LIBERALIZATION OF INDIAN LEGAL MARKET: WHAT DO THE REAL STAKEHOLDERS THINK?

By Raunicka Sharma

Introduction

In the past few decades, the countries all around the world have seen the rising trend of Globalisation and liberalisation which has led to countries opening up their economies for countries around the globe. There has been no sector that has been left untouched through the advancing patterns of liberalisation and globalisation and this would also require significant opening up of the legal profession. In the words of ex-President of the United States Globalisation is not something that we can hold off or turn off: it is the economic equivalent of a force of nature- like wind or water.

The legal sector in India is very lucrative and has millions of advocates practising the profession. The fact cannot be denied that the legal sector does not help in significant flow of FDI in the country, despite the fact that the lawyers and law firms are the ones who lead the major mergers and acquisitions, deal making etc.

Since the ancient times the Indian legal industry has remained closed and the task to cater the needs of the people has always been performed by the Indian legal firms and they hold a tight grip over it. Time and again the proposal of allowing foreign firms to enter into India and practice litigation or provide services has been denied. Despite the denial, though not directly but indirectly foreign legal firms have entered the Indian industry through Legal process outsourcing.

The globalisation of services took place through the advent of General Agreement of Trade in Services (GATS) which came into existence with establishment of WTO prior to which General Agreement on Trade and Tariffs (GATT) prevailed which only concerned with goods only. The 12 sectors classified by GATS which include business services which further includes professional services and under this head lies legal services. India is a member of GATS but it has only made commitments relating to engineering services and no mention of any sort of commitment relating to legal sector.

The present central government along with Bar Council of India has considered the idea of opening India for foreign legal firms in litigation and international arbitration services etc. But even after this, the legal sector is not fully liberalized and there still remains a lot of reservations.


Regulations that hamper liberalization

The fact cannot be denied that the legal service sector of the country has undergone sea change and has become very competitive for which the credit goes to commercialisation which has modified the Indian economy which has led to drastic rise in demand of legal services. With the advent of globalisation and change in the structure of the country the need for legal advice from the advocates has risen than the litigation services which has led to setting up of large number of firms.

The first legislation that hinders the growth of legal sector is The Advocates Act,1961 which regulates and consolidates the legal practitioners in the country and also provides for the Bar Council which has created Bar Council of India Rules, 1975. The act and rules collectively have blatantly put restrictions on just the opening of the sector for foreign firms to enter but also for the operation of the domestic firms.

There is bar on advocates of the country that they cannot advertise their area of specialisation because of which the users of these services are not able to make informed choices and healthy competition which is necessary for growth of any type of industry also does not take place. Further, only citizens have the right to provide legal services in the country, and foreign firms that will set up their firms in the country would also invite manpower from various other countries as well. The rules also prohibit the advocates to get into any sort of co-operation with the non-advocates like advocates cannot get into any sort of partnership or any similar arrangement with shared remuneration with anyone who does not belong to the similar profession. Shri S.V.S Raghavan has said “… the legislative restrictions in terms of law and self-regulation have the combined effect of denying opportunities and growth of professional firms, restricting their desire and ability to compete globally, preventing the country from obtaining advantage of India’s considerable expertise and precluding consumers from opportunity of free and informed choice.”

These provisions not just prevent the legal experts of our country to compete globally but also restrict the consumers of legal services from having better and more viable options available to them.


Advantages and Disadvantages of foreign entry

The majority of the work that foreign law firms be dealing in would include soliciting clients on legal issues relating to both international and domestic laws, drafting of legal documents etc. The main type of work thus that will be undertaken would mainly be related to corporate and commercial work. The Indian legal sector though is very sufficient but still lacks various qualities like that of competence, expertise etc, and the advent of foreign firms will bring pool of these resources which will raise the standard of service, which the Indian firms and lawyers are not ready to face.

The entry of legal expertise will provide the consumers of legal service a huge platform to choose, great level of expertise and experience which otherwise the country lacks. Apart from benefitting only the focused audience of the service, huge employment opportunities will be created in the field with handsome pay packages, not just the employment level but great deal of exposure will also be provided to the students and future aspirants of the profession in terms of internships, interactive sessions etc. Further, the institutions that impart legal education also believe that when the country is opening up to the world, the restrictions upon the legal sector won’t survive long, therefore, many universities, schools and colleges working in the similar field have opened their gates for foreign firms. The ex- vice- chancellor of National Law University, Bangalore opined that anything which would boost competition in the country in any sector should be welcomed by the country.

More so, in order to get rid of the monopoly of few big shot law firms and lawyers it is essential to bring in great deal of competition and challenge in the country. Not just improving the sector domestically, it will also provide the professionals to branch out their business and talents across the world. The country would also benefit at large scale in meeting out their transactional needs etc since the foreign firms will acquaint domestic bodies about the laws and rules of their country.

The views contradicting the above points are that with the entry of foreign firms might overpower the performance and revenue of the domestic firms. The fear is that the huge international stature of the big firms with giant size, power, economic status will definitely affect the domestic counterparts. The expansion of domestic firms is also restricted highly because of the laws prevailing in the country like the Indian firms are not allowed to raise capital and neither can they get into partnership with non-lawyers. Another drawback of allowing foreign firms to function in the country would be that the advocates might not attend the court proceedings here, in the country because of various reasons like language bars, lack of deep knowledge on the domestic laws etc.

The fact cannot be denied that liberalisation poses a lot of threats to Indian companies but liberalisation is the need of the hour and some time or the other will occur eventually therefore, the country needs to put the domestic firms on equal footing in order to protect them against the competitive disadvantage.


Conclusion

In the light of present happenings around the world and the severity of the ties of our country with world will make us bound to open up our all sectors for other countries to flourish here. In my opinion, with the advent of foreign firms in the country not just the foreign reserves and GDP of our nation will be at rise but a huge pool of opportunities will be created which would further attract manpower in the industry. The Indian law firms are now second to none in the world in terms of efficiency, research, use of technology etc and it can be hoped that we achieve great heights even when exposed to competition from various foreign counterparts if we are provided with a levelled field to play as said by Mr. Gerhard Schroeder “We must take care that globalization does not become something people become afraid of” .

The government is also required to take gradual integrating steps which would resolve the issues of both the sides such as easing down the restrictions on the entry and working of foreign firms, if not fully allowing the entry of foreign firms then atleast starting with international laws, arbitration and then slowly opening it up further so that the necessary exposure and protection both are provided to the Indian firms.

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