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Report No. 266

Chapter -XIV

Prospects of Foreign Law Firms and Lawyers in India

14.1 In recent years, fast transformation has been experienced in every field, whether it is social or economic. With the opening of new vistas, the world is increasingly shrinking. Countries are becoming more and more inter-dependent. The opening of the economy to other countries and widening of the international trade and commerce has brought the dire necessity of reviewing various municipal laws relating to "ease of doing business" and other relevant laws which also includes the Advocates Act. The increase in the quantum of import and export, formation of new companies and concerns with import of technology and invitation to multi-national companies to establish their subsidiary companies in India and have their commercial establishment here, necessitated the beginning of international arbitration. In arbitration matters, very often foreign lawyers appear on behalf of companies and their establishments in India from time to time.

14.2 At times, the issue of allowing foreign firms and lawyers in India and having vice-a-versa arrangement for advocates practicing law in India in other counties has been raised in different forums. In this context, sections 17, 29 and 47 of the Advocates Act require a passionate examination. In terms of section 17, a person desirous of taking up the profession of advocacy is required to be enrolled on the rolls of the advocates maintained by the State Bar Council. Section 29 visualises that only the advocates registered under the Advocates Act are considered to be the recognised class of persons entitled to practice law. Section 47 relates to reciprocity whereunder the nationals of any other country may also be admitted as an advocate on the State roll, if citizens of India duly qualified are permitted to practice law in such other country.

14.3 In the matters of allowing foreign lawyers and law firms to practice law in India, the basic objections raised at different forums over the time is that the law graduates from India are allowed to practice the profession of law in U.K., USA, Australia and other countries subject to following their cumbersome procedure which is very costly also. Further, there are many restrictions like qualifying tests, prior experience, work permit etc. which is not contemplated under the Advocates Act in respect of foreign lawyers who intend to practice in India. Therefore, issue of allowing entry of foreign law firms and lawyers without any reciprocal arrangements similar to that of arrangements prevailing in those foreign countries should not be entertained.

14.4 An examination of the issue in its correct perspective of allowing the foreign law firms carrying on its business in India requires consideration as to how this necessity has arisen. From the past practices, it can be seen that the foreign law firms are carrying on consultancy/support services in the field of protection and management of business and industrial proprietary rights, and carrying out market survey and market research. They also protect their intellectual property rights. The foreign lawyers usually visit India for giving advices on their own system of law. The foreign law firms do also come with the objective of taking part in negotiations, for settling documents and conducting arbitrations in India.

14.5 International arbitration is growing in India and in almost all countries across the world. India is a signatory to the General Agreement on Trade in Services (GATS), which has opened up the gates for many international business establishments based in different parts of the world to come and set up their own respective business in India. The large number of Indian companies even reaching out to foreign destination by mergers, acquisitions or direct investment. There may be several transactions in which an Indian company or a person of Indian origin may enter into transaction with a foreign company and the laws applicable to such transaction are the laws of the said foreign country. In this context, seeking legal advice on the manner in which the foreign law would be applied to said transaction from a foreign lawyer cannot be considered as inappropriate.

14.6 Besides the on-going discussions, the issue of foreign law firms establishing their place of business in India (liaison office) and related issues have been raised in certain High Courts. The High Court of Madras in A.K. Balaji v. Government of India48 has observed, as under:

"(i) Foreign law firms or foreign lawyers cannot practice the profession of law in India either on the litigation or non-litigation side, unless they fulfil the requirement of the Advocates Act, 1961 and the Bar Council of India Rules.

(ii) However, there is no bar either in the Act or the Rules for the foreign law firms or foreign lawyers to visit India for a temporary period on a fly in and fly out basis, for the purpose of giving legal advice to their clients in India regarding foreign law or their own system of law and on diverse international legal issues.

(iii) Moreover, having regard to the aim and object of the International Commercial Arbitration introduced in the Arbitration and Conciliation Act, 1996, foreign lawyers cannot be debarred to come to India and conduct arbitration proceedings in respect of disputes arising out of a contract relating to international commercial arbitration.

(iv) The B.P.O. Companies providing wide range of customised and integrated services and functions to its customers like word-processing, secretarial support, transcription services, proof-reading services, travel desk support services, etc. do not come within the purview of the Advocates Act, 1961 or the Bar Council of India Rules. However, in the event of any complaint made against these B.P.O. Companies violating the provisions of the Act, the Bar Council of India may take appropriate action against such erring companies.".

14.7 In Lawyers Collective v. Bar Council of India & Ors.49, the High Court of Bombay quashed the permission granted by the Reserve Bank of India to foreign law firms to establish their place of business in India (liaison office) under section 29 of the Foreign Exchange Regulation Act, 1973. On the issue as to whether these foreign law firms could carry on their liaison activities in India only on being enrolled as advocates under the Advocates Act, the Court held that the expression "to practice the profession of law" in section 29 of the Advocates Act is wide enough to cover the persons practising in litigious matters as well as persons practising in non-litigious matters. Therefore, to practice in non-litigious matters in India, the foreign lawyer and law firms were bound to follow the provisions contained in the Advocates Act.

14.8 The judgment referred to hereinabove was challenged before the Supreme Court in Bar Council of India v. A K Balaji & Ors.50, wherein the Supreme Court granted leave and maintained the interim order passed on 4 July 2012, which reads as under:

"In the meanwhile, it is clarified that Reserve Bank of India shall not grant any permission to the foreign law firms to open liaison offices in India under section 29 of the Foreign Exchange Regulation Act, 1973. It is also clarified that the expression "to practice the profession of law" under section 29 of the Advocates Act, 1961 covers the persons practicing litigious matters as well as non-litigious matters other than contemplated in para 63(ii) of the impugned order and, therefore, to practice in non-litigious matters in India the foreign law firms, by whatever name called or described, shall be bound to follow the provisions contained in the Advocates Act, 1961.".

14.9 In view of the developments that have taken place, if the foreign law firms are not allowed to take part in negotiations, settling up documents and arbitrations in India, it may have a counter-productive effect on the policy of the government to make India a hub of International Arbitration. In this regard, it may be stated that many arbitrations with Indian Judges and Lawyers as Arbitrators are held outside India, where both foreign and Indian Law Firms advise their clients.

If foreign law firms are denied entry to deal with arbitrations in India, then India may lose many of the arbitrations to Singapore, Paris and London. It may be contrary to the declared policy of the government and against the national interest. With this in view and judgement of the High Courts, the Law Commission considers it necessary to have enabling provisions in the Advocates Act which will enable the Bar Council of India to frame rules to recognise and register foreign law firms and lawyers in India, as and when a decision is taken in this regard, particularly in view of the reciprocity provisions.

Advocates Act, 1961 - Regulation of Legal Profession Back

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