Supreme Court Order: A Guide To What Foreign Lawyers Can And Cannot Do In India

In a judgment delivered this week, the Supreme Court of India offered some clarity on a two-decade-old debate plaguing India's legal services industry but also narrowed the services foreign lawyers and law firms can provide in India.

The Back Story

Back in 2009, the Bombay High Court had held that foreign lawyers cannot practice any law within the territory of India—whether such practice is litigation or commercial and transaction related. This decision relied on the Advocates Act, 1961 that permits only persons enrolled with the Bar Council of India to practice law in the country.

Three years later, the Madras High Court came to the same conclusion. But the court did weave in some flexibility for foreign lawyers by:

• allowing foreign lawyers to visit India temporarily and advise their clients on foreign law aspects and diverse international legal issues—this came to be referred as the ‘fly in and fly out' rule.
• permitting foreign lawyers to conduct arbitration in India, if such arbitration relates to international commercial disputes.
• permitting foreign players to become business process outsourcing service providers for only ancillary non-practice related services such as secretarial support, transcription services or travel desk support.

Experts told BloombergQuint that both these cases were triggered by incidents of foreign players setting up offices in India to advise Indian clients on commercial deals and Indian law, all in the guise of offering advice on foreign law.

This did cause some unease, said Anand Desai, managing partner at DSK Legal.

Some law firms who wanted to establish offices in this country had taken approvals from the regulator to establish offices to conduct liaison activities with their clients in this country, Sajan Poovayya, senior advocate at the Supreme Court, said. Poovayya represented foreign law firms White & Case and Covington & Burling, two of the many respondents in the Supreme Court case.

Supreme Court Decision

This week, the apex court not only confirmed both the Bombay High Court and the Madras High Court rulings but experts said it has perhaps made the access for foreign lawyers tougher. One, by leaving open the question of what amounts to practice of law. And two, by imposing limitations on how the foreign lawyers advise on foreign law aspects of Indian deals.

Modification Of Fly In-Fly Out Rule
Foreign lawyers and law firms play a significant role in the structuring deals and negotiating and drafting legal documents in cross-border and commercial transactions having foreign implications. Lending an ear to this issue, the Madras High Court had permitted foreign lawyers to visit India temporarily on a fly in-fly out basis for giving advice on foreign law matters. But the apex court narrowed that by ruling that visits, if regular, may still qualify as ‘practice of law' and therefore be barred. What is deemed as ‘practice of law' would need to be determined on a case-by-case basis and the Bar Council of India and the government can frame rules to regulate this, the Supreme Court held.

In doing so the Supreme Court order modified the earlier Madras High Court decision and provided that BCI should establish a code of conduct on what constitutes fly in and out, Lalit Bhasin, the president of Bar Association of India, told BloombergQuint.

There is more clarity now, Desai said.

Arbitration, An Exception

The second modification that the Supreme Court made to the Madras High Court order relates to arbitration practice by foreign lawyers in India. It is common practice for foreign lawyers to represent foreign clients in commercial arbitration conducted in India. These lawyers are not just involved in conducting arbitrations but also negotiating and drafting documents that relate to such arbitration.

Noting this requirement and the intent of the government to popularise India as a hub for commercial arbitration, the Madras High Court had allowed foreign lawyers to conduct international commercial arbitration for disputes arising out of commercial contracts. But the apex court tightened this framework to say that the ability of a foreign lawyer to represent clients in arbitration proceedings in India is not absolute. It will be subject to rules of institutional arbitration, the Arbitration Act and governed by the code of conduct that applies to the legal profession in India. Here too, the apex court provided for the government and the BCI to frame rules to cover the gaps.

It's not that lawyers are not allowed, and international lawyers are completely disbarred from international arbitrations, Poovayya explained.

The Supreme Court judgment provides some much-needed clarity on a matter that has been pending for quite some time now, said Alexander Fessas, general secretary of the ICC Court, to BloombergQuint. The International Chambers of Commerce administer arbitration through the International Court of Arbitration.

It is now clearer that foreign counsel can represent clients in arbitration hearings that are taking place within India when the dispute is an international commercial arbitration dispute, Fessas added while pointing to certain restrictions.

The judgment, experts said, is a positive development as it removes ambiguity around what foreign lawyers are permitted to do in India.

Any relief for foreign lawyers will be forthcoming only when the government decides on whether or not to open up India's legal services sector.