Amongst the professional services, the law of inertia has perhaps had its most lasting impression on legal services. The legal services sector – the term itself has its fair share of protestors who prefer the more nobler expression ‘profession’ than ‘legal services’ – has been the most resistant to any kind of change, let alone welcoming reforms. The three main players in the sector are the lawmakers, practitioners (lawyers, judges, law firms and law associations/ bodies) and the consumers or end-users. There is, apparently, also the influence of the invisible hand of foreign law firms, but - if the liberalisation process (or the lack of it) is any indicator - I am not sure how much influence they have actually had in the process so far. As we usher in 2016 with renewed optimism on the Indian economy and its effect globally, I wonder how a vibrant economy can surge ahead without an equally enabling or progressive legal machinery. Legal services are at the very heart of that legal machinery; and unless we address, debate and ultimately bring in reforms in this sector – it would only serve as a snag, instead of a facilitator, to India’s economic resurgence. I set out below my list, not in any particular order, of the best reforms in the legal services sector that India never had and, perhaps, never will in the near future (for reasons that remain best unknown).
Make lawyers accountable, please! : There is absolutely no accountability of lawyers or law firms in India. Any professional services firm, including a law firm, should be accountable for the advice that it renders to its clients – as is the norm in all developed jurisdictions. However, in India, there is no quality control whatsoever on the products or services that is routinely doled out by firms or lawyers. Engagement letters ordinarily have a clause that the law firm will not be liable for any advice unless there is gross professional negligence or fraud. And even in such cases, the extent of liability is contractually capped at the professional fees charged by the firm. Needless to add, this clause is rarely, if at all, pressed into service. I find no reason why lawyers need to be treated as a privileged class of professionals who enjoy near immunity from the advice that they render to their clients. At present, there is neither any discussion nor debate on the need to draw up acceptable standards of service or extend the principles of product liability to legal services as well. It is one thing to say that legal advice, by its very nature, is susceptible to a certain degree of uncertainty or diversity; but can we stretch that notion to a point where there is no accountability at all. For sake of completeness, I might add that insurance for professional negligence is, therefore, not surprisingly still at a very nascent stage India.
Allow third party litigation funding: There are a few items on this list which have been long considered as the taboo-items. Third party litigation funding is one such item. Litigation funding, also known as third-party funding, allows a party to litigate or arbitrate without having to bear the costs of such litigation – either because they are unable to pay for it or because they want to hedge their risk of ultimately losing the litigation. A third party professional funder can pay some or all of the costs/ expenses associated with a dispute in return for a share of the proceeds of the award or decree. If the litigation is not successful, the funder bears the costs it has agreed to fund. In India, third-party funding is not permitted as being against public policy - as we follow the common law principles against champerty. Almost all developed jurisdictions have moved on from the rule against champerty and adopted a legal and regulatory structure prescribing for third party funding. Given the glorious uncertainties of litigation in India, it will come as a boon to litigants if part of the financial burden of litigation can be passed on to professional funds. As I have always maintained, common litigants (even small to mid-sized companies) cannot afford to litigate on issues as it is prohibitively expensive and protracted to litigate in India. Therefore, you use third party funding as a financing tool to survive the rigors of litigating in Indian courts. One may start with a lot of zeal, but not before long, the litigant will run out of steam especially if he wants the services of senior counsels representing them – which brings me to my next item.
Regulate extortionate fees of Senior Counsels: I will try to put this as mildly as possible. The fees charged by most designated senior counsels of the Supreme Court or High Court are not only exorbitant – they are simply extortionate. Illustratively, a top counsel of the Supreme Court, when appearing at the Delhi High Court charges about INR 15,00,000/- ($ 22,550) per hearing – even if the hearing last only for five minutes or there is a simple adjournment. If the hearing is before a tribunal, the fees could be even higher. At the time of admission of new matters before the Supreme Court, a top Senior Counsel will charge about INR 5,50,000 – 7,50,000/- ($ 8,268 - $11,300) per hearing – the hearing will usually not last more than a few minutes. Imagine the plight of the litigants when there are multiple hearings in those cases. For international arbitrations, fees of Senior Counsels range anywhere between INR 7,00,000/- to 25,00,000/- ($10,530 to $37,608) per hearing. Yes, clients are grudgingly paying such fees – but do they really have a choice? There is no better example of the anti-trust principle of abuse of dominant position or cartelisation than when it comes to the fees charged by the top Senior Counsels. There is absolutely no reason why hapless litigants are made to cough up such insane amount of fees with the hope that this is their best chance of getting a favourable order. Litigation will never be a viable option to redress disputes in India, unless the government regulates and puts reasonable ceilings on the fees charged for the services provided by Senior Counsels. Litigants (including corporates) will continue to be disillusioned by the legal process and conflict resolution system where escalating legal costs (contributed mostly by the exorbitant fees of the senior counsels) and protracted judicial proceedings only add to the woes of the end users.
