Can Indian law firms remain independent and retain quality clients after foreign law firms enter? Dennis Unkovic argues they can
Over the past year, Prime Minister Narendra Modi has launched a number of bold initiatives designed to fundamentally change how the world views India and how India views itself. One “Modi initiative” will provide access to the Indian legal market to rapidly growing and aggressive foreign law firms, which are currently barred from practising law in the country.
I knew that change in the Indian legal market was finally imminent after reading an insightful article titled “Road Map for Reform”, by the well-respected president of the Society of Indian Law Firms, Lalit Bhasin (India Business Law Journal, February 2015). In it, Bhasin reversed his long-held view that India is not yet prepared for foreign competition in its legal market and instead embraced the view that this trend is inevitable. According to Bhasin, “Indian law firms are now ready for a phased sequential approach to the entry of foreign lawyers and law firms”.
Now that the opening of the Indian legal market over the next few years is inevitable, India’s leading law firms face a stark choice: remain independent or elect to merge with certain “magic circle” firms or other large multinational law firms. Either choice carries risks.
Since the mid-1980s, I have travelled extensively throughout Asia and India, working on behalf of multinational companies. I have seen many dominant Indian law firms which existed 30 years ago be replaced by more internationally focused firms. Some analysts now predict that most of the larger remaining national firms in India will eventually surrender their independence and become the Indian branch office of a multinational law firm. I respectfully disagree with this analysis based on historical trends from other large legal markets.
Having observed the rapid evolution of the Chinese legal market over the past decade, as well as the response of quality German firms to increased international competition, I believe there are solid reasons why choosing independence is an attractive option for Indian law firms. The experiences of China’s and Germany’s legal markets – as summarized below – can provide a helpful model of what we can expect in India.
National firms are more in tune with local culture: Even as the world becomes more interconnected, major countries such as India and China possess unique cultures and legal systems that national law firms understand, making them better prepared than international firms to interact effectively with domestic clients. Beginning in the 1990s, Chinese companies flocked to retain foreign law firms operating in China, especially when seeking advice on doing business outside China. However, over the past eight years, Chinese law firms have grown larger and more sophisticated, and as a result Chinese companies have been increasingly selecting local firms over the large foreign firms. Given the choice, Chinese clients prefer to work with lawyers with whom they are comfortable, and that familiarity is something the local Chinese firms provide. I presume that Indian clients may react in similar fashion.
Affordability: Aside from sophisticated capital or banking-dominated transactions that demand certain technical skills, national law firms can handle most transactional legal matters at significantly lower costs than the larger global firms. The affordability of national firms is a basic fact that is unlikely to change.
Benefits of networks: Over the past several decades, international lawyer networks have emerged as a way for mid-size and regional law firms to expand their reach throughout the globe without having to merge into a multinational global firm. Indian firms which wish to remain independent but also want to be able to refer their clients to respected firms for cases and transactions in different jurisdictions may find that joining an international lawyer network is the ideal solution.
One size cannot fit all: In markets where leading national law firms have merged with larger international law firms, top lawyers are often seen leaving the resulting mega-firms in order to set themselves up in smaller but sophisticated practices. Not every lawyer finds that a global firm offers the kind of personalized environment in which they want to practise law. Also, clients often follow the lawyers who represent them and have no specific loyalty to the firms for which they work.
Domestic clients prefer national firms: In my experience, mid-sized companies (as opposed to Fortune Global 500 companies) in need of legal representation are less willing to use larger international law firms for a variety of reasons and so choose to remain with national firms. For example, in Germany, companies (both public and private) often prefer to retain a quality German firm for personal and corporate representation.
No single factor controls whether a national law firm presented with a highly attractive financial package should elect to merge into a global law firm. What is clear to me is that there will still be plenty of room for a national law firm in India to operate independently and retain quality clients. National law firms which remain independent and are members of quality global legal networks will continue to receive significant inbound legal work from around the world. It will be interesting to watch India over the next five years and see how the Modi initiative plays out.
Dennis Unkovic is the chairman of Meritas (www.meritas.org), a global alliance of 173 independent, full-service law firms in over 80 countries, and a partner at Meyer Unkovic & Scott (www.muslaw.com).