Decision to end relationship marks the latest setback for hopes of the local market opening up to foreign firms

Last week's news that Allen & Overy (A&O) and India's Trilegal have called time on their referral relationship has marked the latest setback for long-held hopes of the local market opening up to foreign law firms.

The decision comes after Clifford Chance (CC) last year ended its 'best friends' relationship with Indian leader AZB & Partners, with the lack of progress on liberalisation cited as a key factor in both cases.

A&O's move to break off its five-year-long ties with Trilegal came after the non-exclusive relationship – which began in early 2008 – was extended indefinitely last February.

A&O India group chairman Jonathan Brayne commented: "It was a mutual agreement. We sat down together and thought it through, but we saw there was no prospect of liberalisation in the medium term, which was the original rationale of our arrangement. 

"Because of it, our agreement became more difficult to sustain, and we had to reluctantly accept that we had to bow to market forces. Without the benefits of the closer collaboration that would be allowed by market liberalisation, both A&O and Trilegal were essentially operating as separate law firms. Yet we were so closely identified with each other that we did not have the market opportunities that result from collaborating with a wider range of other law firms."

The news comes after the Bar Council of India last October promised to set out a timeline for the liberalisation of India's legal market, with law and justice minister Salman Khurshid vowing to fast-track the process. However, movement towards change appears to have stalled yet again.

Brayne added: "Liberalisation does not appear to be a priority of the current Indian Government. Even if a new government came in, it would take a considerable time before changes could be put in place."

CC's 'best friends' alliance with AZB, which dates back to January 2009, was abandoned just two years later, with the pair subsequently maintaining looser referral ties. 

In addition to the lack of progress on liberalisation, other factors cited for the decision included the capacity offered by the magic circle firm's Singapore-based lawyers, as well as around 44 partners handling India-related work across its global network. 

sumesh-sawnhey-cc-webCC corporate partner Sumesh Sawhney (pictured), whose practice focuses on India, told Legal Week: "Without liberalisation, it can be more beneficial for clients as well as for the firm to work with a wider set of local firms than establishing a 'best friends' relationship with just one firm."

Despite these moves, some firms have held on to their 'best friend' agreements. Linklaters' tie-up with Mumbai firm Talwar Thakore & Associates has lasted since 2006, while Ashurst struck up an arrangement with local outfit Indian Law Partners (ILP) last summer. Both have recently reaffirmed the strength of their relationships.

Ashurst Asia head Geoffrey Green said: "Our relationship with ILP has proved successful. In terms of liberalisation, we would remain optimistic. 

"There are clear benefits that would follow liberalisation – in the long term, having a unified partnership with a local firm would always be the most ideal option, but there are so many stops along that road anyway. It'd be surprising if a firm just gave up on a relationship simply because the market has not liberalised yet."

For more, see A&O and India's Trilegal call time on five-year referral agreement.