India is an enticingly lucrative yet frustrating market for international law firms. Growing hugely it remains highly politicised and local firms are keen to protect their turf.

India is an enticingly lucrative yet frustrating market for international law firms. Growing hugely it remains highly politicised and local firms are keen to protect their turf. 2

Mention India to a lawyer at any sizeable British firm and you are guaranteed an animated response.

India, they will tell you, deservedly boasts of its long democratic history, progressive values and bright future as one of the world’s great economic powers.

But when it comes to the practice of law, British lawyers say, it foolishly clings to a backward and ultimately self-destructive protectionist system that blocks foreign law firms from setting up shop.

Despite gradual moves towards liberalisation and encouraging signs from Delhi, the question of whether — and to what extent — India will open up to foreign law firms was back on the agenda this week. The Bar Council of India, the country’s legal representative group, has reiterated its demands for the Indian Government to abandon its liberalisation plan.

Some lawyers in the UK dismissed the demands as sabre-rattling from a small group of Indian law firms fighting to secure minor concessions in a battle they have already lost. Others were less bullish, pointing out that India’s legal system remains highly politicised and that changing its rules to allow foreign lawyers to come and steal work from local practitioners is hardly a vote winner.

But regardless of their outlook, lawyers have been unanimous in their condemnation: protectionism is bad and prolonging it would be a mistake.

But why does India stir such a strong reaction from British lawyers?

In their quest to grow revenues and profits, European firms are disappointed to be missing out on an increasing amount of lucrative work coming out of India. With estimates of annual growth ranging between 7 and 9 per cent, its economy is one of the fasting-growing in the world. Even more importantly, the type of economic activity that European law firms are likely to profit from is growing even faster.

The firms want to work on large, cross-border deals. Last year, the value of acquisitions by non-Indian companies of Indian companies jumped 200 per cent. Since 2000, the value of takeovers by foreign buyers has grown from $4.4 billion to more than $30 billion so far this year, according to Thomson Financial. (This year’s total has already passed last year’s despite fears of a global slow down.)

There is a clear picture: European law firm’s clients are buying in India but protectionist rules means their fees are going to Indian law firms.

To be fair to the firms, their desire to get their feet under negotiating tables in Delhi and Mumbai goes beyond simply growing their bottom line. By not being in India, they are also letting their clients down. Yes, there is money to be made in India, but the firms say they are only responding — as good lawyers should — to their clients’ needs.