Abstract
Globalization of Legal Services and Regulatory Reforms (published by SAGE) fills a much needed analytical space in the discussion of Indian services sectors, especially professional services. Previous works related to the trade policy aspects of professional services focus either on the political economy aspects of professional services or on the technical aspects of trade negotiations. A comprehensive treatment that investigates the fundamental linkages of domestic regulation, domestic industry conditions, institutional features and the political economy and its relation to trade policy and trade negotiations was missing. This work by Rupa Chanda and Pralok Gupta fills this void, and provides extremely important insights that extend beyond legal services to other professional services.
The book is even more timely because there has been a growing perception that Indian professionals in legal and accounting services, among others, are especially vulnerable to foreign competition, given that the global giants in these sectors hail from Anglo-Saxon countries (i.e., USA and UK), and given that the commonality of legal and regulatory traditions and the language of India shared with these economies deprives Indian professionals of even the nominal protection afforded to their counterparts in Brazil, China or South Korea.
The first two chapters of this book provide a detailed overview of the international landscape that defines professional services, and specifically, legal services. Chapter 1 fleshes out the various initiatives and dialogues related to developing a global architecture of regulation of professional services that have largely been met with resistance from professionals in almost all the countries. The authors present a balanced view that provides the advantages of national regulation that is determined by the associations or institutions that represent the professionals themselves in maintaining standards and accountability, and in adhering to the specific peculiarities of a particular country. This is balanced by a discussion on how ‘self’ regulation can lead to the creation of entry barriers and provides professionals benefiting from such barriers through increased ‘monopoly’ rents. A key missing piece of this discussion that deserved a slight more detailed discussion is the relationship between which aspects (or one might argue, which tasks) within a profession are regulated and through which instruments. For example, in legal services, the instruments of regulation for representation and litigation tasks are fundamentally different from the instruments of regulation for consultation, arbitration and advisory functions. Some of these tasks, for example, the type of work being done through legal process outsourcing (LPOs), are not even considered as ‘legal services’, falling under a more generalized category of management consulting or research and development services.
The key takeaway of chapter 1 is that unlike some other services, for example, insurance, where there is a greater ease and coherence in developing the overarching global disciplines, professional services offer a much more challenging ground. Unlike the more standardized services, such as insurance, where globalization has led to even more standardization of services and products on offer, the fact that regulating a ‘professional service’ is akin to regulating the individual, who provides the service and makes the political economy of regulation a very complicated area of reform.
Chapter 2 goes over what is a familiar ground to the trade specialists, investigating multilateral liberalization of professional services under the General Agreement in Trade in Services (GATS), and some of the more ambitious trade liberalization of professional services in the agreements such as the NAFTA. However, the concise and focused discussion of the disciplines that evolved in these agreements and their impact would be of interest to a lay reader. Chapter 2 also provides a discussion on restrictions on legal services that have been tabulated in indices developed by the OECD and the World Bank. A key deficit of these indices that perhaps deserved a greater discussion is that they do not do justice to a ‘taskwise approach’ of regulatory barriers, that is, distinguish between the litigation and representation aspects with other legal service related functions. Chapter 2 does provide a very good overview of the existing global market place of legal services that would be of interest to both lay readers and experts. However, even in this context, the emerging international market of legal outsourcing (more than just process outsourcing and increasingly a value added task segment) and increasing dependence on electronic delivery that does away with any need for legally defined commercial presence or registration deserved greater discussion. This is especially in the light of the fact that the global value chain of services tasks, including legal services, are being bundled together through single window ‘management consultancy’ related services. The fundamental fact remains that representation and litigation are increasingly getting a smaller share of the pie of legal services revenues, while advisory, research, outsourced case development and arbitration share of the pie is rapidly increasing.
Chapter 3 changes gears and provides a comparative analysis of regulation of legal services and treatment of foreign legal service providers in the key countries. This serves as an important reference point on the discussion that follows in Chapter 4 on the business, regulatory and institutional landscape in India, and helps put things in context. Chapter 3 does a commendable job of putting together the salient aspects of regulatory regimes in a diverse range of countries, which in itself is a substantial research effort. This enables the readers to understand the nuances of regulation that have a direct impact on business models, organizational structures and actual delivery of services across this wide range of countries. A summary tabular presentation of the key regulatory aspects discussed in Chapter 3 would have added great value. A more detailed discussion on regulatory requirements for service providers that are not a violation of national treatment (i.e., applicable to domestic service providers as well) would have provided better context to Chapter 4 that follows.
