India has its own legal system, regulations and heritage. It is difficult for an American lawyer to chart his way through that maze. The way to go is to tie up with an Indian legal firm, says Morris DeFeo, a partner with the Crowell & Moring (C&M) corporate group. DeFeo is head of the law firm’s India and MENA (Middle East-North Africa) practice. Increased cooperation will result in a positive sum game, DeFeo notes, but both sides of any partnership must accept that they have much to learn from each other. The key issues for Western companies, says DeFeo in this interview with India Knowledge@Wharton at the Wharton India Economic Forum, are fewer restrictions on foreign direct investment (FDI) and more transparency.
An edited version of the transcript follows.
India Knowledge@Wharton: I know you are an alumnus of the University of Pennsylvania, so welcome back. Have you been back a lot since you graduated?
Morris DeFeo: I wouldn’t say a lot, not as much as I would have liked. But it’s going to be 30 years since I graduated, which I try not to tell too many people.
India Knowledge@Wharton: I would love to start off talking about Crowell & Moring and why your firm decided to begin doing work in India.
DeFeo: Crowell is a U.S.-based firm of about 550 lawyers. We have offices throughout the U.S. and also throughout the Middle East and in Europe. I am by background a capital markets and M&A lawyer, with focus on cross-border transactional work. I manage our Middle East and India practices. The reason we focus on India is very simple: Our clients are focused on India. When we have meetings with some of our marquee clients, which are among the Fortune 500 and Fortune 100 companies in the U.S., and their counterparts in Europe, they all list India as being one of their top two or three most important markets. I’m a big believer in going where our clients go. And when our clients want to focus on India, we have to focus on India as well.
In addition, India is an incredibly important and growing part of the world economy. This makes it critical that we, as a major law firm with international reach, be present to the extent we can for our clients in India.
India Knowledge@Wharton: Can we add some timelines to the trends you’ve been seeing? When you say your marquee clients are looking to have an India strategy, when did this start happening and how strongly is this momentum going forward?
DeFeo: Well, it’s certainly been happening for quite a number of years. And I think the world economic downturn in 2008 kind of created a disruption in the flow of things. But over the past two years, I’ve seen a dramatic increase in interest among some of our global clients. Our firm represents a significant number of U.S. government contractors and some household names, not only in the defense industry, but also in government contracting generally. And in the past couple of years they’ve all been very, very focused on India.
One of our clients, which has many subsidiaries in every imaginable field [and is] one of the largest companies in the U.S., has said that they have one ambition strategically by the end of 2012, and that is to have a certain number of strategic alliances, which they have ranked by tiers. And in tier one, India ranks with one or two other countries. I think that’s very indicative of where a lot of the major multinational businesses that are based in the U.S. or in Europe are looking.
India Knowledge@Wharton: Since your firm and you personally have been doing work related to India for the past couple of years or more, what are some of your perceptions of the Indian legal system as a whole? India, especially when you compare it to other fast-growing economies in the world, is touted as a strong democracy with vibrant institutions, including its judiciary and its legal system. How do you view it?
DeFeo: Without exception, India offers Western businesses a degree of comfort that many other jurisdictions do not. There is widespread recognition that the Indian legal system [has a] heritage, a long tradition of independence, and a similarity to the U.K. and some Western legal systems. [These factors] as well as the language familiarity, which cannot be understated, and the cultural comfort that the legal profession in India has in dealing with Western clients, [contribute] to American and European companies finding it more comfortable to work in India and with Indian law firms.
That is also enhanced by the fact that India is uniquely positioned to look both East and West when it comes to businesses. In many respects, India and Indian law firms can act as a bridge between not only India and the West, but also the West and the rest of Asia. Having said that, I [also] think that there are things that both Indian law firms and lawyers can learn from Western law firms and vice versa. We are seeing some of those trends emerging.
When I talk to our U.S. clients, they are generally more comfortable if an American lawyer is involved in the transaction or the project.
India Knowledge@Wharton: Which is good for you?
DeFeo: Which is good for me. I think it is indicative of the fact that there is still some way to go for Indian lawyers and law firms to be more Western in their approach.
