A perfect storm


What you see may not be what you get

With the country’s banks taking yet another pummelling following the recent unearthing of large scale frauds, it is evident that checks and balances built into the system do little to thwart the fraudsters. This is cause for concern.

The incidents of fraud also suggest that recent attempts to recapitalize public sector banks may not be enough to resurrect the fortunes of the banking sector. Tackling fundamental problems such as poor lending practices and questionable governance standards will require a major shakeup of the status quo. So, while overstretched borrowers should not expect to go scot-free, banks will need to be accountable for misallocation of funds, poor risk management and more. Just as important will be restoring independence and removing banks from the clutches of powerful interests. But is this realistic given the reality of India?

The promise of India is very real, but so are the risks – as Daiichi Sankyo discovered after its 2008 acquisition of an equity stake in Ranbaxy. What you see may not be what you get and it may be best to cultivate a sceptical mind.

This issue’s Cover story focuses on associations for in-house lawyers, who it could be argued are valued for their ability to satisfy sceptical minds with facts and evidence. Analysing the role played by corporate counsel associations, which typically offer networking and learning opportunities, we ask if expectations are being met. Responses vary and while Shukla Wassan at Hindustan Coca-Cola sees the associations as important platforms for networking and building connections, Saugata Chakravarty at Siemens would like them to do more. He points out that associations for corporate counsel in India are not as influential as those for chartered accountants and company secretaries.

Writing in this issue’s Vantage point PM Devaiah, a partner and group general counsel at Everstone Capital Advisors, says that portfolio managers are embracing “socially responsible investing” as a way to deploy capital. A robust integrity management system and trained personnel can help ensure “clean source, clean use and clean profits”. This in turn depends on the strength of a compelling cultural value rather than “a mere mandate of a mundane written contract or a statute book”. This must mean that sniffing out such investments are a challenge for private equity investors.

New measures proposed in the recent union budget are examined in What’s the deal. This includes reducing corporate tax rates for smaller companies and incentivizing startups. Among other measures the budget proposed to widen the scope of business connection such that enterprises do not abuse tax treaty provisions by merely concluding contracts outside India. There is also a proposal to introduce the concept of significant economic presence, on account of systematic and continuous soliciting of business activities through digital means rather than physical presence, to constitute business connection of a foreign enterprise to India. This and other significant aspects of the budget are highlighted.

As China’s Belt and Road initiative – a US$900 billion infrastructure spending spree along the old “Silk Road” linking Asia to Europe – continues to captivate imaginations and investors we turn the spotlight on significant opportunities created for legal work in both established jurisdictions and new frontiers in Road of Risk and Reward. While a lasting legacy of the initiative, from a legal perspective, would create the environment for a fair and equitable rule of law, law firms across the globe have been galvanized at the prospect of working on high-level inter-governmental transactions. Nicholas Hanna at K&L Gates in Singapore says the firm’s lawyers have been looking to help multinational companies identify and secure contracts. He says given the cross-border nature of the initiative, transactions are inevitably more complex due to regulatory, business landscape and language differences and sound legal advice is vital at every stage.

This month’s Intelligence report reveals the winners of India Business Law Journal’s 2017-18 Indian Law Firm Awards. The year gone by has provided both opportunities and challenges for law firms across India. While the imminent opening of India to foreign law firms has continued to focus minds, the country’s increasingly complex legal and regulatory environment has created the space for specialist lawyers and law firms. This has been tempered by a continuing downward pressure on fees and a widening of the market that has translated into increased, and sometimes brutal, competition. To find out which law firms finished the year on top, our editorial team sought the opinions of in-house counsel and other qualified observers of India’s legal profession, both in India and around the world.

The results are in and AZB & Partners wins the top award as the Law Firm of the Year. The firm has long been seen as one of India’s most respected firms, which is in no small part on account of the stellar reputation of its three top partners. The respect and reputation garnered by the firm, along with the formidable expertise it has built up, has propelled it to the top of this highly competitive market. Our sincere congratulations to AZB & Partners and other winners.