-Shurbhi Kumar (First Year Law Student at National Law University Delhi)
Introduction
“Law is a reflection of the society” and hence, as society grows, so does the law. We are currently in a dynamic stage of law where with every new progress in a field requires new formulation of laws, for example- as new space missions are being successfully launched, world leaders have begun to deliberate more on the Space Laws, and similarly, as world advances in technological aspects, the emergence of Artificial Intelligence (AI) and various AI tools have stimulated the making of AI-governance laws. Now, as different fields of study and business are growing, one of the most important factors is that overall economy is being boosted and private sector is thriving. One of the very reasons for this boom is the Foreign Direct Investment (FDI) in various countries. Talking about India, the total FDI inflows in the FY 2023-24 were $70.95 out of which a bijou share was of the investments in legal services. Therefore, it becomes significant for the Government of India to globalise and privatise as well as engage in foreign law services/investments in India. The notification by the Bar Council of India in 2023 is one of the stepping stones in this vast pathway.
What is the need for integrating India’s legal market with the world and what impact would it make? A conflict between globalisation and localisation?
The Bar Council of India (“BCI”) took a major liberalising step towards encouraging foreign law firms and lawyers into practising and establishing legal offices in India, albeit with some limitations. It is said that this reform was long-due and much needed for the expansion of Indian Legal Market.
Therefore, globalisation of Legal Market in India was a need since many years for various reasons. It is a global necessity as there has been a rapid increase in the number of multinational corporations and cross-border transactions which in turn necissitates for efficient international legal services. Such integration of India’s legal market with the world’s will draw more investements in India and further explore the potential of India for being the centre of International Arbitration where Indian legal professionals can indulge in global legal standards.
Also, as technological advancements are taking a big leap, especially with the emergence of Artificial Intelligence (“AI”), it becomes very significant to keep up with the world and one way to achieve this is by opening our legal market to the world. Such a step would stimulate AI- Powered Legal Research, making of Smart Contracts, Data Analytics for Legal Strategy, Legal ChatBots, Cloud-Base Case Management Systems, Legal Startups, and much more productive use of AI can be put in the legal field to make it more efficient, more accessible to justice and cheap. In fact, many global firms have begun the usage of integrated Cloud-Based Case Management Systems for seamless case management, client collaboration, and real-time updates. Foreign law firms leverage on the use of contract automation to draft and negotiate to execute legal documents. All these tools help the lawyer to reduce the number of routine tasks such as checks and reviews of contracts, and generation of contracts, thus lowering the chances of mistakes. Sophisticated solutions are incorporating Smart Contracts, using Blockchain Technology which enables the contractual terms of an agreement to be performed automatically when certain predetermined conditions have been met.
In India, such advancements are still far away, hence this opportunity could prove fruitful if done right. Indeed, local sovereignty also has to be balanced with the proposed globalisation. The tension around the possibility of a conflict of interest between globalisation and localisation is well founded as it has the potential to hamper the traditional firms in India and create a gap with the common masses. However, it can be managed if the steps are taken gradually and a balance is struck between opening up to global players and safeguarding the unique elements of its legal system, along with skill upliftment of the domestic lawyers in the field of International Law so that all can progress without being left behind.
What are the advantages and disadvantages of exposing our legal market to foreign limelight?
The LPG (Liberalisation, Privatisation, Globalisation) policies of the 1990s were an attempt in pushing India’s economy to the forefront of the International Market. And, since then and even before, there have been certain reasons that have made various stakeholders in India not expose themselves to the Foreign World. In reality, it is true that such an initiative does require taking precautions but are also very essential to move ahead. Therefore, this is one of the times to embrace the positives of this policy and alongside be cautious to elements that could be a hurdle on this path.
Advantages
One of the key benefits is the increase in international investment attractiveness of India. Thus, India can position itself in accordance with legal trends characterized worldwide, which will help to ensure that foreign investors can be as confident in the country’s economy as in the case of supplying and participating in cross-border transactions. Additionally, we note that the admission of foreign law firms is advantageous in that there is constant sharing of information between local and foreign firms. This knowledge sharing also implies the enhancement and development of sound legal professionalism in submenu areas like arbitration, intellectual property, and mergers to develop the quality of legal services in India. The other benefit is that the india law firms can grow overseas through reciprocity agreements where they can open their offices in different countries implying the firm’s growth.
Disadvantages
As with any liberalization move, there is always a fear that certain players will be left behind and this is something that must be watched as out on the horizon small and middle sized Indian law firms may find themselves in a disadvantaged position. These firms cannot often match the heft or the networks of their foreign rivals and therefore may be forced out of the market or unable to bid, leaving fewer opportunities for such firms. Moreover, there is the legal imperialism danger whereby the international elite legal companies control the market at the expense of local options. Finally, there are concerns of ‘brain drain’ with the internal legal profession’s best teams eventually moving to foreign firms as competition heats up, ultimately eradicating the internal legal professional progressively.
Regulatory Challenges and Ethical Concerns
However, having addressed the advantages and disadvantages of such a step, it is also imperative to be aware of some regulatory challenges and concerns that it brings along. Firstly, it might be difficult to make the foreign law firms and legal professionals comply with the Advocates Act 1961 of India that regulates the legal profession in India. It is a significant legislation that can not be overlooked. Many other laws like Indian Data Privacy Laws, corporate laws, etc. will have to be adhered to by the foreign law firms for the protection of client data. Also, there can be an instance where the fee models may not align with the traditional Indian practices and potentially lead to ethical concerns. Threat of Jurisdictional overlaps, complications in escalation of complaints, etc. also looms over the Indian Administration that needs to be tackled for good functioning of this system.
Conclusion
Hence, the entry of foreign law firms presents both a great opportunity and a challenge to deal with. On one hand, it holds great opportunity to grow by bringing concepts of global experience, superior technologies and new models of delivery utilized in the legal industry in order to enhance the quality and productivity of the legal service in India. On the other hand, it creates opportunities, which are in the form of regulatory issues and competitiveness factors that can negatively impact the smaller domestic firms and challenge the structures of the legal profession in India. Thus, the legal system of India must ensure that while including these global players it takes care of the local firms and at the same time maintains the Indian identity of its legal profession as distinct from that of other countries. More legal reforms need to be carried out for instance establishing fair competitors grounds and eradicating gin in excess of regulatory authorities in order to guarantee that overseas legal departments improve the local market instead of continually destructing it. This balanced approach would ensure India accruing improvements from globalization which does not threaten the fundamentals of legal system.
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