Permit contingent/ success/ alternate fee arrangements: I think it is time that the regulations permit consumers to enter into conditional or contingent fee arrangements. A contingency fee arrangement provides access to the courts for those who cannot afford to pay the lawyers’ fees and costs of civil litigation. It also allows clients to escape them from paying their attorneys by the hour irrespective of the result in the litigation. Moreover, since the lawyers assume the financial risk of litigation, the number of speculative or unmeritorious cases may be considerably reduced. Many developed jurisdictions including United States, United Kingdom, Australia, Brazil, Canada, France, Japan, New Zealand allow such arrangements and provide for suitable regulations. The end users or clients will, at least, have the option or choice of proposing a success fee model – a choice which is simply not permitted today.
Allow legal advertising and marketing: There is a prohibition today on lawyers or law firms to advertise in India. Yes, it will be good for lawyers to drum up their business if they were so permitted. But more importantly, it will also enable consumers or clients to better understand the precise expertise and skill-sets of the lawyers or law firms. Most law firms continue to have truncated websites which provide very basic information about their respective expertise to comply with the current restrictions on advertising. However, if the legal service sector has to thrive in a global economy, they need to have an equal platform to showcase their expertise as the international firms. Therefore, the archaic restrictions on advertisement must give way to greater transparency and knowledge dissemination of prospective service providers.
Facilitate lawyers to raise debt for their business: The single most handicap of a law firm to scale up its business is that it can’t avail loans from bank for its business. The unwritten code amongst banks and financial institutions is not to provide loans to lawyers for their business. This is one of the primary reasons why we have not witnessed a similar entrepreneurial trend in the legal services space as we have in other sectors. For a law firm to operate and grow as any other business entity, it needs access to debt to scale up fast. However, the banking industry has largely shunned the legal services sector altogether. Unless we have a clear change of mindset here, it will be extremely challenging, well-nigh impossible, for the domestic law firm sector to prosper and compete with international firms.
So, that’s my list. While I was very tempted to put two more reform items on this list; somehow I am cautiously optimistic that we will achieve these two items in 2016. First, we need more clarity from the Bar Council of India on whether law firms can operate as a limited liability partnership (LLP) — since that would be attractive to many lawyers. The other item is what will be the great “Wolf! Wolf!” moment – opening of the legal services sector to foreign firms. I think we are all, by now, tired of the discussion on entry of foreign firms. But I am hoping we will cross that bridge. Eventually.
The views expressed herein are entirely personal and not necessarily that of the firm.
Make lawyers accountable, please! : There is absolutely no accountability of lawyers or law firms in India. Any professional services firm, including a law firm, should be accountable for the advice that it renders to its clients – as is the norm in all developed jurisdictions. However, in India, there is no quality control whatsoever on the products or services that is routinely doled out by firms or lawyers. Engagement letters ordinarily have a clause that the law firm will not be liable for any advice unless there is gross professional negligence or fraud. And even in such cases, the extent of liability is contractually capped at the professional fees charged by the firm. Needless to add, this clause is rarely, if at all, pressed into service. I find no reason why lawyers need to be treated as a privileged class of professionals who enjoy near immunity from the advice that they render to their clients. At present, there is neither any discussion nor debate on the need to draw up acceptable standards of service or extend the principles of product liability to legal services as well. It is one thing to say that legal advice, by its very nature, is susceptible to a certain degree of uncertainty or diversity; but can we stretch that notion to a point where there is no accountability at all. For sake of completeness, I might add that insurance for professional negligence is, therefore, not surprisingly still at a very nascent stage India.
Allow third party litigation funding: There are a few items on this list which have been long considered as the taboo-items. Third party litigation funding is one such item. Litigation funding, also known as third-party funding, allows a party to litigate or arbitrate without having to bear the costs of such litigation – either because they are unable to pay for it or because they want to hedge their risk of ultimately losing the litigation. A third party professional funder can pay some or all of the costs/ expenses associated with a dispute in return for a share of the proceeds of the award or decree. If the litigation is not successful, the funder bears the costs it has agreed to fund. In India, third-party funding is not permitted as being against public policy - as we follow the common law principles against champerty. Almost all developed jurisdictions have moved on from the rule against champerty and adopted a legal and regulatory structure prescribing for third party funding. Given the glorious uncertainties of litigation in India, it will come as a boon to litigants if part of the financial burden of litigation can be passed on to professional funds. As I have always maintained, common litigants (even small to mid-sized companies) cannot afford to litigate on issues as it is prohibitively expensive and protracted to litigate in India. Therefore, you use third party funding as a financing tool to survive the rigors of litigating in Indian courts. One may start with a lot of zeal, but not before long, the litigant will run out of steam especially if he wants the services of senior counsels representing them – which brings me to my next item.
