Leading lawyers from MZM Legal provide an important insight into rapid legal developments in the Indian corporate world.
A Brief History
The Republic of India appears poised to live up to global expectations and deliver global value in all fields of human endeavour including the field of law. The Indian justice system is acknowledged and appreciated among the United Nations member countries as being a robust one, and the ratios settled by Indian courts are followed in letter and spirit, for an equitable and just interpretation of statutes keeping in pace with the changing times.
The Indian legal system is one of the oldest in the world, tracing over 5,000 years of evolution. Indian lawyers and jurists have held prominent positions and international offices. Mohandas Karamchand Gandhi, Balkrishna Gokhale and Mohammed Ali Jinnah were all legal professionals who have contributed not only to the evolution of the legal profession but to the creation of entire nation states. The former Chief Justice of India PN Bhagwati held with great dignity, the office of the chairman of the UN Human Rights Committee. Over the past five decades or so, the Indian legal profession has grown tremendously in terms of size as well as diversity of practice areas.
The last few years have witnessed rapid developments in the Indian corporate world as Indian companies have been making large overseas acquisitions. The same, inter alia, has paved the way for growth of the Indian legal service market which is presently worth about US$1.25 billion and is expected to rise every year hereafter. India’s legal business cannot be compared to the UK and the US markets - it being reported that the top 200 UK law firms have recorded revenues of US$23 billion in the year 2010, while the annual global legal market is said to be around US$250 billion. However. Indian clients expect their legal spend to outstrip the growth of the Indian economy.
The past decade has seen a mini-revolution in the legal services sector in India, with significant impact felt in corporate law, project financing and infrastructure contracts, intellectual property protection, organised crime, environmental protection, competition law, corporate taxation and investment law as legal practice areas.
With the growth of India’s corporate community, white collar corporate crimes in India have become more significant and visible. It is now very common to read about some new corporate scam or the other in the media at any given time – scams that encompass the banking, housing finance, telecom and infrastructure industries. Such billion dollar scams have paved the way for a new legal practice area - “White Collar Crime” (WCC) or the “Business Crime Practice”.
More and more Indian corporate entities and high-networth individuals are seen to engage specialist WCC defence lawyers or firms and retain them for immediate relief or specialist advice, should any “economic crime” crises strike them or their corporate entities.
Earlier such assignments were handled by lawyers practicing criminal law as individuals who, by the weight and ability of their silk, coupled with their seniority and standing, assisted the clients. However, with the increased complexities of such economic offences, the same assignments are being now handled by smaller boutique firms who have recourse to top criminal law counsels for court appearances.
The Indian Law Position Regarding Foreign Legal Services
The Limited Liability Partnerships (LLP) Act is possibly the start of a new chapter in the history of legal services in India. However, with India’s stated position of denial at the Uruguay round of the WTO’s General Agreement on Trade in Services (GATS), to “open” legal services in India, it still seems like a rough journey for the much interested international law firms to share a piece of the legal pie from India. Several international law firms (including “magic circle” firms such as Clifford Chance, Linklaters, White & Case and Allen & Overy) are believed to have “bestfriend agreements” with Indian law firms whereas the statute law as well as judicial precedents in India are clearly protectionist and specifically debar foreign lawyers or law firms from practicing in India, whether as litigators or non-litigators, including advising as transaction counsels, issuing opinions, drafting documents, etc.
Indian tax authorities have also claimed taxability over professional fees received (not in India) by law firms such as Clifford Chance and Linklaters for advice pertaining to businesses and assets in India. Recent amendments to the Indian Finance Act 2010, seek to enlarge the net of chargeability available to Indian taxmen, to specifically include such legal services rendered by foreign law firms. Indian courts have specifically held that foreign law firms are not permitted to render “non-litigation” services as well. Basically, most Bar Associations in India have expressed concern that the entry of foreign law firms will result in a cut-throat economic culture. Also, the Bar Association and Bar Council have opposed the entry of foreign universities as some of them feel that entry of foreign universities is the first step for back door entry of foreign law firms. Recently a writ petition has been filed before the Madras High Court, which not only questions the entry of foreign law firms in to India, but also questions several aspects of this, such as income tax to be paid by the foreign law firms on work done in India along with law firms operating under the guise of legal process outsourcing (LPO) units, issues pertaining to immigration law violations and violations of advertisement restrictions as mandated by the Bar Council of India.
It will be interesting for us, as legal practitioners in India in the coming years to see how much of the global legal market is tapped by us and how much we can contribute to the international legal fraternity as much as how foreign law firms and lawyers may evolve to be a part of the Indian legal services industry. As we move into the new decade of this century, we face new challenges and newer forms of competition, we hope to perform much better as individuals and as legal practitioners, with more ethics and with more responsibility towards our profession and our collective conscience.