Tuesday, August 3, 2010

Law and globalisation: Not entirely free, your honour | The Economist

Law and globalisation: Not entirely free, your honour | The Economist

The legal profession, like the clients it serves, is well on the way to going global—but especially in India, obstacles to its spread remain

LAW is supposed to be about universal principles: rules that apply without prejudice to a broad category of human beings, regardless of sex, culture or economic status. So in a world where barriers to the transfer of goods, expertise and people are coming down, you might expect that the legal profession would be among the first to fuse into a seamless transnational fraternity. In history, whenever cross-border commerce has flourished, as in medieval Venice, so too have trade lawyers with broad horizons, like the ones pictured above. And today, at least from the vantage-point of the ambitious practitioner, the legal profession seems to have little respect for borders.
A talented graduate from any of the world’s top law schools can expect a life of globe-trotting. A single month’s work can include writing the small print on a Saudi investment in Africa, helping an Indonesian firm to market its shares in New York, and writing a contract under English law between two companies in Russia. Humanitarian law, as well as the commercial sort, is going global: these days nobody would be surprised to see an American lobby group test the principle of “universal jurisdiction” (for egregious crimes) by trying to get an African dictator arrested on a shopping trip to Europe.
But that is not the whole story. On one hand, international lawyers are at least as ingenious as their customers when it comes to overcoming obstacles to transnational operations; on the other, lawyers have always been skilful at limiting access to their own profession, both within their own countries and globally. And when there are big barriers to professional mobility inside a country, it is less likely to open up to foreign competition.
Eyes on the prize
By global standards, the glittering prize of practising law in New York is fairly accessible to anybody with the brains (and a green card). If you come from another American state, or from another country that practises English-style common law (in which precedents set by judges are all-important), it is a matter of mugging up and passing the New York bar exam. If you come from a country that practises civil law (where a written legal code holds sway), then you must spend first spend a year getting a Master of Laws at an American university.
As this arrangement implies, there are big similarities between the precedent-based systems of law that prevail in the Anglophone world, and a wide difference between them and the civil-law tradition of continental Europe. So it might be expected that lawyers could slide easily from one English-speaking or Commonwealth country to another, while finding it harder to leave the Anglo-sphere. It is true that most global law firms are British- or American-based. But Commonwealth countries have not always offered an open environment; among the things they learned from British mentors—along with ideals like the presumption of innocence—was how to protect the profession from pesky competitors. And some non-Commonwealth countries are now surprisingly open.
In China and Brazil foreign firms have flourished by offering advice on international law, but they cannot provide legal representation in local courts. (An exception is Hong Kong, which has recently seen a spurt in foreign lawyers taking the local bar exam.) If a Chinese lawyer takes a job with a foreign law office in Beijing, he or she will temporarily forfeit the right to practise Chinese law. But a Russian lawyer who wants to work for a foreign employer faces no such disincentive.
South Korea has promised to open up its legal market to outsiders under a Free Trade Agreement with the European Union that should be ratified later this year. And in 2008 Singapore became more foreign-friendly; certain firms from other countries can practise domestic law in some areas, as long as the lawyers they use have local qualifications. Japan opened up its legal-services market in 1999, despite great nervousness from its own lawyers. Since 2005, foreign firms have been able to set up partnerships employing Japanese lawyers, who (in contrast with Singapore) need not give up their national licence.
But there is one determined outlier among fast-growing Asian economies: India, the only big country that is closed to foreign lawyers in any capacity. A powerful lobby—ranging from hundreds of thousands of small (often husband-and-wife) practices to a handful of leading partnerships—resists change. Foreigners who tried venturing into the Indian market are still reeling from a decision in December by the Bombay High Court which deemed illegal the “liaison offices” that some outsiders had opened. The Indian government said (rather half-heartedly) that it would appeal against this ruling. But the climate in which law-related work could be undertaken by outsiders has gone from difficult to prohibitive. Reena Sengupta, a London-based consultant, says she used to see foreign-owned legal-research operations in India where beds, not desks, greeted the visitor; such was the keenness to dispel the impression that law was being practised. Now those offices have simply closed.
