Supreme Court restricts practice of foreign law firms in India: Bar Council of India vs. A.K. Balaji (2018)

Date of the Judgment: March 13, 2018

Citation: (2018) INSC 207

Judges: Adarsh Kumar Goel, J, Uday Umesh Lalit, J.

Can foreign law firms and lawyers practice law in India? The Supreme Court of India addressed this critical question in a recent judgment, clarifying the extent to which foreign legal professionals can operate within the country. This case is significant for understanding the regulatory landscape of legal practice in India and its implications for international legal services. The judgment was delivered by a two-judge bench comprising Justice Adarsh Kumar Goel and Justice Uday Umesh Lalit.

Case Background

The case originated from a writ petition filed in the High Court of Judicature at Madras by A.K. Balaji, an advocate, against several foreign law firms. The petitioner sought action against these firms, alleging they were illegally practicing law in India without proper authorization. The petition highlighted that foreign lawyers were operating in India under the guise of Legal Process Outsourcing (LPOs), conducting seminars, and participating in arbitrations, while violating tax and immigration laws. The petitioner contended that foreign law firms were treating the legal profession as a business, engaging in activities like advertising, which are prohibited for Indian lawyers. The Union of India initially supported the participation of foreign law firms in negotiations, document settlements, and arbitrations to promote India as a hub for international arbitration. However, the Union of India later supported the Bar Council of India’s position that the Advocates Act, 1961, applies to both litigious and non-litigious legal practices. The Bar Council of India argued that even non-litigious legal practice should be restricted to advocates enrolled under the Advocates Act, 1961, citing Sections 24 and 29 of the Act.

The foreign law firms argued that they were providing consultancy and support services, not practicing Indian law. They claimed that they were advising on foreign law and international legal issues, and that Indian clients were advised by Indian lawyers enrolled with the Bar Council of India. They also contended that there was no bar to advising on foreign law, and that the issue of reciprocity should be decided by the Government of India. Some firms stated they were Business Process Outsourcing (BPO) companies providing support services, not practicing law. The High Court of Judicature at Madras allowed foreign lawyers to visit India to advise on foreign law and participate in international commercial arbitrations. The High Court of Judicature at Bombay held that foreign law firms could not open liaison offices in India and were bound to follow the Advocates Act, 1961 for non-litigious practice.

Timeline:

Course of Proceedings

The High Court of Judicature at Madras ruled that foreign law firms or lawyers could not practice law in India unless they met the requirements of the Advocates Act, 1961, and the Bar Council of India Rules. However, it allowed foreign lawyers to visit India temporarily to advise clients on foreign law and participate in international commercial arbitrations. The High Court of Judicature at Bombay held that foreign law firms could not open liaison offices in India and were bound to follow the Advocates Act, 1961 for non-litigious practice. The Supreme Court, on July 4, 2012, issued an interim order clarifying that the Reserve Bank of India (RBI) should not grant permission to foreign law firms to open liaison offices in India under Section 29 of the Foreign Exchange Regulation Act, 1973. The court also clarified that the term “practice of law” under Section 29 of the Advocates Act, 1961, includes both litigious and non-litigious matters, except as contemplated in para 63(ii) of the Madras High Court order. The Supreme Court continued this interim order until the final judgment.

Legal Framework

The Supreme Court considered several key legal provisions in this case:

• Section 2(a) of the Advocates Act, 1961: Defines “advocate” as a person entered in any roll under the provisions of the Act.
• Section 2(1)(f) of the Arbitration and Conciliation Act, 1996: Defines “International Commercial Arbitration” as arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, where at least one party is a foreign national or entity.
• Section 6 of the Advocates Act, 1961: Lays down the functions of the Bar Council, including admission of persons as advocates and safeguarding their rights and privileges.
• Section 17 of the Advocates Act, 1961: States that every State Bar Council shall prepare a roll of advocates, and no person can be enrolled in more than one State Bar Council.
• Section 24 of the Advocates Act, 1961: Specifies the qualifications for admission to the roll of a State Bar Council, including Indian citizenship and a law degree from a recognized university.
• Section 29 of the Advocates Act, 1961: States that, subject to the provisions of the Act and the rules made thereunder, there shall be only one class of persons entitled to practice the profession of law, namely, advocates.
• Section 30 of the Advocates Act, 1961: Subject to the provisions of this Act, every advocate whose name is entered in the State roll shall be entitled as of right to practise throughout the territories to which this Act extends, (i) in all Courts including the Supreme Court; (ii) before any tribunal or person legally authorized to take evidence; (iii) before any other authority or person before whom such advocate is by or under any law for the time being in force entitled to practise.
• Section 32 of the Advocates Act, 1961: Provides that any court, authority, or person may permit any person, not enrolled as an advocate, to appear before it in a particular case.
• Section 33 of the Advocates Act, 1961: States that except as otherwise provided in the Act or any other law, no person shall be entitled to practice in any court or before any authority or person unless they are enrolled as an advocate under the Act.
• Section 35 of the Advocates Act, 1961: Provides for punishment of advocates for misconduct.
• Section 47 of the Advocates Act, 1961: Deals with reciprocity, stating that if a foreign country prevents Indian citizens from practicing law or subjects them to unfair discrimination, no subject of that country shall be entitled to practice law in India.
• Section 49 of the Advocates Act, 1961: Empowers the Bar Council of India to make rules for the standards of professional conduct and etiquette to be observed by advocates.
• Section 49A of the Advocates Act, 1961: Empowers the Central Government to frame rules on the subject.
• Section 48 of the Arbitration and Conciliation Act, 1996: Provides that enforcement of a foreign award can be refused if the parties were unable to present their case.

Arguments

Arguments by the Bar Council of India:

• The Bar Council of India argued that only advocates enrolled with the Bar Council are entitled to practice law in India, encompassing both litigation and non-litigation work, including opinion work.
• The Council contended that the ethics prescribed by the Bar Council apply to all aspects of legal practice, including client interactions, opinions, and participation in legal conferences.
• It was submitted that any person practicing law illegally, including foreign lawyers, is liable for punishment under the Advocates Act, 1961.
• The Bar Council emphasized that the Advocates Act, 1961, requires that to practice law in India, a person must be an Indian citizen, unless they are a national of a country where Indian citizens are permitted to practice, and must have the prescribed qualifications.
• The Bar Council argued that the term “authority” under Section 33 of the Advocates Act, 1961, includes an arbitrator, and therefore, only advocates enrolled in India can appear before an arbitrator.
• The Bar Council argued that the rules framed by it under Section 49 of the Advocates Act, 1961, define the practice of law to include giving legal opinions.
• The Bar Council pointed out that the ethics applicable to the legal profession in India are different from those in other countries, particularly regarding advertising, solicitation, and contingency fees.

Arguments by the Foreign Law Firms:

• The foreign law firms argued that the Bar Council’s regulatory regime only applies to advocates enrolled with it and that the Advocates Act, 1961, does not bar non-litigation/advisory work by those not enrolled under the Act.
• They contended that the Advocates Act, 1961, applies only to individuals, not law firms, and that the reciprocity provision applies only for enrollment under the Act, not for casual legal services or international commercial arbitration.
• The firms argued that foreign lawyers are regulated by their own Bar Councils and that the practice of law in India does not include advising on foreign law.
• They argued that a foreign lawyer visiting India to advise on foreign law by pre-determined invitation is not barred from doing so.
• The firms submitted that the Advocates Act, 1961, does not cover companies or firms, only individuals.
• They contended that there was no bar to carrying on consultancy/support services in the field of protection and management of intellectual, business and industrial proprietary rights, carrying out market survey and research, publication of reports, journals etc. without rendering any legal advice.
• The firms argued that if foreign law firms are not allowed to take part in negotiations, settling of documents and conducting arbitrations in India, it will have a counter productive effect on the aim of the government to make India a hub of International Arbitration.

