In this blog post, Sakshi Gupta, a Tax Legal Associate pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, describes the new trends in the Indian Legal Service Marketplace.
Legal Service Marketplace
The demand for India’s legal services is growing rapidly with the growing trend of many foreign and multinational companies investing in India and many Indian companies entering into cross-border transactions with foreign companies. The Indian legal services market is growing at a considerable speed. The expansion of the Indian legal services market owes its current position to increased level of globalization and trade in goods and services between India and other countries.
Law is today both a business and a profession. Legal practice is openly moving towards adapting these changes as technology and numerous other factors are challenging the initiative and creativity of lawyers.
The good news is that the-
- Legal profession is adapting quickly and innovatively.
- Creating new patterns of practice.
- Developing detours around regulatory rules that might stifle growth and competition.
- Finding resourceful methods of handling the increasing costs of practice and overheads.
- Adopting new tools of management as competition from professional service firms increases. [1]
The legal service marketplace also needs Proper Regulations that provide the contours within which the sector can operate.
- The need for regulations in the legal service marketplace is furthered by asymmetric information flow between consumers and suppliers of legal services which make it difficult for consumers to fully evaluate the quality of legal service provided.
Balanced regulations can, therefore, facilitate the growth of the sector by providing certainty to consumers, a level playing field to service providers and opportunities for innovation.
- Laws and regulations form the backbone of an economy. They play a critical role in protecting the social and property rights of citizens and institutions.
A well-functioning legal service marketplace facilitates the implementation of these laws and regulations and hence is fundamental to the harmonious growth of an economy.
The profession of advocates in India is governed by the Advocates Act, 1961 and also the rules prescribed by the Bar Council of India (BCI), which is the regulatory body for the legal profession of India.
India is a member country of the General Agreement on Trade in Services (GATS), however, it has not taken enough steps to liberalize the legal service sector.
General Agreement on Trade In Services (GATS)
India is a member country to GATS or General Agreement on Trade in Services which came into existence after the Uruguay Round of Negotiations and the agreement came into force on January 1, 1995, after the establishment of the World Trade Organisation (WTO).
Prior to GATS, the General Agreement on Tariff and Trade (GATT) was only in existence and it provided for only trade in goods. When the World Trade Organisation (WTO) came into existence, there were several other agreements which were annexed to it, one of which was the GATS.
Because GATT came into existence much before GATS, the legal profession has largely been aware of the trade in goods rather than trade in services.
- GATS applies to services sector and applies to trade in all kinds of services ranging from engineering, architecture, accounting, tourism, investment and also legal services.
- The GATS provides for different modes of supply of services through its framework.[2]
- For instance, in cases of cross-border supply, both the service supplier and the user remain in their confined territories and only the service crosses boundaries. E.g. a lawyer providing legal advice through email, or phone, etc.
- Similarly, services can be obtained by way of consumption abroad where for instance, an Indian company travels abroad for seeking legal advice.
- The third kind of provision of service can be where, for instance, the service provider establishes a commercial presence in the country where it seeks to provide service. Therefore, an Indian law firm, having a branch office in the UK, would be a good example of this.
- Cross-border trade and the temporary movement of natural persons are the two most important modes of supply of legal services under GATS. Because of this, firms know where they stand with respect to dealings with foreign clients.
- Every member of GATS has the right to demand justification from another with regard to any deficiency in commitments by any other member state and can have recourse to a dispute settlement process where a member does not conform to its commitments.[3]
Essential Read: Modes of supply under GATS
Nature of Legal Services
At present, there are twelve sectors classified by GATS under which services can be provided.
One of the categories is Provision of Business Services which is further divided into six categories. One of these sub-categories is providing of professional services, which also includes providing the legal services.
According to the above-mentioned categorization, legal services can include within its ambit –
- Legal advisory and representational services.
- Drafting or legal documentation with respect to criminal law.
- Pleading before a court of law and out of court work like interviewing the witnesses.
- Pleadings before a tribunal or a statutory body functioning as an adjudicatory authority.
- Drafting of commercial contracts also come under legal services.
The legal service marketplace has witnessed steady growth in recent times as the focus in recent times has been on corporate restructuring, privatization, cross-border mergers and acquisitions, intellectual property rights and competition law. Most of the demand for legal services stems from the areas of business law and international trade.[4]
Typical market access limitations in the legal sector include –
- Restrictions in the movement of professional.
- Managerial and technical personnel.
- Restrictions on the form of incorporation.
An important aspect regarding law is that it has a national character because it is part of local culture and life. This creates the main obstacle to cross-border trade in legal services.[5]
However, so far as India is concerned, there is no prescribed definition for ‘legal services’ and hence, being a member of GATS, India is obligated to follow the definition provided in the WTO classification.
Trends Reshaping the Legal Service
Traditional legal services are losing their luster. People are steadily turning away from the good old lawyers and law firms and moving toward solutions powered by technology.
But what is the reason for such deviation?
This is so because the alternative legal service providers are offering more efficient and cost effective solutions to consumers and they have taken a stronghold on the market as a result.
After a basic analysis, following two primary trends occurring in the market today could be considered a reason of reshaping the legal industry.
- COMMODITIZATION [6]
Basic legal services are becoming a commodity, driven by the demands of consumers. The market wants easy, accessible, efficient, and affordable services. Today online legal service providers are better at delivering these things than most lawyers, irrespective of the quality of the actual legal work.
