The entry of foreign firms should herald more legal sector reforms

Source: The post is based on the article “The entry of foreign firms should herald more legal sector reforms” published in Live Mint on 29^th March 2023.

Syllabus: GS 2 – Governance – Government policies and interventions for development in various sectors

Relevance: measures needed to bring legal reforms

News: The Bar Council of India (BCI) has allowed foreign lawyers and foreign law firms to practice and set up offices in India.

About the BCI decision to permit foreign lawyers

Read Here: Foreign lawyers, firms can operate in India: BCI

Foreign lawyers and firms will be allowed to practice on the principle of reciprocity. This means that the other country must also offer similar treatment to Indian lawyers and firms.

What are the advantages of allowing foreign firms in India?

The BCI Rules for Registration and Regulation of Foreign Lawyers and Foreign Law Firms in India, 2023, states that the standards and proficiency of Indian lawyers and firms are up to international standards.

Therefore, allowing foreign lawyers and firms will –a) help in the growth of the legal profession, b) generate employment and retainership opportunities, c) provide global exposure to Indian lawyers.

Read More: Global law, local practice – BCI’s move recognises India’s corporate globalisation

What other steps can be taken to bring legal reforms in the country?

Allow FDI in Indian law firms: As per the rules, persons not qualified to practice law in India are restricted from investing in a law firm. This makes Indian law firms to be dependent on the domestic capital from the lawyers.

Further, restricting FDI to the Indian legal firms will give the competitive advantage to foreign legal firms operating in India.

Hence, allowing FDI in legal sector will – a) allow Indian lawyers and law firms to raise foreign capital, b) benefit Indian legal sector through innovation and technology c) help local legal entrepreneurs create more startups.

Lift restrictions on solicitation and advertising: Indian legal professionals are barred from advertising their legal services because their services are considered to be in the public interest of securing justice. This makes commercialization of the legal profession undesirable.

However, in reality this profession is already commercialized. Lawyers and law firms are in the business of serving clients and charge fees for their services.

Therefore, lifting restriction on advertising the legal profession will – a) enable efficient price discovery in the legal market as lawyers or firms could reveal their fees and charges, b) price discovery would allow more individuals and firms to enter the legal market and lead to growth and lower service charge, c) encourage market players to conduct research and innovation that might offer superior services, as seen in advanced countries.

What is the way ahead?

India is set to reach a size of $5 trillion plus in a few years. This will increase the demand for quality legal services and better dispute resolution mechanisms are integral to a sound business environment and the ease of doing business.

Therefore, the BCI, law ministry, policymakers and other stakeholders must make policies that will lead to growth, development and innovation in the legal sector to better serve the interests of justice and the economy.