India's Legal Market: The Ongoing Journey of Liberalization

Almost 18 months after the Bar Council of India’s (BCI) March 2023 surprise announcement that the Indian legal market would be opening, this market is back in the news. The renewed chatter in global legal circles comes after BCI representatives told the Law Society of England & Wales that they are on course to implement amended regulations governing the entry of foreign lawyers and foreign law firms to India by the end of July 2024.

In 2023 there was a frenzy of activity, as many international firms welcomed the news in public statements—however the lack of clarity of what these rules meant and how they would be practically implemented (together with various legal challenges in the Indian courts) caused most firms to pause actions and watch and wait for greater guidance.

As this recent news promises that guidance, we have revisited the topic with our network of law firm and in-house clients and share some thoughts below.

While the March 2023 announcement did not cause international law firms to rush to open offices in Mumbai or Delhi, it did cause all our clients to look again at India, and plan how to operate more effectively in that market. In the past 18 months, we have seen a refocus on India with many firms setting up or strengthening their India practices that are usually based in other strategic offices—primarily London or Singapore, and occasionally from Dubai.

It is clear that the opportunities in India for international law firms have evolved to support global clients in a broader sector of Indian investments, or to support major Indian Multinational Corporations (MNCs) in their global growth strategies – often partnering closely with Indian best friends firms in the process. However, until the rules are more clearly defined (and the consequences more fully understood), the international law firm community remains in watch and see mode.

And from discussions with clients, these newest talks do not seem to have changed that thinking yet. The general sentiment remains that this will be a long process, requiring further information, and that firms will continue to assess the cost/benefit of opening an office in India rather than servicing from other international hubs. The thinking remains that if there are moves and changes to that strategy, they will be incremental rather than monumental.

Some of our clients have talked about the Indian domestic opportunity as being the real prize. As the Indian economy continues its path of growth, so will the demand for high-quality legal services which cannot be satisfied solely by domestic firms. In our view, there is some merit in that suggestion, but this is a long game, requiring much more negotiation and a great deal of patience. Compare the changes to the ‘liberalization’ of the Singapore legal market, where Singapore is still not fully liberalized after nearly four decades of slow and deliberate change!

In the Indian general counsel community, the prospect of any impending change is still being met with a healthy dose of skepticism. They cannot see the best domestic firms giving up market share without a fight – despite the welcoming rhetoric from them. There is also a question over how frequently changing tax rules, challenges with immigration and work permits, and the inability to get money out of India will continue to be questions that international law firms will ask and struggle to get comfortable with.

The GCs also remain concerned about rising costs for their legal departments. Indian law firm rates can currently be up to one-sixth that of international firms, and the move to paying significantly more for the same legal services will be a terribly slow and sticky one.

Having said all of this, most GCs feel that the impact of this potential liberalization could be positive overall—fostering a more meritocratic system, lifting standards (and opportunities) for the profession, and having international standard local legal advice in the time zone are all wins for them.

In summary, the move towards Indian liberalization continues to rumble on gathering greater pace than in past times and causing a great deal of interest in Indian deals and Indian MNCs. However, all parties still need more information and greater clarity before making major moves.