With the Australian market having reached a level of maturity that only allows for moderate growth, law firms have for some time been looking abroad for expansion.

 

Although most efforts have been directed at China and to a lesser extent Southeast Asia, India is increasingly on the radar.

 

Outbound investment from India into Australia has surged in recent years, fuelled by the country’s hunger for natural resources. The domestic economy also forms a drawcard – GDP has grown by more than 7% since 2003, and M&A activity is escalating and reached a total value of US$72bn (M&A deals announced) in 2007.

 

On top of this, there are good indications that a number of Australian corporates are exploring the possibilities of off-shoring part of their activities to India.

 

The shortage of liquidity in the market stemming from the US sub-prime mortgage crisis has made the Indian market even more attractive as it appears to be largely unaffected by the market turmoil.

 

What is more, local Indian companies with strong balance sheets are taking the opportunity to expand their global market share and investment.

 

A recent eye-catching deal was the acquisition by Tata Motors of the luxury car brands Jaguar and Land Rover from Ford. The US car manufacturer said in March this year that it intended to settle on a price of US$2.3bn, which is far less than it paid for the brands. Ford bought Jaguar for US$2.5bn in 1989, while it paid US$2.75bn for Land Rover in 2000.

 

However, the company is in need of cash as it has lost US$15.3bn over the last two years.

Local knowledge

 

Freehills is one of the few Australasian firms with an India desk that employs lawyers admitted in India. The team is led by partners Philip Christensen in Brisbane, Neil Pathak in Melbourne and John Nestel in Sydney, and includes senior associates Prashanth Sabeshan, Karthik Kumar and Rohit Kumar.

 

In the last four years, the firm has ramped up its efforts in India, building the desk on the foundations laid by the late Michael Sonnenberg.

 

Banking & finance partner John Nestel got involved with India through a client of his. “Four years ago, I was acting for a large telco company in Russia on setting up a mobile phone network there. This client also identified an opportunity in India, and it was then that I teamed up with Michael Sonnenberg. If I was asked at the time where most work would come from, I would have said from Australian clients investing into India, but actually most work has come from Indian clients investing into Australia,” Nestle said.

 

“We built on that practice, and gave presentations for Australian clients about foreign investment into India. But Australian companies were relatively slow to recognise the opportunities there. Only in the last 12 months we’ve started to see the activity that we thought was going to happen four years ago,” he continued.

 

The firm’s moment of glory was its advisory role on Tata Power Company’s takeover of a 30% equity stake in PT Bumi Resources subsidiaries PT Kaltim Prima Coal and PT Arutmin Indonesia for US$1.3bn last year. It also acts for both Australian and Indian banks.

 

“One bank…is looking to set up in Australia. I’ve been acting on that for the last six months,” says Nestel. “Indian corporates are cashed up and are investing in the US, Canada and here. The more Australia is affected by the credit crisis the better it is for Indian companies, because they are looking for buying opportunities in the current economic downturn.”

 

 

Corrs Chambers Westgarth has eight lawyers who work on Indian transactions for Australian clients. Partner Philip Catania, who leads the India practice, was joined by Simon Crawford in April this year.

 

“We expect to substantially increase our India practice, driven by the expanding activities of our clients,” said Catania.

 

Mallesons Stephen Jaques’ managing partner international Nicola Wakefield Evans puts the number of lawyers in that firm’s India desk at 40, including 20 partners, but admits that this number includes everybody who has worked on an Indian transaction. The desk is headed by Sydney-based M&A partner Dave Poddar.

 

Wakefield Evans says that the majority of work is in the areas of M&A, litigation, fund management and infrastructure. She estimates that 60% of the work comes from Australian and international clients investing into India, while Indian outbound work represents 40%. The firm has recently advised Macquarie Bank on the establishment of a US$2bn infrastructure fund.

 

Poddar, who was born in India, said that he expects large amounts of work to come from the Indian infrastructure industry. “The government has announced plans to spend up to US$320bn on infrastructure over the next five years,” he said.

 

Freehills’ Nestel also expected to expand his team, but said he did not have a size in mind. “It’s not a numbers game,” he said. However, he points out that the office in Singapore has almost doubled in size over the last 18 months, partly as a result of the firm’s strategy for India.

 

“I’m not telling a story when I say that if you go to India the only Australian law firm that they know is Freehills.”

Opening up India   Pressures are building up for the Bar Council of India to open up the legal market to international law firms as the government has taken a positive stance towards foreign involvement and international lobbyists are throwing everything they have at getting a foot in the door.   Market players expect a limited opening of the market within two years, but before this can take place a number of changes need to be made to the current regulations, which impose major restrictions on the ability to expand legal practices. For example, Indian firms are not allowed to have more than 20 partners and cannot market themselves or even have websites.