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Need for Reforms in India Legal Services?

Aug 15, 2017 4:30 AM 3 min read
Editorial

Indian law needs reforms?

Does Indian legal services sector need reforms? 

Amidst much economic turmoil, India hesitantly started its experiment with liberalisation in 1991. With vital sectors opened, the narrative swiftly moved away from Nehruvian Socialism to deregulation, lower taxes, tariff reduction, and greater foreign investment. However twenty-five years hence, a sector fundamentally intertwined with any formal economic activity and our society’s general fabric stays distinctly protectionist with no meaningful reforms having been acted upon. What pushed Legal Services towards an inward-looking, fragmented, and sub-scale trajectory?

 

To understand this outcome, it is important to recognise the regulatory restraints placed by the Bar Council of India Rules and the Advocates Act, 1961. While the former skews transparency by barring Indian law firms/lawyers from actively marketing their services, the latter restricts competition & innovation by preventing foreign players from practicing in Indian courts.

 

Besides minor allowances of permitting overseas lawyers to “fly in and fly out” to advise on International law and leeway to set shop in Special Economic Zones, the regulatory machinery has been unnecessarily conservative. Caps on number of partners, profit-sharing and capital infusion restrictions ensure most legal practices operate either as small or medium sized sole proprietorships or family-held LLPs.

 

With 1.2m+ lawyers currently practicing and multitudes graduating every year, India’s legal services headcount is comparable to the US. However the said manpower doesn’t always translate into egalitarian access and commensurate requisite service. A fragmented market becomes a key inhibiter.

 

According to Asian Legal, a Thomson Reuters owned legal research platform, India’s 20 top law firms including high profile names viz. Cyril Amarchand Mangaldas, Shardul Amarchand Mangaldas, Khaitan and Co., and Luthra & Luthra are collectively (c.5,000 lawyers) smaller than the biggest law firm in China. Moreover, these 5,000 lawyers operate at a price point hardly affordable for all, but only the largest companies or richest individuals in the country.

 

An extreme example bordering on exploitation, is the world of ‘Senior’ advocates, a special status granted to select top lawyers in India by courts as per the Advocates Act. Renowned names include the likes of Ram Jethmalani, Fali Nariman, P. Chidambaram, Kapil Sibal etc. These privileged few are afforded a certain ‘indulgence’ by the courts. This regard and proximity to the judicial system in turn enables Senior Advocates to command exorbitantly high fees ranging from INR5–20Lakhs per hearing. Other than charging for appearance, additional fees include retainers, reading fee, consultation fee etc. In contrast, a 2016 survey evaluating citizens’ Access to Justice concluded that 90% of litigants earn less than INR3L p.a. with only 1% depending on state-sponsored legal aid. Such fractured dynamics is a case in point that litigation is severely “under-lawyered” at the higher-end and “over-lawyered” at the lower end, thereby posing natural barriers to judicial access, service quality, and viable economics. With bankers globally facing flak and scrutiny for their bonus pay-outs, India’s Senior advocates and for that matter any advocate, enjoy a free rein to charge what they please, with zero oversight.

 

It is ironic how restrictions stemming for the “noble” notion of the profession has in turn steamrolled those very principles, highlighting the dire need for reforms. These reforms need to aim for increased growth opportunities of Indian firms, improved discipline and accountability in the sector, triggered by influx of capital, International expertise, and foreign competition.

 

A phase-wise approach starting with relaxation of norms around domestic firms followed by opening of advisory and litigation-related activities for foreign players is a sensible approach. However different interest groups i.e. Bar Council of India (lawyers’ regulator), the Society of Indian Law Firms (industry group representing 100 top law firms in India), and a sluggish Law Ministry has ensured the reform process kicked off by the Inter-Ministerial Group in 2015 glacially perambulates. It is about time the current dispensation takes heed. Twenty-five years is long enough.