Monday, 06 Feb 2012
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India: market liberalisation moves closer
06 February 2009
Foreign law firms are one step closer to being able to practise in India following the passing of the Limited Liability Partnership (LLP) Act 2008 in December last year.
If the Indian Government passes secondary regulations permitting the use of LLPs by law firms in India, the framework could also be used to establish joint ventures between Indian and foreign law firms.
The Act may prove to be the first step towards the liberalisation of the Indian legal market, which has been closed to foreign firms since a High Court ruling in 1995.
The change in legislation will be welcomed by international law firms who have long been aware of the lucrative business opportunities India’s fast growing economy holds. With Western economies struggling and law firms starting to feel the pinch, the move towards opening up the Indian legal services is particularly timely.
However, while the LLP indicates a relaxing of the government’s protectionist stance, it does not, as yet, give international firms the green light to practise in India. Further legislation regulating accounting, tax and other sectors is still pending and could take months. The drafting and implementation of this will be further directed by the result of India’s election this May. There is no guarantee that a different government would continue with legislation to strengthen India’s potentially lucrative relationships with British and American businesses.
In the meantime, international law firms must continue working around Indian restrictions, as they have been doing for some time. Top international law firms have succeeded in tapping into the Indian market via offshore offices where their lawyers handle lucrative Indian cases.
A number of magic circle firms including Linklaters, Allen & Overy, and most recently Clifford Chance, have further strengthened their connection with India’s legal service through “best friend” agreements with domestic Indian law firms. Clifford Chance’s friendship with AZB & Partners has been widely interpreted as the first move towards a merger, which will proceed once the law permits it.
However, there is widespread resistance from Indian law firms, who at present enjoy the high fees an uncompetitive market affords them. Rajiv Luthra of top Indian law firm Luthra & Luthra recently told The Law Society Gazette that his firm refused to engage in a “best friend” agreement because it went against the spirit of the law.
The widespread resistance is reflected in the protectionist stance of the Bar Council of India, which persists in its assertion that foreign law firms should not be allowed to operate in India. For this reason international law firms may be concerned about the close tie many Indian legal practises have with their government.
However, the bill also provides Indian law firms with a host of opportunities and potential for growth previously hindered by laws. Prior to the new legislation, firms were not allowed to exceed 20 partners. The LLP structure offers Indian firms the chance to expand to a level where they can both seek to compete with international firms and when legislation allows, merge.
If the Indian Government passes secondary regulations permitting the use of LLPs by law firms in India, the framework could also be used to establish joint ventures between Indian and foreign law firms.
The Act may prove to be the first step towards the liberalisation of the Indian legal market, which has been closed to foreign firms since a High Court ruling in 1995.
The change in legislation will be welcomed by international law firms who have long been aware of the lucrative business opportunities India’s fast growing economy holds. With Western economies struggling and law firms starting to feel the pinch, the move towards opening up the Indian legal services is particularly timely.
However, while the LLP indicates a relaxing of the government’s protectionist stance, it does not, as yet, give international firms the green light to practise in India. Further legislation regulating accounting, tax and other sectors is still pending and could take months. The drafting and implementation of this will be further directed by the result of India’s election this May. There is no guarantee that a different government would continue with legislation to strengthen India’s potentially lucrative relationships with British and American businesses.
In the meantime, international law firms must continue working around Indian restrictions, as they have been doing for some time. Top international law firms have succeeded in tapping into the Indian market via offshore offices where their lawyers handle lucrative Indian cases.
A number of magic circle firms including Linklaters, Allen & Overy, and most recently Clifford Chance, have further strengthened their connection with India’s legal service through “best friend” agreements with domestic Indian law firms. Clifford Chance’s friendship with AZB & Partners has been widely interpreted as the first move towards a merger, which will proceed once the law permits it.
However, there is widespread resistance from Indian law firms, who at present enjoy the high fees an uncompetitive market affords them. Rajiv Luthra of top Indian law firm Luthra & Luthra recently told The Law Society Gazette that his firm refused to engage in a “best friend” agreement because it went against the spirit of the law.
The widespread resistance is reflected in the protectionist stance of the Bar Council of India, which persists in its assertion that foreign law firms should not be allowed to operate in India. For this reason international law firms may be concerned about the close tie many Indian legal practises have with their government.
However, the bill also provides Indian law firms with a host of opportunities and potential for growth previously hindered by laws. Prior to the new legislation, firms were not allowed to exceed 20 partners. The LLP structure offers Indian firms the chance to expand to a level where they can both seek to compete with international firms and when legislation allows, merge.
