Akshay Jaitly on the Making of a Modern Indian Law Firm

SHRUTI RAJAGOPALAN: Welcome to Ideas of India, where we examine the academic ideas that can propel India forward. My name is Shruti Rajagopalan, and I am a senior research fellow at the Mercatus Center at George Mason University. 

Today my guest is Akshay Jaitly, the author of the recent book, Trilegal: The Making of a Modern Indian Law Firm. He is one of the founders of Trilegal and specializes in advising on energy and infrastructure projects. His research interests include power sector reform, the energy transition and public-private contracting.

We talked about how Trilegal grew in the context of India’s market liberalization and sectoral reforms, different partnership structures, delegated legislation, regulatory capture, the alchemy between the founding partners, and much more. 

For a full transcript of this conversation, including helpful links of all the references mentioned, click the link in the show notes or visit mercatus.org/podcasts. 

Hi, Akshay. Welcome to the show. It’s great to have you on again.

AKSHAY JAITLY: Thanks, Shruti. Lovely to be back.

In the Shadow of Liberalization

RAJAGOPALAN: Yes. This time you’re here with your new book, which is about your firm, Trilegal. It’s called Trilegal: The Making of a Modern Indian Law Firm. The curious thing about it is that the six of you who are the founders, you start winding down what you were doing in other places in the late ’90s, so officially start in year 2000. You have a good decade, almost, most of you, looking at all the changes that happened in India in the ’90s, the big bang reforms in ’91, and also the slow liberalization, some of it sectorally.

How much of that was part of just wanting to start a new firm? What was happening? Presumably the size of the pie was growing. There was more—not exactly commercial disputes—but definitely more commercial contracts suddenly opening up. More contracts, but Indian firms are growing larger because now License Permit is gone so you can expand. Foreign firms start contracting with Indian firms. Is that the appropriate background, or the reasons are completely personal and completely different?

JAITLY: No, I think it’s definitely the appropriate background, in fact. I’m not sure whether it was self-consciously the background for us that, “Oh, we’re in this liberalization moment and look at the lovely opportunities it’s throwing up.” It was more a question of the fact that corporate law had become a thing at all. Most of us, when we started contemplating doing law, we weren’t really sure about what law firms did. We weren’t sure about where we wanted to necessarily work. 

The default option in those days was join a senior advocate and become a junior and learn enough to be able to steal a few clients away at some point in the future, and with financial rewards definitely postponed until well into the future. That was the template. We can come back and talk about my own part in this, but it was very much my thinking as well, that I’m going to do a law degree and come back to India and join a senior advocate and become a litigator.

This is a nice example of events overtaking your own plans without even knowing that that’s what’s happening. This whole space of law firms had opened up and it had opened up precisely, as you said, because of liberalization and the fact that there was foreign capital coming into India. And the fact that the complexity of deals—because possibility landscape, thanks to liberalization, had increased, had broadened—the fact that there were these new types of deals happening with foreign money, with international companies, which had been doing transactions around the world for decades, cross-border transactions, they had their own ways of doing things. And given that they were providing the capital, they were calling the shots on how a lot of the deals were done. That was the backdrop within which we started our careers in the mid-’90s. All of us started in the mid-’90s. 

I think liberalization was too recent and too new. There was a delayed effect, if you like. Even though we were already beginning to feel it, we didn’t have that sense that we were in that moment. Little by little, I think by the time we set up, that feeling was getting slightly more crystallized, and it was clear to us that a lot of the deals that were happening would just not have happened if we’d started our careers 10 years earlier.

It was really a moment in time that we found ourselves in, and it was the moment that overtook us rather than us grabbing the moment, is how I think about it. Because otherwise it would sound like we had this grand plan to take advantage of this liberalization moment, which is not what it was. The grand plan was, as you were beginning to hint, more personal.

RAJAGOPALAN: I didn’t mean it in terms of grand plan, but no one starts a new firm unless there’s an expectation that there will be work. There is some sense of optimism and growth, maybe, that there’s actual work to be done. There are contracts to be written, disputes to either be resolved or avoided, and so on, and regulation to be clarified.

I mean it more in terms of that. That that somehow seemed to be a period of optimism that everything was growing, and there was either directly work to be done or money to be made. That’s the general sense that I get, having grown up in that time.

JAITLY: No, that’s very much the case, and there was a great deal of excitement. We had this enormous sense of excitement in the period running up to when we started, and then when we started because everything was possible at the time. It just felt like it was the right moment. Just in response to your original question, we weren’t really framing it in terms of an academic look at liberalization or a deliberate look at liberalization. It was just that these opportunities existed. The fact was they existed because of liberalization. I think what is true, though, is that this enthusiasm and optimism that was generated was very much an outcome of that process.

Specialization

RAJAGOPALAN: I don’t know if you were being modest when you were writing the first few chapters of the book, at least the origin story, the way you make it sound is you outworked your competition. You were more professional. You followed deadlines. You set international standards. You were just simply more professional and more hardworking. You never talk about how you might have had more expertise.

Are you being too modest, or was it just this was all so new, everyone was making it up as they went along? The established law firms didn’t know that much more than you because the nature of these contracts was new. Having a 100-year-old law firm or a 30-year-old law firm really didn’t have that much meaning because the kinds of contracts and disputes and regulation coming up were fairly new. All of you were learning on the job, and young people tend to hustle more and work harder, and are maybe more open to new things. What is the appropriate way of looking at that origin story?

JAITLY: I think it’s a mix of a number of things. I think it’s true that the types of transactions that were happening, there were lots of new things that were taking place. Many people were figuring it out as they went along. All kinds of new spaces were opening up almost on a monthly basis. Telecom liberalization and then various phases of telecom liberalization where more and more stuff becomes open. Foreign direct investment limits come down progressively. That leads to new transaction structures. That leads to buyouts.

All of this was happening. People hadn’t done it before, but the law is the law. There are many people who had been dealing with the law for many years before we started. I guess the largest corporate commercial law firms of the time, as they are now, the people running them, they didn’t necessarily have that many more years of experience, but at least a decade on us. That was an advantage.

As I say in the book, I think a lot of it was to do with the fact that they were not necessarily organized to take advantage of the opportunity as much as they could have been, which is why you were talking about those sorts of things like reply to an email when it comes. It was just not part of the modus operandi or the standard operating procedures of most firms. I remember being at that point, working in London, being the “English lawyer on a deal” where my colleagues, my senior colleagues, would be saying things like, “How can they not reply to emails? The deadline was three weeks ago, we still haven’t got the document.”

These things that I picked up, and all of us picked up, gave us the indication that whatever we might not have known in terms of the law, the experience we may not have had compared to our rivals, there were some things that we could do better in the moment without really doing very much at all in some ways. It’s not false modesty; it was just really the fact of the matter. When we set up the firm, I was just under five years qualified. By no stretch of the imagination was I an experienced lawyer at all.

RAJAGOPALAN: Speaking of experience, the way I think about what happened in, let’s say, the first decade after liberalization—and I obviously think about this more in the academic sense—is first, foreign firms start doing some deals in India because things have started opening up. In the late ’80s, there had been some green shoots like Suzuki Maruti, Pepsi had come back, so there were some things happening. Post-liberalization, it was quite clear that there was money to be made in India, and there was foreign capital coming in. One is foreign companies doing deals, and typically it starts with Japan, and then other folks start coming in. 

