India - Legal;Lawyers going global

India’s development is a fantastic success story, but its closed legal service market is frustrating its ambitions for even greater growth.

It is 30 years since I first visited India when I travelled here with Alice my wife to spend our honeymoon. I have enjoyed returning many times since.

In my view, when I have revisited other places that are experiencing a fast rate of change similar to India, such as Beijing or Shanghai, they have become largely unrecognisable, so fast is the pace of change there. But that’s not true of India.

This is despite the major process of liberalisation started by the government some 15 years ago, which has seen India fast emerging as a global superpower, on course to be the third biggest dollar economy before 2050. Reassuringly, it is still recognisably the same India in many respects.

What is new is that increasingly, India is looking out and playing a part in shaping the world, taking her place on the world stage, and engaging with global issues.

India’s prosperity can be largely attributed to globalisation. And while some countries have embraced the phenomenon, there are many countries which have chosen to practise protectionism instead.

Either way, it is clear that no country can ignore the power of globalisation and the effect it has on the world markets. And India has engaged with globalisation very successfully.

India has followed a deliberate policy to look outward, in particular by opening up its economy and unleashing the creative potential of the Indian people. This is evident in the terrific success of the Bollywood film industry, as well as the IT and pharmaceutical sectors. And the future certainly looks bright as India, with its young population, creates a well-educated labour force with highly-trained graduates.

As with the development of any major financial centre, which India has the potential to become, professional services play an essential part in supporting the financial services industry. Legal services are an indispensable element of this, and in the UK they account for almost 2 per cent of GDP. International law firms operate in many of the major financial centres in the world. In the UK, for example, there are about 200 foreign law firms.

Yet currently, the Indian legal services market is one of the few in the world that is completely closed to foreign lawyers.

A country with a liberal legal services market stands to make substantial gains. This is an attractive option for a country like India. The tax revenue they receive from the earnings of foreign firms established on their soil would increase; something they wouldn’t earn if the same firms worked off-shore.

Equally important is the inward transfer of knowledge and expertise that would come to Indian lawyers working with foreign firms. There would be an increase in jobs and opportunities open to Indian legal professionals from the ability to work with foreign firms, without leaving the country. The country’s entire legal system would be strengthened, leading to a consequent reduction, over time, of the need to import legal services to support local demand. A strengthened legal sector would of course contribute to increasing India’s attractiveness not just to the financial services industry but to all sectors.

Liberal regimes in legal services are key to attracting the foreign direct investment on which development depends, and the input of lawyers is vital to ensure that trade takes place in a structured, secure and predictable way.

I am pleased to say that the government of India, particularly the Law and Justice Minister, are now firmly pro-liberalisation.

My colleague, Bridget Prentice, recently made a visit to India and reported back many positive signs of change. I was particularly heartened by news of the growing enthusiasm for change among the business community and young lawyers.

Many lawyers in India are enthusiastic about the increase in work opportunities and the greater diversity that liberalisation would bring. They recognise that the presence of international law firms in a country is an attraction to multinational companies, particularly when they are considering where to place their offices and in-house lawyers.

At the same time, there are Indian lawyers who fear this type of competition, thinking it will lead to loss of work and the brightest and best young lawyers going to work for high-paying foreign firms. But if new job opportunities are not created, then many of the best lawyers will start to look for jobs abroad either way. The best way to retain talent in the domestic profession is to allow young lawyers to have all options available to them.

The majority of lawyers who do court work don’t need to fear for their jobs, as foreign lawyers are only interested in advice or consultant work. Foreign firms would bring work and clients into the country with them, and hire local lawyers to work in the courts on their behalf.

And finally, competition drives up standards.

When we liberalised the UK legal services sector in the 1980s, there were those who feared that foreign firms would attract the best domestic lawyers and take work away from UK firms. Those fears were unfounded.

The fee income generated by the largest 100 law firms more than tripled between 1993-94 and 2003-04 to reach £9.1 billion. During the same period, the number of solicitors employed by the largest 100 firms grew by 75 per cent. Of course, it is essential to ensure that foreign lawyers are properly regulated. It is also perfectly possible to reserve certain areas of work, such as litigation, to local lawyers.

The UK now has one of the most cosmopolitan legal service markets in the world, and much of its strength lies in its diversity. Foreign law firms in London helped the UK become an international centre for legal services.

The development of India in recent years is a fantastic success story, but its closed legal service market is frustrating its ambitions for even greater growth. I believe that by liberalising its legal sector, India would achieve a stronger and more competitive legal profession, increased foreign direct investment and easier Indian investment overseas.

The writer is the Secretary of State for Justice and Lord Chancellor of the UK