The Indian Legal Profession

Volume 4 • Issue 2 • January/February 2018
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Foreign Firms Prepare for Landing?

International perspectives on a long-running debate

As this issue of The Practice goes to press, the Indian Supreme Court is actively considering a long-standing case concerning the liberalization of the Indian legal market. Representatives from major international firms, including Ashurst, Bird & Bird, Clifford Chance, and Linklaters, are all scheduled to appear before the country’s highest court to preserve their ability to temporarily fly-in and fly-out of India to advise their clients on non-Indian laws. The case represents the latest in a two-decades-long saga over whether to allow foreign lawyers the right to practice law—foreign, Indian, or otherwise—in the country. As any casual observer of the Indian legal profession knows, the standard prediction that the legal market will open “in two years” has now been repeated for more than a decade. Nevertheless, the Modi administration has signaled strong support for allowing foreign lawyers to formally advise on non-Indian legal matters. While this debate has often been examined from the perspective of the Indian firms, in this article we explore the question of foreign firms in India from the perspective of the foreign firms themselves (for a detailed account of how these issues impact domestic Indian law firms, see “Mapping India’s Corporate Law Firm Sector” in The Indian Legal Profession in the Age of Globalization). How do foreign law firms view the market? What are their current strategies? And what is going to happen if the proverbial floodgates do, in fact, open?

Current state of play

For readers of The Practice new to the debate, it is useful to start by laying out the current state of play. Forgoing the spectrum of historical details and nuances, the core of the debate centers on existing Indian law and bar regulations that restrict foreign lawyers from registering as advocates in the country and thereby practicing any sort of law within India. More specifically, the Advocates Act of 1961, which regulates the profession, permits only Indian citizens ages 21 and older who have obtained a law degree from a recognized university to be admitted as advocates. (In this context, it is worth noting that India does not allow for dual citizenship.) Furthermore, the Bar Council of India, the body established by the Advocates Act to regulate the profession on an ongoing basis, has been a staunch opponent to liberalization and has interpreted admission and practice rules in the most restrictive manners. (For more on how this debate has formed and the various players involved, see Aditya Singh’s paper, “Globalization of the Legal Profession and Regulation of Law Practice in India: The ‘Foreign Entry’ Debate,” in The Indian Legal Profession in the Age of Globalization.) As a result of all this, the Indian legal market, at least on the surface, is completely closed off to foreign lawyers.

Many Indian law firms have tried to prepare for what they believe to be the inevitable opening of the market by forging alliances—often dubbed “best friends” arrangements—with foreign law firms.

Yet, despite these restrictions, countless foreign lawyers do actively service international clients doing business in India as well as Indian clients doing business internationally. To make it work, foreign law firms have adopted a so-called fly-in/fly-out approach, whereby non-Indian lawyers sitting in London, New York, Singapore, and elsewhere fly in to India for short periods of time to offer non-Indian legal advice on transactions (often meeting clients in hotel lobbies if they have to!) and then fly out when their business is concluded. In recent years, technology has only expanded this practice through the use of videoconferencing and other forms of client engagement. Despite some debate, this practice was upheld by a judgment of the Madras High Court in 2012 and has remained the status quo for much of the last decade.

It is also important to note that in the early 2000s a number of international and Indian firms entered into so-called best-friends agreements. As Ashish Nanda, David B. Wilkins, and Bryon Fong write in their chapter on Indian corporate law firms in The Indian Legal Profession in the Age of Globalization:

Many Indian law firms have tried to prepare for what they believe to be the inevitable opening of the market by forging alliances—often dubbed “best friends” arrangements—with foreign law firms … Indeed, U.K. Magic Circle firm Linklaters was so anxious to establish a toehold in the Indian market that in 2006 it engineered the creation of a new firm by encouraging Suresh Talwar, a senior partner at Crawford Bayley & Co., and Shobhan Thakore from AZB & Partners to create a new firm called Talwar Thakore & Associates, with whom Linklaters would enter into a nonexclusive referral agreement.

In addition to Linklaters and Talwar Thakore, Trilegal entered into a similar nonexclusive referral agreement with Allen & Overy, AZB entered into an agreement with Clifford Chance, and Clyde & Company established a tie-up with India’s ALMT Legal. These agreements, many of which were done on the assumption that the market was about to open, all proved to be short-lived, and by 2013 all had broken down.

“Why bother with India? 1.3 billion people, forecast to overtake China at some point in the next several years, and projected to be the second biggest economy in the world after China by the middle of the century,” says Alasdair Steele, cohead of Cameron McKenna Nabarro Olswang’s (CMS) India group.

