What changed
Earlier, a 2015 circular had paused fresh permissions for foreign law firms' liaison offices pending the Supreme Court's decision. Now, with the court's final disposal, RBI has issued a permanent ban on any FEMA-based approval for foreign law firms or lawyers to establish any place of business in India for legal practice.
What it means for you
Banks must reject all applications from foreign law firms or lawyers seeking to set up offices in India for legal work. This aligns FEMA rules with the Advocates Act, 1961, and banks must report any violations they detect to RBI. The existing BO/LO/PO policy remains unchanged for other sectors.
What you must do
- Stop processing any new applications from foreign law firms or lawyers for branch, liaison, or project offices intended for legal practice.
- Review existing approvals and ensure no foreign law firm is operating a place of business in India for legal practice under FEMA.
- Report any suspected violations of the Advocates Act by foreign law firms to the Reserve Bank immediately.
- Update internal compliance checklists to include this prohibition for all foreign entity applications.
Who it affects
AD Category-I banks, Foreign law firms and foreign lawyers, Compliance departments handling FEMA approvals
Can a foreign law firm set up a liaison office in India for non-legal activities like market research?
The circular only prohibits offices for practicing the legal profession. Other business activities by foreign law firms may still be permissible under the general BO/LO/PO policy, but banks should verify the purpose and ensure no legal practice is involved.
What should we do if we have already approved a liaison office for a foreign law firm before this circular?
You must review the approval. If the office is used for legal practice, it violates the circular and the Advocates Act. Report such cases to RBI and consider revoking the approval.
Does this circular affect foreign lawyers providing legal advice remotely from outside India?
No, the circular specifically addresses establishing a physical place of business in India. Remote advice from abroad is not covered under FEMA's office approval framework, but other laws may apply.