Despite the financial turmoil, New York shines as an international centre for India legal work. Leading lawyers talk to India Business Law Journal about the Big Apple’s challenge to London’s preeminence
The metallic chirp of Jaipat Jain’s BlackBerry stops the lawyer in mid-sentence. Turning his head, Jain answers the call with a deep and confident “Jaipat.” After a brief pause he dispatches the other party with a few polite sentences in English.
In less than five minutes, the BlackBerry’s electronic ringtone interrupts Jain again. The lawyer answers this call with the same “Jaipat”, but this time after a brief pause, an eruption of Hindi follows as Jain reassures one of his Indian clients about a banking matter.
Jain is, of course, bilingual. Originally from Lucknow, he received his law degree from Delhi University and is licensed to practice law in India. This scene, however, didn’t take place in Delhi or Bombay. Jain is a partner at the boutique firm Lazare Potter & Giacovas in New York City.
As a New York lawyer, Jain is far from unique. Indeed, New York is increasingly becoming a hub for India-focused legal work, a significant amount of which is being done by India-trained lawyers who are also licensed to practise law in the US.
Many observers believe that New York may one day rival London in India-focused legal importance (see Who’s number one? on page 20). With its thriving India practices, the Big Apple is fast emerging as a hotbed of India-related legal work, particularly as Indian clients increasingly look to make commercial investments and acquisitions in America.
“When you look at Indian activity in the West, to the extent it’s flowing to the United States, it’s flowing through New York,” says Stephen Besen, a partner at Shearman & Sterling in New York.
“New York is still really leading the way in developing and being the first port of call for a lot of Indian companies who are looking for opportunities for networking, for access – access to people, access to businesses, access to capital,” says Baker & McKenzie’s Valerie Demont. “New York is a big magnet.”
One reason for New York’s growing importance to India-related legal matters is the recent escalation of Indian investment into the US.
“For the first time, this year the amount of investment by Indian companies into the US has exceeded the investment of US companies into India,” says Demont. “The balance has now shifted.”
“In the past three years my practice has shifted from outbound to India, to now almost exclusively inbound,” agrees Eliab Erulkar of Baker & McKenzie. “There’s been a huge wave of Indian companies that are middle market companies that are coming of age and starting to invest overseas.”
“There’s so much business coming out of India that I don’t have to solicit business going into India,” adds Jain.
There are a number of reasons for the shift, lawyers say, including the cheap dollar, distressed situations, the availability of financing in India, and the surplus of interesting US assets in industries where Indian companies face pressure to grow their market share. “Some of the leading Indian conglomerates like Tata have really led the way by entering into high profile deals where they’ve shown Indian companies back home, ‘We can do it and we can do it successfully. And this is the model to do it.’ This has emboldened a lot of the Indian companies,” explains Demont.
The growth for many of New York’s top India practices has been remarkable in recent years. Jain’s India practice has doubled, and now composes about 80% of his work. “Indian clients are very aggressively looking to buy customer bases in the US,” he says.
Rohan Weerasinghe, Shearman & Sterling’s senior partner and head of its India practice group, said his firm’s India practice has roughly quintupled in the last three years. “We’ve been making it a priority for the firm,” he remarks.
Among the deals fuelling Shearman’s success was the US$2.6 billion purchase earlier this year of virtually all of the operating assets of ASARCO by Sterlite Industries of India. The copper deal was the largest Indian investment in US history, says Weerasinghe.
Giving a nod to the seemingly bright future of Indian acquisitions of US entities, Weerasinghe smiles and adds, “I expect that record to be broken.”
A spectrum of industries
An important trend that has been acknowledged is the multitude of players that have become involved in transactional work, which is far from confined to big-ticket deals executed by large, established companies. While some Indian acquisitions of US companies are big deals by any standard, many involve mid-market Indian companies, reflecting the buoyancy of the Indian market. Some companies are making acquisitions that are relatively small by US standards, notes Demont, revealing that many deals fall within the US$20 million to US$100 million range. These acquisitions, which are often huge for the Indian entities investing in them, span many industries, she says, including technology, automotive, outsourcing and healthcare. According to Demont, last year there were 85 acquisitions of US companies by Indian companies worth US$10 billion in total.
All of these deals create significant opportunities for India-focused lawyers in New York. “If it’s a really big deal, you’re more likely to want a name-brand law firm that everyone recognizes,” says David Lindsey, a partner in Clifford Chance’s New York office.