Indians who need world-class legal advice lose out, says Stuart Popham, a senior partner in Clifford Chance, a London firm, who this week accompanied David Cameron, the British prime minister, on a tour of India. The effect is “to restrict supply and competition and raise prices…you have to fly clients out to meet lawyers elsewhere.” A lot of Indian-related work is done in the more liberal climate of Singapore. Mr Popham says he is frustrated by some Indians’ contention that firms like his own will inevitably take away local jobs. “Liberalisation does not take away anyone’s job…the evidence is that no country has ended up with a smaller domestic legal community after opening up.”
For the Law Society of England and Wales, getting the Indians to free up their market is high on the wish-list. “We want to invest in India’s potential to become a global legal player…this means new work coming to India,” insists Alison Hook, the society’s head of international activities.
But much of her target audience is, as yet, unpersuaded. “The Indian profession will rise up in arms if [foreigners] want to open offices here,” says Lalit Bhasin, head of the Society of Indian Law Firms. He accuses the British government and profession of “trying to emasculate the Indian legal community” by pressing a “one-point agenda” of liberalisation. In practice, India’s legal world is unlikely to let outsiders participate unless restrictions on the country’s own lawyers are eased. Indian firms may not advertise their services, and only the simplest websites are permitted; until recently the number of partners was capped at 20. Cyril Shroff, managing partner at Amarchand Mangaldas, India’s biggest law firm, says a more liberal regime, both internally and externally, is inevitable—but he would oppose opening the field to foreigners unless life was also made easier for locals. “The real question is how we can modernise the Indian legal market.” Ms Hook says her society agrees with the idea of India undertaking “holistic” reform, domestic as well as external.
Wading through maple syrup
Another big Commonwealth country, Canada, is less restrictive than India—but not as open as England or Australia either. It is fairly rare for lawyers to move between Canadian provinces, and a switch from Quebec to an English-speaking province involves a change of legal tradition as well as language. Meanwhile, foreign lawyers who want to practise Canadian law face two evaluations—one at federal level, the other provincial—and most fail. Between 1999 and 2009, the Federation of Law Societies received 4,515 applications from foreign advocates and issued only 1,708 certificates. Of the 1,027 English lawyers assessed, only 375 got the desired bit of paper. Paul Paton, a Canadian-born law professor, believes that governments, not lawyers, deserve the credit for opening up the profession in England and Australia—and he hopes for a similar change in Canada. English and Australian lawyers were forced to abandon the idea of self-regulation when “the public saw something wasn’t right and the government had to step in,” says Mr Paton, who now works at California’s University of the Pacific.
Canadian lawyers could benefit from a more liberal legal-services regime, he believes. Already, some Canadians find ways around the obstacles which they, like everybody, face in India. Stikeman Elliott, a Canadian firm with about 500 lawyers worldwide, trawls for contacts among the Indian diaspora in Toronto and Vancouver, and it stands ready to assist Indian investors with an eye on Canada’s resources. But it avoids giving even a whisper of advice on Indian soil.
While some countries still hesitate to enter the global contest for legal services and talent, the competition itself is changing, says John Conroy, chairman of Baker & McKenzie, an American firm which went global before anybody else. It was no longer a question of vying to help Western investors with their activities in emerging economies; the real prize in those markets was “outbound” work—for example, advising on investment by Chinese concerns in Africa and Latin America, or on rights issues for Chinese banks. (His firm’s China-based partners have recently done both.) The other change was that firms based in Asia were bidding for Anglo-Saxon talent. Chinese firms were hiring lawyers from English-speaking countries, while Japanese law firms—so risk-averse only a decade ago—were consolidating and girding themselves for international work. As Mr Conroy notes, it takes time for an institution based in the Anglophone world to be acculturated in Asia or Latin America; winning local trust is as crucial as passing exams or gaining licences. And even in countries where trust has been established, the climate can change, as Baker & McKenzie is finding in the anti-American atmosphere that now rages in Venezuela, where it has worked since the 1950s. The situation there is “really testing our mettle, and I call our Caracas partners heroes,” Mr Conroy says. Whether administrative or just cultural, barriers can go up as well as down.