Innovativeness of the argument: The foreign law firms innovatively argued that the Advocates Act, 1961, primarily regulates the practice of Indian law and does not extend to advising on foreign law, particularly in the context of international commercial arbitrations. They also argued that the regulatory regime of the Bar Council should not apply to them as they are not enrolled with it and are governed by their own regulatory bodies.

Submissions Table

Issues Framed by the Supreme Court

The Supreme Court framed the following key issues for consideration:

1. Whether the expression ‘practise the profession of law’ includes only litigation practice or non-litigation practice also.
2. Whether such practice by foreign law firms or foreign lawyers is permissible without fulfilling the requirements of the Advocates Act, 1961 and the Bar Council of India Rules.
3. If not, whether there is a bar for the said law firms or lawyers to visit India on ‘fly in and fly out’ basis for giving legal advice regarding foreign law on diverse international legal issues.
4. Whether there is no bar to foreign law firms and lawyers from conducting arbitration proceedings and disputes arising out of contracts relating to international commercial arbitration.
5. Whether BPO companies providing integrated services are not covered by the Advocates Act, 1961 or the Bar Council of India rules.

Treatment of the Issue by the Court

The following table demonstrates as to how the Court decided the issues

Authorities

The Supreme Court considered the following authorities:

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

• Pravin C. Shah versus K.A. Mohd. Ali and Ex. Capt. Harish Uppal versus Union of India: These cases were followed to re-emphasize the broad definition of “practice of law,” which includes non-litigation activities.
• Roel versus New York County Lawyers Association and Appell versus Reiner: These cases were discussed to examine the complexities of multi-state and international legal practice, but were not followed as the Supreme Court of India has its own jurisdiction.
• Bar Council of Maharashtra versus M.V. Dabholkar: This case was cited to highlight that advertising is a serious professional misconduct for an advocate.
• Zauderer versus Office of Disciplinary Counsel and Shapero versus Kentucky Bar Association: These US cases were discussed to show that the US legal system is different from the Indian system regarding advertising and solicitation of clients.
• The various sections of the Advocates Act, 1961, and the Arbitration and Conciliation Act, 1996, were explained and applied to the facts of the case.

Final Decision

The Supreme Court held that the expression ‘practise the profession of law’ includes both litigation and non-litigation practice. It further held that foreign law firms and lawyers are not permitted to practice law in India without fulfilling the requirements of the Advocates Act, 1961 and the Bar Council of India Rules. The court clarified that a casual visit by foreign lawyers to advise on foreign law may not be covered by the expression ‘practice’, but regular visits may constitute practice. The court also stated that there is no absolute right for foreign lawyers to conduct arbitration proceedings, and they must follow the code of conduct applicable to the legal profession in India. The court concluded that the nature of the services provided by BPO companies must be examined on a case-by-case basis, and if they amount to practice of law, the Advocates Act, 1961 will apply. The Supreme Court directed the Bar Council of India and the Union of India to frame rules in this regard.

Ratio Decidendi

The ratio decidendi of the judgment can be summarized as follows:

• The term “practice of law” under the Advocates Act, 1961, encompasses both litigation and non-litigation work, including giving legal opinions and drafting documents.
• Only advocates enrolled with the Bar Council of India are entitled to practice law in India, and this restriction applies to both Indian and foreign lawyers.
• Foreign law firms and lawyers cannot practice law in India without meeting the requirements of the Advocates Act, 1961, and the Bar Council of India Rules.
• A casual visit by a foreign lawyer to advise on foreign law may not constitute “practice of law,” but frequent and regular visits may be considered as practicing law in India.
• Foreign lawyers do not have an absolute right to conduct arbitration proceedings in India, and they must adhere to the code of conduct applicable to the legal profession in India.
• The nature of services provided by BPO companies must be examined on a case-by-case basis, and if they amount to practice of law, the Advocates Act, 1961, will apply.