Regulate extortionate fees of Senior Counsels: I will try to put this as mildly as possible. The fees charged by most designated senior counsels of the Supreme Court or High Court are not only exorbitant – they are simply extortionate. Illustratively, a top counsel of the Supreme Court, when appearing at the Delhi High Court charges about INR 15,00,000/- ($ 22,550) per hearing – even if the hearing last only for five minutes or there is a simple adjournment. If the hearing is before a tribunal, the fees could be even higher. At the time of admission of new matters before the Supreme Court, a top Senior Counsel will charge about INR 5,50,000 – 7,50,000/- ($ 8,268 - $11,300) per hearing – the hearing will usually not last more than a few minutes. Imagine the plight of the litigants when there are multiple hearings in those cases. For international arbitrations, fees of Senior Counsels range anywhere between INR 7,00,000/- to 25,00,000/- ($10,530 to $37,608) per hearing. Yes, clients are grudgingly paying such fees – but do they really have a choice? There is no better example of the anti-trust principle of abuse of dominant position or cartelisation than when it comes to the fees charged by the top Senior Counsels. There is absolutely no reason why hapless litigants are made to cough up such insane amount of fees with the hope that this is their best chance of getting a favourable order. Litigation will never be a viable option to redress disputes in India, unless the government regulates and puts reasonable ceilings on the fees charged for the services provided by Senior Counsels. Litigants (including corporates) will continue to be disillusioned by the legal process and conflict resolution system where escalating legal costs (contributed mostly by the exorbitant fees of the senior counsels) and protracted judicial proceedings only add to the woes of the end users.
Permit contingent/ success/ alternate fee arrangements: I think it is time that the regulations permit consumers to enter into conditional or contingent fee arrangements. A contingency fee arrangement provides access to the courts for those who cannot afford to pay the lawyers’ fees and costs of civil litigation. It also allows clients to escape them from paying their attorneys by the hour irrespective of the result in the litigation. Moreover, since the lawyers assume the financial risk of litigation, the number of speculative or unmeritorious cases may be considerably reduced. Many developed jurisdictions including United States, United Kingdom, Australia, Brazil, Canada, France, Japan, New Zealand allow such arrangements and provide for suitable regulations. The end users or clients will, at least, have the option or choice of proposing a success fee model – a choice which is simply not permitted today.
Allow legal advertising and marketing: There is a prohibition today on lawyers or law firms to advertise in India. Yes, it will be good for lawyers to drum up their business if they were so permitted. But more importantly, it will also enable consumers or clients to better understand the precise expertise and skill-sets of the lawyers or law firms. Most law firms continue to have truncated websites which provide very basic information about their respective expertise to comply with the current restrictions on advertising. However, if the legal service sector has to thrive in a global economy, they need to have an equal platform to showcase their expertise as the international firms. Therefore, the archaic restrictions on advertisement must give way to greater transparency and knowledge dissemination of prospective service providers.
Facilitate lawyers to raise debt for their business: The single most handicap of a law firm to scale up its business is that it can’t avail loans from bank for its business. The unwritten code amongst banks and financial institutions is not to provide loans to lawyers for their business. This is one of the primary reasons why we have not witnessed a similar entrepreneurial trend in the legal services space as we have in other sectors. For a law firm to operate and grow as any other business entity, it needs access to debt to scale up fast. However, the banking industry has largely shunned the legal services sector altogether. Unless we have a clear change of mindset here, it will be extremely challenging, well-nigh impossible, for the domestic law firm sector to prosper and compete with international firms.
So, that’s my list. While I was very tempted to put two more reform items on this list; somehow I am cautiously optimistic that we will achieve these two items in 2016. First, we need more clarity from the Bar Council of India on whether law firms can operate as a limited liability partnership (LLP) — since that would be attractive to many lawyers. The other item is what will be the great “Wolf! Wolf!” moment – opening of the legal services sector to foreign firms. I think we are all, by now, tired of the discussion on entry of foreign firms. But I am hoping we will cross that bridge. Eventually.
The views expressed herein are entirely personal and not necessarily that of the firm.
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