New York law firms are also leading the way in terms of helping inbound Indian clients comply with unfamiliar regulations.
“One of the areas that Indian companies are getting accustomed to is the new Foreign Corrupt Practices Act and the export control enforcement environment, which in the States has gotten a lot tougher in the last couple years,” Erulkar says. “A lot of Indian companies are not as prepared for that, and they need a good vetting by a firm here. And New York has been a hub for that.”
Another prospering area is the technology sector. Although California is normally regarded as the US destination for legal work on IT deals with India, there are plenty of lawyers in New York also working on such deals. Jain, for instance, has already worked on three IT acquisitions between US and Indian entities this year, each one worth roughly US$25 million.
Poojitha Rao of Thelen Reid also works as a technology lawyer in New York. She represents several US-based and international clients, negotiating contracts in New York for those conducting business deals in India.
“New York is in the top five list of destinations for Indian [law firms] to receive legal work from,” she says.
Many lawyers also see New York as a fertile training ground and potential launch pad for the seemingly inevitable migration of foreign firms to India. “The nanosecond we can establish something more [in India], we will,” Lindsey confirms.
“We expect that while for now, New York is going to be a very strong source or centre for our India practice, as things pick up in India and as people are able to open offices in India, you’re going to see that same migration going over,” says Demont. “You’re going to see more of the work being done locally. At which point New York will still be involved in the India field, but more with cross border M&A with people going into India, where you need to have people on the ground here in New York for financing or some other reason.”
“It’s going to become more strategic,” she says.
Who’s number one?
Lawyers weigh in on New York’s potential to surpass London in India-specific legal importance
The distance from London to New Delhi is 5,000 kilometres shorter than the distance from New York to India’s capital. The UK and India share a tangled, if imperfect, colonial history, not to mention a love of cricket. In 2001, Robin Cook, the former British foreign secretary under Prime Minister Tony Blair, declared chicken tikka masala “the most popular” meal in England and “a true British national dish.”
Added to that is a shared legal heritage. The Indian legal system is based on British law, and when the Indian Supreme Court cannot find a precedent for a ruling in its own history, it sometimes turns to decisions made by the House of Lords for guidance. British law firms have a much longer history of involvement in India than US firms do and there’s a long tradition for Indian lawyers to study in the UK.
For many of these reasons, London has traditionally been the non-Asia legal hub for India-focused work. But is New York on the verge of trumping London to claim that title? Perhaps not. Not yet at least.
“The London firms are definitely ahead of the New York firms,” admits Nandan Nelivigi, a partner at White & Case’s New York office.
“The big US firms clearly have an importance in India,” adds David Lindsey, a partner in Clifford Chance’s New York office. “But there’s a disproportionate impact by the big English law firms.”
Despite these realities, New York is on the rise. In many ways, this is due to the perception of the US as a hotbed for the investments and acquisitions Indian companies are increasingly looking to make.
“When you look at the economy here and the opportunity here, you’re going to see an increase in Indian companies acquiring businesses in the United States,” says Rohan Weerasinghe, Shearman & Sterling’s senior partner and head of its India Practice Group. “And if you’re going to do an acquisition in the United States, does it make sense to do it out of London?”
“If an Indian company wants to engage with a US company, it obviously wants a US law firm,” says Jaipat Jain of Lazare Potter & Giacovas. In addition, the India-US market, as compared to the India-UK market, is “by far the largest market today. It is the one with the largest potential.”
Further, Jain adds, “Indian companies are just getting warmed up to the idea that they use New York law instead of British law.”
Some lawyers say that ranking New York and London on Indian legal importance really requires a niche-specific approach. For instance, Nelivigi says London is far ahead of New York on capital markets work coming out of India.
“I don’t think anybody should be building their capital markets practice in New York and think they’re going to get a lot of work coming out of India,” he says.
As far as private equity and M&A work coming out of India, which Nelivigi says he expects to be dominant at least for the next few years, New York is a premier destination for legal advice, on par with London.
Still, some lawyers wonder whether in today’s shrinking, flattening and digitizing world the New York versus London question isn’t obsolete. “I absolutely believe that New York does not matter much and that London does not matter much,” says Dorsey & Whitney’s Richard Baumann. “It is unequivocally true that brand names built in New York and London don’t matter that much.”
Baumann attributes this to many discerning Indian clients looking for excellent service at a reasonable price who are apt to leapfrog the big firms in New York and London in favour of smaller firms in unlikely cities like Minneapolis or Cleveland.