Obiter Dicta

The obiter dicta in this case include the following:

• The Court observed that the Bar Council of India and the Union of India should frame rules regarding the frequency of visits by foreign lawyers to determine whether they amount to “practice of law” in India.
• The Court noted that the rules of institutional arbitration may allow foreign lawyers to conduct arbitration proceedings, but they must adhere to the code of conduct applicable to the legal profession in India.
• The Court emphasized that the nature of services provided by BPO companies should be examined on a case-by-case basis to determine if they constitute the practice of law.

Flowchart of Court’s Decision

Ratio Table

Analysis

Strengths of the Judgment:

• Clarity on “Practice of Law”: The judgment provides clarity on what constitutes “practice of law” in India, encompassing both litigation and non-litigation work. This definition helps in regulating the legal profession effectively.
• Protection of Indian Legal Professionals: The decision protects the interests of Indian legal professionals by ensuring that only those enrolled with the Bar Council can practice law in India. This safeguards their professional rights and the integrity of the legal system.
• Regulation of Foreign Lawyers: The judgment sets clear guidelines for the practice of foreign lawyers in India, preventing them from bypassing the regulatory framework of the Advocates Act, 1961.
• Guidance on Arbitration: The judgment provides guidance on the participation of foreign lawyers in arbitration proceedings, balancing international practices with the need for domestic legal compliance.
• Case-by-Case Approach for BPOs: The judgment’s approach to BPO companies ensures that their services are scrutinized on a case-by-case basis, preventing them from engaging in the practice of law without proper authorization.

Weaknesses of the Judgment:

• Ambiguity on “Casual Visit”: The judgment does not clearly define what constitutes a “casual visit” by a foreign lawyer, leaving room for interpretation and potential misuse.
• Potential Impact on International Arbitration: While the judgment provides guidance on arbitration, it may have a chilling effect on India’s ambition to become a hub for international arbitration, as foreign lawyers may be hesitant to participate in proceedings due to regulatory hurdles.
• Lack of Clarity on BPO Services: The judgment’s case-by-case approach for BPO companies may create uncertainty and lead to potential litigation, as there is no clear definition of what constitutes the practice of law in the context of BPO services.
• Reciprocity Issues: The judgment does not fully address the issue of reciprocity, which is crucial for the internationalization of legal services.

Implications of the Judgment:

• Impact on Foreign Law Firms: Foreign law firms will need to reassess their operations in India and ensure compliance with the Advocates Act, 1961, and the Bar Council of India Rules.
• Impact on Indian Lawyers: The judgment protects the interests of Indian lawyers by limiting the competition from foreign legal professionals, and ensures that the practice of law remains within the purview of the Bar Council.
• Impact on International Arbitration: The judgment may lead to a more cautious approach by foreign lawyers in international arbitration proceedings in India, potentially affecting the country’s position as an arbitration hub.
• Impact on Legal Process Outsourcing: BPO companies will need to ensure that their services do not constitute the practice of law, and they may need to adjust their business models to comply with the judgment.
• Need for Clear Rules: The judgment highlights the need for the Bar Council of India and the Union of India to frame clear rules regarding the practice of foreign law in India, including the definition of “casual visits” and the regulation of BPO services.

Questions for Further Discussion

Here are some questions for further research and discussion:

• How can the Bar Council of India and the Union of India frame clear rules regarding the frequency of visits by foreign lawyers to determine if they constitute “practice of law” in India?
• What specific criteria should be used to assess whether the services provided by BPO companies amount to the practice of law?
• How can India balance the need to protect its legal profession with the desire to become a hub for international arbitration?
• What are the implications of this judgment for the internationalization of legal services in India?
• How can the issue of reciprocity be addressed to facilitate the cross-border practice of law?
• What are the potential economic impacts of restricting foreign law firms’ practice in India?
• How does this judgment align with or diverge from international norms and standards regarding the practice of foreign law?
• What are the ethical considerations for foreign lawyers participating in arbitration proceedings in India?
• How can the judgment be interpreted in light of the evolving nature of legal practice and technology?
• What are the potential legal challenges to the implementation of the guidelines established by this judgment?