Then the second part of it is within about seven, eight years after 1991, Indian firms get much bigger. There are a lot more domestic deals to be done, a lot more domestic restructuring because all these Indian firms were like Hindu-undivided-family structures. They’re not very professional and scalable themselves. As they merge and split, there’s that going on.

Then the third phase comes maybe after 2000, which is Indians start doing foreign deals. They start selling their work abroad. There’s a lot of outsourcing work going on and so on. This is really the rise of Gurgaon and Bangalore, so to speak. Did you actually see that in the deal pattern, what we see as macro aggregates and academics on the outside? Was that the experience of the first decade of the firm?

JAITLY: If you look at the half-decade before we set up, that’s 1995 to 2000, which is the period in which I started practicing, but in which we had not set up the firm, you’re right, there were a lot of Japanese companies, but there were a lot of Americans and there were a lot of Brits. There were also a few Australians and the odd Italian and French company as well. But it was Japan, the UK, and the US that were most prominent.

The US definitely was far ahead of the pack compared to everyone else. This is the period of Enron. This is the period of Cogentrix. These are all of these large transactions that were taking place, pushed with either US or UK capital. The Japanese were doing investments more in the space of electricity, power—

RAJAGOPALAN: Infrastructure.

JAITLY: —and also they were doing a fair amount of joint ventures. They were never as comfortable doing things as their own in those days, as perhaps the Brits and the Americans were. There were more strategic deals. There were these corporates who were doing these transactions. As I talk about in the book, it was Y2K that really, as everybody knows, Y2K that—

RAJAGOPALAN: Not everybody. Everybody in India was born after Y2K, apparently. Only you and I know now, Akshay. You say Y2K to all the young folks, they have no clue what we’re talking about.

JAITLY: I know.

RAJAGOPALAN: Sorry.

JAITLY: The fact that there’s going to be a two in the date for the first time in the year column, that was what was causing all of these global companies to get their code rewritten to make sure that their computer systems didn’t crash. In the run-up to that, which was that same late ’90s period, there’s all this outsourcing work that came to India. I’ve never been certain whether the Y2K bug was actually a bug or not, or it is the biggest hoax that was perpetrated on the global business population, but it was certainly excellent for India.

Because what happened afterwards was that all of these companies said, “Look, if these guys can recode our dates and our computer systems for us, then why can’t they do more?” That more became so much more. There’s a straight line between Y2K and the GCCs that are being set up in India and the massive data centers, et cetera. I’m sure that there are people who are studying that or have studied that in a fair amount of detail. It would be interesting to see what they have to say in terms of the trend.

I think that that’s where Indian companies started becoming more confident. There were a number of US companies, actually, which saved their global businesses after the dot-com bust of the early 2000s because they had large outsourced centers in India. Those who managed to do that early, India saved them a lot because they cut their costs, and they were able to be more nimble at the time.

In that process, some of this exposure gave Indian companies also the gumption to say, “Okay, we need to go and set up marketing centers in the US,” or, “We need to start buying some technology in the US.” It was more marketing to start off with, but that was the beginning of that whole process.

RAJAGOPALAN: When I think about the kind of work that a firm like Trilegal does, especially in the early years before it became a full-service firm, I think of a few different things. One is just commercial work, which is not disputes. I think of it as commercial work that is required to avoid disputes, in some sense. It’s funny you said that the Y2K bug might have been a hoax because I think of the computer scientists who were working on the Y2K bug the same way I think about lawyers, which is you never get recognized for what you avoid. Then everyone thinks it’s a hoax.

The bread-and-butter work is to write contracts sensibly such that disputes can be avoided, mediated, or resolved in some way other than straight-up litigation. Then, of course, there’s litigation. Then the third part of it, which I imagine was quite central in the early years, is just understanding regulation. How much of it was that you were actually clarifying the law when it came to regulation? Because it’s all like you’re building the airplane as you fly it, right? At least that’s what India seemed to be doing. How much of it was just knowing what the law is and explaining it to outsiders who are nonlawyers? How much of it was actually inventing norms and practice because there were huge gaps? How much of it was lobbying for change of some sort? Do you have a sense for that, or is this just very hard to say?

JAITLY: No, it’s hard to carve it up in terms of proportions, but I think one of the really exciting things about practicing in that period of time that it was all of the above and very often in the same deal. You had to structure around a regulation because the regulation seemed to be saying something. You had to take a view on what nascent market practice might have been in terms of interpreting that regulation, which could be wrong because the government could take a different view, and then, beyond them, the courts could take a different view as well.

We weren’t necessarily the best at drafting and framing those regulations, so that while the intention might have been broadly understood, once it gets translated down into a piece of paper, what it says might not be what was originally intended. Or at least somebody looking at it a few years down the line could take a different view and reasonably so. Again, there were some kinds of transactions which just hadn’t been contemplated by regulation.

Although we say deregulation, it was very much that I am now going to allow you to do A, B, C, D, E. Here’s a sort of exclusive list of what you are now allowed to do. There were other things which there was no crime in some of those transactions necessarily happening, but people hadn’t just thought about them. As a consequence of which we had to say, “Okay, now we’ve got this deal in mind, can you please tell us whether we can do it or not?”

Because that’s what the risk-averse way of doing something would be, which is what lawyers are there for. Some clients might say, “Look, I don’t care. I’m going to do it anyway because I think no reasonable person would say no.” We’ve seen many examples in India where that’s not the right approach to take, and it’s better to find out. Again, in the book, I talk about this one case where we had to get the law changed on foreign exchange broking, to have it included in the list of NBFC activities in which FDI could happen because nobody understood that broking was not the same thing as market making. 

RAJAGOPALAN: I find that hilarious.

JAITLY: It took a long time because there just were no real brokers in the Indian market who put willing buyers and sellers together. There were very few of them, and as long as they had domestic customers, nobody bothered with them because it’s a question of having a good rolodex, saying, “I know who wants to buy, I know who wants to sell, and I’ll just introduce them.” It’s no different from stock broking. Because it sounded like it was an NBFC activity, you didn’t want to take the chance.

RAJAGOPALAN: And in foreign exchange.

JAITLY: And in foreign exchange, you didn’t want to take the chance. Although it took way longer than it should have, we did get the law changed for that to happen.

RAJAGOPALAN: On that specific transaction, can you recollect what their issue was? Are they worried about a Harshad Mehta-type thing when they think broker? Are they worried about intermediaries who are usurious moneylenders? Are they worried about another 1991 crisis precipitated by foreign exchange? What is the worry? Or is it just this is unknown and we don’t want to touch it.

JAITLY: I think at a lower level, it’s probably the latter, that it’s unknown, and we don’t want to touch it. I think when it went slightly up the chain, the word foreign exchange was a bit of a red flag, and the fact that you could be making the market somehow or the other. It was a question of making the same argument up the chain to various different people. To be fair, each person who we made the argument to got it.

