June 16 (Bloomberg) -- Two weeks before Clifford Chance LLP said it would fire as many as 100 lawyers in London and New York, the world’s largest law firm by revenue announced an alliance with India’s AZB & Partners to expand operations there.
The firms said in January that they were establishing a referral relationship that would give Clifford Chance a way to serve clients doing business in India, which bans foreign firms from practicing in the country. This month London-based Clyde & Co. and ALMT Legal announced a similar association, saying they would look to merge once it was “permissible.”
These alliances and the increased hiring of Indian lawyers come as U.K. and U.S. law firms are fighting a collapse in work from their financial clients. India is a logical countertrend. For the past five years, Asia’s third-largest economy grew at the fastest pace since independence in 1947. Lawyers are betting India will be a growth market for them once they’re allowed in.
“Most international law firms are looking at doing more” in India, said Sunil Gadhia, chief executive officer of London- based Stephenson Harwood LLP. It’s “a market where firms can generate more business” than in Western economies, he said.
“India’s a place you have to be, from a global business franchise standpoint,” Goldman Sachs Group Inc. India head Brooks Entwistle told 66 European and North American law firms attending a Mumbai conference of the International Bar Association in March. Some of the firms, barred from practicing in India since a 1995 court order, have set up India teams in nearby locations, including Singapore, to serve companies doing Indian deals.
‘Bullish’
“Indian corporates are very bullish,” said Sandeep Katwala, India group head of London’s Linklaters LLP, which allied with Mumbai-based Talwar Thakore & Associates in 2007. Since the election “we’ve seen more mandates in the capital markets than for the last six to eight months,” he said.
Private equity firms’ interest in pre-IPO investments also has revived from “virtually nothing for a few months,” due to positive sentiment following the government’s re-election last month and a belief in the economy’s underlying strength, he said.
“The outlook for India is very promising -- more than any other Jones Day market, in my view,” said Jeffrey Maddox, a Hong Kong-based partner of the Washington-based firm, which works with New Delhi-based P&A Law Offices, which a Jones Day partner set up in 1995.
In February, Jones Day hired Sushma Jobanputra, a Barclays Capital managing director who was previously a lawyer with Linklaters, to join its India practice based in Singapore, Maddox said.
‘Same Basic Problem’
“Most international firms have the same basic problem as us: We service our clients globally, and India is a big market,” said Chris Wyman, the India practice head of London- based Clifford Chance. “If you’re trying to have a global footprint, then ignoring India is nonsense.”
In November, Clifford Chance hired Rahul Guptan from Amarchand & Mangaldas & Suresh A. Shroff & Co., the top Indian legal adviser on acquisitions. He works in its India capital markets group based in Singapore.
The London firm and AZB, which has offices in Mumbai, Delhi and Bangalore, “would want to have a presence working alongside one another as soon as we could,” said Wyman, who plans to spend a few months in AZB’s Mumbai office.
“It’s difficult to operate in a market where you don’t have a base,” said Andrew Harrow, managing partner of the India group at Allen & Overy LLP, which entered a referral, training and joint marketing relationship in 2008 with India’s Trilegal.
Swamped
The 15 or so Indian firms worth partnering with have been swamped with offers from global firms seeking an advantage over competitors, according to Reena Sengupta, whose RSG Consulting has published a study of the Indian legal market.
“Liberalization of the legal sector isn’t going to be top of the government’s agenda, but with its strong mandate, we may see it in two years rather than five,” she said.
India’s central bank licensed New York-based White & Case LLP to set up a liaison office in Mumbai in 1994, when the government at the time was first opening the economy to foreign investment. Chadbourne & Parke LLP of New York and Ashurst LLP of London were also licensed.
Indian lawyers opposed these operations, winning an interim ruling in the Mumbai High Court in 1995 that local lawyers have a monopoly on practicing law in the country. Government proposals to allow foreign lawyers in have also been opposed.
White & Case pulled out voluntarily after the ruling, as did Chadbourne, though Ashurst remains in New Delhi. No new licenses are being issued.
Illegal Practice
Indian lawyers argued that foreign lawyers with offices in India were illegally practicing even when they advised clients on non-Indian law, such as matters related to global transactions. In 2007, the law ministry filed an affidavit disagreeing with this point. A court decision is pending.
“We can’t help those countries where legal services are facing negative growth by letting their firms come to India,” Lalit Bhasin told the March IBA conference. “India’s legal sector is not for sale,” the Society of Indian Law Firms president said.
While other Indian lawyers, such as Cyril Shroff, believe deregulation of the Indian legal market is “at some stage inevitable,” the Amarchand Managing Partner said in an interview that his firm plans to stay independent.
“We will have the critical mass, both in terms of depth and breadth, to deal with the challenges,” he said. Suhail Nathani, one of the founders of Economic Laws Practice in Mumbai, said the eight-year-old firm is currently focused on organic growth rather than a foreign alliance.
Continued Opposition
Indian lawyers told Law Minister Veerappa Moily in a June 8 meeting that they continued to oppose opening the legal market to foreign law firms.
Katwala of Linklaters rejected the notion that global firms like his see India just as an alternative to slowing home markets. Even with rapid growth, India’s legal market won’t exceed that of the U.S. or U.K. in the next 10 years, he said.
“That’s not what’s driving us,” he said. “If deregulation doesn’t happen for, say, five years, I don’t think we’d scale down our focus, simply because our clients want us to be involved.” The decision to invest in India was taken “a long time ago,” he said.
Not every law firm focused on India feels an alliance is essential. An exclusive relationship isn’t “at present” the best strategy for Freshfields Bruckhaus Deringer LLP, said Pratap Amin, head of the firm’s India practice.
Freshfields
The London-based firm, advising Africa’s largest mobile- phone company, MTN Group Ltd., on a merger with India’s Bharti Airtel Ltd., has about 25 lawyers in its India practice, mainly in London, he said. It works with three or four Indian firms.
White & Case, which terminated an alliance with Mumbai- based India Law Services in 2005 and closed its liaison office in 2008, is still “fully prepared” to take advantage of liberalization, according to Nandan Nelivigi, a New York-based partner in the firm’s India practice.
“India is a ‘must have’ when the rules for entry of foreign law firms are clear,” he said. “Everything will be up for grabs at that time, and I don’t believe any of the participants in tie-ups have really agreed upon all the big issues which would need to be addressed and can only be addressed when the rules are clear.”
“The Indian legal market is important, not so much for today, but for the future,” said David Jacobs, the head of Chicago-based Baker & McKenzie LLP’s India practice. Foreign acquisitions by Indian companies more than tripled to $13.9 billion in 2008 from $4.5 billion in 2005, and India “will be restored as one of the dominant global economies in our lifetimes,” he said.
Security Risks
The risks to that scenario are the global financial crisis and security issues, said Jacobs, who spent 46 hours in his 16th-floor Mumbai hotel room in November while it was besieged by terrorists. Jacobs said a second such attack could discourage foreign investment in India.
Ashurst, the one international firm that maintains an Indian office, doesn’t practice law there currently. It will continue to work with three or four Indian firms when it’s allowed to set up a legal office, according to India practice head Richard Gubbins. The office, staffed by a former civil servant, provides advice on how the government works, he said.
“I suspect foreign firms, even once they have been allowed to set up in India, won’t be allowed to practice Indian law for some considerable time,” Gubbins said.
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