What has changed? The election of Narendra Modi as prime minister in 2014 and the Modi administration’s public support for increased liberalization (of all types), in conjunction with the ongoing court cases, has led many to believe that liberalization of some form is inevitable. To learn more about how foreign law firms view this potential, we sat down with partners from two such firms—one based largely in the United States and the other largely in the United Kingdom—each of whom leads their firm’s “India desk.” The very existence of these India desks, staffed by lawyers with expertise in the regulatory and economic landscape of India, speaks to the persistence of globalization even in the face of closed markets like the Indian legal market. While much is made of the “will they or won’t they” over allowing foreign lawyers to practice in the country, examining foreign law firms’ approach to that potentiality provides important perspectives on what to make of the whole debate. And the views of these partners are telling.

Gaining a foothold with a virtual office

Because foreign law firms are forbidden from establishing offices or otherwise practicing law within India, they need to be discerning when it comes to work that meaningfully involves the world’s largest democracy. Nevertheless, globalization makes engaging with India in one way or another virtually unavoidable for large international firms (see “The Indian Legal Profession in the Age of Globalization”). Alasdair Steele, a partner at London-based CMS Cameron McKenna Nabarro Olswang (CMS) and cohead of the firm’s India group, stresses the importance of India globally:

Why bother with India? 1.3 billion people, forecast to overtake China at some point in the next several years, and projected to be the second biggest economy in the world after China by the middle of the century—depending on which particular economist you want to listen to! Either way, it’s a big economy, a big opportunity, and it is—and will be—a big market as it accelerates further. Frankly, we can’t afford not to take an interest in India.

Given the regulatory restrictions on foreign lawyers, in order to foster sustained engagement with the country, many firms have formally established “India desks”—groups of lawyers within law firms who, among other responsibilities, serve as strategists and expert liaisons to and from the Indian legal market. These India desks are most often led by a senior partner and often include dozens of associates, some of whom are directly recruited from Indian law schools. Lawyers in these groups typically work on the foreign and international aspects of deals for clients doing business in India or with Indian businesses as well as those aspects of Indian clients doing business elsewhere. Nandan Nelivigi, a partner at New York–based White & Case and the head of its India practice, puts it this way:

Because we are not allowed to have an office on the ground in India, our India practice—or “India desk—is intended to operate like a virtual office without a physical presence in India. It’s a combination of lawyers in different offices intended to focus on opportunities involving India. Internally, it means coordinating our efforts and staying organized so that we can respond to market opportunities as they come up. Externally, it means promoting our brand, making our clients and other stakeholders in the market aware of our capabilities in this area, identifying opportunities, and connecting clients with the right people.

A significant part of the India desk’s job is centered on building and maintaining relationships. “There are large parts of India where it’s still very much face-to-face driven and it’s about meeting people,” says Steele. “You can’t just do things over the phone, so you have to go out there quite a bit—not just flying your flag, but really building relationships with people.”

Given the regulatory restrictions on foreign lawyers, many firms have formally established “India desks”—groups of lawyers within law firms who, among other responsibilities, serve as strategists and expert liaisons to and from the Indian legal market.

It is important to note that building these relationships applies to both inbound and outbound work—the latter being more and more important as Indian companies are increasingly doing deals with places like Africa. On the one hand, given the size and scope of India’s economy, international clients are investing heavily into the market—investments that require on-the-ground help. For instance, Mars recently acquired a majority stake in Preferred Brands International, a food service company headquartered in Stamford, Connecticut, but with significant operations and sales in India. Given the company’s strong Indian operations and associated legal issues, SkaddenArps, Slate, Meagher & Flom, Mars’s main outside counsel, needed an on-the-ground Indian partner to see the deal through within India. That meant having sufficient-enough knowledge of local law firms that they could stand by their referral with confidence and execute it with efficiency. In this case, Skadden lawyers worked with a team of lawyers at AZB & Partners to complete the transaction as it pertained to Indian matters.

On the other hand, there is also significant outbound Indian investment ($44 billion USD in 2016), almost all of which requires international law firm participation. For instance, in 2008 Bharti Airtel acquired Zain’s Africa operations. Within India, Bharti Airtel was represented by AZB. However, the conglomerate recognized that the complexity and multijurisdictional nature of the deal required international expertise. To that end, Bharti Airtel brought on Herbert Smith Freehills, which had a long-standing and well-regarded presence in the country, to handle the deal’s international and due diligence components—work that spanned 15 African jurisdictions. Therefore, just as international law firms are using their relationships with Indian firms to complete in-country deals, these same firms are courting Indian companies and general counsel doing outbound work requiring international expertise.

