India Business Law Journal – March 2012

Opportunities amid crisis

The world held its breath while Europe bailed out its troubled brethren

For now the euro appears to be safe, but uncertainties persist and the turmoil in Europe remains a cause of concern in India. One of several sectors affected is the apparel industry, where companies are grappling with the risks of doing business with buyers that may be experiencing financial troubles. Some have already gone bankrupt and defaulted. It is vital that companies “read the fine print” of all documents, warns Rahul Gupta, the head of the Clothing Manufacturers Association of India.

As this month’s Cover story reveals, the challenges thrown up by the eurozone crisis have legal implications for Indian as well as European companies. But is it all doom and gloom? Perhaps not. For as we report, the crisis has opened up opportunities for Indian companies in a range of sectors to pursue inorganic growth by acquiring distressed assets in Europe at rock-bottom prices.

Some have taken advantage of this, while others are sitting it out. Siddharth Pai of TPI, a global technology advisory firm, believes Indian IT companies are “sitting on cash and they could do well to invest more in Europe”.

But some Indian companies are eyeing up more adventurous destinations for their foreign forays. As we report in this month’s Intelligence report (Exploring new pastures), a growing number are finding opportunities within the diverse economies and regulatory regimes of Africa. Indian investors are providing products, services and infrastructure to fulfil the needs of an emerging continent. As they do so, they are also beginning to exploit Africa’s natural resources.

The pioneers of Indian investment in Africa are clearly demonstrating high levels of creativity, innovation and adaptability. Yet writing in this month’s Vantage point (A burst of creativity), Raman Roy, the chairman and managing director of Quatrro, expresses his concerns that such traits are all-too-often suppressed back at home. Roy is worried that the competitive nature of education in India and the resulting preoccupation with academic grades is creating a generation of graduates who are too “bookish” and lacking in creativity. While India is renowned for its innovation and entrepreneurialism, in many cases “entrepreneurial ideas are not being allowed to blossom,” he says. Roy calls for the creation of “an environment that puts a premium on creativity and innovation”.

In this issue’s What’s the deal?, we focus on indemnity provisions. Such provisions are routinely included in all kinds of contracts, but are often misunderstood and may be of little help unless drafted carefully. Parties to a contract may have different reasons for seeking indemnities, and the provisions must be drafted to reflect this. It is also vital that unforeseen and unwanted obligations are not inadvertently inserted while drafting and negotiating contracts. Clearly, this is a task that is best left to the experts. But can the cost be justified at a time when most companies are under pressure to rein in their legal spending?

Faced with such challenges, many international companies have turned to legal process outsourcing in an effort to cut their legal bills without compromising on the quality of their legal advice. In India, however, the trend is running in the opposite direction, with many companies beefing up their in-house legal teams and reducing their use of law firms (Calling the shots). Samuel Mani Kallupurakal, the head of legal at Infosys, calls this the “law firm within a company model”. It entails building small armies of in-house lawyers who handle just about everything except high-stakes litigation and certain aspects of complex M&A deals.

As a result, in-house lawyers are becoming more prominent in the senior management teams of many Indian companies and assuming a greater role in strategic decision making.

Some like B Gopalakrishnan, the head of legal at Axis Bank, believe that as the conscience keepers of the company, in-house counsel should stay at arm’s length from the commercial heart of the business. “We assist the business department but that does not mean that we have to don the mask of the business department and say everything is correct,” he says.

Another group of lawyers who are often kept at arm’s length from the decision-making process – both in law firms and companies – is women lawyers. This is particularly noticeable in the West. In 2010 only 17% of partners in the top 50 US law firms were women. The picture is almost as bleak in the UK. But how does India fare?

An investigation by India Business Law Journal reveals that Indian law firms actually do better than their Western counterparts in terms of the representation of women at partnership level. Indeed, at some of the country’s largest law firms, more than 30% of the partners are women. More surprisingly, women who have got there see gender as a non-issue. “If you know your job, it doesn’t matter any longer whether you’re male or female,” says Charandeep Kaur, Trilegal’s first woman partner.

Nevertheless, as our investigation reveals, for many women the glass ceiling continues to be impenetrable. Law firms struggle to retain their female talent and women lawyers tell of little support from employers, especially while coping with long hours and the demands of a young family.

The giant strides made by India’s more successful women lawyers may be in vain unless the younger women are mentored and helped to stay on in the profession. Will India’s corporate law firms be up to the challenge?