Wednesday, April 21, 2010

C to Z of foreign law firm debate – everyone knows A, B

In this article we analyze the issue of liberalization of Indian Legal sector and the scope of Advocates Act 1961 (hereinafter referred to as ‘1961 Act’) in non-litigious matters. One important judgment, a recent case filed and some eye-opening realities will help our assessment of the entire situation.

Lawyers collective Judgment: - In 1995, a Writ Petition (W.P. No. 1526 of 1995) was filed in the Bombay High Court by the name Lawyers Collective vs. Chadbourne, Ashurst and White & Case. This petition was filed by Lawyers collective in public interest as according to them, the permission granted by Respondent no. 8 (Reserve Bank of India) to the Foreign Law Firms, namely Respondent no. 12 to 14 (White & case, Chadbourne & Parke and Ashurst Moriss Crisp) to open liaison offices in India, was totally illegal and in gross violation of the provisions of 1961 Act. The Petitioner (a society) concerned with the practice of legal profession and particularly concerned in ensuring that the ethical practice prevails in the legal profession in India, sought declaration from the court that the permission granted by RBI was bad in law and further that Foreign Law Firms cannot be permitted to carry on both litigious and non-litigious activities in India unless they are enrolled as advocates under the 1961 Act. The petitioner argued that the practice of law in India included the practice of non-litigious matters such as drafting documents, reviewing and providing comments on documents, conducting negotiations and advising clients on international standards and customary practice relating to the client’s transaction etc. and therefore Foreign Law Firms cannot be allowed to practice in non-litigious matters without enrolling under the 1961 Act.

The High Court Bench, comprising Chief Justice Swatanter Kumar and Justice J.P. Devadhar, granting the prayer of Petitioner, held that the RBI did not have the authority to grant permission to these firms to carry on the practice of non-litigious matters, and also, that the practice of the profession of law, governed by the 1961 Act and the Rules of the Bar Council of India, includes the practice of non-litigious legal matters. Thus, "to practice in non-litigious matters in India, the Respondent Nos.12 to 14 were bound to follow the provisions contained in the 1961 Act." The court further held that the 1961 Act cannot be narrowly construed to be applicable only in litigious matter since in that case an advocate found guilty of misconduct in performing his duties while practicing in non-litigious matters cannot be punished under the 1961 Act. Similarly, where an advocate is debarred for professional misconduct can merrily carry on the practice in non-litigious matters on the ground that the 1961 Act is not applicable to the persons practicing the profession of law in non-litigious matters.

The above Judgment since then is deemed a precedent on the matter of entry of foreign law firms in India.

The Indian Legal Market and the Foreign Law Firms: - The Indian Legal Industry is estimated to be $800m worth. In the last two years the amount spent by India Inc. against charges and fees towards due diligence for mergers and acquisitions alone, is comparable to the GDP of a small country. India is fast emerging as legal supermarket and foreign law firms are keen to cash this opportunity. Apart from and other than advertising by organizing seminars on different international legal issues, below are some instances of the presence of foreign law firms:-

· Herbert Smith sponsored an essay writing competition in collaboration with Indian Law School,

· Clifford Chance had sponsored a moot court competition organized by the National Law School, Bangalore,

· Herbert Smith, Clifford Chance, Covington & Burling in the past few years shared their knowledge with law students by conducting short specialization courses,

· Linklaters financially supported setting up of new school near Delhi,

· There are about 38 ‘magic circle’ firms with their liaison offices or referral relationships with their Indian counterparts, while others strike up informal associations,

· Baker and McKenzie, have been amongst the most active law firms in India for the past two decades,

· Allen & Overy regularly advises on power projects, particularly in the oil & gas sector, acts for Indian banks, besides doing advisory work for corporate houses in India,

· CMS Cameron has advised the government of Orissa on privatization of the state electricity system,

· Denton Wilde Sapte’s Indian clients include Tata Electric and Gujarat State Energy Company,

· Linklaters represents clients in their disputes with the Maharashtra State Electricity Board,

· A large number of foreign accounting firms have already set up their offices and are clearly providing legal services in the area of Tax and Corporate Transactions,

· Indian law firms are reverse outsourcing high-end Patent application work to Foreign Law Firms in US,

· Allen & Overy sent their Singapore-based Capital Markets Partner, to allied firm, to boost its ailing capital markets practice,

· Linklaters and Clifford Chance have “best friend” alliances with Indian law firms and their managing partners stay in India for several months to improve integration.

So the Foreign Law Firms are already here.

The recently filed A. K. Balaji Case:- On 18th day of March 2010, one A. K. Balaji filed a writ petition W.P. No. 5614 of 2010, before the Madras High Court on the lines of the Lawyers Collective case (Supra). Respondent no. 9 to 40 are Foreign Law Firms, except Respondent No. 15 (Integreon) which is a Legal Process Outsourcing vendor. Other respondents include UK’s Allen & Overy, Clifford Chance, Linklaters, Freshfields and US law firms, WilmerHale and Shearman & Sterling. The Petitioner inter alia has alleged immigration law and 1961 Act violations. The Petitioner also claims that there is no true “reciprocity” as Indian Lawyers has to undergo cumbersome process, enormous conditions and restrictions and subjecting themselves to qualifying tests to practice law in US/UK whereas, to the contrary, Foreign Law Firms are silently capturing the Indian market through Unauthorized Practice of Law.

