The government is finalising a proposal that would allow foreign legal firms to operate in the country through a proprietary concern and only for non-litigious services.
The proposal is being worked out by the department of industrial policy and promotion (DIPP) and is with a committee of secretaries that is examining its modalities. “It is being finalised taking into consideration the views of the Bar Council of India. It is likely to be taken up to the Union Cabinet in a month’s time or so,” said the official.
According to the proposal, foreign legal firms would be allowed to be invest in a partnership firm or a proprietary concern. They are unlikely to be permitted to provide litigation services but would be allowed to practice in non-litigious areas and arbitration.
“The permission will not be in the form of direct foreign direct investment. Instead, it is likely to be granted under regulation 24 of the Foreign Exchange Management Act that permits investments in firms of proprietary concern,” said the official, adding that the sector would opened up gradually.
Former commerce secretary Rajeev Kher had said last month that the Bar Council of India and the Society of Indian Law Firms have agreed in principle to the proposal. In fact, the plan has gained traction only because the BCI and the SILF are on board now as earlier they had opposed it saying Indian firms need to strengthen themselves first.
However, the Economic Survey 2013-14 had pitched for opening up of the legal services sector, pointing out that it could benefit from foreign competition. “In India, the practice of law is governed by the Advocates Act of 1961. Under this Act, foreign law firms are not allowed to engage in practice of law in India…Given that India has benefited from opening up to foreign competition in many other areas, and given that Indian lawyers are offering services across the world, India should explore allowing foreign law firms greater access to the Indian market,” it had said, adding that many foreign legal firms have set up liaison offices, while a few have referral relationships with Indian firms.