International Arbitration and Foreign Lawyers

Written by  //  October 22, 2010  //  Corporate Law and Business  //  3 Comments

(The following is a guest post from Deepak Raju, who runs the Lex Arbitri blog on arbitration law. He discusses the relationship between the existing law on foreign lawyers practicing in India and India’s prospects as an emerging hub of international commercial arbitration)

Ban on foreign lawyers – another nail in the coffin of India’s international arbitration dreams

The recent decision in Lawyers Collective v Bar Council of India has been discussed widely. Along with discussions on the correctness or otherwise of the decision, several comments have focused on the more normative question of desirability of foreign lawyers being allowed to practice India. Yet no one appears to have paid attention to what is probably the best argument in favour of foreign lawyers, at least in limited circumstances – the impact of keeping foreign lawyers out on India’s recent attempts at becoming an international arbitration destination.

Lawyers collective v  Bar Council of India – A brief overview

As the decision in Lawyers Collective has been widely discussed in the blogosphere, I would like to deal with the case only to the extent necessary for this post. In this case, the legality of permission granted by the Reserve Bank of India under the Foreign Exchange Management Act, 1973 to some foreign law firms to open liason offices in India was assailed. “Practice of law” as per the Advocates Act, 1961, can be carried on in India only by an advocate registered with a Bar Council. The case centered around the question of whether liaison offices which engaged in activities like coordination between foreign firms and their Indian clients, broadly classified as non-litigious practice, were “practicing law” and hence were acting illegally on account of their not being registered as Advocates. The court interpreted the term “practice of law” broadly to include both litigious and non-litigious aspects of practice of law and held that the liaison offices were illegal.

Can a foreign lawyer appear before an arbitral tribunal in India?

The Court, in Lawyers’ Collective took a starting point that all litigious practice was prohibited for anyone but a registered Advocate. In many places in the decision, litigious practice is indicated to include appearing before tribunals. Even if one were to rely on the capital ‘T’ with which tribunal has been spelt by the court and somehow make a fanciful argument that this would be a reference to statutory tribunals and not to private arbitral tribunals, that would, at best, merely take appearances before arbitral tribunals outside the purview of “litigious practice of law”. It would still be “practice of law”, given the wide understanding accorded to the phrase.

Impact of Ban on foreign lawyers on international arbitration

In an international commercial arbitration several legal systems come into contact. For instance, let us assume a contract between an Indian party and a Swiss party which is governed by French law and which provides for arbitration in India according to LCIA India Rules. Upon a dispute arising between the parties, the Swiss party seeks arbitration. The Indian party, contests the validity of the arbitration clause on the ground that the Swiss party was incompetent to contract, a question usually to be settled under the law of domicile of the party concerned, in this case Swiss law. Also, if the dispute was to reach the merits stage, the claims of the parties are to be decided in accordance with the substantive law of the contract, in this case French law. Thus, the dispute here is going to be adjudicated under laws of two civil law countries, entirely different from the common law tradition in which Indian lawyers are trained. Indian law may come in handy if one of the parties wants to move court for interim relief or for appointment or removal of an arbitrator. But, apart from these limited functions, Indian law has nothing to do with the dispute.

In this situation, given a choice who would a party prefer – an Indian lawyer or a continental lawyer? Choice of a lawyer trained in civil law is bound to be the logically sound option. Yet, India’s closed door policy on foreign lawyers forces Indian lawyers to argue out the case despite their lack of competence in the subject area.

India has recently been attempting to make itself an “arbitration friendly” jurisdiction or an arbitration destination. Yet, will any foreign party agree to arbitration in India in a contract governed by a non-Indian substantive law when he knows that his choice of lawyers in case of a dispute is limited to Indian lawyers? One may say that a foreign party may still agree to have India as the legal seat of arbitration and merely hold hearings outside India with foreign lawyers of his choice. But that hardly makes India an “arbitration destination”. Also, I cannot see what could be so attractive about Indian arbitration law that lures a party who does not intend to hold a single sitting in India into designating India as the legal seat of arbitration.

What is the solution?

A general permission for foreign lawyers to practice law in India seems to be distant. A more pragmatic solution will be to bring this issue within the purview of arbitration reforms that India is pursuing and make a special exception (probably through a non-obstante clause in the Arbitration and Conciliation Act, 1996) allowing persons of any nationality, whether or not registered as Advocates in India, to appear before arbitral tribunals seated in India where the arbitration in question is an international commercial arbitration.

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