In March, the Bar Council of India (BCI) announced tentative plans to liberalise the country’s legal services sector by opening up the market to foreign entrants. This would be facilitated through a ‘fly in and fly out’ basis, to allow foreign lawyers to advise on matters of international and foreign law, with a ban on most services providing advice on Indian law.

Further, the invitation to practise – at least to some degree – would depend on whether there’s a reciprocal arrangement for Indian lawyers and law firms to provide services in the host jurisdiction of those keen to enter the Indian market. Despite these limitations, several major firms have reportedly already expressed an interest in setting up offices in India.

While Marmor believes that the announcement represents ‘a breakthrough for those looking to develop much stronger links in India from a legal industry perspective’, he says ‘the Indian legal sector is going to be able to export its offering to a much greater degree, and benefit from this development, given the need for reciprocity’.

Ramesh K Vaidyanathan, Co-Chair of the IBA Asia Pacific Regional Forum and Managing Partner at Indian commercial law firm Advaya Legal, says the BCI’s plans are a step forward and should lead to more cooperation, information sharing and healthy competition, creating better value for clients. The long-term effects of these rules, he says, will depend on how Indian law firms adapt and innovate in response to the challenges and opportunities brought by the changes.

But Vaidyanathan adds that the BCI’s approach ‘doesn't go far enough for a disruptive impact’. While in his view the move gives hope and much needed clarity on the overall regulatory approach towards the entry of foreign law firms in India, ‘foreign lawyers in India can only work on non-litigious matters such as giving legal advice, contract drafting, international arbitrations, and dealing with intellectual property issues’. Vaidyanathan adds that ‘they can’t appear in Indian courts or do other specific tasks like conveyancing or title investigation so they’ll need to partner with Indian lawyers in order to offer a full range of services in India’.

Such entry, he says, is subject to registration and is largely contingent on reciprocity with countries where Indian lawyers are also permitted to practise. This means that only select foreign applicants may be granted entry at the BCI’s discretion after the body considers the impact on the Indian legal market and relations with the applicant’s home country.

‘The rules admittedly aim to make India an attractive location for international commercial arbitrations by allowing foreign clients to have their own lawyers involved’, says Vaidyanathan. ‘Although this is good news for foreign clients, it’s not enough [of a change] for India to compete with other popular seats for arbitrations.’

A result of the proposed changes would be that foreign clients and multinational companies would not be able to choose foreign law firms for work in India unless they have a local presence and proven expertise because they cannot provide complete legal services, Vaidyanathan says. Individual advocates practising in litigation or before Indian authorities, however, are untouched by this development and, believes Vaidyanathan, may in fact benefit from more appointments.

Despite the odds, foreign law firms that opt to independently establish themselves in India ‘are certain to give Indian law firms increased competition, potentially attracting clients willing to pay for top services’, he says. These firms may also seek to hire from the Indian talent pool by offering attractive salaries and job opportunities, raising the overall bar for Indian practitioners. Big Indian law firms, however, ‘would prefer to collaborate or merge instead of compete, which is the most harmonious way forward and the inevitable trend we predict’, says Vaidyanathan.   

Stephen Revell, Co-Chair of the IBA Law Firm Management Committee, believes the BCI’s announcement has been ‘massively overhyped’. He says that these plans may never happen given the level of opposition, and adds that ‘allowing foreign law firms into India has been talked about for decades but nothing has ever happened. This latest announcement and the reaction to it does little to suggest that anything actually will – although it is obviously an encouraging move at one level.’

The BCI was contacted by Global Insight for further comment, but had not responded at the time of publication.

Revell says the Society of Indian Law Firms, an umbrella body of top Indian law firms, is likely to contest the move. There are concerns the move would be inconsistent with India’s Advocates Act 1961, which is the legislation that underpins the rules about how lawyers and law firms operate in the country – namely, that only Indian citizens can practise law in India – and the decisions of the Indian Supreme Court. ‘If changes are going to be made, then existing legislation appears to need to be amended, which could take years’, says Revell. ‘If I was a foreign law firm thinking of setting up in India, I’d need much greater clarity about the range of services I can offer, what the impact of “fly in and fly out” would be, how long the licence to practice may last, and when the changes might come into effect.’

