Abstract
For those who are familiar with the nuances of international trade in services, the title of this book immediately draws attention. It has been two decades since the World Trade Organization (WTO) came into existence, and there has been proliferation of bilateral and regional trade agreements; yet, there has been negligible progress in terms of liberalization of legal services. This book is therefore an assurance in a vibrant package.
Globalization, liberalization, cross-country establishment of multinational corporations, outsourcing and advent of information technology, among others, have increased cross-country movement of professionals. Multilateral, regional and bilateral trade agreements have tried to facilitate such movement by removing market access, discriminatory and regulatory barriers. In spite of these developments, cross-country movement of professional is a sensitive issue and is widely debated. The debate includes how to regulate the professional services market in terms of recognition of foreign qualification and standards, implications for the quality and cost of these services and impact on domestic employment, among others.
Against this background, the book explores the possibilities of liberalizing trade in legal services—which is one of the highly regulated professional services in India and in many other countries. While the book focuses on India, it also presents the regulatory experiences of a number of developed and developing countries to understand the liberalization process and international best practices. It highlights the regulatory challenges and perceptions surrounding liberalization of legal services in India, examines the validity of these perception and make policy recommendations for strengthening the regulatory and institutional framework. One of the core strengths of the book is the fact that it is based on a primary survey that captures various perceptions, operational issues and ground realities that substantiate the secondary evidence. The book is based on round table discussions and telephonic interviews with stakeholders, representing various segments of legal services.
The book is laid in six chapters, each discussing crucial aspects of legal service across the world and in India, starting with a review of existing work on the subject. The book has rightly pointed out that legal service, by nature, is different from other professions, such as, accountancy, auditing and engineering, thereby making legal services onerous to open to international markets.
Therefore, it is important to understand the global experiences in liberalizing legal services. The book presents an overview of the global market for legal services. It highlights that the United States (US) and the European Union (EU) are the largest markets for legal services, and these two economies were thepioneers in initiating the discussions on liberalization of legal services. The chapter discusses how trade agreements, such as, North America Free Trade Agreement (NAFTA) and WTO’s General Agreement on Trade in Services (GATS), laid down the principles for liberalizing legal services. While both NAFTA and GATS focused on market access and somewhat failed to address regulatory barriers, they set the framework for future liberalization. The firms from the developed countries were quick to realize the benefits of market liberalization and started using trade agreements to push for the same. Nevertheless, legal services continue to face trade barriers, which is reflected in various trade restrictive index designed by the multilateral organizations, such as, the Organization for Economic Co-operation and Development (OECD) and the World Bank. The chapter provides a detailed analysis of these indices and concludes that regulatory measures at the border and behind the border have adversely affected trade in legal services.
The book further explores cross-country variations in regulatory practices. It is worth mentioning here that the book is robust in its approach. It has presented the otherwise formidable regulatory practices of different countries in one chapter. The in-depth discussions help to understand international best practices and country experiences with the liberalization process. This chapter discusses the regulations, which can impose restrictions on entry, advertising, fees charged and form of organization for legal practitioners. It also provides an overview of regulations in selected countries, namely, Australia, China, Malaysia, Japan, Singapore, the UK and the US. The cross-country comparisons in terms of institutional and regulatory framework, practice requirements, form of organization and mode of practice, regulation on advertising and entry regulations for foreign legal professionals, among others provide deep insights into the regimes followed in other countries.
After drawing upon other country cases and regulatory practices, the book focuses on the home market. India has the second largest number of lawyers in the world, after the US and more than 900 law colleges. However, the country lacks a firm organizational framework. Most of the lawyers in India work as individuals, in family firms or in partnership, and hence there are only few large law firms. The restriction on firm size to 20 partners was imposed by the Companies Act (1956) of India, which has somewhat prevented scale expansion. The regulatory framework and some key regulations in India are discussed and the regulatory environment is compared with that of the selected countries.
The book has some key findings. It pointed out that in India the legal education lacks practical training, while in countries, such as, Australia, China, Malaysia and Singapore, there is a strong emphasis on clerkship, apprenticeship, etc., for a period ranging between six months to two years. In spite of the regulatory and other barriers faced by legal service providers, India has witnessed a significant rise in legal services exports in recent years and has a positive trade balance in this sector. Nevertheless, the country has a defensive approach towards liberalization of trade in legal services. India is under pressure in multilateral, regional and bilateral trade negotiations from its trading partners to liberalize legal services, specifically to allow foreign law firms to establish the presence in India through foreign direct investment (FDI) for corporate practices. So far, India neither has undertaken any commitments in this sector nor has signed any mutual recognition agreements which will allow easier movement of professionals between India and the partner countries.
To probe deeper into the reasons for India’s defensive position, the authors tried to examine the different perspectives on opening up the legal services and its impact on domestic law firms. The authors conducted round table discussions with practitioners and other stakeholders and one-to-one meetings. The focus of the discussions was (a) regulatory environment, (b) competitiveness of domestic firms and (c) likely impact of opening up of the sector to foreign law firms. The discussion highlighted a number of regulatory barriers faced by legal service providers in India which adversely impact their competitiveness. There are restrictions on advertising, and until recently there were limitations on the number of partners. More importantly, there is a lack of preparedness and capacity. There are variations in the quality of education, training and professional exposure. The authors also discussed regulatory and governance issues in detail.
The book has attempted to get answer to an important question in the policy domain: Can India allow foreign law firms to provide corporate advisory services? It is not a surprise that the responses have been mixed—while there are concerns about the rise in fees and high rates of foreign firms, others thought that foreign firms will squeeze out domestic firms from the market and attract the best skills. Thus, the fears are related to the lack of competitiveness of domestic firms. There are also chances of the lack of reciprocity and concerns raised about the difficulties in signing mutual recognition agreements. Yet, benefits of opening up the legal services sector were highlighted. These include enhanced partnership opportunities, more specialized training and knowledge upgradation, employment creation, increased awareness of international best practices and increase in outsourcing to India, among others.
The authors carefully distinguish between the short- and long-term reforms, easing out the tasks of policy-makers. According to the authors, certain reforms can be implemented in the short run over 3 to 5 years while others would take a longer time frame: 5–10 years. Based on the primary survey and global best practices, the authors presented a road map for regulatory reforms and discuss how to strengthen the governance structure and build domestic capacity.
Overall, the book is first of its kind to provide a detailed analysis of liberalization of legal services sector in India. It will provide practitioners with a snapshot of this sector and enable the government to prioritize and implement reforms. This book can be of immense assistance to the Indian policy-makers and regulators. It is worth mentioning that the book has been released at an opportune time when service sector reforms are on the top of the agenda of the Indian government and legal services is likely to be one of the beneficiaries of the reforms. The government is planning to roll out inter-ministerial consultations to discuss services reforms, and this book has potential to be referred as a backgrounder for reforms in legal services.