Some Interesting Comments
  1. India is just reciprocating, in kind, to what Indian professionals in all walks of life, have been facing in the West, since decades. So what's your beef, Economist? 
First remove the beam in the West's professional eyes, before trying to remove the speck in the Indian legal eye.
  1. NY is very open to foreign lawyers, but Florida isn’t, so it varies state by state. Canada has provinces with different legal systems, Quebec law has real differences from that of Ontario, and so they should have different admissions procedures for lawyers. The purpose of these rules is to protect clients from malpractise. If foreign lawyers take the bar exam and fail, they shouldn’t really be admitted to practice. 
Re India- it’s Mumbai, not Bombay, and there are good local “multinational” firms. For US readers, some of what American lawyers do (incorporations) is done in India by chartered accountants, as in the UK. NY law is practical, because many financial entities worldwide are willing to use NY law for overseas transactions just as they use the US dollar. Countries which do not provide a reserve currency or reserve legal system may not be enthusiastic to follow suit.
  1. Well said. Until the white, male, middle-aged, upper-class dominated culture and demographic of law firms in the UK, US and Australia changes; those same white, upper-class male dominated firms will not be allowed to have any legal dialogue with those of a different skin colour they consciously belittle and debar from their own Gentlemen's club, even within their own firms, even within their own countries. Anglo-Saxon lawyers' eagerness to dip their greedy colonial paws into the honey pot of India (for the second time) makes for a laughable caricature, especially because of their complete lack of subtlety. When will these lawyers realise that India doesn't necessarily want its hard earned money flowing away into the already undeserved deep pockets of Anglo-Saxon common lawyers? How much value for money is truly given in the service? Not much. The price of advice simply is not worth all that money. Law firm fees are barely affordable for the Indian masses. Until those Anglo-Saxon firms curb their glut fuelled fees, they have no hope of accessing the wider global society.
  2.  Can the Economist kindly explain why India should open the door to British legal practioners when there has never been any reciprocity? While on the subject can any Westerner explain why an experienced Post Grduate Indian medical practitioner is made to undergo the ignominy of starting his western career from the bottom under westerners who are far far junior? Open up the global job market and encourage a free flow for all professions. Don't be selective. My employer just spent US$ 2 million on a short & simple arbitration matter in the UK. The opposing party spent a similar amount. What a rip-off. Let Indian professionals into all western professions so the cost structure will become more rational.
  3. This article reeks of arrant hypocrisy.As a black lawyer qualified in two jurisdictions ( including England and Wales ) I know first-hand what latent and even overt restrictions are placed in the way of 'foreign' lawyers.The Indians are right and should prohibit British lawyers from ever practicing in their jurisdiction.I am afraid to say,but discrimination,a feeling of right ( which clearly inspired this article )and a neo-colonial mentality are still rife in the U.K.Bravo to the Indians and I hope other countries follow suit.
  4. Indian legal professional qualification is acquired simply by passing law exams after two years of mostly part time study. To practice there are some requirements and these are not uniform in the ever increasing number of Indian States. Practicing to appear before a higher forum like the Supreme Court needs some additional qualifications. The Solicitors exam is not taken by most lawyers and invariably those connected with leading law firms either as children or siblings of partners after qualifying with a law degree go at it. More than opening the field to foreigners what India needs to address is about improving and standardizing the professional course and its contents. As a first attempt National law schools have opened and these aim to impart the core content of fundamentals and the application of legal principles through study and analysis of precedents. This assists students to grasp the changes in the course of legal history and better apply the principles. There are courses in drafting and pleading and these are barely adequate. Where the foreign firms steal a march is in the area of drafting contracts and agreements of a variety and range that Indians are not used to. There are utterly verbose and jargon filled boiler plates that get developed in US and UK for cut and paste use which India does not seem to have developed a taste or skill for. 
    1. I am an advocate for reciprocity in an open and fair manner.If experienced and qualified partners of Indian law firms are straight away allowed to practice and set up shop in the US and UK India could respond for an equal number here. In any event practice at court is not a serious bone of contention with the creme that corporate and financial law advisory can provide.