While many New York lawyers don’t agree with that appraisal, there is a general sense that regardless of whether New York eventually inches ahead of London with regard to India-focused legal work, they are both among a handful of global financial cities that will remain the undisputed leaders in the field for the foreseeable future.
Surviving the financial crisis
In many ways, the current preeminence of New York law firms for big deals with Indian entities can be attributed, in part at least, to their advantageous proximity to some of the world’s biggest and most important markets and financial institutions.
“It’s special by its strength as a financial centre,” Lindsey says of New York. “This is a place that provides a lot of the business world’s finance.”
That strength is now being questioned as quivering financial markets in the West send tremors out through Asia. Indian stock prices plummeted following the collapse of investment bank Lehman Brothers, the largest bankruptcy in US history. The repercussions of the turmoil continue to unfold and cannot be underestimated by Indian investors. However, while some express apprehension about existing and future investments in the US, many are confident that the level of Indian capital available can be mobilized to snap up distressed assets to enhance Indian company portfolios.
“In the end, I don’t think the financial crisis will affect the situs so much,” says Besen. “When you look at it, the players are all shifting, but none of them are leaving.”
“There’ve been a lot of things to capitalize on here in New York,” says Nandan Nelivigi, a partner at White & Case’s New York office. “New York is the source of a lot of foreign direct investment going into India. It is a source for private equity investors, a source for hedge fund investors.”
That was critical when US investments flowing into India outweighed Indian investments directed to the US. “Traditionally when the money was going more into India, a lot of private equity funds that were putting money into India were all based here,” explains Demont.
Even though inbound investment from India now outstrips US investment to India, the outbound market is still extremely lucrative. “The US is still the largest investor, both directly and through Mauritius, in India, and the major export destination for India’s goods and services,” say Murali Neelakantan and Rabindra Jhunjhunwala of Khaitan & Co in Mumbai. “This has meant that large US entities who consider India as a business destination will look to New York as a gateway.”
While the recent upheaval in US financial markets may put some of this advantage in jeopardy (see Market meltdown on page 22), Nelivigi believes that for the next couple of years India will still be dominated by private equity and mergers and acquisitions, allowing New York to retain its mantle of financial prominence.
“New York is the preeminent place for commercial transactions,” says Jain.
For many lawyers, New York’s proximity to key financial institutions and players has tangible benefits. For instance, when asked whether his practice would be as effective if he was transported to another American city, such as Dallas or Chicago, Nelivigi stresses the importance of meeting with hedge fund managers and other financial leaders in person on a daily basis.
“If you transplanted my entire building but left Wall Street in New York City, I don’t think I would be as effective,” he says.
Cultural differences may sometimes create issues for New York lawyers working on India deals. “Living here in New York, we’re used to doing big deals quick and fast and everybody’s right to the point and very businesslike,” explains one New York lawyer. In India, he continues, there’s more of a deliberate focus on personal relationships and presentation.
“It’s challenging when you are representing US investors and looking at the other side, usually an Indian target company, beating around the bush,” he says.
One way that some New York-based India practices have tried to bridge the cultural gap is through the hiring of India-trained lawyers. For instance, Talat Ansari of Kelley Drye & Warren says his firm’s New York office has five lawyers working full time on India – all five of whom are licensed to practise law both in the US and in India.
“A lot of Indian clients who are coming [to acquire US entities] are very comfortable dealing with someone who speaks their own language and understands the culture,” Ansari says. “We find that a great advantage.”
And when such professionals are also licensed to practice Indian law, as the members of Ansari’s team are, there’s the added advantage of not having to rely on Indian counsel.
“We don’t have to go down to local counsel and get advice,” says Ansari. “We can give that advice right here in New York to our American clients.”
Of course, finding exceptional lawyers qualified in both jurisdictions isn’t easy (see Surviving the talent crunch on page 26). One reason, some lawyers say, is because Indians who earn law degrees in India would still be required to take a number of classes, earn an LLM in New York, then pass the state bar, before being able to practice law in New York. In some states, like Illinois, it is compulsory to earn an American JD instead of the lighter one-year LLM.
One US lawyer says that plenty of Indians acquire the additional qualifications, but casts dispersion on the general employability of the new wave of such lawyers. “I get about five of these resumes a week,” he says. “They don’t get the full formal legal training of a US legal environment. Generally, what happens is you find these very polished Indian lawyers who, frankly, are very hard to employ here.”
