June 23, 2021

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Gujarat SEZ hints foreign entities can open branches for legal work • JSA did not renew GIFT office during Covid

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Foreign law firms get theoretical nudge that they are welcome in GIFT SEZ

The Gujarat International Finance Tec-City (GIFT) has released a new framework for attracting legal services, including potentially foreign law firms, into the special economic zone (SEZ).

The International Financial Services Centres Authority (IFSCA), which was set up in April 2020 by the GIFT to regulate and develop financial services in the SEZ, has released a framework document dated 10 February 2021 that noted that “any Indian or foreign incorporated entity” could offer legal services and other “permissible ancillary services”.

The definition for such services in the framework stated:

The service providers may engage in any one or more of the following activities:

(i) Legal, Compliance and Secretarial;

Such entities could then provide such services to other entities based in the International Financial Services Centre (IFSC), which might give access to a number of financial institutions and a few other corporates currently based in the GIFT (tough the numbers are not huge: most SEZs take years if not decades to grow and flourish).

Baby steps

This latest framework follows the GIFT in 2017 having officially opened up the SEZ for legal services, which sent the Society of Indian Law Firms (Silf) into a brief flurry of protectionist activity concerned that it might allow the entry of foreign law firms.

SEZs do have wide ranging powers to relax regulatory requirements (and offer tax breaks) within their areas.

But of course this does not mean any foreign law firms that were to set up shop in an SEZ, such as the GIFT, would be immune from legal challenges, particularly under the Advocates Act 1961 that bans foreign lawyers from practising law in India, and has been affirmed in the Lawyers Collective and AK Balaji cases.

Current global Covid-crises in the legal industry notwithstanding, it might therefore take a brave foreign law firm to venture into an SEZ based purely on this framework.

Foreign law firms thinking about planting their flags in the GIFT would therefore likely need a much stronger assurance of regulatory immunity from the Advocates Act restrictions and its defenders than a framework document.

On the other hand, the limited ambit of the framework might mean that resistance from the wider litigating profession might also be more limited.

Domestic GIFT action

It is not just foreign legal services providers that have been luke warm on the GIFT.

J Sagar Associates (JSA) had opened an office in the GIFT with one associate in 2017.

However, JSA’s GIFT office is not listed on the firm’s website anymore.

We understand that JSA has not renewed its licence to operate in the GIFT during the pandemic last year.

We have reached out to the firm for further comment and will update the article if we hear from it.

GIFT Framework for Ancillary Services (pdf)

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