It was just that they weren’t necessarily empowered or didn’t feel empowered to take the decision. Therefore, we had to keep going up the chain until we came to a point where somebody said, “Okay, I get what you mean by this.” Finally, entry 16 in the list of permitted NBFC activities was foreign exchange broking. I used to point to that very triumphantly for many years.

Delegated Legislation

RAJAGOPALAN: This is another interesting thing that I was thinking about when I was reading the early parts of the book, in general, I think India relies too much on delegated legislation, right? It’s nuts. That also means that all your compliances and penalties and all sorts of bizarre things proliferate. No one really knows what the law is, and bureaucrats have too much power. I don’t think you and I fundamentally disagree on that at the principal level.

In practice, in the post-liberalization period, that might have almost been a blessing, right? Because you have to make this up as you go along. We’re not exactly known as a country that places the first principles of contract and says, “Okay, now do as you wish.” In some sense, the delegated legislation part helps because if you had to go back to parliament to change the stuff, it would have been damn near impossible.

JAITLY: That’s a really interesting question because it’s made me think about the fact that the me of the early 2000s was just delighted at the fact that we could find a way to get some of this delegated legislation to do some of the stuff that we wanted it to do. The me of today thinks very differently about that. Actually, it’s a reason that highlights the importance of the basic principles of law.

In this case it’s really a question of the rule of law itself. The rule of law dictates that you only have to do something if it is the law. Now, if a delegated legislation isn’t fully authorized by the original legislation, the original statute, or by constitutional principles, then it should not be valid. However good the outcome of doing that transaction might be, or allowing those sorts of transactions might be, it should not be something that should happen because it is not good for the way in which the law itself operates as a whole.

Today, you might agree with what the law is trying to do. Tomorrow, you might disagree. In fact, we’ve seen many examples where the stakes have been high enough for someone who cares enough, where they go and challenge the law, and they might well challenge it successfully, because the delegation was not done in the proper fashion. There are plenty of examples in our case law to show that. That actually shows that the system is working.

There are judges who will say things like, “Look, we are completely for renewable energy. We know that that’s an essential goal that the country has to work towards, but the manner in which you brought these guidelines or regulations into force was not in accordance with the powers that were given to you under the Act.” Today, I feel very happy when I see that happen because, Shruti, when we’re in this moment today, where we’re all thinking about stage two reforms, the stage two reforms have to be upstream of where a lot of the economy is operating today.

RAJAGOPALAN: It’s also a stage of what the economy is like. In the ’90s, one, we were a tiny economy. Second, there wasn’t that much complexity because everything was command and control. Complexity really comes from the degree of specialization, which leads to more contracts and so on. That requires a different kind of mindset where you’re slowly opening things up, almost reformed by stealth, or making it up as you go along. Now, we’re in a completely different place. We’re totally integrated to the global economy. Leaving aside issues of capital control and things like that—there’s lots to be done. It just doesn’t make sense to work in this command-and-control sense. 

We’re even worse than command and control in one sense because now there’s no centralized command. It’s every bureaucrat who can make stuff up as they wish, and every new regulator who comes in can completely reinterpret the list or change the list of things that are allowed using foreign exchange or something. It seems a little anachronistic to have that stuff on the books now. I completely agree with you. We have to completely rewrite the stuff on first principles of contract and rule of law, and administrative law. I’m not very optimistic about how quickly that’ll happen, but I’m optimistic it’ll happen.

JAITLY: I’m beginning to feel more optimistic because I think there’s an understanding, at least in some parts of the country and in government, that these broader principles now matter to enable things to happen downstream without specific intervention for each different business model that you might think is good for the country to have. I’ll give you an example from a sector in which I do a lot of work, which is the power sector.

Now, everybody agrees that allowing the private sector to get into EV charging, electric vehicle charging, is a good idea. It’s a great idea. But if you look at what that activity is, it is buying power from a distribution company and selling it to somebody who owns a car.

RAJAGOPALAN: Which is not allowed.

JAITLY: Now that buying and selling, it’s allowed, but you have to get a license. Now, the government realized that for this business model to develop, you could not have a licensing regime. What they said is that charging a vehicle is deemed power generation, which does not require a license, and therefore, it is allowed. Now, I’m happy with the outcome, but I’m completely dissatisfied with the process.

RAJAGOPALAN: Yes, it’s totally backwards.

JAITLY: It’s totally backwards. What we need to do is somebody needs to go back and think, there must be 20 other business models of this kind that would be enabled if we got rid of the requirement to need a license for trading. That’s still not the meta level that you and I perhaps would like to see change at, but it is at least one level up within the statute and within the sector where changes would allow the enormous innovation that we’ve seen Indians deploy both in India and overseas to be unleashed. Because there’s so many business models that we can’t even think of right now that are stymied by the fact that the laws don’t permit it.

RAJAGOPALAN: Yes, and the thing that you and I would really like to see, I imagine, is allow everything unless you explicitly don’t allow it and make that list incredibly short. If there is harm, first rely on courts and contracts, and tort to resolve it. Only if the harm cannot be resolved at that stage, should you rely on regulation. That would be the standard way of thinking about this, but I think we’re a little bit weird. I know that’s not the way most people would set this out. 

JAITLY: As I said, I think that there is an understanding that we need to move to a more principles-based approach. It’s not a comprehensive understanding. You see it in certain pockets. If you think of the regulation of AI, for example, people are talking of a principles-based approach, and there seems to be some openness to that idea rather than going down the European route, which perhaps an institution or a state or a parastatal entity with high capacity can pull off. It’s harder for us to do.

This whole thing about look at the level of harm potentially and then regulate based on harm. Where there is extreme harm possible, then perhaps have a licensing regime. For instance, for nuclear energy, where the new act contemplates licenses, which I think is a good idea in that sector. At the same time, for somebody setting up an EV charging center, today they should not need a license, even if the government has put in this deeming fiction to not require them to have it.

Managing Risk

RAJAGOPALAN: When you think about the work that you do and, more generally, Trilegal does, you’re really in the business in some sense of managing commercial risk. There’s a lot of money at stake. Most of your clients have lots of investments, either directly in India or a lot of their business relies on these contracts going through. There’s a contractual risk element. 

Then there’s a second part, which is a regulatory risk element, which is the Indian government might do something crazy.The low end of the crazy is not including using foreign exchange in that list. The high end of the crazy is like Vodafone and retroactive taxation, but there is a fair bit of regulatory risk. 

Then the third part of it is global sands shifting risk, which is partly uncertainty, I guess. How do you think about the work that all of you do? I’m sure it’s changed over 25 years. How much of it would be contractual risk? How much of it would be managing regulatory risk? How much of it would be managing global economic risk?

JAITLY: I think the one that’s generally above our pay grades is the global economic risk. Although once something like tariffs happens at scale, you can be sure that any contract that might potentially be affected by tariffs brings in a provision where it becomes part of force majeure, or there is some other means to allocate that risk. 

I think, if you go back to just the basic principles of contract, it’s a risk allocation mechanism, as you were suggesting. You allocate as many risks as you can reasonably foresee. There may be some other risks that are foreseeable but highly unlikely to happen. Then you take a call as to whether you want to address that at all or not, or whether you want to say, “Okay, we’ll deal with this when we come to it.” In general, if you identify a risk you want to allocate it. The principle—you’ll be happy to hear this as an economist—should be the risk goes to whoever’s going to deal with it most cheaply, whoever it costs least for.