To wit:- While some contentions like Immigration law and 1961 Act violations are meritorious, I do not see any reason for LPO vendors to panic from the allegations raised against LPO companies in the petition. A managing partner of a magic circle firm coming to India on a tourist visa and conducting arbitration in hotel room is violation of 1961 Act and Immigration Act. The magic circle firm receives fees in its foreign account in a foreign location thus violating Income Tax and other Foreign Exchange Act. Clifford Chance had, in 1996 and 1997, advised foreign investors on English Law for the execution of certain power projects in India. The projects included the Bhadravathi Power Project, promoted by the Ispat Group, Electric de France and Alstom; Vizag Power Project promoted by the Machen Development and National Power; Ravva Oil Fields promoted by Cairn and Chase Manhattan and the Vemagiri Power Project promoted by GMR with investment from Avondale (Projects). The advisory work was undertaken by attorneys located outside India, and consequently, Clifford Chance's bills were raised and paid outside India. These issues need to be regulated if not restricted in the best possible manner taking the entire legal fraternity and governments of both countries in confidence. Since the matter is sub-judice I am hopeful that the court will do the needful.

Suffice it is to mention here that every country has body regulating unauthorized practice of law and both litigious and non-litigious matters are recognized as part of legal profession. To exemplify,

· The Court of Appeals of New York in the matter of New York County Lawyers Association (Roel) reported in 3 N.Y. 2D 224, inter alia held thus :-

“..........................Whether a person gives advice as to New York law, Federal law, the law of a sister State, or the law of a foreign country, he is giving legal advice. Likewise, when legal documents are prepared for a layman by a person in the business of preparing such documents, that person is practicing law whether the documents be prepared in conformity with law of New York or any other law. To hold otherwise would be to state that a member of the New York Bar only practices law when he deals with local law, a manifestly anomalous statement. .............................. As heretofore pointed out, the public is as liable to injury when an unlicensed person gives advice to an individual as to his legal rights under foreign law as it is with respect to his rights under domestic law. The State need not have separate examinations for those who will specialize in real estate law, patent law, mining law, foreign law, or any other law. There are many branches of the law that a Bar examination does not reach, but the test is a general one which all qualified applicants are required to take. And so all are equally subject to the same character qualifications. Thus it is not unreasonable to require that a person desiring to engage in the practice of foreign law be admitted to the Bar here and be subject to the same rules as every other member of the Bar of this State.”

· The Supreme Court of South Carolina in its opinion No.25757 reported in 2003 S.C. Lexis 293, inter alia held thus :-

“Based on the foregoing analysis, we hold that when nonlawyer title abstractors examine public records and then render an opinion as to the content of those records, they are engaged in the unauthorized practice of law. But if a licensed attorney reviews the title abstractor’s report and vouches for its legal sufficiency by signing the report, title abstractors would not be engaged in the unauthorized practice of law.”

· In the case of Legal Practice Board V/s. Wilhelmus Van Der Zwaan reported in (2002) WASC 133, the Supreme Court of Western Australia, has held thus :-

“The expression “administration of law” in s 77 is to be read as meaning “the practice of law” or “the practice of the law”. The practice of the law includes the giving of legal advice and counsel to others as to their rights and obligations under the law, and the preparation of legal instruments by which legal rights are either obtained, secured or given away, although such matters may not then, or ever, be the subject of proceedings in a court. If the giving of such advice and performance of such services affect important rights of a person under the law, and if the reasonable protection of the rights and property of those advised and served requires that the person giving such advise possess legal skill and a knowledge of the law greater than that possessed by the average citizen, then the giving of such advice and the performance of such services by one for another as a course of conduct, constitutes the practice of the law. Where an instrument is to be shaped from a mass of facts and conditions, the legal effect of which must be carefully determined by a mind trained in the existing laws in order to ensure a specific result and to guard against others, more than the knowledge of the layman is required. A charge for such service brings it within the term “practice of the law”.”

The allegations raised against Legal Process Outsourcing vendors are however abysmal. LPO’s work on a module wherein they are not a law-firm and do not provide legal advice in any domestic or foreign jurisdiction. We train our peers not to get engaged in Unauthorized Practice of Law.


legal process outsourcing said...

Most of the given information seems to indirectly instigate that legal process outsourcing now a days seems to have grown even beyond complexity itself. I mean there's just too much changes in a short span of time in outsourcing methods, styles and techniques.

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Abhinav said...

At least six ethics panels in various cities and states in the U.S. already have addressed the issue of ethics in relation to off-shore legal outsourcing, or legal process outsourcing (LPO / legal KPO), and they all have ruled in favor of it. These include the American Bar Association Standing Committee on Ethics and Professional Responsibility, which issued Ethics Opinion 08-451, which states that (a) "U.S. lawyers are free to outsource legal work, including to lawyers or non-lawyers outside the country, if they adhere to [various] ethics rules," and (b) legal outsourcing is "a salutary trend in a global economy." As The New York Times also reported: “ ‘there is no problem with off-shoring,’ said Stephen Gillers, a professor at NYU School of Law and a legal ethics expert, ‘because even though the lawyer in India is not authorized by an American state to practice law, the review by American lawyers sanitizes the process.’ ” (“Corporate America Sending More Legal Work to Bombay,” March 14, 2004.)

Abhinav Chandan

SDD Global Solutions

High-end legal outsourcing

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