IS it a case of lawyers violating the law? At least thats what the Bombay High Court seemed to think, when on October 9, in an interim order, it directed the Reserve Bank of India (RBI) to conduct a probe against three foreign law firms allegedly practising law through the backdoor.
A writ petition filed in the Bombay High Court (BHC) by Lawyers Collective, a registered society, challenged legal practice in India by three foreign law firms, saying they violated the Foreign Exchange Regulation Act (FERA) 1973. Though the writ was filed only against three firms, there are at present over 40 foreign law firms operating in India, mostly styled as liaison offices.
Besides, this wasnt the first case filed against foreign lawyers practising in India. Earlier, a British lawyer, Micheal Fysh, was found to be representing an Indian client in a case, Whirlpool Corporation vs N.R. Dongre. The Delhi Bar Association (DBA) objected to Fyshs appearance in an Indian court. It argued that foreign counsels should be permitted to practise in India only on a reciprocal basis, as per Section 47 of the Indian Advocates Act. While Fyshs country, England, permits lawyers qualified in India to practise in England, there is one hitch: apart from being qualified lawyers, foreigners must appear for an aptitude test. The DBA contends that this violates the principle of reciprocity and amounts to discrimination. The respondents say the aptitude test is a mere procedure for foreign lawyers and is not discriminatory.
Even as the issue is debated, the writ filed by the Lawyers Collective in Bombay has widened the scope of the argument. Filed against the Bar Council of India and 13 other respondents, including the three foreign firmsWhite and Case, Chadbourne and Park and Ashurst Morris Crispthe writ claims that these firms were violating Sections 29 and 30 of FERA. In fact, the three foreign firms admitted before the court that they had not sought permission from the RBI, under Section 30, to practice any profession in India, leave alone law. But the foreign firms defended their actions, saying that since they were not appearing in court, they were not practising law.
Refuting this stand, senior advocate Dr A.M. Singhvi agrees with the interim court order. But, he points out, "it would be unrealistic to interpret the words practice law only as appearance in court; it would include drafting, consultation and advice even without appearing in court."
Section 29 of FERA deals with the granting of permission to open a liaison office in India. And that is the only permission these law firms have taken. "The RBI does not permit liaison offices to generate funds from India," says Hemant Batra, partner, KDB and Associates, Advocates and Consultants. "Further, all expenses of the office are supposed to be met by funds transferred from abroad." Liaison offices can only be used for promoting the companys name in India. But some foreign firms are reported to be conducting business in India for which payments are being made overseas, in complete violation of RBIs permission to open a mere liaison office.
Morover, sources say, when these law firms applied for RBI permission to open liaison offices, they probably did not specify that they were legal firms and presented themselves as general consultancies. If the RBI was aware of this, it would not have granted approval without consulting the Bar Council of India.
However, Singhvi admits that there are a lot of grey areas in the law, making it impossible to police the activities of law firms, specifically under Section 30 of FERA. "We cannot have a total ban on foreign lawyers, and must allow their practice on the basis of reciprocity," he says. He adds that an adequate legislation to control their practice in India is required. Interestingly, both Batra and Singhvi welcome the entry of foreign lawyers: "In sectors like power, telecom and mining, where there are hardly any Indian lawyers competent enough to draft agreements, we need the assistance of foreign lawyers." What is called for, they say, is a fresh regulation which clearly lays down the parameters for foreign law firms. Maybe they should get John Grisham to draft it.
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