Case Analysis: All you need to Know about Restriction on Foreign Law Firms in India by SC
CASE ANALYSIS: FOREIGN LAW FIRMS IN INDIA
Bar Council of India vs A.K. Balaji and Ors.
Order dated:MARCH 13, 2018.
Civil Appeal No. 7875-7879 OF 2015
The bench comprising Justice AK Goel and Justice U.U Lalit of the apex court in a landmark judgment has declined to permit the foreign law firms to set up offices in India. However, the bench considered the submissions and modified the Madras High Court Order to allow the law firms to provide consultation services on “fly in and fly out basis”.
LET’S UNDERSTAND THE ENTIRE ISSUE IN VIEW OF THE JUDGMENT PASSED BY THE HON’BLE SUPREME COURT
Whether foreign law firms/lawyers are permitted to practice in India.?
POSITION BEFORE THE HIGH COURT:
The present appeal before the Hon’ble Supreme Court was preferred against the Judgment of Madras High Court dated 21st February 2012 in A.K. Balaji versus The Government of India wherein the Hon’ble High was pleased to hold, inter alia, as under:
“63. After giving our anxious consideration to the matter, both on facts and on law, we come to the following conclusion :-
(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 BarCouncil 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 advise 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 againstsuch erring companies.”
FIRST HEARING BEFORE SUPREME COURT:
When the matter was first listed before the Hon’ble Supreme Court on 04.07.2018 the apex court passed the following order, inter alia, 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.”
STAND OF THE PETITIONER:
- To practice law in India, a person has to be Indian citizen and should possess degree in law from a recognized University in India.
- Nationals of other countries could be admitted as advocates in India only if citizens of India are permitted to practice in such other countries.
- Foreign lawyers cannot be allowed to practice in India without reciprocity.
- A foreigner is not entitled to practice in India in view of bar contained in Section 29 under the Advocates Act.
STAND OF THE UNION OF INDIA:
- Initially barring foreign firm will obstruct the aim of making India a hub of international arbitration.
- In the counter affidavit filed on 19.04.2011, it is stated that a proposal to consider an amendment to Section 29 of the Advocates Act, 1961 permitting foreign law firms to practice law in India in non litigious matters on a reciprocity basis with foreign countries is under consultation with the Bar Council of India.
- Finally, in the counter filed on 17.11.2011, it is stated that the Government of India has decided to support the stand of the Bar Council of India that the provisions of the Advocates Act, 1961 would apply with equal force to both litigious and non-litigious practice of law, and it is only persons enrolled under Section 24 of the Act, who can practice before the Indian Courts.”
STAND OF THE FOREIGN LAW FIRMS:
- There is no bar to a company carrying on consultancy/support services in the field of protection and management of intellectual, business and industrial proprietary rights, carrying out market service and market research, publication of reports, journals etc
- Even Indian lawyers are permitted to practice outside India and issue of reciprocity is a policy matter to be decided by the Government of India.
- There is no discrimination in U.S. against Indian citizens practicing law. Indian lawyers travel to US on temporary basis for consultation on Indian law issues.
BY MR. POOVAYYA ADVOCATE FOR US BASED FIRMS
- Rule 45 the Indian Council of Arbitration laid down that parties have no right to be represented by lawyers unless the arbitral tribunal considers it necessary and allows
- Section 28(b) of Arbitration Act permits Arbitral Tribunal to decide disputes in accordance with rules of law applicable to the substance of the dispute as agreed by the parties.
- As per Section 19 Parties can agree on the procedure to be followed.
BY DUSHYANT DAVE SENIOR ADVOCATE FOR LCIA
- Referred to rules of certain Arbitration Institutions to the effect that the parties are free to be represented by an outside lawyer.
- He submitted that the Special Leave Petition arising out of the Delhi High Court order is on the question whether London Court of International Arbitration could use the expression “COURT” had become infructuous as the respondent had closed its working in India
BY SHRI C.U. SINGH ADVOCATE FOR BCI
- Further pointed out that Ethics for the profession as applicable in India are different from the Ethics applicable in other countries.
- In India, with regard to Contingency fees, Rule 20 in Part VI, Chapter II of the BCI Rules bars an advocate from stipulating a fee contingent on the results of the litigation or from agreeing to share the proceeds thereof.
- In India, funding of litigation by advocates is not explicitly prohibited, but a conjoint reading of Rule 18 (fomenting litigation), Rule 20 (contingency fees), Rule 21 (share or interest in an actionable claim) and Rule 22 (participating in bids in execution, etc.) would strongly suggest that advocates in India cannot fund litigation on behalf of their clients.
- There appears to be no restriction on third parties (non-lawyers) funding the litigation and getting repaid after the outcome of the litigation
BY MR. ARVIND DATAR SENIOR ADVOCATE FOR UK BASED FIRMS :
- His Argument was that flyin and flyout doesn’t amount to practice.
- He further argued that only court practices by an advocate is governed by Advocate Act and non-litigious work are not regulated or covered under said Act.
SUPREME COURT OBSERVATION:
- Ethics of the legal profession apply not only when an advocate appears before the Court. The same also apply to regulate practice outside the Court. Adhering to such Ethics is integral to the administration of justice. The professional standards laid down from time to time are required to be followed. Thus, we uphold the view that practice of law includes litigation as well as non litigation.
- Scheme in Chapter-IV of the Advocates Act makes it clear that advocates enrolled with the Bar Council alone are entitled to practice law, except as otherwise provided in any other law. All others can appear only with the permission of the court, authority or person before whom the proceedings are pending.
- Visit of any foreign lawyer on fly in and fly out basis may amount to practice of law if it is on regular basis. A casual visit for giving advice may not be covered by the expression ‘practice’
- Bar Council of India or Union of India are at liberty to make appropriate rules in this regard.
- The BPO companies providing range of customized and integrated services and functions to its customers may not violate the provisions of the Advocates Act, only if the activities in pith and substance do not amount to practice of law.
The Hon’ble Supreme Court upheld the view of the Bombay High Court and Madras High Court in para 63 (i) of the judgment to the effect that foreign law firms/companies or foreign lawyers cannot practice profession of law in India either in the litigation or in nonlitigation side. However made following modification:
- We hold that the expression “fly in and fly out” will only cover a casual visit not amounting to “practice”.
- We hold that there is no absolute right of the foreign lawyer to conduct arbitration proceedings in respect of disputes arising out of a contract relating to international commercial arbitration.
- P.O. Companies providing wide range of customized 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 thepurview of the Advocates Act, 1961 or the Bar Council of India Rules.