India market finally opens but caution is the watchword

News of the liberalisation of the Indian legal market took almost every observer by surprise. Although rumours had circulated for years that it was on the agenda, that discussions were underway, watch this space, etc, when the announcement finally did come it was somewhat out of the blue. And despite some belated, general, non-specific noises of optimism from the press offices of international firms (and the Law Society of England & Wales), the response has been muted.

It could be that everyone was caught on the hop and is still calibrating thoughts and strategies but perhaps also the lustre of one of the biggest Asian markets is not as bright as previously thought and there are various reasons for this.

It is stating the obvious but India is a huge country with a large diversified legal market. By contrast, when South Korea opened its doors in 2013 the capital Seoul was the only viable destination for international firms. While Mumbai and Delhi seem the obvious first ports of call, India has many other large industrial and financial centres. The Indian legal market is complex and idiosyncratic, and difficult to navigate for outsiders.

Most major international firms active in India will have existing relationships with local firms and lawyers that they know and trust. The current proposal is that international firms will only be permitted to advise on non-Indian law. Unsurprisingly, much has been made of the potential for increased international arbitration work from India, especially with its relative proximity to the regions major international arbitration centres in Singapore and Hong Kong. Bearing all of this in mind, is a large permanent presence on the ground required?

Another unavoidable truth is, the market simply isn’t lucrative compared with the other leading economies in the region. Adjusting price points to accommodate offices in new locations or second-tier markets is something firms are increasingly reluctant to do.

The most likely initial scenario is that entrepreneurial, mid-market firms with existing India practice groups will set up satellite offices, most likely relocating someone internally or hiring a familiar face embedded in the market, and strengthening bonds with local firms while widening their client bases. Minimal outlay, minimal risk. Others will be content to adopt an “after you, sir,” approach and watch how things develop. However, as history tells us, if some of the big players do decide that India is a market they simply cannot ignore despite all of the mitigating factors, expect to see a trickle become a flood.

Published by Hughes Castell

Asia's Premier Firm for Global Legal, Compliance, Risk and Regulatory Executive Search

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