Let’s think of two types of contracts: contracts between the two private people have with each other and a contract between the state and a private person, of which there are many and many of very high value. It’s an important category of contract. In the public-private contract, my strong view is that any risk which involves getting a permission, a consent, land through acquisition, et cetera et cetera, even if it’s not directly given by the body with which you’re contracting, it should be on the side of the government because they have more of an ability to move the levers of other parts of government than a private entity does.

For instance, if you’re setting up a facility in a solar park, there are two major interactions that you have with the state. One is your power purchase agreement, which is with the distribution company, and the other is an implementation agreement, which is with the entity that runs the park. The implementation agreement involves a very important approval, which is the interconnection approval, without which you can’t—the infrastructure needs to be up before you can supply power.

The earliest deals that happened in these solar parks, the PPAs basically said, if the infrastructure isn’t ready, it’s your risk, and you’ll be late on delivering power to me even if the infrastructure isn’t ready. We turned around and said, “Look, why are you giving me a solar park at all if I have to take this risk? The earlier regime was better, where I just set up, and I say I’m ready, and you’ll take it from me.”

In these kinds of situations, we try and nudge the government to take risks wherever we have an ability to, either through pre-bid conferences or in situations where we are advising the government to say, “Look, you’ll get a better response from bidders if you take these risks rather than pass them on to the private sector.” That’s on the public-private side.

On the private-private side, what you do is you anticipate what might happen and then provide for a consequence if that happens. If you say there is a change that does not permit me to sell you my shares—you’re a foreign entity, and there’s a prohibition on selling those shares to a foreign entity—then I will be able to nominate a domestic third party to whom you will sell.

You have to find these sometimes inelegant, sometimes slightly more elegant mechanisms which deal with those risks. It’s just a question of what can you come up with on the spot on the basis of the facts in front of you. Then, of course, some of that becomes market practice over the years.

Dispute Resolution

RAJAGOPALAN: Now there’s all kinds of risks. Some can be managed, some can’t be managed, or some can’t be managed at relatively low cost, which is why we have dispute resolution. Now, the issue in India’s dispute resolution is incredibly costly. A part of it is just courts taking a long period of time. We’re not a country where contract enforcement is taken as seriously or is treated as sacred perhaps, the way it is in many other countries.

Arbitration was slow to take off, though I believe arbitration’s quite a norm nowadays in Indian commercial disputes. Do you think Indian lawyers are just better at allocating risk because dispute resolution is so costly? Is that a bizarre comparative advantage you’ve developed, or is it that non-Indian lawyers are better even though they have good dispute resolution because the opportunity cost in those transactions is just so high that they have to be better at allocating risk? What is a good way to think about that?

JAITLY: There’s a very strong argument to be made for the reverse of what you’re saying, which is that dispute resolution in India takes a long time because it’s too cheap.

RAJAGOPALAN: No, no. It’s too costly in terms of opportunity cost. Everything gets held up, right?

JAITLY: Yes. It’s actually, if I owe you 500 crores, it’s cheaper for me to pay a bunch of lawyers to delay the case as much as possible than it is for me to pay you the interest or to repay the 500 crores. I get more money from wherever that money is deployed. That is very much an argument that I’m beginning to see being made, and some amount of research is also being done to study this.

RAJAGOPALAN: Hang on one second, though. It is very cheap, but it’s asymmetric. It’s very cheap for one side. Presumably, you guys are lawyers for different sides at different points. Sometimes you’ll find yourself on the side where it’s going to be incredibly costly if it goes into litigation, and the other side can hold things up endlessly by paying lawyers for cheap.

JAITLY: Yes, but it’s easier to delay than to make the system work fast because the cost issue is not the only issue. The whole tarikh pe tarikh statement is true, to get cases delayed much more than they would be in most other jurisdictions. The problem in India is not that we don’t respect contracts per se, but we don’t respect them quickly enough. In doing so, the value of that contract or having a contract in the first place is diminished.

You’ll find that many people will want to have these very simple contracts. Two Indian companies will enter into a far simpler contract than a contract between an Indian company and a foreign company. It depends on how much value you put in that contract. Having said that, the commercial side of disputes in India, especially when they involve large amounts of money, and especially if you go to the Delhi High Court or the Bombay High Court, the commercial side is reasonably quick.

It is not as slow as it used to be. For cases involving land and various other things, it still takes a long time. A lot of the public impression, not the academic impression, but the public impression of how long the court’s process takes is also dictated by what happens in civil disputes, which do take an inordinate amount of time. Your family matters and property matters and those sorts of things.

RAJAGOPALAN: I understand what you mean by there is a more fundamental issue of people wanting to delay, Indian companies being a little bit more comfortable with a handshake and so on. As these deals get more complicated, are you actually effectively able to get the go-around to avoid going to court, maybe going to arbitration, or some third kind of clause which will activate altogether?

JAITLY: The reality is most transactions don’t go to court. It’s a relatively small percentage of the ones that do. The ones that do, they go because the stakes are really high. Parties have been unable to settle. Going to court is actually either because the dispute cannot be resolved, and it’s important or that it is so important that someone wants to go to court to delay. That could be one way of looking at it.

I think that we continue to develop more and more sophisticated contracting structures and clauses within contracts because the economy is getting more complex, deals are getting more complex, and that needs to be documented and risk allocated. There are very few companies who, when they get into a deal, think that I’m going to breach this contract. It’s also very hard to hide that from the other party in the event that you will either agree to something too quickly or give it away in some other way. I think that the contracts are becoming more sophisticated. They’re becoming much better than they used to be. Indian lawyers are very good at doing this sort of work now compared to where we were 25 years ago.

Trilegal’s Partnership Structure

RAJAGOPALAN: Yes. Coming to Indian lawyers, now I want to talk to you a little bit about the firm. The way the book is set up is there is the first few chapters, which are all about the origin story and each of you and where you were at, what point in life in the late ’90s, and how you get together. 

The second part is about all the growing pains, and then eventually you talk about the scale, which has been extraordinary in the last few years. Just to give the listener some context, you start out as six co-founders and a couple of associates and some office staff in year 2000, and in year 2025, you’re about 1,100 lawyers and about 150 partners. Is that about right?

JAITLY: Roughly, yes.

RAJAGOPALAN: That’s extraordinary, and a very large chunk of this has happened in the last five years. It’s a post-COVID thing. You grow from about 50 partners to almost 150 partners, and about 300 lawyers to about 1,100 lawyers. The growth is not linear in some sense. It becomes exponential. 

The way you set it up in the book is it’s the magic of compounding, which as an economist, I will never disagree with. Compounding is the closest thing we have to magic. I think the more interesting thing is how you slowly move the partnership model from just the founding partners to a tiered model, to then the lockstep, and so on. For those who have never set foot in a law firm, can you describe what are the different kinds of partnership models, and then we can get into the single-tier lockstep partnership that you have?

JAITLY: Sure. There are two broad types of models, none of which exist in their most pure form anymore, I don’t think. The ones that do are not necessarily very large. One is a sort of eat what you kill kind of model, which is that a partner is largely compensated based on the amount of work they do or bring into the firm. That’s one type of model.

