims by the Bar Council of India to being the only body which can regulate all lawyers, whether Indian or foreign.” There can be no denying it.

                               No doubt, this latest order by Apex Court allows a window for foreign lawyers to offer advice to Indian clients on “fly-in, fly-out” basis on international law but it is only for casual visits and not regular. It also cannot be lost on us that that the discretionary power to decide what amounts to casual visits and what does not has been left with the Bar Council of India. Legal experts mince no words in pointing out that foreign law firms won’t be comfortable with this move.  

                                  What cannot be discounted, however, is that some foreign law firms do not consider the Supreme Court order as any sort of setback for their India aspirations. Gary Seib who is the Global Executive Committee Chairperson of Asia Pacific, Baker & McKenzie which is a global legal powerhouse exclaims that, “We are pleased that this litigation has concluded and for the guidance it provides. The resolution of this case is an important step set by the government ahead of the introduction of a proposal to liberalise the legal sector.”  He further adds that India is a strategic and important market for Baker McKenzie and the firm engages more than 300 lawyers globally for managing India-related matters.

                                    Needless to say, the Bar Council of India had strongly opposed to the idea of foreign law firms operating in India and wanted regulations even for lawyers who “fly in and fly out” for legal advice. S Prabhakaran who is co-chairman of the Bar Council of India said that, “They should follow the Advocate Act 1961 and the rules laid down by BCI. If any foreign lawyer commits a professional misconduct, then under BCI rules, we can hold them accountable and initiate disciplinary action”.

                                  Truth be told, in January, the Centre had told the Apex Court that the BCI should consider framing rules to open up the legal sector to foreign lawyers and law firms, failing which it would step in to assist the process. BCI was not happy with this and showed reservations to opening up the legal field to foreign players. BCI also wanted that the “fly in fly out” policy also should be subject to the Indian regulatory framework. Senior advocate CU Singh appearing for BCI said that, “The fly-in-fly-out policy is in violation of the provisions of the Advocates Act, 1961 which provides that there shall be only one class of persons who can practice law in India, i.e., advocates admitted on the state bar council rolls”.

                        It cannot be denied that many sections of the Indian legal fraternity have been vociferously opposing the entry of foreign lawyers and foreign firms on the ground that Indian advocates are not allowed to practise in the UK, the US, Australia, Singapore and other nations, except on fulfilling onerous restrictions like qualifying tests, experience and work permit! They have a valid point! They also have a fair point that foreign lawyers cannot be allowed to practice in India without reciprocity. Also, they argued that Indian law firms would not be able to compete with foreign firms and that the latter had greater money power and may well start controlling the legal market very easily! This again has merit and is a fair point!

                                  But there are some eminent legal experts who have welcomed this judgment and entry of foreign lawyers to India.  Sanjay Chaddha who is a senior partner in BSK Legal says that, “We welcome the judgement since it allows foreign lawyers with international expertise to come and offer their advice. When we argue our cases, we often cite or refer to international law. So, international exposure helps but at the same time, the judgment protects our Indian law firms and lawyers”. Anand Desai who is Managing Partner of DSK Legal is quick to point out on fly-in and fly-out rule that, “The principle is laid down and the intent is to ensure that foreign visits are not a regular occurrence. To continuously have people on the ground over here continuously advising albeit not with an office and a signboard outside, is not permitted”.             

                      Ashwani Kumar who is former Law Minister and also an eminent and senior advocate of Supreme Court who has dealt with the subject as Law Minister said that the Supreme Court order has interpreted the law as it exists today but larger questions of policy need to be answered. He also said that, “The judgment of the Supreme Court reflects the spirit of the Advocate’s Act as currently in place and the rules of the profession as defined by the Bar Council of India. However, there is a question that pertains to liberalization of the legal sector in accordance with WTO initiated global trade negotiations”.

                        Another senior and eminent advocate of Supreme Court and former Additional Solicitor General of India Abhishek Manu Singhvi who had also successfully argued on behalf of foreign law firms in the Madras High Court in 2012 said foreign law firms never attempted to practice in India on Indian law. He said that, “Their entire object is to handhold foreign clients or Indian clients from abroad coming into India or foreign and Indian clients doing legal work abroad. In all cases involving appearances in Indian courts or all cases of opinions on Indian law, such law firms always do and must engage Indian lawyers.” He further said that deliberately a “provocative ambience of jingoism” is created that often clouds the issue. Till such time as the legislature steps in with a comprehensive law, we need to follow the above principle”.

                                    Lalit Bhasin who is President of Society of Indian Law Firms that has advocated phased opening up of the domestic legal market says about the Supreme Court order that, “It gives legitimacy to the efforts being made as the Supreme Court has consciously left it to the government and the Bar Council of India to frame appropriate legislation, rules, regulations.” He further goes on to say that, “The order has put to rest any uncertainty around the outcome of the legal proceedings in the Apex Court. This is the best time for the government to consider the opening of the legal services sector.”

                               It must be brought out here that Alexander Fessas who is General Secretary of ICC Court explicitly points out that, “But the Supreme Court judgement does come with a caveat, it does impose certain conditions. Mainly that the arbitration needs to be administered by an institution and the parties must have agreed under the institutional rules or alternatively that the dispute is being conducted under the Arbitration Act. At the same time, the ICC court notes and welcomes the encouragement that the Supreme Court judgment passes on the Indian Bar Council in ensuring that rules framed with regards to conduct by foreign counsel within cases administered in India should be developed.”

                                    It may be recalled here that both the previous UPA government as well as the incumbent NDA regime were seriously considering a proposal to permit foreign law firms in the country to practice laws in matters not involving litigation on a reciprocal basis. Also, in 2011, the Union Law Ministry had even informed the Madras High Court that it was holding consultations with the Bar Council of India to consider amending the Advocates Act for the purpose. A Committee was set up by the Commerce Ministry in 2005 to seriously dwell on the possibility of opening up legal services. But it didn’t materialize.

                             All said and done, this landmark ruling by the Supreme Court has come at a very appropriate time. Now at least whenever there is some lingering doubt on this issue, this landmark ruling can always be referred to by the parties concerned. Centre has to abide by the judgment which it shall do as laid down. Its potential ramifications will be felt in many years to come in our country! No doubt, this landmark judgment has removed all ambiguities about what foreign lawyers are permitted to do in India. Now the ball is certainly in the court of the Centre to decide on whether or not to open up India’s legal services sector!

Sanjeev Sirohi, Advocate,

s/o Col BPS Sirohi,

A 82, Defence Enclave,

Sardhana Road, Kankerkhera,

Meerut – 250001, Uttar Pradesh.