Still, the demand for such lawyers exists. “A lot of our US clients who are investing [in India] would like to have an Indian lawyer on staff helping them,” says Erulkar. “To some extent the market is driving that as well. You’ll find a lot of other firms are picking up on that trend.”
How will the carnage on Wall Street affect New York’s India-focused lawyers?
September was a bloody month on Wall Street. Lehman Brothers collapsed. To avoid a similar fate, American International Group needed a US$85 billion bailout from the federal government and Merrill Lynch agreed on a rushed sale to Bank of America. Days later, Goldman Sachs and Morgan Stanley began to restructure themselves as more cautious and conventional banking organizations, subject to far greater government regulation.
“All these banks have been here for a long, long time,” says Gautam Bhat, a partner at Thakker & Thakker in Bombay. “Now suddenly they’re all not there.”
That has many lawyers who focus on high-flying international financial deals in New York wondering what’s next. Some, at least, remain optimistic that in the long run the financial earthquake on Wall Street won’t knock New York lawyers from their position of preeminence on many India-focused financial deals.
“New York is still the financial capital of the world,” says Sanjiv Kapur, a partner with Jones Day in Cleveland. “A lot of the financial transactions and other important work still happens in New York. You need to have an important presence in New York.”
Rohan Weerasinghe, Shearman & Sterling’s senior partner and head of its India Practice Group, offers similar reassurance. “The financial markets are in disarray right now,” he states, “[but] I don’t think it’s going to have a dramatic impact.”
Other lawyers are less optimistic. One US lawyer who isn’t based in New York argues that even before the recent financial upheaval, many of the most important India-focused lawyers were in California and Washington DC, adding that those in New York are the sort of attorneys who work almost exclusively on expensive deals. He says the practices of such attorneys are suffering at this point.
Some New York lawyers are already feeling the pinch. Richard Baumann, a capital markets partner in Dorsey & Whitney’s New York office, says his practice has completed very few equity deals this year. “There’s been an immense drop-off in the level of deal activity,” he says, adding that of the fifteen or so deals on his deal list, all but two or three are dormant. Some, he says, “will probably never come back.”
“It’s hard to say when that will reverse,” says Baumann, noting that for many deals involving Indian parties, the trouble “began when folks in India saw crisis outside India and looked back at some of the Indian fundamentals and got worried about them too. Then the markets went off a cliff with everyone else.”
Asked to forecast the future of India-focused high-finance lawyers in New York in such uncertain times, the US attorney based outside New York said, “It depends on if there’s a Plan B that develops. Some of the capital markets stuff, certain kinds of structured finance transactions, I don’t think that stuff’s ever coming back. The key is, are the people entrepreneurial enough to come up with new ideas?”
One new development many lawyers say they expect as a result of the US financial crisis is a flood of Indian buyers swelling into depressed US markets. Valerie Demont of Baker & McKenzie, for instance, says she believes that falling valuations of US companies and other assets might allow some mid-market Indian companies to snatch up purchases that would have seemed too expensive mere weeks ago.
“At this stage, the Indian buyers are finding values in the US which they didn’t believe existed before,” explains Talat Ansari, a partner with Kelley Drye & Warren in New York, and chair of the firm’s India practice group. “The companies are available far more cheaply. Maybe this is the time to go in there and buy.”
Jaipat Jain, a partner at Lazare Potter & Giacovas in New York, put it in starker terms. “This is certainly a good time to make a killing,” he says.
Weerasinghe suggests that the ultimate effects of the recent financial turmoil depend primarily on how the credit markets eventually settle. Indian companies looking to acquire US entities need financing and, according to Weerasinghe, “the issue is, how easy will it be for them to get the financing?”
“It could have an impact by slowing down companies being able to do acquisitions,” he continues. “And it’s not just an India issue. It may slow down a company’s willingness to make a significant ‘bet the company’ type of transaction. They’re going to be more cautious.”
Nandan Nelivigi, a partner at White & Case in New York, thinks care and caution on the part of Indian investors coming into the US could represent an opportunity for lawyers. “On the legal side of it, New York counsel and certainly international law firms can offer to bridge the New York legal culture and risk control mentality with the sort of entrepreneurial and risk-taking spirit that prevails in India,” he says.
David Lindsey, a partner at Clifford Chance in New York who recently arbitrated a case in India, describes the New York legal market this way: “It’s holding its breath to see what happens with the financial crisis. It’s a scary time.”
Lindsey pauses for a beat before adding confidently, “But we will get through this.”
