In this blog post, Uday Agnihotri, a student at National Law University, Odisha and pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, describes the top five emerging areas of practice in India for Commercial Lawyers.
The commercial sector of a developing country is dynamic in nature and progresses frequently. Even the slightest change in government policies triggers a dimensional shift in the commercial business sector. The sector calls for a modification of the activities and undertakings of various groups of people involved in that area, i.e., a simple commercial policy change may require professionals such as bankers, lawyers, investors, etc. to change their practices and adapt to the new norms of the market. This may further require new entrants (specialised individuals) in the commercial sector as the sector grows exponentially and diversifies equally well.
As it happens in all societies, already established and functioning areas of laws tend to take a backseat upon the emergence of newer areas of laws which jurisprudence tends to focus on more; studying, defining and engulfing the subject within its ambit. The primal difference between already established laws and the upcoming areas is that the already established and well-settled areas of law just require minor maintenance as there exists a rock solid foundation which only needs to be altered from time to time. Whereas, in the newer areas, active jurisprudence is necessary to develop the subject ground up.
The NDA government brought with it a series of policy changes, especially in the financial and commercial sector like relaxed FDI norms, major tax overhaul (both; direct and indirect), bankruptcy laws, demonetization of High Denomination Notes, amendments in bilateral investment treaties etc. which had a direct impact on the commercial sector. For commercial lawyers, this gives a plethora of opportunities to explore and expand their practices in the commercial sector. The textbook litigation in property and service matters gives way to practice in emerging and more technical fields such as insolvency practitioners, taxation, investment, e-commerce and commercial arbitration.
Insolvency Practitioners
According to the World Bank reports, it takes on an average, 4.3 years (in 2016) for an insolvency process to complete in India. The insolvency process is around two times the world average of 2.55 years (in 2016).[1] There are currently many statutes that deal with insolvency and bankruptcy laws which lead to unnecessary delay and complexities. Therefore, to facilitate this process of insolvency and to consolidate all laws under one code, one of the most important legislations of 2016, especially for the commercial field, the Insolvency and Bankruptcy Code, was notified on 28th May 2016. This code is aimed at the insolvency of corporate entities like companies, partnership firms, etc. in an expeditious manner. It was particularly brought keeping in mind the ‘ease of doing business’ ranking in India (which is currently, 130 out of 189 countries)[2] with an aim to develop the bankruptcy infrastructure in India, resolve insolvencies in a time bound manner and thereby, improving the rankings. Furthermore, it will help solve the problem of Non-Performing Assets (NPAs) that haunt the public banking sector. Institutionally, the code leads to the formation of the Insolvency and Bankruptcy Board of India (IBBI), Insolvency Professional Agencies, Information Utilities, etc[3]. The process of insolvency and liquidation would require Insolvency Practitioners, and this avenue becomes probably the most appealing emerging area for commercial lawyers. As per the final regulations of the government, professionals like company secretaries, chartered accountants, lawyers, etc. practising for ten years can apply for becoming Insolvency Practitioners by clearing a ‘limited insolvency examination’. With regards to professionals with less than ten years of experience, a ‘national insolvency examination’ would be conducted and the qualified individuals would be appointed as Insolvency Practitioners. It is imperative to note that the IBBI is expected to be functional from 1st December 2016[4]and therefore, this avenue is not only appealing but also just around the corner.
Taxation Lawyer
Taxes affect each and every person in some way or the other. Taxes are primarily divided into two types: direct taxes and indirect taxes. Direct taxes are taxes that are directly paid to the government. These include taxes such as Income tax, Corporation tax, etc. Indirect taxes are levied on the manufacture or sale of goods and services. These are initially paid to the government by an intermediary, who then passes on to the consumer. Thus, the consumer indirectly pays these taxes. These include taxes such as Service tax, Value Added Tax, Excise duty, etc. The taxation policy of India is undergoing a major overhaul, and thus, this field of commercial law provides another opportunity for the lawyers to explore. Not only the indirect tax regime, but even the direct tax regime is expected to change completely in the times to come. The hailed Goods and Services Tax is probably the biggest achievement of this government since assuming power in 2014. The Goods and Services Tax is expected to be levied starting 1st April next year. This tax would be a comprehensive indirect tax levied on the manufacture, sale and purchase of goods and services and will subsume almost all indirect taxes and thus, would lead to a paradigm shift in indirect taxation. Further, the proposed Direct Tax Code, if tabled in and accepted by the Parliament, will reform the direct tax regime in the country which is currently governed by the Income Tax Act, 1961. This is another reason for exploring the taxation field. Coupled with these two tax reforms, is ‘the surgical strike on black money’ –Demonetization of high denomination notes which is bound to lead to umpteen conflicts regarding the imposition of taxes and penalties on deposited money. Furthermore, the government is keen on reviewing and amending India’s tax treaties with various countries to fill the lacunae. The government has already amended treaties with Mauritius, South Korea and Cyprus and plans to do so with other countries as well[5]. Therefore, all these policies (and much more to come) will have an effect on taxation, either directly or indirectly and thus, would open vast opportunities for the existing taxation lawyers or new entrants to expand their clientele and business.