Chapter 4 provides an excellent overview of the Indian legal system and the regulatory and institutional structures that support it. It is a concise but detailed treatment of the subject and goes over all the important issues that impact legal services market structure, competitiveness and service delivery in India. The strictures on marketing and multidisciplinary service provision (combination of legal and other services) due to Advocates Act, the issues of limitation of partners due to Companies Act, the limited appeal of the limited liability partnership (LLP) and the landmark judgments of Bombay and Madras high courts on the rights of foreign lawyers to practice or provide services in India have been woven in with detailed discussions on structure and function of Bar Council of India and ground realities of regulatory functioning. The discussion on India’s trade in legal services provides a technical treatment of trade policy positions of India vis-à-vis GATS and the key preferential trade agreements, as well as data on legal services. However, this section needed to add greater nuance on a taskwise approach, that is, detail out both the regulatory and institutional regime (or the lack thereof) that govern the non-litigation and non-representational functions of legal services and their treatment in the trade agreements.
Chapter 5 is the highlight of this book as it provides insights from stakeholders into the legal services profession in India. It throws up interesting new insights that alone make this work a major contribution in the understanding of the legal services in India. The authors rightly flesh out the institutional development related insight (i.e., what needs to be done) in the light of global competition from the diverse range of for and against positions of liberalization of this sector in India. This is a major analytical contribution that will go a long way in helping India’s government and negotiators to take a nuanced and balanced approach to trade policy decisions with respect to legal services.
While an overarching theme in the legal services profession is that domestic regulations are a limiting factor to sectoral development and, therefore, protection of India’s relatively less developed legal services sector is desirable, the authors actively deconstruct this position on the actual specifics of such limitations. On all issues, ranging from restrictions on advertising, inability to provide multidisciplinary services, limitations on form of organization and number of partners, the authors are able to demonstrate three things. First, there is a diversity of opinion on whether such restrictions are actually limiting to development of Indian law firms. Second, in actual practice, there are ‘workarounds’ to these restrictions. Third, the fundamental fact that the Indian legal services sector is essentially a dual hierarchy with few large firms at the apex and thousands of small firms and individuals in the bottom, and that the average Indian clients are typically seeking small transactional legal remedies (as opposed to comprehensive legal services), which makes India’s domestic market fundamentally different from say Canada or Singapore.
However, the authors also demonstrate that there are real concerns, for example, with respect to access to formal bank credit, even for those firms that would like to grow and develop domestically or globally, and the fact that regulatory structure (i.e., Bar Councils) are over focused on litigation and representation and not on the other aspects of service delivery. Skills and the need for greater rigour in qualification (and periodic tests of ability to ensure sustained domain expertize of the professional) are the other areas on which the authors do an expert job of summarizing.
An especially commendable job on the part of the authors in Chapter 5 relates to the analysis of the political economy of reform and liberalization of legal services. The fundamental tension with the more reform-oriented government (represented by law ministry) and vested interests of the Bar Councils that have the ability to strike and shut down courts has been put in the context of the discussion on legal services, thereby enriching it and adding the touch of reality this discussion deserves. Equally insightful is the analysis of inconsistencies in the positions of those who are opposed to liberalization and reforms, for example, arguing in the same breadth that most of the Indian clients are price sensitive and demand minor transactional services while arguing that large global MNCs that are typically more expensive and have little interest in such transactional services would wipe out the smaller firms that provide such services in India. This section is especially relevant to develop a dispassionate and objective understanding of the reality of the political economy of the legal services profession in India today.
Chapter 6 that draws on the rich analytical work of the preceding five sections to make recommendations on the way forward is an essential read for the Indian trade negotiator, legal professional and those interested in the trade policy aspects of professional services. It develops a case for graded reforms and liberalization that benefits the long-term development of the profession in India, while at the same time, allows the benefits of improved service quality and more transparent regulation reach Indian consumers of legal services. It provides an institutional development position and not just a for or against liberalization/reforms position overly dependent on the apparent political economy.