With or without Indian-qualified lawyers, New York law firms cannot overlook the necessity of frequent contact with India-based practices and companies. On that front, “there are certainly challenges,” says Nelivigi.
Chief among those challenges is the roughly ten-hour time difference between New York and India.
Demont of Baker & McKenzie says that despite the time zone inconvenience, many of her Indian clients and colleagues are very good about making themselves available at reasonable New York hours.
“Indian lawyers have made themselves available,” she says. “A lot of corporates in India really work US hours. While you can’t reach a [US] law firm partner on his cell phone past 8pm, in India you can, and they return your calls until midnight. So yes, there is a time difference, but in India there is a different mentality.”
Other New York lawyers say they align their own schedules to match the Indian work day. “It’s very convenient for us to assume that people in India will schedule their calls at a time [suitable] for us,” Nelivigi says, adding that New York lawyers owe it to their Indian clients to provide the same service and timing the client would receive from a lawyer in India.
Because the Indian work day typically starts late – “Nothing really happens until 11,” says Ansari – and ends late, the most desirable window of temporal overlap between New York and India is America’s morning and India’s evening.
“We all begin our day here very early,” Ansari says. “My whole team is in the office at 7:30 at the latest, if not by 7.”
Some New York lawyers start even earlier. “I’m taking calls at 4:30 in the morning,” says Nelivigi.
The scheduling doesn’t always work out that cleanly, however. “You don’t get much sleep,” Lindsey says. “I’ve had [telephone] hearings start at midnight my time.”
“I don’t think my sleep patterns have ever been corrected,” he adds wryly.
Geography is also an issue for New York lawyers dealing with India. “Nothing beats the face-to-face meeting, and that’s tough,” says Erulkar. “The flight there is a long one. And it’s hard to do that as frequently as you’d like.”
As Weerasinghe notes, much can be accomplished over the phone and internet, somewhat solving the problems associated with distance. However, as other New York lawyers point out, the lack of a year-round presence in India does pose a disadvantage.
New York, New York
“One of the challenges sitting here is you miss the direct contact with [Indian] regulatory agencies,” says Jain, adding that when representing a US company investing in India, “it is difficult to provide them good services”.
Due to their geographical proximity to India and their solid reputations for Indian legal matters, London, Hong Kong and Singapore offer tempting alternatives to US-based law firms. Nevertheless, there appears to be clear consensus within the legal fraternity that New York is also among the world’s leaders in providing excellent legal advice on India. But how much does New York really matter?
For big-money deals, New York certainly seems on par with any of its rival cities. That is especially true for mergers and acquisitions. “This has become the deal centre for M&A,” claims Ansari. “There’s a clear and distinct advantage to having an India practice here.”
Some lawyers, however, think the importance of New York and its brass ring law firms is overstated.
“I don’t think their practice requires them to be in New York,” says one US lawyer. “I think they could move anywhere if they wanted to. They just like being in New York.”
“Capital markets are globalizing,” says Richard Baumann, a partner at Dorsey & Whitney in New York. “They’ve been doing that for years. It means whole new jurisdictions are coming into the market with savvy business people who don’t really care that you’ve got a fancy office in New York rather than a fancy office in Minneapolis. And they don’t really want to pay the higher rates that New York firms charge to buy their places in New York and their houses in the Hamptons.”
The relatively high rates of the leading New York law firms is definitely an issue for some Indian clients.
As one California-based lawyer recalls: “Ten years ago, I remember, when Japan was really big, there was this bias of Japanese companies to say, ‘We want to hire the New York big name law firms.’ And I don’t see quite the same bias with Indian companies. They tend to be much more focused on cost and New York firms are too expensive.”
A market for large deals
“Just as Indian corporates have been looking carefully at acquisitions, they look carefully at their counsel,” says Weerasinghe. “Price is a factor, but I think they appreciate quality as well.”
“We’re certainly not in the game for small deals,” Nelivigi remarks. “But for the large deals that Indian corporates are doing, where they’re willing to pay the kinds of fees we want to charge, we are certainly the first port of call in North America.”
Firms in other US cities might offer lower cost structures and the technological ease of today’s world might make many of those firms viable alternatives to the top dogs in New York.
However, as Ansari argues, “when it comes down to the crunch, when you’re really negotiating a stock purchase agreement or you’re doing a financing, these folks tend to like to sit across the table with you.”
“New York is a major hub for transactions. So it’s important to have an office here.”