The other is, broadly speaking, a lockstep where all the equity of the firm is divided into a number of continuously increasing points. The points are on a scale, say, from five to 40 or 10 to 50. There are some partners who are at the top, who are capped at that. They get capped out at, say, 50 points. You enter the lockstep, say, at five points or at 10 points. I’ll come back to talking about how the points increase, but the most important feature of that system is that everything is put into a pot. You meet your costs, and then everything is shared out in accordance with the lock, the number of points that each partner has depending on where they are on the lockstep. 

For things not to be frozen in time, based on certain principles, initially—and that’s why I was saying that the pure lockstep doesn’t exist anymore, really—is that you just went up in the lockstep every year regardless, and it was either up or out. The famous Cravath system was that we’re going to select you so carefully, and we’re going to train you so well that the default is going to be up, and for the terrible people who don’t manage to succeed, they’ll be out, and they’ll become partners in the second-best firm in the land. That’s what the original system was. As I said, it doesn’t really exist in that form anywhere now. 

The way you go up on the lockstep is by meeting certain performance criteria. You could do it year on year, or you could do it every few years. We do it every few years where your performance is evaluated, so that you go through what are called either gateways or up to the next level. The criteria that you need to fulfill at different points in your seniority in the partnership are different. Initially, when you’re a young partner, you’re largely evaluated on the basis of the amount of work you’re doing and, to some extent, on the work that you pass on to other partners.

As you go up in the system, the amount of work that you build for others becomes more salient. At two key stages in your progression, your progression is dependent on you making up another partner from within your practice. Ultimately, any one lawyer can only work for so many hours in the day. They can only work with a certain number of associates, and supervise them adequately. The logic would dictate that, from one of your best associates, as they become more senior and more experienced, should become partner, and then form their own team and grow. That’s how you go up the partnership. 

The people who are at the top of the lockstep are effectively getting diluted every year. If you retain or increase, even better, the value of each point, then that’s how you earn more money. The point also is that, the value of the point should be such that, at 40 points at the top of the lockstep, you’re not so bothered about earning more money every year, because you’re already earning a decent amount.

RAJAGOPALAN: This is towards the end of the book, there’s a table that describes the lockstep. It sounds incentive-aligned for many reasons. You have people who are on a partner track who can come in at the lowest level. There are reasons to move up, and the way you’ve set it up, is to protect against business cycle risk, right?

Partners and certain practices within the firm can have bad years, or good years, or bad quarters. The second part of it is you want to make sure that they actually grow the size of the pie. The real way to grow the size of the pie is to encourage more people to be partners, and to bring in more clients. The only way to really do that is to align it with moving up in the partnership. As you go up the lockstep in levels, you need to mentor more people, and specifically mentor more partners, right? 

Now, all this sounds really incentive-aligned, but you didn’t start out that way. The sense I got from the book is, you actually experiment with eat-what-you-kill model and a tiered partnership, and then the lockstep, right? Because, first, when you set up the three chapters in the three cities, the three separate balance sheets, they eat what you kill at the city level, but you’re really just two lawyers, or two partners in each, right? You have that model. You’re like, “Okay, eat what you kill works when there is a lot of disproportion either in earning capacity, or just the way those cities or sectors are growing.” It makes more sense to get into some kind of equality and a tiered system, and you do that once you grow a little bit bigger. 

You figure out that the tiered system is not working very well, because a lot of your associates on partner track are quite disgruntled, and then you move up to this. Is this a good way of thinking about this? Is this is the natural progression of scaling a firm?

JAITLY: Well, without being prescriptive that this is the way that firms should scale or not, I think that it’s largely how it happened for us. I’ll just qualify what you said earlier in terms of the eat what you kill in the early phase. The principle behind it was not eat what you kill. The principle that we’d written down was that we would all share equally with each other. We just said that we’ll do it only in the individual offices, more because of uncertainty, than because the rewards were going to be disproportionate, and the minute that we found that we were roughly in the same ballpark—it was and will never have been equal contribution, and it would have gone up and down in different offices, and from different partners at different points in time.

The philosophy and the principle and the sentiment behind it was very much that we’re all sharing. We’re just doing it only in our own offices to start off with. That was the first phase. No one thought it was eat what you kill.

RAJAGOPALAN: Am I misremembering, or is there a conversation about how the Bangalore office gets a smaller percentage until everyone says no, and then everyone meets in the middle a few years later?

JAITLY: No, we didn’t. No, the Bangalore office didn’t integrate onto the same balance sheet until they went up, because we did not want them to get a smaller percentage.

RAJAGOPALAN: Got it. That does sound a little bit like eat what you kill, right? Maybe in practice? But I know what you mean. In terms of principles, you were kind of waiting it out.

JAITLY: Yes. Also, because in eat-what-you-kill models, you get a referral amount for what you refer to other partners. We never brought that in.

RAJAGOPALAN: You’re quite collaborative from the beginning.

JAITLY: We had it in principle. We never implemented it. We never gave each other referral fees. Although within the system now, there is an implicit referral fee on the basis of getting credit for work that you pass on to other partners in order to go through the levels of the lockstep, not in order to be paid, because that would be double counting.

I think that one of the reasons we had salaried partners to start off with—and it wasn’t that they were associates who were not partners; they went through a fairly rigorous technical evaluation to become partner. They were just not sharing profit, they were still on salary plus bonus, is because that’s what everybody did. Nobody had an all-equity partnership at that point in time. In fact, other than us, nobody else has one even today.

The whole point was that you see how these guys do for a certain period of time. You give them the ability to find their feet, and to learn how to become partners, to go and market with a partner tag, as opposed to, if you walk in as an associate, nobody’s going to give you work. If you go in as a partner, people might, but they won’t do it the day you become partner. It’ll take you a couple of years for that to happen. That was the logic behind all of that.

Other firms presumably had some partners, at least on some level of equity. There was this ante room of salaried partnership before you became a full equity partner. We just did it because it was the thing to do.

RAJAGOPALAN: There’s a second aspect, or at least three aspects that make you guys weird. One is you decide that you’re not going to do eat what you kill. The second is there’s no buy-in, and there’s no payout when someone enters and exits the partnership. This is quite vulgarly called naked-in, naked-out. I don’t know if that’s what it’s called in India. You don’t have to pay the remaining partnership anything to buy into the profit-sharing model. When you exit or retire, no one pays you out. 

Now, when you combine these two things, I imagine that’s the reason you had to have a long bit of salaried partnership, right? If people aren’t paying in, it means they’re not compensating the founders for the risk that they took in the early years, which means you need to wait a little bit longer to get entry into the partnership. That also makes some of your associates, and those on partner track, quite disgruntled. 

I read the chapter on what happened in 2008, and some of your very, very close friends and partners quitting altogether, and starting their own firm. Was this just inevitable, because you have this combination of two things, where it’s a tiered partnership model, because it’s you come in with nothing and you leave with nothing, and that’s the only way to make everyone equal, or at least, in some sense, compensate the original founders for the risk they took?

