Doors will open, the question is how

Dear Friends,

It is a peculiar irony that while India’s lawyers have been instrumental in opening up the country’s economy, they have fiercely resisted any moves to open their own profession to international competition.

The overwhelming majority of Indian law firms surveyed by India Business Law Journal claimed to support the entry of foreign firms (see our survey results). Very few will publicly stand up and say “no, we don’t want them here”. But in private, not-for-the-record, conversations over drinks at 5-star hotel bars, many lawyers will admit that, in truth, they don’t want the foreigners around.

The arguments are wide ranging. Some say that foreign firms will suck business from the plates of their domestic rivals, particularly lucrative work from large corporate clients. Others say that domestic firms are shackled by local regulations and lack the financial resources to compete on a playing field that is not level.

On balance, India Business Law Journal supports the entry of foreign firms. Protectionism of any industry is ultimately self-defeating and a more open India means more business opportunities and more growth across the range of sectors.

The debate will rage on, at least until the co-existence of domestic and foreign firms – likely staffed with domestic lawyers – becomes a reality. Meanwhile, instead of fighting the entry of foreign players, local firms would be well advised to focus their energies on tackling the domestic problems that are hampering their profession (see this month’s Intelligence Report) and gearing themselves up to compete – and even cooperate – more effectively with their foreign rivals.

The more interesting phenomenon goes the other way. Indian firms are so preoccupied with the prospect of foreign lawyers storming the subcontinent that they have barely considered the possibility of venturing abroad themselves.

India’s royal families of industry are picking up choice assets around the world. As Ed Lane reports in this issue’s Cover Story, they now own or control top steelmakers, whisky distillers, energy producers and telecommunication companies, often acquired in high profile deals that grab global headlines. Yet, unlike many of their foreign counterparts – and due in no small part to the burgeoning supply of legal work at home – Indian law firms have largely passed up the opportunity to follow their top clients abroad.

There are a lot of law firms in India and the market is desperately fragmented. Even the largest firms are small by international standards. Despite this, very few are willing to specialize, preferring instead to spread themselves thin as full-service firms often passed from father to son.

How realistic is it for hundreds of firms with 20 to 60 lawyers to compete with international firms that can put twice that number of lawyers to work on a single deal?

The argument that Indian law firms need a few more years to prepare for the entry of foreign firms is persuasive. The respite would give them time to grow and set deeper and stronger roots. It would also give the profession an opportunity to reform some of its outdated regulations that, if left unchecked, could seriously hinder the ability of Indian firms to compete. What’s more, it would give a very fragmented industry a chance to modernize and consolidate. Consolidation is vital and long overdue.

For all intents and purposes foreign law firms are already in India. Two of them – Ashurst and White & Case – have liaison offices set up during a brief window of opportunity in the 1990s. And the majority of others are also operating in the country, whether in name or in deed.

The debate over the entry of foreign law firms is no debate at all. Sooner or later they will arrive. And with them they will bring services that are much in demand in today’s increasingly complex legal world.

The question on the table is not if, but how to open the doors.

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Alfred Romann
Editor
aromann@indilaw.com