Indian firms beware

By Robert Sawhney, Managing Director, SRC Associates

We all know that India has a closed legal market, but that has not stopped foreign law firms from making money out of the emerging market. The fact that foreign lawyers are not permitted to practice in India (although many have worked out of hotel rooms), and the few liaison offices set up in the mid-1990s by firms like White & Case have now been closed, has not stopped foreign firms from benefitting from growing outbound activities and loosely-based alliances with Indian law firms.

While domestic law firms are probably right in demanding time before the Indian legal market is opened to foreign firms (i.e. to give them time to become more competitive), it seems inevitable that as India further integrates into the world economy the domestic legal
market will eventually open up. When and in what form is anyone’s guess. But, as China’s legal market has proven, given the right context and support, domestic firms can and will compete.

There are varying figures on the value of the Indian legal services market, ranging from anywhere between half a billion to one billion US dollars. Where there is agreement seems to be in the amount which goes to foreign law firms, which is estimated to be about half. This figure is likely to grow as Indian businesses continue on their outward FDI march and seek the help of international law firms, which have significant cross-border experience compared to the relatively sheltered Indian law firms.

Cashing in

Indian M&A hit a record US$48bn to date this year, representing a fourfold increase from last year, according to Dealogic.

Foreign law firms looking to benefit from the growing need for legal work in India have not been letting regulatory restrictions hold them back. They have been increasingly resourceful in generating business from the nascent market.

Some recent Indian M&A deals involving strong roles for foreign law firms include the sale of Primal Healthcare to Abbot Laboratories, which netted large roles for Baker & McKenzie and Stephenson Harwood.

Allen & Overy also scored two deals worth US$1.72bn, including Hinduja Group’s acquisition of KBL European Private Bankers from KBC Group.

Also notable is the US$1.34bn purchase of Anglo American Zinc by Hindustan Zinc, in which there was no Indian law firm involvement. Advisers on the Hindustan deal included Linklaters, A&L Goodbody, Dewey & LeBoeuf and Corpus Legal Practitioners.

Springboard Singapore

A number of foreign law firms run their India desks from Singapore, which has become one of the key trade partners of the country.

Indian businesses are, in turn, increasingly using Singapore as a springboard into markets like Africa, Cambodia, Indonesia and Vietnam. This investment takes a number of forms, including holding companies. Sectors receiving considerable attention include agriculture, food processing, mining and mineral sourcing.

The number of Indian businesses investing in Singapore is expected to double to around 4,000 by 2014, according to the Singapore Indian Chamber of Commerce & Industry.

Forging alliances

Foreign law firms are doing different things to create closer relationships with Indian firms.

Well-known ‘alliances’ include:

• Clyde & Co LLP’s association with ALMT Legal;

• Allen & Overy’s non-exclusive referrals relationship with Trilegal; and

• Clifford Chance’s alliance with AZB & Partners.

The Law Society of England and Wales has also been encouraging UK law firms to build closer links with Indian law firms, and UK firms which have done so include Marriott Harrison, Cumberland Ellis and Burges Salmon.

Other firms have created co-marketing types of relationships, where they deliver seminars and use other mechanisms to share their expertise and create business opportunities.

Ultimately, while one may need patience in building links with Indian law firms and understanding their culture, the growing importance of the Indian market for global trade will make it an ever-growing target for foreign law firms.