Indian currency is checked at a bank in Allahabad. Foreign lawyers will now be allowed to practise -- and make fees -- in India on a fly-in, fly-out basis.Jitendra Prakash/Reuters
Forget flying doctors – India has just given the green light to flying lawyers. Foreign practitioners can now work out of their hotel rooms without fear of being arrested, so long as they stick to international law and observe a "fly in fly out" principle. This clarification is overdue. India can gain much more by relaxing the rules further.
India's ban on foreign lawyers was drafted in the 1960s to protect domestic lawyers. Foreigners are still forbidden from setting up shop. In practice, they already meet with clients in hotels, host seminars and participate in arbitration. A ruling on Feb. 21 makes that official.
The remaining curbs could stunt rather than help native firms. Lawyers like Zia Mody, Cyril Shroff and Rajiv Luthra are among the world's highest paid, and their three firms dominate the domestic market. But Indian executives complain of slow service, insufficient scale and a lack of specialism. For large transactions, corporations end up looking overseas, and young lawyers prefer to work in London, New York and Singapore, where salaries are higher and firms less family dominated.
In the 1980s India's industrial giants violently resisted liberalization. But it was foreign competition that spurred the likes of Tata and Birla to become world class.
And so India misses a trick. With democracy, a common-law heritage, and a low-cost, high skilled services sector, the country could be Asia's leading legal hub. In China, where foreign law firms can open offices, the result has been a rising generation of highly skilled, internationally minded local lawyers, many of whom later opt to return to local firms.
The opening of the sector would also be a useful bargaining chip for India to play in ongoing Free Trade Agreement talks with the European Union, where the EU wants to see a freer services sector.
Even without big reforms, the system is changing slowly. New firms are trying to break the dominance of the big three partnerships. But it's not easy for small law firms to raise capital for growth on their own. India has become a world leading services hub. Its legal services sector could lead the world too.