JAITLY: Well, I think one way in which founders get compensated is the fact that they are at the top of the lockstep, and other people are at the bottom. Even when if you’re an equity partner, there is the difference between what you’re taking out, and what you’re putting in is large enough for it to be a compensation in some extent. In the beginning, you’re putting more in, and the real big rewards are post-dated, if you like, they’re postponed.

RAJAGOPALAN: Then, why not just put everyone on equal equity partnership right from the beginning? Because you guys were weird right from the get-go, right? Was it just because it wasn’t the norm, or it didn’t occur to you?

JAITLY: It wasn’t equal. Even now, it’s not equal equity partnership. It’s on the lockstep.

RAJAGOPALAN: It’s profit sharing, as opposed to salary plus bonus, is what I mean, right?

JAITLY: Yes. As I said, I think it was just what everybody did at the time. That was one. The problem with those guys who left wasn’t in the phase when they were salaried partners at all. 

RAJAGOPALAN: It lengthened the process for them to move up, right? 

JAITLY: It did.

RAJAGOPALAN: That’s not when the problem reveals itself, but it’s like they waited so much longer than they thought that they should have waited, was the way I read the story.

JAITLY: Yes, that’s one way to look at it. The way we looked at it at the time, and the way I generally think about it, is to say that when they were offered equity, they thought the equity wasn’t enough, that they should be slightly higher up on the lockstep, because they felt that they’d taken some of the initial risk with us by having taken a punt on the startup, and because they were not so much more junior to us then to justify that difference. Yes, it would have taken longer, but I think that they would have been happy with it taking longer if they had been slightly further up in the lockstep, possibly. We don’t know.

Scaling 

RAJAGOPALAN: The third weird thing is that it’s one partner, one vote, right? Now, when I think of this from an institutional design point of view, so you have a single-tier lockstep partnership. Now, you guys got rid of the salaried tier altogether. You have one person, one vote, and no one has to buy into the partnership, and no one pays you out when you go out. Is that the reason the scaling is so slow in the first 20 years? Because effectively, you can bring new people in, they haven’t paid into the partnership, they’ve only worked their way up, and very quickly they can vote you guys out, because it’s one person, one vote, irrespective of the fact that you’re the top of the lockstep?

JAITLY: You mean that we didn’t make more partners earlier because we thought that they’d kick us out?

RAJAGOPALAN: No, you’re just slow, you’re more cautious. I don’t mean it literally, like someone’s sitting and plotting it. I mean it that you grow very slowly, you’re more nervous about this, you’re very careful about who you include into the thing, because now it’s one person, one vote, and no one bought equity in, and if something bizarre happens, the founders don’t get paid on the way out.

JAITLY: No, it wasn’t because of one partner, one vote. It was because our partners were real partners, they were not supervised by another partner. You had to make sure that the quality of each partner was sufficient for you to hand over transactions, clients, relationships to them without hovering over it like a mother hen.

It is more a question of making sure that you had really, really good people. Either we did not put up people for partnership even when they were senior enough, because we thought they wouldn’t make it, or they wouldn’t be able to be the sort of partner you would expect them to be, or some people came up for partnership and didn’t make it through the selection process, because the selection process is tough.

Till today, that is the case, and it is because the equity is valuable. What it does now is it puts more of an emphasis on each partner and the firm collectively, to make sure that we are training people really well, so that when it comes up for them to become partner, they are able to do what it takes to be a successful partner. That’s one.

Number two, earlier we used to be able to make salaried partners at seven years qualified. Today, you don’t become a partner until you’re 10 years qualified, and you had three years in salaried partnership. Effectively, in those days or even today, almost every other firm makes partners at seven years qualified, because they have the salaried tier, so they can afford to make it.

Our partnership now is recognized as being valuable enough, so that our people coming up through the system are okay with waiting for a couple of years more than their law school peers in other firms, because everybody knows that at Trilegal, partnership means that you get a chunk of the equity.

RAJAGOPALAN: I don’t disagree with any of that, but that also doesn’t explain how the growth is so slow in the first 20 years, and just explodes later. Presumably, the quality standards haven’t dropped. You are just more willing to bring in more people from outside, and have lateral hires, and people who move their entire practice with their other partners into the firm, and so on and so forth. That’s where I was wondering about the institutional design. Is there something peculiar about what you tried to do that just makes you more cautious in the beginning?

JAITLY: My sense is not that it was about institutional design. My sense is, it was more about reputation, market, external factors. The people didn’t know us well enough to trust us with the really large deals to start off with. We didn’t get a whole number of the same kinds of deals. We did some of them, but not dozens of them. Therefore, we perhaps didn’t have the financial resources to be able to grow.

You will not make a partner into the equity if it means that you’re going to earn less. It doesn’t make economic sense to do that. It means that you’re not charging your clients enough, or that you’re paying yourself too much. We didn’t think we were paying ourselves too much, because we were on a lockstep, and points were not that different.

If you look at the difference between what a first-year partner in our firm earns, and the senior-most partner, it’s far less than in any other firm in the country, the difference between those. It’s because the people are becoming partners a bit later, and it’s a flatter partnership more generally. I think the reason we grew slower was more because of external factors, and that reputation is a trailing indicator of your success.

RAJAGOPALAN: Yes, the way you guys talk about the scaling part in that chapter is very similar to the way startups think about it. There’s a founder mode, and then there’s a managerial and scaling mode, which I don’t fully agree with, but we’ll go with that comparison for the moment. The moment the founders start loosening control over running the firm, and bringing people who are partners, but not founders, things start scaling a little bit differently, and so on. No matter how much you avoid the family situation, or don’t put your names on the door, founders will always be first among equals, right? Is there just no way to avoid that at some level, or by the time you avoid it, it just takes a very, very long time?

JAITLY: That’s a very complicated issue, I think. I remember also in all of what I’m saying about institution building, et cetera, it’s a sample of one that I’ve studied, which is my own firm. 

I don’t know whether this is what generally happens, that it’s inevitable that this is what will happen to founders. I don’t think necessarily that it was either inevitable that we needed to have to change leadership in order to grow, or the other way around.

There’s no way of knowing exactly what the reasons [are] for this scale, this remarkable growth was. That’s why I really focus on compounding, because what happens is, once you’ve got a critical mass of partners, and now they’re all incentivized to make up partners from within their own practices, then at some point you get enough senior partners who are making up more and more partners, and then there’s an inflection point to that process.

As far as the status of founders are concerned, it’s a matter of fact. It’s a matter of fact when you’re a founder. It doesn’t mean that you’re better, or that no one else could have done it, or that someone else couldn’t have done it better. We were just founders of the firm, because we existed at a certain point of time. We had chemistry with each other, and we happened to be there, and we built the firm.

Could someone else have done it? Maybe. We don’t have too many competitors of any scale from the time that we set up. That’s one, and nobody else has really used our model. In order to be able to say, with a hand on my heart, to say this is what worked and this didn’t, I’d need to have a couple of comparators. 

But what my strong feeling is, based on the lived experience, is that, it is having a huge luck in having a certain type of people, a certain set of people who are founders, who are not very different from each other, and who shared values, and were willing to stick it out through some difficulty with each other, because the project seemed to reveal value relatively early on.

