India Business Law Journal –  April 2023

Ready, set, about-face!

Domestic opposition keeps foreign firms guessing

After more than a decade of “will they, won’t they?” and going back and forth, the Bar Council of India finally gave the green light for the opening of the legal sector to foreign law firms and lawyers. However, the announcement garnered mixed reactions from the Indian legal community, with a few leading Indian lawyers raising concerns about the manner and timing of the opening-up of the sector.

These law firms fear that foreign firms may engage in the surrogate practice of Indian law, and may also steal their talent. The bar council rules were also criticised for drafting errors and inconsistencies. Our Cover story highlights these important points, and examines the scope of the argument on all sides.

India is too big a market for global law firms to ignore, given that it’s also the fifth-largest economy in the world, with billions of dollars in M&A deals taking place annually. However, many Indian firms believe that domestic reforms are necessary to level the playing field, such as providing clarity on limited liability partnerships and allowing business promotion and market development activities.

Our What’s the Deal? looks at another area of the economy that the government has sought to liberalise, but also one where the process has been beset by challenges.

In January this year, India approved a plan to allow foreign higher educational institutions (FHEIs) to open campuses in the country as part of efforts to boost education and foster multidisciplinary research to strengthen the economy.

However, industry experts have raised concerns that the proposed rules are restrictive, and FHEIs will need to navigate issues including taxation, investment flow, and whether the foreign university will need to establish a local Indian entity.

This month’s Spotlight discusses the challenges faced by in-house counsel when building legal departments for startups. The Indian government’s focus on startups through its signature campaign, Startup India, has resulted in the recognition of more than 77,000 startups in the country. As startups grow, the need for a separate legal department becomes more acute to take on the responsibilities of compliance, contracts, risk management and dispute resolution.

The article examines the challenges of retention, development of in-house skills, cross-functional/country collaboration, and developing uniformity in work processes. It concludes with a discussion on tackling startup troubles, such as ensuring legal compliance to avoid issues during financial and legal due diligence.

Our Expert Briefing tackles a related issue concerning startups. That is, how investors can protect themselves from potential disputes between founders by establishing a comprehensive agreement anticipating possible scenarios. Due diligence on the relationship between co-founders is essential, and any hint of disconnect is a red flag.

If disputes arise, mediation is advisable before any dispute resolution provision is invoked. Mediation is a voluntary binding process, and the resolution is fast, confidential, and avoids public attention. If mediation fails, the agreement should provide for institutional arbitration with recourse to the courts for any urgent relief. Ultimately, the founders must keep the interests of the company above their personal feuds to find a solution based on shared interests.

This year’s Indian Law Firm Awards sees Shardul Amarchand Mangaldas & Co steal the show with its stunning overall performance, taking the title of Law Firm of the Year. Our report also identifies the top firms in 37 categories, including seven best overall law firms, individual practice areas and three best new firms.

Although established firms continue to dominate the largest matters, there are breakaways from large firms, which are gaining traction based on their hard-earned reputations among clients. Mid-sized law firms are also recognised for their legal expertise, commercial acumen and competitive pricing, making them an attractive choice. The comprehensive selection process for the awards reflects the opinions and experiences of legal professionals and clients from India and around the world.

In New safety net a surety, Puneet Gupta of Max Life Insurance, discusses the introduction of surety bond insurance products in India’s insurance sector, which is expected to contribute to infrastructure development and the country’s economic growth. Surety bonds offer a financial guarantee that a deal will be fulfilled according to predetermined and mutual conditions.

The article explains how surety insurance can assist in the execution of infrastructure projects at a faster pace, which will expand the road network, increase employment opportunities, and stimulate social and economic growth in India. The article also explores the different types of bonds recognised under the guidelines.