The highly anticipated decision on the ‘fly-in, fly-out’ rule certainly had lawyers’ chins wagging when I visited Mumbai and New Delhi in March. Upholding a decision by the Madras High Court, appeal judges ruled that foreign law firms still cannot set up permanent offices in India, but are allowed to fly in and out of the country to give legal advice on matters of non-Indian law and, in certain circumstances, conduct international commercial arbitrations.
On the face of it the decision is bad news for those global firms with designs on the world’s fastest-growing economy. Yet, according to many of the Indian lawyers I spoke to, the outcome was the best their international counterparts could have hoped for; besides which, the judgment hardly kills Prime Minister Narendra Modi’s plans for the sector. As reported by The Law Society Gazette, the presence of this long-running litigation has been used by some, including the Bar Council of India, to stall the government’s reforms. With the case now concluded, the question of liberalisation is not if it will occur but when.
Global businesses contemplating greater investment in India would no doubt feel comforted by the presence of their favoured legal brand in Delhi or Mumbai. Indeed, this is one of the Modi government’s primary reasons for wanting to sweep away current protectionism of the legal market, as doing so should attract further international investment and boost the nation’s economy ahead of next year’s general election. But what is in it for India’s lawyers?
Much like the reaction to the Supreme Court’s legal reasoning, opinion on whether or not India’s legal market should be opened up to foreign practitioners is split among both law firms and individual lawyers, but there is perhaps more acceptance (bordering on enthusiasm) of liberalisation than some press reports may otherwise suggest, and for a variety of reasons.
Some Indian lawyers are wary of a potential talent war, such as that seen in Singapore, where local practices may end up as feeder firms for their larger international counterparts. Others are understandably worried that an influx of foreign firms will bring more competition to an already highly competitive marketplace.
While many lawyers believe that global players will concentrate on servicing their international clients there is suspicion that Magic Circle and White Shoe firms will attempt to lure India’s premier businesses away from local counsel. However, this is where many foreign firms may encounter difficulty because, as one Indian banking and finance partner put it, ‘in India, sometimes relationships are more important than the quality of work that is produced’.
India remains a relationship-driven economy, and nowhere is that perhaps more evident than in the legal sector where partners with longstanding clients can wield incredible power within their respective firms. International outfits looking to enter the market would likely require a tie-up with an Indian practice – or a lateral hiring splurge – if they planned to prise Indian clients away from domestic practices. Good news for those Indian partners keen on a lucrative merger and/or early retirement, but perhaps not so great for the global firms which may find, according to several lawyers in the know, that the quality of work in the mid-market is not up to international firm standards.
Then there is the thorny issue of pricing. For a global firm to make a profit out of Indian clients would be difficult, said one Mumbai-based M&A partner. ‘If they think they can come to Delhi or Mumbai and charge £500-plus per hour then they are sadly mistaken. Hourly rates at that level are difficult to maintain because India is so competitive. There is a lot of undercutting on fees.’ However, a corporate partner sitting in New Delhi had a different take. ‘If international firms come here with their big fees then we can increase ours,’ they said. ‘It will also raise standards across the board and make us all better.’
Although not universal, this was a frequent response to the question of whether liberalisation was wanted by Indian practitioners. Many leading Indian firms believe an opening up of the market offers the perfect opportunity to prove themselves against the elite of the global legal profession – showing the world that India’s top lawyers can go toe-to-toe with their counterparts in London, New York, and Hong Kong – but also acknowledging that standards below the most well-known and respected firms can be improved.
In short, the message from Indian lawyers seems to be that there is more to gain than lose with an opening up of the market, and that foreign practitioners will not have an easy ride of it, or as one competition partner said when asked about Big Law moving in next door: ‘My message to them? Come and have a go if you think you can.’