Realities and projections

Given all of this, foreign firms are understandably paying close attention to how the legal market liberalization debate develops in India. Should the market open up, additional opportunities for legal work would become available to outside firms. So, we asked our interviewees, how does a foreign law firm approach this possibility?

“It really depends on what type of opening up we’re talking about,” says Nelivigi. “Some talk about joint ventures with Indian law firms or with Indian lawyers. I’ve heard discussion over the possibility of lawyers being allowed to establish an office solely to practice foreign law. Then I’ve also heard talk about emulating the old Singapore model. It really depends on what that liberalization means.”

Steele echoes Nelivigi’s comments, cautioning that liberalization can come in a number of forms and degrees. “If liberalization does come, I suspect that in the initial stages we will see firms open offices to advise on non-Indian law and possibly appear at arbitrations—kind of like the Singapore model or the Dubai model, where you can have your office there, but for advising on local law, you need local lawyers.”

Whatever form liberalization takes, neither Nelivigi nor Steele are bullish on its potential impact with respect to the activity of foreign law firms. “If it is a full-fledged liberalization, I expect there will be a number of international firms that move offices into the country, but I don’t think it’ll be some opening of the floodgates,” says Nelivigi. “I expect that it will be a more measured approach,” Steele says, “and to understand why I think it’s important to start by looking at the Indian legal market itself.”

“In many ways we are already doing what we would have been doing had we had an office on the ground in India,” says Nandan Nelivigi, cohead of White & Case’s India practice.

In other words, Steele argues, one should bear in mind the full size of the Indian legal market when considering prospects for foreign law firms should it liberalize. “It’s actually a relatively small market,” he notes. “If there was a demand for more corporate and commercial lawyers, then the Indian firms would have responded, and the big Indian firms would be two or three times the size they are now. But they are not run off their feet. There’s a reason they’re not expanding, and a part of that comes down to demand.” In numerical terms, RSG Consulting estimates that for the 2017–2018 financial year, the Indian commercial legal market was worth $1.2 billion USD. Of that, around $700 million USD was spent on Indian-based lawyers and $500 million USD on foreign lawyers.

Foreign firms are also cognizant of the existing state of play. Put simply, many of the foreign law firms whose interests could be affected by liberalization have been working productively with Indian clients for decades. “In many ways we are already doing what we would have been doing had we had an office on the ground in India—that is, advising our clients on New York law or English law or other laws on which we are qualified to advise,” says Nelivigi. “We’re just doing it outside of the country, and we’re doing it on a fly-in/fly-out basis to the extent we need to be on the ground in India.” Many foreign firms have already made moves and established reputations to the degree possible within the bounds of Indian legislation and the rules of its legal profession, indicating that if liberalization were to take place, there may well be fewer variables left to solve than the anticipation might suggest. As Nelivigi explains, “There isn’t likely to be a significant shift in the mix of clients or practice areas once international law firms are allowed offices on the ground because this process has been going on for the last 20-plus years.”

That being said, if a foreign firm were tempted to set up such an office, considerations would focus more on proximity to clients and the right mix of talent to fill that office. Nelivigi expands on how such a firm might approach staffing an office in India:

There are a number of factors to think through, and again so much depends on what type of liberalization we are talking about. If we are not allowed to practice Indian law, I think the focus will be on hiring people who are really qualified in both India and other jurisdictions. The second factor is the pricing model. I don’t think you can bring in a lot of senior talent and expect to charge the same rate at which you are able to charge in New York or London. It’s a very price-sensitive market—high volume, low margin. And lastly, in terms of expertise and experience, you still need to be able to create a team that can inspire confidence with Indian clients and show that you’re not simply bringing old wine in a new bottle. So, I think you would need some seasoned lawyers with support from good, well-trained junior- and middle-level associates.

When asked about how U.S. and U.K. firms might approach market liberalization differently, neither Nelivigi nor Steele considered it a major factor in differentiating how firms would plan or behave. “It’s a fair question, but it is difficult to say in those terms,” says Nelivigi. “There are general differences between the United States and the United Kingdom to be sure—for example, the United Kingdom has a relatively smaller market compared to the U.S. market, and thus there is a general tendency for U.K. firms to be more international than U.S. firms—but the distinction is not that clear-cut.” These broad differences may come to inform observable trends, but there are more relevant factors among foreign firms that could foreshadow how liberalization would unfold. As Steele explains, “It depends on the type of firm.”

