India Looms as Next Possible Big Legal Market for Firms

Gina Passarella

The Legal Intelligencer

2008-09-04 00:00:00.0

The American Bar Association may have recently given the thumbs up to U.S. law firms outsourcing legal work to India, but that doesn't mean lawyers aren't handling India-related legal work stateside.

And that only looks to increase for international firms as regulations in India loosen and inbound and outbound corporate finance work to and from the region expands.

Some attorneys caution, however, that a stronghold of large-firm leaders in India will push to slow the liberalization of the country's legal sector that would allow foreign law firms the ability to operate in the country.

A recent report by consulting firm Hildebrandt International said India-related legal work is of growing importance to international firms despite the country's ban on foreign-owned offices.

As multinational companies move into India and more investment deals involve Indian companies or investors, large U.S. and U.K. law firms are focusing their efforts on the finance and mergers and acquisitions work coming out of the country, according to the report.

The Indian legal market is also changing, with more partners of Indian firms leaving for more versatile, niche corporate and finance operations, the report found. As the U.S. has seen for years, the competition for talent in India is increasingly fierce. Many U.S. and U.K. law firms are hiring attorneys directly from Indian law firms.

With the pressure from the Indian government and the anticipated restart of a case before the Bombay High Court over whether foreign firms can have offices in the country, Hildebrandt predicts the liberalization of the Indian legal market within two to five years. It does caution, however, that changes in the country's government after the 2009 election could slow down reform.

Reed Smith's Ajay Raju, who co-manages the firm's Indian initiative with some of his London colleagues, said India may be the firm's next big international target now that it has achieved many of its goals in China.

"There's no doubt that India has jumped to the top of the strategic plan for us, along with China and others, as far as global expansion is concerned," he said.

The firm has created several local partnerships with Indian firms to handle work for a broad-based transactional practice involving the country that has included corporate structuring, strategic alliances, distribution formations, joint ventures, outsourcing contracts, M&A work and real estate development projects, he said.

Traditionally Reed Smith had represented U.S. and European companies that were expanding into India, but as India-based companies are becoming cash rich, Reed Smith has represented several of them in outbound investment in the U.S. and Europe.

There are about 45 partners at the firm, along with a group of associates, who actively generate fees and log time on India-related matters, Raju said.

"We're carefully monitoring developments in India and meanwhile building our client base," he said. "The minute that the Indian market allows us to have a presence there I suspect that we will be there."

But as the workload increases, that doesn't mean he sees an easy path to having an office in the country.

At a recent ABA conference in New York, Raju participated in a small roundtable discussion with leaders from the U.S.-India Business Council and select leaders from large Indian firms. Raju said he got the sense from those firm leaders that the few large firms in India that do international work and would have a lot to lose if foreign firms entered the market are not going to make it easy for foreign firms to come in.

"They have their foot firmly planted on the ground and they questioned whether or not clients even need international firms to advise them in India," Raju said of the Indian firm leaders at the roundtable discussion. "Based on that rhetoric it is clear to me there will be a lot of foot dragging involved."

He said the hesitation comes from a small group of powerful people who happen to be influential with the Indian government. A number of media reports out of India in late 2007 said the India Bar Council passed a resolution opposing opening up the legal profession to foreign lawyers and firms.

There is a legitimate concern among Indian lawyers over a level playing field when it comes to legal marketing and lateral recruiting in the country, Raju said. He estimated, however, that about 99 percent of the more than one million lawyers in the country practice local, Indian law. International law firms aren't looking to fight over that client base, he said.

The Hildebrandt report found the two most likely strategic opportunities for foreign law firms in India, if the regulations are loosened, would be offices that can't practice Indian law or foreign-law-only offices via joint ventures with Indian firms.

In 1995, a lawsuit was brought by a group of Indian firms against White & Case, Chadbourne & Parke and Ashurst Morris Crisp after the three firms opened offices in India.

Under the country's 1961 Advocates Act, which states only Indian lawyers registered in the country as advocates can practice law in the country, the Bombay High Court ruled that practicing law doesn't just mean appearing in Indian courts, but includes executing documents or negotiating settlements. It ruled licenses issued to the three foreign firms by the Reserve Bank of India only allowed for the establishment of a branch office to act as a communications channel.

The U.S. and U.K. law firms appealed the ruling to the country's Supreme Court and it sent the case back to the Bombay High Court in 1996, where it has sat ever since. Hearings in the case were finally set for April and resulted in a resurgence of talk about whether U.S. firms would soon be able to flock to India. Raju said the arguments kept getting pushed back a month, and he doesn't have high hopes for them to be heard anytime soon.

In the meantime, local firms have either created unofficial alliances with Indian firms or have represented Indian companies in the U.S. and abroad.

The majority of India-related work for both Duane Morris and Blank Rome is related to their intellectual property practices. The firms handle litigation and patent counseling in a market that is one of the generic pharmaceutical leaders of the world.

Lewis F. Gould Jr., chairman of Duane Morris' intellectual property group, said his team represents two Indian companies, both out of their U.S. headquarters in New Jersey. They represent pharmaceutical companies Ranbaxy Laboratories and Dr. Reddy's in the companies' intellectual property and litigation needs.

"In terms of our clients going there, there certainly is an increased awareness among our clients of the very dynamic growth which is taking place in India," Gould said. "It is becoming an industrial powerhouse and its financial status is increasing all the time."

In terms of Gould's practice, as India becomes more of an industrialized nation, its companies will be able to benefit from the U.S. Patent and Trademark Office. He said he is meeting more and more Indian patent attorneys at intellectual property conferences around the world.

While Duane Morris isn't at a point where it would do much work on the ground in India through alliances, Gould said his firm has shown itself to be aggressive when it comes to international expansion as long as there is a market for legal work in that area.

H. Keeto Sabharwal, head of Blank Rome's intellectual property litigation practice out of the firm's Washington, D.C., office, has about five or six companies with India-related legal needs. Most of his clients are based in India and do work in the United States while a few are U.S.-based companies that have large facilities in India.

A lot of Sabharwal's work is done in District Court in New Jersey because his clients are in the life sciences and pharmaceutical industries.

About 70 percent of the work is litigation based and has increased each year because India-based companies now have the cash and willingness to get involved in multimillion-dollar intellectual property disputes, he said.

Sabharwal teams up with several local Indian firms when he needs to do work in India and most of his Indian clients were referred to him from those firms.

While Blank Rome has probably thought about whether it would open an office in the country if and when there is an ability to do so, Sabharwal said he gets the sense from talking to attorneys at Indian law firms that they want foreign attorneys to stay on their own turf.

And he said the system currently in place is working very well for Blank Rome. Many of the large Indian companies have long-standing relationships with Indian law firms, and just because foreign firms can gain entry into the country doesn't mean they will gain the work, he said.