RBI directs banks not to grant permissions to any foreign law firm for opening of liaison office in India


A Liaison Office implies a position of business to go about as a channel of communication between the chief business environment or Head Office or by whatever name called and entities in India however which doesn't embrace any business/exchanging/mechanical movement, straightforwardly or in a roundabout way, and keeps up itself out of internal settlements got from abroad through ordinary financial channel. Liaison offices (LOs) are a popular option for foreign investors exploring the Indian market for the first time, and unsure of how the country’s liberalizing FDI caps will affect their business.

Rather than different business structures, LOs permit foreign companies to build up a light impression in India while keeping their monetary, legitimate, and managerial responsibilities low. Foreign companies can open a contact office in India to encourage and advance the parent organization's business exercises, and go about as an interchanges channel between the foreign parent company and Indian organizations.

Nonetheless, the Reserve Bank of India (RBI) has coordinated the banks not to concede new authorizations/restoration of consent to any foreign law office for opening of contact office in India. The Apex Bank's notice emphasizes its kid remain after the Supreme Court had explained in 2015 that foreign law firm’s liaison offices are not permissible in India.

What was stated by the RBI?
  • RBI said that foreign law firms/companies or foreign lawyers or any other person resident outside India, are not permitted to establish any branch office, project office, liaison office or another place of business in India for the purpose of practising the legal profession.
  • AD Category – I banks were directed not to grant any approval to any branch office, project office, liaison office or other places of business in India under FEMA for the purpose of practising the legal profession in India
  • Further, they shall bring to the notice of the Reserve Bank in case any such violation of the provisions of the Advocates Act comes to their notice.
What do you mean by AD Category 1 Banks?

Approved Dealer Category - I Banks (AD Category–I Banks) and Authorized Dealers Category – II elements (ADs Category–II) are approved by the Reserve Bank to bargain in foreign exchange for indicated purposes. Such banks expect to facilitate the foreign exchange facilities for NRI.

Meaning of the term Liaison Office as per FEMA

According to the Foreign Exchange Management Act (FEMA), the Liaison Office implies a position of business to go about as a channel of correspondence between the administrative center by whatever name called and substances in India however which doesn't attempt any business/exchanging/modern action, straightforwardly or in a roundabout way, and keeps up itself out of internal settlements got from abroad through ordinary financial channel.

Reference to a Supreme Court Decision by RBI
  • The Supreme Court, in a judgment delivered in 2015 [BCI vs. AK Balaji] had held that foreign law firms cannot set up offices in India or practice in Indian Courts.
  • However, it was clarified that they could advice Indian clients on a “fly in and fly out” basis, not amounting to regular practice.
  • “Visit of any foreign lawyer on fly in and fly out basis may amount to practice of law if it is on regular basis.
  • A casual visit for giving advice may not be covered by the expression ‘practice’. Whether a particular visit is casual or frequent so as to amount to practice is a question of fact to be determined from situation to situation.
  • It was observed that Bar Council of India or Union of India were at liberty to make appropriate rules in this regard.

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