(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)
By Jeff Glekin
MUMBAI Feb 24 (Reuters Breakingviews) - 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, corporates 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 liberalisation. 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.
-- An Indian court ruled on Feb. 21 that foreign law firms could advise on international law and take part in international arbitration while in the country. It said that visiting lawyers could work on a "fly in fly out" basis.
-- In its ruling, the Madras High Court in Chennai rejected a petition filed in 2010 by a local lawyer who accused a group of foreign law firms of illegally practicing law in violation of India's Advocates Act, which governs the country's legal profession.
-- Foreign law firms cannot open offices in India, advise on Indian law, or appear in Indian courts. The 2010 petition targeted other activities such as meeting with clients in hotels, hosting seminars, and participating in arbitration.
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(Editing by John Foley and David Evans)