Cyril Shroff-Headed BCI Committee Recommends 3-2-2 Year Phased Opening for Foreign Law Firms in India
The Phased Entry Plan Explained
The keystone of the committee recommendation is the so-called 3-2-2 year model of phased entry, a seven-year period of transition which is aimed at opening up the legal field progressively. This would subsequently take place in the first phase, a three year probationary or first entry period. The foreign law firms would be allowed to open offices in India during this period but their jurisdiction would be limited. They would mainly be permitted to give advice on foreign and international law to clients, which is now being provided on a fly-in, fly-out basis.
This would also enable them to engage in international commercial arbitration, a fast-developing discipline of dispute resolution. It would focus on working with non-litigious, including the mergers and acquisition (M&A) and corporate transactions under the jurisdiction of foreign laws. More importantly, they would not be allowed to practice Indian law or even appear in Indian courts in the first three years. This is a well thought out restriction so that their initial venture does not directly interfere with the basic areas of practice of most Indian lawyers, particularly those who are engaged in litigation.
The first three years would be followed by the second phase of the plan that will take two years. This step would entail an analysis of the effects that the presence of the foreign firms would have on the local market. According to this evaluation, the range of their operations might be broadened. The committee has proposed that foreign firms could even be permitted to engage in broader scope of transactional and corporate assignments even joining venture or collaborations with Indian law firms in this stage. This would foster the sharing of knowledge and assist in the closing of the local and international practice divide.
The liberalisation process would become complete once the final two-year phase of the seven-year plan would commence. Provided that the above stages have been found to be successful and the Indian legal market is adapting positively, foreign law firms may be allowed to practice Indian law. This would be a giant leap and they would be technically equal to their Indian counterparts. But this latter step would probably be conditional, including a minimum number of Indian lawyers being employed, and their being brought into the full fabric of the local legal system in accordance with the regulatory structure of the Bar Council of India.
Balancing Opportunity with Protection
The step-by-step approach of the proposed plan can be explained by the well-rooted fears of the Indian legal community. The core issue has always been that the unregulated and unprecedented influx of international law firms, namely, their enormous financial power, and well-established international connections, would subdue local law firms. The smaller companies and the individual professionals on which the Indian legal system depends were afraid to compete and began consolidating and losing professional autonomy.
The phased approach is a form of protection mechanism against such a shock to the system. It gives a seven-year grace period to Indian law firms so that they can be ready in the new competitive environment. This would enable them to increase their operation, invest in technology, niche diversification and also in strategic alliances. In essence, it provides the local industry with time to evolve and change, and make the introduction of foreign companies not a threat but an ambient of growth and modernisation. This is aimed at creating a good competitive environment and not the hostile acquisition of the market.
The principle of reciprocity is another major principle behind the recommendation. The committee has greatly stressed the point that the liberalization of the Indian legal market should not be a one way road. It demands that the Indian law firms and lawyers should be given equal rights and access to practice in the home country of foreign firms that want to establish themselves in India. This will guarantee a balanced and just position, in which the gains of globalisation will be bothway, with Indian companies having the chance to increase their international presence.
This considered attitude also results in the regulators whose main concern is the Bar Council of India to keep a check on the impacts of liberalisation at every level. It offers a chance to evaluate the effects on legal education and professional ethics and the justice delivery system in general. In case something go wrong at the early stages, the BCI would be flexible to make modifications on rules and regulations at later stages. This will make the whole process controllable, monitored and in the best interest of the Indian legal profession and the people it serves.
Potential Impact on the Economy and Legal Profession
The opening of the legal sector will lead to a very beneficial effect on the Indian economy. The availability of large international law firms is considered to be a serious boost of confidence among foreign investors. In dealing with difficult cross-border transactions, global corporations tend to engage legal advisors with whom they have a relationship. The presence of these firms in India may also facilitate foreign direct investment (FDI), and the country will hence become even more desirable to international capital and spur economic growth.
This development holds the potential of opening up a pool of opportunities to Indian lawyers, especially those who are young. The influx of foreign companies would generate new employment opportunities, probably at a better pay structure and international career growth opportunities. Such practice would be a priceless exploration of international best practice, advanced legal practice and varied professional culture. Such an introduction of international norms has the potential to transform the whole profession and a new breed of Indian lawyers who are competent to deal with international complex legal issues will emerge.
