India: Supreme Court Of India Clarifies Foreign Law Firms/Lawyers' Scope Of Services In India

Overview

The Hon'ble Supreme Court of India (Supreme Court) pronounced a judgment restricting foreign law firms/lawyers from setting up offices in India and has only allowed them to come to India on temporary basis for advise on foreign law only and for participation in international commercial arbitrations in India. Further, restrictions have been imposed on BPO's so that they do not venture in to practice of law in any manner.

Background

  • Under the Advocates Act 1961 (Act), a foreigner is not entitled to practice law in view of the restrictions contained under the said Act. However, under the guise of different entities foreign lawyers were conducting seminars and conferences etc in India. Foreign law firms were also practicing the profession of law in India in violation of the Act. Writ petitions were filed before the Hon'ble Madras High Court (ie, AK Balaji vs. Government of India (Madras HC Judgment)) and Hon'ble Bombay High Court (ie, Lawyers Collective vs. Bar Council of India (Bombay HC Judgment)), seeking restrictions on such practices.
  • The Supreme Court, in Bar Council of India vs. AK Balaji & Ors, passed a landmark judgment dated 13 March 2018, which has put to rest some of the major issues concerning the entry of foreign lawyers and law firms in India.

The key issue was whether foreign lawyers and law firms are permitted to practice in India.

Madras HC judgment

  • The main issue arising in the Madras HC Judgement was whether foreign lawyers and law firms can practice law in India in case of litigation and commercial transactions.
  • The writ petition was filed by Mr AK Balaji, Advocate, seeking directions restricting the entry of foreign lawyers and law firms in India. The Madras High Court held that:
    • There was no bar on foreign lawyers and law firms from taking part in negotiations, settling of documents and conducting arbitrations in India.
    • There was no bar on foreign lawyers and law firms providing consultancy/support services as the same cannot be treated as practice of law.
    • There was no bar on foreign lawyers and law firms to participate in international commercial arbitration in India. It was observed that foreign contracting parties are entitled to lawyers from their own country.
    • Foreign lawyers and law firms can "fly in and fly out" of India for advising their clients in India on foreign law and there is no bar on the same.
    • It was also observed that several accountancy and management firms are employing law graduates who are rendering legal services which is contrary to the Act and, and held that in case any activity is carried out against the provisions of the Act, Bar Council of India will be entitled to take appropriate action.

Bombay HC judgment

  • The main issue arising in the Bombay HC Judgment was whether foreign law firms can open liaison offices in India to carry on the practice in non-litigious matters without being enrolled as Advocates under the Act.
  • The Bombay High Court held that,
    • The phrase "to practice profession of law" used in Section 29 of the Act is wide enough to cover litigious as well as non-litigious practice. As a result, foreign lawyers and law firms were bound to follow provisions of the Act.
    • The Reserve Bank of India was not justified in granting permission to foreign law firms to open liaison offices in India.

Supreme Court judgment

  • The Hon'ble Supreme Court held that the phrase "practice of profession" includes both litigation practice and non-litigation practice. The understanding of "practice of profession" has thus been given a wider meaning to include provision of advisory services, legal opinions etc.
  • On the issue whether practice by foreign lawyers and law firms is permissible without fulfilling the requirements of the Act and Bar Council of India Rules, the Hon'ble Supreme Court held that the regulatory framework for conduct of advocates applies to non-litigation practice. It was further held that the prohibitions as applicable under the Act are applicable to foreign lawyers and law firms also.
  • On the issue whether there is a bar on foreign lawyers and law firms to visit India on a "fly in and fly out" basis for giving legal advice regarding foreign law, the Hon'ble Supreme Court held a casual or temporary visit for giving advice will not be covered under "practice" and the same is permissible. On the issue whether a particular visit will be treated as 'casual' or 'regular' will be decided on a case to case basis.

The Hon'ble Supreme Court has subjected the foreign law firms/lawyers to regulatory mechanism in India and suggested the Bar Council of India or Union of India to frame appropriate rules in this regard.

The Hon'ble Supreme Court also clarified that the Act deals with companies and firms in addition to individuals. This is the first instance wherein law firms or entities engaged in the legal sector were recognized, which were earlier not recognised by the Bar Council of India.

  • On the issue of foreign law firms/lawyers conducting arbitration in international commercial arbitration, the Hon'ble Supreme Court also held there is no absolute bar and the same would be subject to the rules and regulations of the concerned arbitration institution or the provisions of Section 32 and 33 of the Act. It further held such foreign law firms/ lawyers will however be subject to Code of Conduct as applicable to legal profession in India.
  • On the issue whether the business process outsourcing companies (BPOs) providing integrated services being covered under the Act or the Bar Council of India Rules, the Hon'ble Supreme Court held that there is no strict violation, only if, in "pith and substance" the activities do not amount to practice of law. Whether the services offered by a BPO amount to "practice of law" under the Act will be decided on a case-to-case basis.

Comment

  • The judgment by the Hon'ble Supreme Court is a landmark judgment on the issue of entry of foreign lawyers and law firms in India;
  • It is interesting to note the observations of Madras High Court which has been noted by the Supreme Court that foreign law firms/lawyers have accepted the position that there is express prohibition for them to practice Indian law.
  • The Hon'ble Supreme Court has clearly held that foreign law firms/lawyers cannot practice profession of law in India either in the litigation or non-litigation side, without compliance of relevant provisions of the Act and concerned Rules and Regulations.
  • The judgment has however carved out an exception in favour of foreign law firms/ lawyers to advise on either of the issues of (a) foreign law (b) on their own system of law or (c) diverse international legal issues on a "fly in and fly out" basis.  This implies that the foreign law firms/lawyers cannot be allowed to set up permanent set ups or liaison offices in India and can only visit India on temporary or casual visits which have been held to be not amounting to practice.
  • The "fly in fly out" however has not been clearly defined in the judgment, as to what could be the restrictions or parameters to identify whether a visit would be 'regular' or 'casual' visit and the same has been left open to Bar Council of India or Union of India to make rules and regulations in this regard.
  • The judgment is also a welcome step to allow foreign law firms/lawyers to conduct Arbitration proceedings in India in an international commercial arbitration which is the need of the hour and is also in line with growing international trade and exchange of foreign goods and services in India.
  • The judgment has also observed that there appears to be no restriction on third parties (non-lawyers) funding of the litigation in India and getting repaid depending on outcome of litigation. The judgment further clarifies that such funding by a lawyer is however prohibited and the lawyer is also prohibited to charge fee based on outcome of litigation.
  • It is relevant to note the observation in the judgment that Advocates Act not only deals with individuals but also with firms or companies. This seems to be a welcome step by recognition of 'firms' and other entities practicing law in India as earlier there was no such recognition of any entity apart from an individual lawyer. It is now expected that the Bar Council of India will take cue from this judgment and frame appropriate rules and regulations governing such firms or companies engaged in the field of law.
  • The judgment however cannot be called an exhaustive judgment as it lays down basic parameters based on which the Bar Council of India or the Union of India have been called upon to frame rules and regulations for foreign law firms/lawyers.
  • The judgment may not be strictly in line with the stand of the present government which promoted entry of foreign law firms/lawyers in India, which also envisaged setting up of their offices in India. The Bar Council of India or Union of India now have to come up with rules and regulations at the earliest so that there is more clarity to the foreign law firms/ lawyers.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

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