The Internet has changed the game by streamlining services and opening up a wealth of free, easily accessible legal self-help and information.
The trend of commoditization will only become stronger as these online alternatives make improvements to their products and services and gain an increasingly large share of the lower half of the market.
Lawyers will have to change the way they do business to serve these types of clients in order to keep pace with the changing trend.
- SPECIALIZATION [7]
The days of the general law practitioner are coming to an end. To survive the massive shift occurring in the legal marketplace, one will have to become a specialist. The law is so broad and varied across each different industry and vertical that it is difficult to survive as a general practitioner and not an expert in anything.
Thus, it has become a need of the hour to focus on one niche area of practice that these alternative service providers are unable to address.
Few examples of interesting, upcoming areas of law that are much more narrowly focused than the traditional fields include:
- Internet and digital media
- Startup law
- Cyber security and privacy
- Technology patents and IP
- Legalized marijuana
- Healthcare
Generally, when new industries emerge in the business world, the law closely follows them. So basically, the overall business market is shifting to discover good future niches or prospects for legal practice are. Thereby studies are being carried up on these industries and especially on the related developments occurring in the law.
Globalization in the Legal Profession
Globalization brought about a revolution in international trade with increasing participation and involvement of countries and greater access to domestic economies. The implication of the same on the legal service marketplace has been both quantitative and qualitative.
The past decade has been mini-revolution in the legal service marketplace with the greatest legal impact on corporate legal arena. Activities in project financing, intellectual property protection, environmental protection, competition law, corporate taxation, infrastructure contract, corporate governance and investment law were almost unknown before 90’s. [8]
A number of law firms capable of dealing such work was very few. It is evident that need of professional service has been tremendous in the legal service sector. In last few years, Law Firms, in-house firms and individual lawyer’s expertise in providing legal services in the corporate sector has increased by several times.
These new Law Firms primarily engage and loan instrument, writing infrastructural contracts, power contract, drafting of project finance, contracts, finalizing transnational investment, joint venture and technology transfer contracts. This is a discerning shift in the disposition of emerging legal sectors towards settling disputes through ADRS rather adversarial litigation mode of dispute resolution.
Globalization has thus expanded the internal and external demand for legal services. Today in legal services is on inevitable fact. At the same time significant for a progressive development of the legal profession in India in this era of Globalization.
Obstacles: Challenges Ahead
The future of many Indian firms is not bright enough, as for them growth and expansion remain a dream. Many firms find growth a day dream because of the challenges in managing their talent, creating and implementing business strategies, implementing proper processes, and instituting business support functions. [9]
Also, the prospect of liberalization is not universally welcome in the Indian profession. Many firms worry about the impact of liberalization on the industry, fearing that it may suffer the same fate as the country’s accounting firms. [10]
Many law firms also remain cautious about setting up alliances with foreign counterparts, as they could lead to the loss of referrals. An International firm, thus, has to consider the possibility of lost opportunities to build relationships with other local firms. The role of cultural differences and their impact on each party’s expectations of these relationships is also significant.[11]
The foremost and main challenge for the Indian legal marketplace is the loss of its business to foreign law firms based in Dubai, Singapore, Hong Kong and other countries where lawyers have been advising international clients on cross-border transactions with India without any fear of criminal prosecutions in India. The Indian legal marketplace is losing business which could easily be kept within India by allowing foreign lawyers to at least practice foreign law in India.
Also, the profession is losing its best talent to foreign law firms based in Singapore, Hong Kong and other countries, where again they may have been advising clients on transactions with India.
Many international law firms such as Linklaters, Clifford Chance, Allen and Overy and Jones Day recruit Indian law graduates, either as partners, associates or trainees in their branch offices in Singapore and Hong Kong, resulting in a ‘brain drain’ from India.[12]
Many challenges lie ahead for the Indian legal sector whether liberalization takes place or not. If the BCI and the Indian government decide to delay or decline to liberalize legal services in the near future, the Indian legal marketplace faces difficult challenges in competing at an international level or to build the confidence of the international legal community in the Indian legal marketplace.
How do you think Indian Legal service marketplace can brace up to face the challenges? Drop a comment & share the article.
References –
[1] Hemant Batra, “Legal Process Outsourcing In India”, 1(1) ILJ 2007, Available athttp://www.indialawjournal.org/archives/volume1/issue_1/article_by_Hemant_Batra.html (Last visited on November 21, 2016)
[2] GATS, 1995
[3] Ibid.
[4]Amrit Subhadarsi, “The Indian Legal Services Market and GATS”, Available at http://www.lawctopus.com/academike/indianlegalservicesmarketgats/ (Last Visited on November 21, 2016)
[5]Ibid.
[6] Aaron George, “2 Trends Reshaping the Legal Industry”, Available at http://blog.lawkick.com/2trendsreshapinglegalindustry/ (Last visited on November 21, 2016)
[7] Ibid.
[8] Supra note 1
[9] Ibid
[10] Ibid
[11]Bithika Anand, “Current & future trends in the Indian legal services marketplace”, Edge International review, Available at http://www.edge.ai/wp-content/uploads/2014/05/india_marketplace.pdf (Last Visited on November 27, 2016)
[12]Amanpreet Chhina, “Liberalisation Of Indian Legal Services: Politics And Challenges”, 12(2) OUCLJ 2013
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