    2. Personally I have on behalf of my Indian employer and later a multi-national employer dealt with foreign firms in Bangkok,Hong Kong,Jakarta,Tokyo and even Hanoi.My experience with these firms never gave me the comfort about their knowledge of the local laws.I had to use local firms and over a period found competent lawyers who were well versed in New York law that was always chosen to govern the relationship among parties. In any event when the claim has to be enforced one needs the local lawyer where jurisdiction resides. It will take a very long time before India can even consider firms opening here and if ever with Indians as managing and operating partners
    1. """India is doing just FINE, without any meddeling by greed-stricken & salivating 'foreign' gold-diggers - legal eagles or others - thank you very much!!"""
I certainly do not mean to be rude, but you do not seem to understand basic economics.
These 'greedy' businesspeople you hate so much are the same people who make the economy grow, who provide the food you eat and the computer you ramble on, and who are now bridging the gap between entirely different nations and cultures which will lead to future global peace and stability.
Why, may I ask you, has India's economy growing so quickly recently? India's growth, in a large part, has been due to 'greedy' Western software firms trying to make their products and services cheaper. In the process, they have succeeded in building a growing Indian middle class, as well has providing better services and products for the developed nations.
And since you seem to know India so well--your name indicated you are Indian--may I please ask you what alternatives to globalization you have in mind? Do you think that a socialist system would be better? And are you really saying that India cannot improve from its present state?
Globalization--simply the trading of goods and services between different countries--has been the biggest promoter of wealth and peace in the world. It has bridged such diverse countries as the USA, China, Brazil, Indian and others. I just hope that it will continue, and populist naysayers like yourself will finally realize that when people trade and interact with one another, everyone wins.
  1. Just wanted to clarify a few misconceptions:
1. In the US at least, anyone, including Indians, can practice law as long as they pass the bar. There are plenty of lawyers here who are not "Anglo-Saxon" (nevermind the number of non-"Anglo- Saxon" American lawyers). 
2. Lawyers do more than just try cases. What the article is really talking about is corporate lawyers, especially those who facilitate international transactions (and any follow-on litigation). That's entirely separate from, e.g., chasing ambulences or defending murderers. The two are actually related. One of the main reasons US and English firms are so successful in international deals is precisely because they hire non-US attorneys. This gives them an advantage in large international deals, since the parties involved are often from multiple jurisdictions. Western law firms are not looking to send "Anglo-Saxon" litigators to chase ambulances in India

9.  If the greedy western law firms charged outrageous prices, and people still paid, clearly the value must equal the service, or they wouldn't sell. Competition is to make the system more efficient, just ask the chinese factory worker who makes cheap christmas toys, he has a job due to competition, the expensive and thus inefficient US factory is ka-putz, but the US marketing firm is growing and US consumers have extra income to spend from the savings. Welcome to the twenty-first century. Can't blame everything on colonial history, and when you do, it sounds a bit childish.
10. When a multinational law firm wishes to set up shop in a new country, it would normally buy a domestic law firm or recruit domestic lawyers for its practice. This, incidentally, is only positive for the domestic legal profession. If Indian lawyers wish to hamper multinational law firms from establishing themselves in India it would seem they are shooting themselves in the foot...
The article also seems to make the assumption that 'law' is a homogenous profession. This is very far from the truth. Corporate law is highly globalised for the simple reason that business is. Other areas such as family law, administrative law and (especially) criminal law is very much a national concern and likely to remain so for the foreseeable future.
11. Foreign law firms do not just want an entry in India but they want to carry out "Unregulated operations"in India. They refuse to register themselves as law firms under the apex law council (Bar Council of India) on the claim that they do not practice the profession of law. This was the stand taken by the foreign law firms in the Bombay High Court when the Indian law firms challenged their unregulated operation. If this is allowed then there will be no control of any legal authority in the cases of professional misconduct. Nowhere in the western countries such unregulated practice of law is permitted. The objection by the Indian legal fraternity is primarily to the refusal of the foreign law firms to be regulated than their entry in India. Either by oversight or design this crux of the matter is not being highlighted. 

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