Then, to realize that to grow this, if that was indeed an objective, that to grow this, we’d have to be inclusive. We would have all made more money individually if we had been less inclusive, but we would have not built a firm of this type.

Design or Alchemy?

RAJAGOPALAN: I was in law school in Delhi from 2004 to 2007. Trilegal was known, but it was known as this new cool thing for people to intern at. Really, the only firm that had a reputation of being somewhat equitable was J. Sagar Associates. 

Jyoti Sagar, again, he didn’t require a buy-in into the partnership. He had a constitution very early on. It said that none of his children will inherit. He was a little bit ahead of the curve there. Of course, they have a salaried tier too, and his name is on the door. There are some important differences. Did you actually go through what were the constitutions or partnership agreements of all these other firms, and then sit down and do this, or what was the thinking?

Because you’ve changed it as you go along, which is quite remarkable. Is there anything other than the original principles, and the fact that you would do this together that’s the binding constraint? The reason I ask is, the way I think about institutional setup is, if the institutional setup is good, six monkeys should be able to run this, right? The story suggests something very different. It suggests that only the six of you could have done this, and the institutional setup is a byproduct of what it is you all set out to build. What’s a good way of thinking about that?

JAITLY: Very early on in the book, I use the word “alchemy.” I think there’s some alchemy involved in these things. You could put a different set of six people together, and they wouldn’t be able to do this, even with the same understanding of the institutional options available to them. If some things that would have happened differently between the six of us, factually along the way, if we had not had some of the successes that we had earlier, things could have happened differently. I think if you’d had some early strong adversity without having started to develop a reputation, we might not have remained committed to our principles as much as our successes allowed us to be.

I really don’t know the answers to all of that, but I do think that for us, it was not enough that they were just six of us. It was not enough that we had those values. Those got us out of the door, and they set us up really well. It required us to continue to work on those principles, transform them into structure, and then to start building a culture that other people were attracted to.

For me, the big learning, is that lots of people are attracted to collaborative structures. That’s been the big learning that in looking back at the history of the firm through the process of writing the book. I think once you make a certain amount of money, many people want to feel happy about their working life. That working life involves the people you work with, the kind of work you do, the kind of people you work for, all kinds of things.

If you have the luxury of choice beyond a certain level of financial comfort, lots of people will choose those things. Well, obviously, when you look at utility, these are aspects of utility. If you look at it from a purely financial utility point, then my experience has been that, at some point, it breaks down, which is why I say that we are not a firm for rainmakers.

RAJAGOPALAN: You’re not a firm for rainmakers. The eat what you kill thing is something you explicitly stay away from. It is interesting that you’re in a business, where for the first 10 or 15 years, people are rewarded for being very good and for winning. Then, in the second part, now suddenly everything depends on how collaborative you are.

It almost requires a certain level of growth, or for people to make a switch of some sort, which is not always easy, right? This is a set of highly competitive, ambitious type-A people that we’re talking about, because they’re selected and trained to be exactly that.

JAITLY: Well, the collaboration between partners is observed by, and experienced by the associates as well. They see the different teams work together on the same deal, that when a client comes in with a new transaction in someone else’s practice area, their partner will speak to someone and say, “Hey, take care of my client for me and do this deal.” They see all of that. They observe that happening.

There isn’t some very distinctive cultural difference between what happens with associates. They’re not, strictly speaking, competing with each other. It’s only very, very, very much at the margin that you get two excellent people coming up at the same time in the same partner’s team, and the size of the practice only justifies one of them becoming partner. The firm will say to someone like that, “Look, hang on for another year. You might get your chance next year,” or they may speak to another partner to say, “Can you be co-sponsor of this person, and also take some responsibility for their career?”

If you’ve got a good person, you don’t want to let them go, because one thing that happens is, anyone who doesn’t make partner in our firm, and is reasonably good, walks into partnership in any one of our top competitors. That isn’t a fear that people have, but they still like the idea of being a partner in this firm, because they know and they see how partners are with each other, and it’s something aspirational. It’s not a huge change in gears, I don’t think.

Regulatory Capture

RAJAGOPALAN: One slightly different set of questions from the firm, or maybe this is relevant to the firm, and what you guys have built. Now, you are at a scale where there are practices within the firm. You’ve developed an enormous amount of specialization. India is still reforming its regulatory state in meaningful ways. India has a problem, which is a pretty classic transition economy problem.

The people who actually work on these commercial matters, know the most about that area or regulation, oftentimes more than the bureaucrats or the lawmakers. But they also have a very different set of incentives. What I find quite remarkable in India, and maybe this is necessary, is that you see several top lawyers serving on various committees, like this could be the RBI committee, the Digital Competition Law Committee. This is Companies Act, like, all these different sets of committees.

You have all your, name the top people from all the law firms, so the Shroffs are on there, there’s Khaitan on there, Zia Mody’s on a few of these committees. That’s pretty standard. When does this venture into, this is how you get clients now, because you have this influence and also, in some sense, lawmaking, and that’s why the clients will end up going to the really big firms? Because from the point of view of the legal market, that’s not very healthy. It might still be healthy from the point of view of how we conduct reforms.

JAITLY: Yes, I think that we don’t have a revolving door kind of thing in government, so you don’t get the opportunity to go in and out of government. Somebody like myself or Rahul Matthan would be open to doing that if that was a possibility. If somebody says, “Come and become a regulator in an area where you can go and implement your ideas, or become a policymaker,” I think some of us would be happy to do that, but that’s not an option.

Then, yes, then you get asked whether it’s formally through a committee, or informally in a variety of different ways to contribute to various policy and reform initiatives. It does give you a greater standing with clients, there’s no question about that. Whether it’s healthy or not, there was some of this stuff that we were doing very early on. When we were nobody’s, relatively speaking, Rahul was working with Nandan Nilekani on AADHAAR before AADHAAR came in, to draft a privacy bill which still hasn’t seen the light of day, but it was done much more than a decade ago.

If you get the right kind of person to be working with, and in fact, in the book, we’ve got some examples of where we did this very early on in relation to geospatial data, and few other things.

RAJAGOPALAN: Yes, but those are not examples of regulatory capture. You know what I’m talking about, right? Now, we have serious concern over regulatory capture, especially, competition commission, digital competition report. Everyone who’s representing very, very large international clients are on these committees. When you go through the committee reports, they’re quite clearly representing the interests of the clients. Somehow, the geospatial stuff that you talked about early in the book, which is based on a paper written 30 years ago, that doesn’t seem to be in the same ballpark as what’s happening now.

JAITLY: No. I think the point being that there are various people who get invited to, and asked to do these kinds of things at various levels of seniority. Look, as long as it’s being done in public, as long as it’s being done in the open, as long as there are multiple voices that go into the creation of these reports, I think the onus is probably on the government to ensure that they get enough disparate voices.

If someone happens to be an expert in that field, because they’ve done more transactions than anyone else, then it would be a shame not to ask them for their views. Then, if there’s something that they say that you don’t agree with, don’t accept their suggestions, and draft a policy in a different fashion. I wish I had been listened to more in a variety of different situations as far as electricity policy is concerned over the years, but sometimes there are far bigger vested interests than a few clients that a lawyer might be representing. 

