India Business Law Journal – February 2015

How long is too long to wait for change to kick in?

Governments across the world have been swept into power on the back of bold promises of change. But while such promises are a sure-fire way to capture the imagination of the electorate, they also run the risk of raising expectations to a level where they are almost impossible to meet.

Has India’s government fallen into this trap? The magnitude of the task at hand has always been daunting, but that didn’t stop people believing in Narendra Modi and his promise of change. Now, seven months after the euphoria and expectations began, the belief that India can be turned around has begun to fray at the edges.

If cynicism is not to take hold, the inspirational promises must be followed up with bold and effective action. The areas in which such action is required are countless, and one could easily forgive Modi’s government for not knowing where to start.

In terms of business law at least, a good starting point might be to overhaul the country’s antiquated labour laws, which have long frustrated domestic and international companies.

This month’s Cover story offers a poignant reminder of just how serious the problem has become. Our coverage tells the story of Nokia’s Sriperumbudur factory, just outside Chennai, which once boasted of being the largest handset manufacturing facility in the world. Now, mired in a tax dispute and excluded from the sale of Nokia’s mobile phone assets to Microsoft, production at the plant has ground to a halt. Yet Nokia is bound by India’s labour laws to continue paying its employees until the tax dispute is resolved.

A key problem, according to Ajay Raghavan, a partner at Trilegal, is that the government rarely gives permission for factories to be closed. “Seven or eight out of 10 cases are rejected or stuck in a time warp,” he says.

It’s not just factory closures that require government permission. Under the Industrial Disputes Act, 1947, establishments with 100 staff or more require permission to let go of just one employee.

Clearly this has to change if Modi is to succeed in his drive to revitalize the economy.

In last month’s issue of India Business Law Journal, we reported on renewed moves to liberalize India’s legal market and allow the entry of foreign law firms. Writing in this month’s Vantage point, Lalit Bhasin, the president of the Society of Indian Law Firms, explains why after “vehemently and successfully” opposing such moves for nearly two decades, he now welcomes the phased entry of foreign firms. He puts his change of heart down to improvements in the quality of services provided by Indian law firms, which he believes now equip them to “stand up to the competition from foreign law firms”.

While international law firms take stock of the opportunities that may present themselves in India, many Indian companies have focused their gaze on opportunities outside the country. In A busy corridor we shine the spotlight on an upswing of India-related transactions in the Middle East. “A lot of companies know they cannot expand in India” and so look outward, explains Jayshree Gupta, a partner at Baker & McKenzie Habib Al Mulla.

Singapore is another place that has seen increases in India-related transactions. This month’s What’s the deal? analyses a hybrid bond issue in the lion city from a Tata Group company. The deal required some out-of-the-box thinking to get past what Philip Lee, a partner at Herbert Smith Freehills, describes as the “slightly unique” aspects of Indian regulations.

Will this spur on more creative thinking? With Indian companies seeking to take on more debt, often to repay existing debt, chances are it will.

Rounding off this month’s line-up is a special report revealing the winners of India Business Law Journal’s 2014 Indian Law Firm Awards. The year gone by saw India Inc hold its breath during the run-up to the general elections, and then breathe a collective sigh of relief as Modi’s victory gave rise to hopes of change and the prospect of an end to the policy paralysis that had stifled the country for several years. Since then companies have been relooking at stalled investment plans and law firms have been competing for the new work.

To find out which firms finished the year ahead of the pack, our editorial team sought the opinions of in-house counsel and other qualified observers of India’s legal profession. Nomination forms were sent to thousands of India-focused in-house counsel and other legal professionals in India and around the world. Respondents were asked to nominate Indian law firms in each of the awards categories and to justify their nominations with relevant information.

For the third year running, our top award of Law Firm of the Year goes to Amarchand Mangaldas, which also receives 12 practice area awards. “[Amarchand] was fundamental to ensuring the completion of our transaction,” notes one happy client.

It was a strong year for India’s largest law firm, but one cannot escape the irony of Amarchand winning this award as it endures a period of uncertainty resulting from the high profile dispute between Shardul and Cyril Shroff, the brothers who own it.

Amit Chandra, the managing director of Bain Capital Advisors, observes in our coverage that “law in India is a very tricky business.” His observation, it seems, applies not only to the practice of law but also to the management of law firms.