The most important thing would be to try to think more the way Western clients do and act more the way they expect their lawyers to act, in terms of responsiveness and getting back quickly. For example, when clients in the West say they need something, they generally don’t want to wait a day or two. They don’t want to wait more than an hour or two to get an answer. That’s one thing.
I think the efficiency of responding is also very important in terms of being able to provide quick, practical explanations when a client says, “I need to know, can I do this or can I not do that? What are the ramifications?” To be able to respond swiftly and clearly and concisely is very important. Part of it is the mindset. I have met Indian lawyers who are very business focused. They have the kind of business acumen, not simply legal acumen, to stand in the shoes of their clients. Western clients like that. They want to be able to talk to a lawyer not simply as someone who knows the law, but someone who can take [the law] in a very practical and real way and apply it to their specific needs and maybe answer questions that the client himself hasn’t even asked.
India Knowledge@Wharton: What can Western firms learn from the way law firms are managed in India, or from the way that the legal system works?
DeFeo: Well, I do think that American lawyers and Western lawyers in particular need to understand that just because something works for an American client or for an American client doing business in the U.S. or in Europe, it doesn’t necessarily mean that that’s the way it’s going to work in India. We need to be aware of the fact that India has its own traditions and its own ways of doing business and its own ways of dealing with legal issues.
We are not going into India in some backdoor way [like] we know other Western law firms have done. We would rather go in tandem with qualified Indian lawyers. When we have a legal issue or one of our clients has a legal issue, my preferred way of handling it is to be an advisor to my client the same way I am anywhere else in the world, but to acknowledge the fact that I will never understand the Indian legal system or the culture or the business community or the political context as well as a qualified Indian lawyer. I would rather reach out to one of my counterparts at an Indian law firm and team up on providing a solution that the client will benefit from.
India Knowledge@Wharton: Right. If I can then quickly change tack and ask you about the regulatory hurdles that some of your clients have faced. From your clients’ perspective, especially U.S. companies that you’re representing or helping out in India, what are the top areas where they want to see changes?
DeFeo: Without exception, a breaking down of barriers on FDI [foreign direct investment] would be very helpful.
India Knowledge@Wharton: In different sectors?
DeFeo: Right, in various sectors. [U.S. companies want] the liberalization of some of those rules. Currently, non-Indian investors cannot [invest in certain industries], or they can only participate with prior government approval or in a very restricted way. I can give you countless examples where we have had to either back away from transactions or completely restructure them, and spend a lot of time and money restructuring them, in order to conform to some of these rules. I think liberalization of the FDI regime is of critical importance.
[Another issue is] increased adherence to transparency. I don’t simply mean that from an avoidance of improper conduct, which is not in any way unique to India. It is endemic throughout many countries, including to some extent the U.S. The certainty of dealing with a transparent business process that is fair and equitable and open is incredibly important.
The third [issue] kind of flows from that. It is increased efficiency. Elimination of bureaucracy in dealing with business and legal processes is very important.
India Knowledge@Wharton: One element of the interaction between the U.S. and Indian legal systems is the emergence of legal process outsourcing (LPOs). Any quick thoughts on where you see the legal process outsourcing industry going?
DeFeo: I think it’s a comparative advantage that American law firms have been slow to embrace. They view it as a way of siphoning business away from them. But I don’t think that’s the right way to look at it. We’ve actually embraced this outside India to some extent by opening offices in the Middle East where the cost structure is considerably lower. That’s a bit easier for a law firm to embrace because those are our lawyers and the revenue stays within the firm. But as part of the overall way of doing things, it fits squarely into what we’re doing in India.
When a client comes to us and says “We have a major project in India,” they clearly want us to be involved in a very significant way. We will bring in the Indian law firm or lawyer to handle the matters that we cannot legally handle. We will also push a lot of the elements of that transaction or project to the Indian firm. This may take revenue away from us, but it keeps the overall budget in line and allows us to win the project. And I’d rather win the project and give up some revenue than not get it at all.
There are things that can be done by Indian LPOs that are not directly related to work in India. By virtue of the high quality and training of the lawyers there, you are going to see an increasing amount of that work being outsourced. And I think that we would be comfortable with that.