Seeing the whole board

In a previous issue of The Practice (see Strategy in the Law), Robert Couture wrote about market segmentation, arguing that whatever the strategy, it is vital that firms have one and that it is clearly defined (see “Postrecession Strategies”). In the wake of the global financial crisis, questions of strategic growth—or contraction—have played out around the world with countless firms choosing to close, rather than open, global offices. “Since the financial crash, a lot more work is done around asking the question, ‘What’s the business case for opening this office?’ And so, law firms have been slower to go and just open up new offices,” Steele notes. Indeed, recent years have witnessed a number of firms shuttering offices in places like China (for more on this, see The Chinese Legal Profession).

“You need to be able to create a team that can inspire confidence with Indian clients and show that you’re not simply bringing old wine in a new bottle,” says White & Case’s Nelivigi.

The calculation often comes down to where a firm’s strategy is anchored and what the opportunity of an open Indian legal market truly offers from that vantage point. For instance, is the strategy to have extremely broad global reach through physical presence, or is it to focus on targeted jurisdictions or practice areas while using technology to create virtual scale? As Couture stresses in his article, there is no predefined right or wrong strategy—the point is to have one. Thus, India opening up may be enticing from some. “For those firms whose model is to have lots of offices in lots of different places, I think their approach will be that they need to have a presence in India because it’s a big market,” Steele says. On the other hand, he notes, “Others might be asking themselves, ‘What kinds of deals do we do and, in that context, does having an office in India make sense?’”

Large international firms are all making these calculations at the prospect of an open Indian legal market, not just for themselves but also to project how the wider foreign law firm ecosystem will behave. Nelivigi offers the context of his firm by way of example. “There are some international firms whose strategies are going to differ from those of White & Case,” says Nelivigi. “We are one single partnership spread around the globe, similar to the Magic Circle firms, so we are going to take a different approach from firms built more on a franchise model, who are likely to be more aggressive.” He continues:

In fact, even the Magic Circle firms are likely to be more aggressive than us. They have a lot of running room in terms of how long of an investment they can live with in India and how quickly they might expect to see profitability from a presence on the ground in India. On the other end, I think more domestically focused U.S. firms will either not be interested in opening up an office in India or go in with much higher expectations for profitability. We fit somewhere in the middle.

Having said that, Nelivigi stresses that these are broad strokes. “We’ll have to see when liberalization occurs because we are just talking hypotheticals,” Nelivigi cautions. “My answer would have been very different if you had asked me about this five years ago, or 10 years ago. This discussion has been going on for the last 20 years, and my answer today is very different. Who knows what my answer will be when liberalization actually happens.”

A complex country, market, and profession

“For those firms whose model is to have lots of offices in lots of different places, I think their approach will be that they need to have a presence in India because it’s a big market,” says CMS’s Steele.

As the foreign law firm debate continues in India, if history is the best predictor of the future, it is difficult to say what will change or how fast it will move. What we can expect is that firms will move on any opportunity according to how it fits into their larger strategy, and the liberalization of the Indian legal market represents a big opportunity. Having spent years working around both the Chinese and Indian legal markets, Steele suggests firms can take steps to prepare for liberalization. “A lot of what I’ve learned over the years in different international settings is that it’s important that you understand the local culture, how people do business, and how they react,” he says. “In some places in the world, even when they’re saying yes, what they really mean is no, and you have to learn to pick up on those nuances. Just because we would or wouldn’t do this or that in the United States or in the United Kingdom doesn’t mean that those in other jurisdictions are going to behave the same way.” He continues:

But the rest of it is just being aware of what’s going on in India, what’s going on in the economy, what business is like, what’s going on with liberalization, what are the talking points with people when you go out there, and showing that you have that interest. That way you’re not just starting from the beginning if it ever opens up.

While the foreign lawyer debate has taken up a lot of the oxygen in the room, it is simply one of many debates regarding the future of the Indian legal profession. As we see in “Indian Lawyers and the State,” Indian corporate lawyers are steadily gaining influence in the state policymaking process—a new role that will help shape India’s domestic development and place on the world stage. As Fali Sam Nariman eloquently argues in “10 Thoughts on Law and Justice in India,” although India has made strides in promoting justice and improving its delivery, there is still progress to be made. Indeed, as Judge Chandrachud affirms in “The Future of the Indian Legal Profession,” the Indian legal profession is in a state of transition at every stage, from the structure of legal education to quality-of-life concerns for practitioners. Foreign law firms or no, there is a lot to pay attention to in India.

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The Indian Legal Profession Volume 4 • Issue 2 • January/February 2018

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