RAJAGOPALAN: No, fair enough. I wonder if it would be harder for the same six people to start Trilegal today, given that there are these other very large firms who are, in some sense, at a very different kind of elevated seat at the table when it comes to actually writing the regulation, which is very different from making it up as you go along 30 years ago or 25 years ago.

JAITLY: I don’t think that the reason that you may not get other large firms starting from scratch today is because of that reason. I think it’s because the space that was open for us to occupy, or the space that opened up for us, has gone. It has gone partly because of us, and partly because of lots of other people who have done versions of what we’ve done, but are smaller today.

I do think there’s one area—and this is a pet theory of mine—there’s one area in which there’s space for a relatively younger firm to do really well, and become very good, which is in an exclusive disputes boutique, which could become extremely large like Quinn Emanuel in New York, for example, which is only formed some 20, 25 years ago, and is now doing some of the biggest litigation in the country, and charges fees which are sort of eye-watering.

I think there’s space for somebody like that, but I think that it would be hard to set up a Trilegal today, because the space for that is already largely occupied, as I said, partly by us, or a firm of our type, but then to be fair to the other big firms, lots of them have instituted a lot of reform, because the market has demanded it of them.

RAJAGOPALAN: Yes, because otherwise people leave. 

JAITLY: Otherwise people leave, yes.

Foreign Law Firms

RAJAGOPALAN: Now, in terms of looking forward, one of the things that never quite happened in the Indian legal marketplace is, there was this long-time reform that was supposed to come through the Bar Council of allowing foreign firms to come and practice in India, or at least have partnerships and so on. That didn’t seem to go too well, and now it’s purely referral, or individual firms partnering with foreign firms.

Now, you see more and more Indian firms doing deals outside of India, outside of the Indian regulatory landscape. Is that the next frontier for Indian firms to just become global firms to have big offices in Singapore and London and New York? Is that where Trilegal seems to be going?

JAITLY: Just to quickly address the foreign law firm in India issue first, I think that you can do whatever you want on the regulation front. Now, there are regulations which allow them to set up which are inadequate, and have lots of interpretation issues with them. I think the main issue for foreign firms in India is that the fee levels in the market just don’t justify large presences. They justify small offices.

We’d be very happy for them, lots of people to come and set up. It would save a lot of money that we spend on marketing trips overseas to go and see them, if we could just go down the road and see them. I think that in any international market which has been closed, and which has been opened up for international firms, the entire profession has benefited as a consequence of that financially, and in terms of quality standard. We are completely open to that.

I think it’s really a financial issue. Other than in one case where if foreign law firms decided that I’m going to do international deals out of India, where you staff a Vietnam deal out of Bombay, or a Cote d’Ivoire deal out of Delhi, why not do that instead of a Singapore or Dubai which are far more expensive? If your clients have GCCs in India which are doing important pieces of work for them, then why can’t you think of something similar?

It would take a lot of budging of lots of entrenched interests in the international firms for that to happen in the near future. However, for very similar logic is what I think applies to Indian firms who want to go overseas. Also, the markets for Indian firms overseas are not London and New York. They are the Middle East.

RAJAGOPALAN: Africa.

JAITLY: They are potentially Central Asia. They are Africa. They are these kinds of places, where common law systems are well entrenched, where large deal-making is something that is, perhaps, not as developed as it might now be in India, where some of the models that we’ve implemented in India perhaps have relevance in those countries, whether it’s in the tech space or the infrastructure space.

I see activity on that front for Indian firms in the next five to 10 years. Lots of Indian firms have, not lots, but a handful of Indian firms have small presences in Singapore and Palo Alto, but they are post offices. They are marketing offices. They are not doing deals out of there. In terms of more substantive presences, I think we’ll see it happen in the next five years.

RAJAGOPALAN: Do you see any of the major legal innovations happening in India actually leave the country? There were a bunch of innovations you describe in the book on the kinds of deals that were structured that actually helped the telecom sector grow. Or basically, any infrastructure, or energy-based industry where fixed costs are very high, marginal costs are relatively low later. They need special kinds of structuring, and India had to do this at scale, so there were lots ofnot regulatory, but contractual innovations that were made. Do you see more of that coming out of India, or do you think the dust is largely settled on stuff like that?

JAITLY: I think more of that could come out of India. I think it could partly come out of just Indian firms doing more stuff overseas, and carrying that experience. Because at the moment, there is innovation happening around the world. It’s perhaps not following some of the Indian examples. People are solving problems. They’re just not coming up with the same solution. Some of our solutions do apply.

I’ll give you an example. One of our clients bought a distributed solar business in India and then decided to do a similar kind of acquisition in Africa. They decided that because we’d helped them do it, and the market was more similar to India than in their home jurisdiction, that they would use us to do that deal in Africa. There was another Saudi client for whom we did a solar project in India who then said, “Can you help us bid for a similar project in Egypt?”

What will happen inevitably is that we will then take whatever we’ve learnt, and the models we’ve learnt, we’ll apply that over there. I think it’ll happen in a more organic fashion than necessary. Look, what I’m absolutely sure is already happening, is global companies who are implementing business models in India that are working are taking those to other parts of the world. That’s happening, some of which may be a little more well known and prominent and public, and some of those might just be the way that they’re conducting business now in other parts of the world.

RAJAGOPALAN: I was thinking of something a little bit more general. I’m thinking of something like the Y Combinator SAFE. This is the agreement for future equity for startups when it comes to venture funding. This is something Carolynn Levy, who started out as the YC lawyer, came up with as an innovation to make sure that startups can scale quite easily.

Then, it’s become a very standard financial instrument for any startup deal outside of Y Combinator. I was thinking about something a little bit more equivalent to that. Can you think of something that Indian firms have come up with, which the rest of the world has just picked up and run with, or even something Trilegal’s come up with that the rest of the Indian firms have picked up and run with?

JAITLY: Nothing pops to mind immediately. 

RAJAGOPALAN: I’m sure there are, right?

JAITLY: I am unfortunately not the repository of the knowledge of the 150 partners I have.

RAJAGOPALAN: Well, you’re the one who’s written the book. 

JAITLY: No, that’s true. It’s just that in the energy and infrastructure space, it tends to be clunky. It tends to be conservative. I would imagine that in the tech space that there’s this stuff that has happened which has, either I forgotten about, or has escaped my attention that is working.

Some of it is probably happening as a consequence of Indian tech companies buying subsidiaries overseas and then saying, “Okay, we know how to do this business. Let’s use our standard models over here.” There have been a few random things here and there, but I don’t know whether that’s, to my knowledge, whether it’s systematic yet or not.

RAJAGOPALAN: Yes. No, I understand. Sometimes these things may get copied or people may just go with it, and they may not attribute, because there’s no clear way to patent a particular way of drafting a contract, or have copyright over it. I really enjoyed reading the book. This was lots of fun. The entire time I was reading the book, in the background, it was like Adam Smith whispering in my ear, because the size of the market determines the degree of specialization. This is really remarkable story of that.

One, how the firm starts and grows, and eventually, how each of the practices develop, what scales, the way the three cities function, tells a slightly different story of India.

JAITLY: Thanks a lot. I really enjoyed this chat.