Investment Lawyer
The Department of Industrial Policy and Promotion (DIPP), on 7th July 2016, released a new Consolidated Foreign Direct Investment (FDI) policy. The policy aims at making India more investor friendly. This policy, inter alia, allowed up to 100 per cent FDI (under government approval route) for trading, through e-commerce, in respect of food products and manufactured or produced in India, up to 74 per cent FDI (under automatic route) and up to 100 percent FDI (under government approval route) in Brown Field pharmaceutical ventures, up to 100 per cent FDI in India-based airlines and existing airport projects, up to 100 per cent FDI (under government approval route) in defense, up to 100 per cent FDI (under automatic route) in broadcasting carriage services etc.[6] All these FDI changes and other relaxations enumerated under the Consolidated FDI policy aim at making India an attractive FDI destination. This also gives an opportunity for lawyers to explore the area of foreign investment. Furthermore, the government is keen on reviewing Bilateral Investment Treaties (BITs) with countries. Its BIT with the Netherlands is to expire this month whereas; the BITs with other EU members are to expire within two years. All in all, these measures will ensure a plethora of avenues for an investment lawyer.
E-commerce
India is currently going through automation, with almost everything being digitalized. Right from the development and expansion of Knowledge Industries, Information Technology, etc. to economic restructuring, everything leads to the same conclusion, i.e., Internet is the future. The NDA government is keen on modernizing the country with better and widespread internet connectivity, investment in information technology with programmes such as Startup India, Digital India, etc., reforming the Indian economy in line with internationalization with programmes such as Jan Dhan Yojana and with policies such as demonetization so as an attempt to transform the economy to a cashless economy. Since everything is being transferred to the online world; it is probably the biggest avenue for the commercial lawyers. Furthermore, the area of E-contracts is ever-developing, with most of the brick-and-mortar stores going online as well as shoppers preferring to transact online. A joint study by ASSOCHAM and Grant Thornton suggests that the online shoppers will increase from 20 million (in 2013) to 40 million (in 2016). It also predicts a compound annual growth rate (CAGR) of 63 percent to reach $8.5 billion of the E-commerce market in India (in 2016)[7]. What these statistics suggest, is that there is a positive trend (and scope) regarding the E-commerce market in India and resultantly, innumerable opportunities for commercial lawyers.
Commercial Arbitration
This alternate dispute resolution (ADR) mechanism is probably the most used mechanism in commercial disputes, be it domestic or international. For a very long time, ADR was not given due significance in our country. To address commercial concerns and to encourage people to opt for arbitration, the Arbitration and Conciliation Act, 1996 was brought in. It aimed at speedy and efficacious dispute resolution, but it did not meet its expectations as foreign investors and companies always had their doubts regarding the Indian legal system. Resultantly, the preferred seat in an international dispute was always a debating point and usually ended up being an established global arbitration centre like England or Singapore. To add to this, delays and certain controversial decisions by the Indian judiciary has directed eyes of the global commercial community on the development of arbitration laws in India. Keeping all of that in mind, amendments were introduced in the act and as a result, the Arbitration and Conciliation Amendment Act, 2015 was brought into force. The changes s brought aimed further at expediting the procedure as well as ensuring the independence and impartiality. All in all, it is an attempt further to bring the Indian arbitration up to the mark of International standards. Furthermore, the Government of India is committed to making India a global arbitration hub. For this, NITI Aayog also organised a program called ‘National Initiative on Strengthening Arbitration and Enforcement in India’ from October 21 to October 23, 2016[8]. Hence, International commercial arbitration is a promising area for the commercial lawyers to explore.
The commercial sector provides the widest range of opportunities to the lawyers, probably more than any other field of law. It requires a high degree of specialisation and therefore, the choice regarding the particular area of commercial law is necessary. Nonetheless, it is also one of the most dynamic fields and thus, provides new and upcoming areas to explore time and again.
References:
[1] World Bank, ‘Time to resolve insolvency (years)’, available at http://data.worldbank.org/indicator/IC.ISV.DURS.
[2]World Bank, ‘Doing Business: Economy Ranking’, available at http://www.doingbusiness.org/rankings.
[3] PRS, ‘Insolvency and Bankruptcy Bill Draft’ (2015), available at http://www.prsindia.org/uploads/media//draft/Draft%20Insolvency%20Bankruptcy%20Bill,%202015.pdf.
[4] Live Mint, ‘Final norms for insolvency professionals’ (2016), available at http://www.livemint.com/Politics/5pPDZi1CnmDVu4ONcpHf4M/Final-norms-for-insolvency-professionals.html.
[5]Gautam Mehra, ‘After India-Cyprus tax deal, all eyes on India-Singapore tax treaty’ (2016), The Economic Times, available athttp://blogs.economictimes.indiatimes.com/et-commentary/view-after-india-cyprus-tax-deal-all-eyes-on-india-singapore-tax-treaty/.
[6] DIPP, ‘Consolidated FDI Policy’, (2016), available at http://dipp.gov.in/English/Policies/FDI_Circular_2016.pdf.
[7]ASSOCHAM and Grant Thornton, ‘Shopping through smartphones may cross $40 million mark by 2016: study
’(2016), available at http://www.assocham.org/newsdetail.php?id=5135.
[8] NITI Aayog, ‘National Initiative on Strengthening Arbitration and Enforcement in India’ (2016), available at http://arbitrationindia.in/.
Very well written..