by Bhargavi Zaveri
As skepticism mounts over India’s economic resilience and economists rush to blame India’s policy framework for the woes of her economy, the role that India’s BigLaw plays in her law and policy making processes assumes greater significance now more than ever before. In the backdrop of an unpredictable, evolving and complex regulatory and legal regime, the quintessential Indian law firm is expected to not only play the flawless draftsman or the aggressive negotiator but also an organization capable of dealing with the regime, its regulators and policymakers. Indian corporate law firms have responded to this demand by claiming policy affairs as a niche area of their legal practice. In this backdrop, this post explores how and why the Indian corporate lawyer has transitioned from a boardroom negotiator and a draftsman to an active participant in India’s law and policy making processes, and highlights potential conflicts associated with this transition.
Today, India’s law and policymaking processes do not only involve the political class, bureaucrats, civil society actors or jurisprudential developments. A proposed policy or law (in particular, one that affects commerce in India) is regularly preceded by well-publicized detailed analyses proactively offered by leading corporate lawyers in the country. As members of expert committees constituted by the government and regulators, providers of feedback on government-released discussion papers, columnists or interviewees in the media, members of business associations interfacing with the government, Indian corporate law firms strive to make conspicuous contribution to proposed laws and policies. The fact that several prominent Indian corporate law firms now project themselves as having an established regulatory and policy practice (which typically includes reform initiatives, legislative drafting work and holding policy-oriented consultations with government actors), underscores their desire to be seen as being active in the policymaking space. A couple of large corporate Indian law firms are now reported to have dedicated, though limited, resources with profiles involving government affairs and policy formulation. These trends are indicative of a progressive tendency to pro-actively contribute towards law and policy making in India.
The growing participation of the corporate legal community in policy and legislative work is directly attributable to an inclusive approach being increasingly adopted by Indian legislators, policy makers and regulators in recent times. Take, for instance, the FDI policymaking space, a most coveted and crowded practice area dominated by India’s BigLaw. In sharp contrast to the pre-2010 era when FDI policymaking processes had no space for involvement of legal professionals, in 2010, the Department of Industrial Policy and Promotion (being the FDI policymaker in India) initiated a discussion paper series inviting comments on proposed FDI policies from all stakeholders [i]. In addition to responses from industry associations, these discussion papers have, in fact, garnered policy-oriented responses from law firms having an established practice in this space [ii]. Similarly, drafts of proposed rules and regulations released by the Ministry of Corporate Affairs and the Securities and Exchange Board of India (the Indian securities regulator) regularly elicits detailed analyses by corporate law firms known for their capital markets practice [iii].
In addition to the policy and regulatory framework, the contribution that Indian corporate law firms have been making to substantive lawmaking cannot be understated. Several substantive corporate laws (such as the Competition Act, 2002, the Companies Act, 2013, etc.) brought into effect in the last decade have been preceded by consultations with law firms known for their expertise in areas governed by such legislations. So much so, the drafting of certain provisions and filings under these legislations was reportedly entrusted to leading legal professionals in the corporate field. Similarly, leading corporate lawyers were engaged as consultants by the government-appointed commission entrusted with the responsibility of overhauling the legal framework applicable to the Indian financial services sector [iv].
Participation of the Indian corporate legal community extends to the implementation and enforcement stages of policies and regulations as well. Owing to the lack of institutional mechanisms that facilitate formal stakeholder participation at the implementation stages, most often, such participation occurs where a law firm identifies an ambiguity or an unaddressed situation in an implemented law or regulation in the course of assisting a client in a transaction, and approaches the regulator or policymaker for clarifications. In the past, queries seeking transaction-specific clarifications have resulted in the regulator or policymaker addressing the problem for the benefit of the general class of stakeholders. A perfect example of this situation are clarifications obtained through the Informal Guidance Scheme implemented by the Indian securities regulator, which is akin to the Interpretive Guidance initiative of the SEC.
In addition to direct contributions of the kind described above, corporate lawyers have made remarkable contributions to the Indian policy framework indirectly through participation in business associations such as the Confederation of Indian Industries, chambers of commerce, etc. Previous evaluations of government-stakeholder consultations in India have indicated that the interests of members of such associations are not always aligned [v]. Conflicting interests amongst members often restrict the ability of business associations to convey their views on proposed and implemented policies to policymakers. Corporate law firms, through their participation in such associations, are able to impart objectivity and clarity to the associations’ collective views on laws and policies that affect the industry. Through presentations made to such associations, participation in specialized committees and consultation processes initiated by the government and regulators with such business associations, corporate lawyers often end up contributing to the policy framework by participating in actual stakeholder and industry-level discussions. For instance, the post-budget announcement days regularly witness tax law firms explaining the implications of the budget on various industries. These views often supply the foundation for opinion-formation by industry-specific business associations on the budget.
Participation by BigLaw in policymaking is mutually beneficial to policymakers, regulators and the participating law firms. While the former are benefitted with the expertise and real-world experience that law firms bring to the table, a capacity to deal with and establish smooth interface with regulators and policymakers can potentially earn a premium for law firms from a client’s perspective. However, the increasing role of corporate law firms in policy formulation and implementation often raises several questions regarding the objectivity underlying their contribution. To what extent are a law firm’s views insulated from client requirements? Do law firms contribute toward policymaking only when warranted by specific transactions? How does one address the inherent conflict of interest while analyzing policy-oriented feedback offered by legal professionals in the corporate field? These questions often reduce the receptivity of lawyers’ views at policy-level discussions. As unregulated as this space currently is, these questions are open-ended and it remains to be seen whether the benefits of professional expertise and legal skills outweigh concerns of objectivity.
Be that as it may, with increasing inclusiveness in the Indian law and policy making space, credit for contributing towards law and policy making in India can no longer be restricted to socially activist lawyers, legal jurists and civil society actors. By volunteering in his own way towards improvisation of proposed and implemented policies, laws and regulations, India’s contemporary corporate lawyer is now making a leap from being a plain dealmaker to a contributor to the law, policy and rule making processes of the country.
Bhargavi Zaveri is a Mumbai-based solicitor with experience in M&A, private equity and corporate practice in India. She is presently an affiliated fellow with the HLS Program on the Legal Profession where she is researching FDI law and policymaking, and the interface between legal professionals and policymakers in India.
[i] See order dated May 11, 2010 issued by the Government of India constituting an expert group for improvisation of Government-Industry consultation processes. Also see Annual Report 2009-10 of the Government of India, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, pp. 34. Both documents can be found on http://dipp.nic.in/English/Archive/Archive.aspx.
[ii] See http://dipp.nic.in/English/Archive/ArchiveFeed.aspx. This section of the DIPP website posts the responses received by it from stakeholders on draft FDI-related discussion papers released by the DIPP.
[iii] See http://www.mca.gov.in/Ministry/Comments_archive.html. See also Press Release dated March 28, 2007 which deals with the project initiated by SEBI for re-drafting the regulatory framework applicable to the Indian securities markets, and emphasizes the importance of professional feedback as under:
‘The importance of public comment cannot adequately be emphasized as the success of the task will rest to a large extent on the inputs of investors, market intermediaries and professional experts to the first draft put up on the SEBI website.’
[iv] See Report of the Financial Sector Legislative Reforms Commission, Vol.I, March 2013, pp. 159.
[v] See Minutes of the first meeting of the Expert Group constituted by the Planning Commission for improvisation of Government-Industry consultation processes. The document can be accessed on http://dipp.nic.in/English/Archive/ArchiveFeed.aspx.