The ghost of India's Licence Raj lingers on

PUBLISHED : Tuesday, 01 November, 2011, 12:00am
UPDATED : Tuesday, 01 November, 2011, 12:00am


While the notorious Licence Raj is slowly being phased out, India's legal community remains a closed shop. The situation harms litigants and businesses and, perhaps counter-intuitively, the lawyers themselves.

From about 1951 to 1991, India had the most controlled economy in the free world. Entrepreneurs needed dozens, even hundreds, of permits to open shop. They could be penalised for unauthorised changes to product lines or for manufacturing more units than the licence allowed.

The 1961 Advocates Act was a product of those heady days, when the express policy of the Delhi government was to occupy the 'commanding heights' of the economy. The statute, along with the subsidiary rules of the Bar Council of India, codifies an array of protectionist barriers around the Indian legal profession.

But, while the Licence Raj is being dismantled - at least in theory - there seems to be little institutional interest in reforming the legal sector. At first glance, Indian lawyers have a cushy deal, and there's no obvious incentive to change. As a practical matter, only Indian citizens may practice law. Legal partnerships are usually limited in size to 20 partners - levelling the playing field.

Finalising documents requires paying fees to various vendors and legal professionals - it is a government-enforced revenue stream for people in those positions. But a spate of newly published research shows the deleterious effects of the Indian legal profession's stubborn refusal to reinvent itself. Scholar Prashant Narang, of the Jindal Global Law School, has noted that less than 10 per cent of top law students want to become litigators, citing salaries as low as US$100 a month.

RSG Consulting predicts that the Indian legal services market will exceed US$1 billion by 2013; however, the law's insistence on the unlimited liability of a general partner will make it difficult for firms to borrow expansion capital. According to a rough calculation by journalist Kian Ganz, there are less than 10,000 corporate lawyers in a country with more than 1 million licensed practitioners.

Indians of all stripes are harmed by the reluctance of top graduates to become litigators, the arm of the profession most immediately concerned with securing justice. Businesses seeking competent advice on mergers and acquisitions find a shallow local bar. Senior lawyers end up ghettoised, operating from tiny, albeit well-feathered, nests.

Ultimately, Indian lawyers must decide whether to embrace the overall wealth of the legal sector or to continue defending their small patches of dirt. Twenty years has not been long enough to eliminate the Licence Raj; it could take a generation to meaningfully change the legal sector.

Paul Karl Lukacs writes about law and media.