Lawyers want RBI to plug gap, block foreign companies’ entry

MUMBAI: Bar Council of Delhi (BCD) has asked the government to direct the Reserve Bank of India (RBI) to plug what it called a loophole in its March 29 directive “which may lead to the backdoor entry of foreign law firms in India.” The lawyers’ body is of the view that the RBI’s direction, as well as an amendment to Special Economic Zone (SEZ) Rules in India, could be used by foreign law firms.

In a letter to the Prime Minister on July 29, the BCD said the central bank’s March 29 directive said that for the establishment of the branch office, liaison office, project office or any other place of business in India, foreign entities rendering professional or consultancy services can operate after the RBI grants them an approval under the Foreign Exchange Management and Regulation Act.

“We have serious objection to the decision to permit foreign law firms in Special Economic Zones (SEZ) area in India unilaterally without the concurrence of the parent body entrusted with the responsibility of the legal profession in India,” said the BCD in its fourpage letter. “The decision to permit foreign law firms to open an office in the SEZ area in India, being highly arbitrary, is uncalled for and contrary to the interest of the legal fraternity in India has wider implications.”

On January 3, 2017, the government brought an amendment in the SEZ Rules which allowed foreign legal and accountancy services to operate from SEZs. “In the Special Economic Zones Rules, 2006, in Rule 76, for the words ‘professional services (excluding legal services and accounting) rental/leasing services without operators’, the words ‘professional services, rental/leasing services without operators’ shall be substituted,” said the amendment.

“We want the government to direct the RBI to withdraw the ‘Master Directions’ and also the amendment of rule 76 of SEZ Rules in so far as they relate to the legal profession directly or indirectly,” said KC Mittal, chairman of the BCD.

The BCD has also directed the Big Four audit and consulting firms not to offer legal services in India. In May, BCD had directed lawyers affiliated with KPMG, Price WaterhouseCoopers (PWC), EY and Deloitte India to refrain from practising law until further order.

BCD took up the complaint filed by the apex body of the law firms, Society of Indian Law Firms (SILF) against major audit and accounting firms practising law. Now, the BCD is expected to hear the matter further on August 23.