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In early May at a high-level meeting, the Chinese central government placed population and education among its top priorities for the coming years. The meeting’s timing was uncanny – shortly before, the UN had announced that India had officially overtaken China as the world’s most populous country. India’s population is over 1.425 billion, surpassing China for the first time since 1950 when records began. Meanwhile, China’s total population dropped by 850,000 persons in 2022 to 1.42 billion, marking the first such decline in over 60 years. In the same year, China’s national birth rate fell to a record low of 6.77 births for every 1,000 people – among the lowest globally.

China’s Central Financial and Economic Affairs Commission has acknowledged the country’s demographic challenges. The government will introduce specific measures this year to incentivise childbirth, such as cutting the associated costs of pregnancy, as well as substantial reductions in childcare and pre-school education fees. The government has also vowed to promote female employment and tackle workplace discrimination against women for having children.

In 2021, amendments were made to China’s Population and Family Planning Act to allow couples to have three children and to increase the amount of maternity and paternity leave for new parents. However, more drastic changes are needed to remove barriers preventing the younger generation from having more children. The major concerns for young people in China are high housing prices, stagnating wages, long working hours, high medical care costs and job discrimination against women.

Inevitably, businesses will face more competition in the recruitment market as the talent pool becomes smaller. Businesses have a commercial incentive to enhance employee welfare and provide equal opportunities and better support for female employees, so that they can attract and retain talent. However, all the trends point towards the costs of operating businesses in China becoming higher. ‘Employers have a responsibility alongside the Chinese government to play their part in supporting employees in the best ways they can’, says Caroline Berube, Co-Chair of the China Working Group of the IBA Asia Pacific Regional Forum and Managing Partner of HJM Asia Law & Co in Guangzhou, China. ‘China’s aging and decreasing population will mean businesses and law firms alike will no longer be able to simply take for granted a ready supply of local talent for their business operations.’

The government must also invest in and improve its aged care system. It’s estimated that those aged over 65 now make up nearly a fifth of China’s population. The UN predicts this percentage will rise to nearly 40 per cent by 2050. The business and legal communities in China have spotted new opportunities. ‘Whilst China’s shrinking and aging population are a concern for businesses and law firms alike, it also creates a market [in assisting and helping] the aging population in the healthcare and mobility sectors, for example’, says Berube.

‘China will still be the world’s first or second most populous country for a long time’, says Gavin Sun, an executive partner at DeHeng Law Offices in Beijing. ‘The size of China’s middle class will continue to expand, so the demand for better services and higher standard of living will increase. There’s still huge potential for businesses, particularly in the services industry, such as healthcare, education, entertainment and sports.’

For the manufacturing sector, which is already struggling to recruit workers, a shrinking population will threaten its future growth. However, under the government’s current five-year plan, the manufacturing sector is undergoing a transition – from a low-cost, low-margin and labour-intensive model to one of higher end, higher margin and higher value-add. Here, foreign investment is encouraged to upgrade China’s industrial and supply chains.

Immigration is another tool governments can utilise to tackle demographic challenges. Nicolas Rollason, Chair of the IBA Immigration and Nationality Law Committee and Head of Immigration at UK law firm Kingsley Napley, explains that China opened up its immigration policy in 2017, albeit relatively quietly, but the take up rate has not been high. ‘Similar to Japan, language is a natural barrier to attracting highly skilled migrants to China’, he says. ‘There may be incentives for more low-skilled immigration, but there needs to be much more on offer to attract high-earning talent who want to start a family and bring up their children in China and stay for the long-term instead of expat employees who will leave after a period of time.’

Rollason adds that the problem won’t be solved by changing the immigration policy alone. ‘It is more to do with how you can attract foreign businesses in China, the commercial incentives, and the geopolitical dynamics’, he says. ‘You need to create an environment in which companies are happy to grow business there and feel their businesses, people and intellectual properties are protected.’

Maintaining a competitive wage is another factor relating to the success of a country’s immigration policy, as Yohsuke Higashi, a partner at Japanese firm Mori Hamada & Matsumoto, highlights. ‘The Japanese government has tried to attract high-level talent from abroad, but it has not been so successful’, he says. ‘One of the reasons is that the pay level in Japan may not be as competitive as US companies or other foreign companies. Although the average monthly salary level has been increasing, as the exchange rate of yen weakens, the pay level is getting lower compared to other countries.’

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