Legal Off-Shoring
Business Law News
By: Patrick Madden
Evalueserve, Inc.
Introduction
Ever since its debut in the late 90s early 2000, legal process off-shoring has been attracting attention at an increasingly rapid pace. Although, the latest entrant in the highly successfully off-shoring arena has been welcomed by a majority of the legal industry, it has also managed to garner some criticism along the way.
Off-shoring certain aspects of legal services can provide huge gains in terms of time and cost effectiveness. It is no secret that the basic remuneration of an attorney in India is less than that of an attorney in the United States[1]. Differences in time zones also provide the opportunity for rapid turnaround. For example, a lead attorney in the US can assign a project via email when he leaves the office at 6 pm ET (or more likely, 8 pm ET) and begin his day the next morning by reading a memo from the off-shore attorney in India summarizing the 8 hours of research that was done while the US attorney was sleeping.
More and more law firms are making a strategy move to off-shore some of the more mundane aspects of the legal process to providers based in other countries. Many of the firms are then using the relationships as a selling point in their business development efforts. For flat-rate work the firms are able to offer prices that are often more competitive than their current law firm. In other cases the relationship is disclosed as a benefit to the corporate client because the law firm and client can agree that certain aspects of the clients workflow will be delegated to the off-shore provider with the low hourly charge rate passed along to the client. This strategy appears to be addressing many of the challenges faced by law firms subject to corporate demand for reduced legal budgets and alternative fee arrangements.
Larger law firms and corporations have been the early adopters of off-shoring in the legal arena. In fact, the use of off-shore providers can also help smaller firms level the playing field in terms of competition for clients. It is estimated that 98% of law firms have less than twenty attorneys on board, and approximately 76% have less than four attorneys. Often these firms face a feast or famine situation, struggling with either too much work or not enough work. Since these firms cannot afford to keep a large workforce on their payrolls, they face numerous difficulties when they get a large project. Small to mid size firms can benefit greatly by sending overflow work to offshore providers, who can provide a large number of reasonably experienced professionals with the right domain expertise at an affordable cost. This can also help small and mid-size law-firms level the playing field because it allows them to compete more effectively with larger law-firms.[2]
Legal process outsourcing reduces expenses such as salaries, equipment, office space and other elementary aspects associated with the litigation process. By partnering with LPO firms, small to mid-size law firms are able to maintain a lean and profitable operation while maintaining the flexibility to take on larger projects. Trends show that firms using LPOs are able to complete projects quicker and their clients spend less on attorney fees, enabling them to scale up their resources and bid for bigger and better projects, often outperforming their rivals. [3]
Over a period of time the LPO industry has gone from providing low-end paralegal assistance to services such as legal and regulatory research, due-diligence, litigation support, compliance support for mergers and acquisitions and contract review to name a few. In fact, where one saw industry giants crumble under the pressure of the prevailing economic scenario, the LPO industry witnessed tremendous growth. Cost constraints are the driving force behind the success of this industry. Various companies have caved into demands from their clients and have been compelled to off-shore a gamut of services in order to reduce costs and increase productivity. The latest example being the Rio Tinto deal with CPA Global.[4]
It is estimated that the legal process outsourcing industry has driven a revenue growth of 495% in 2009 alone.[5] Forrester Research and ValueNotes forecast that the LPO industry will create as many as 79,000 jobs globally by 2015 and revenues will grow from $640 million in 2010 to $4 billion by 2015 respectively.[6]
Bar opinions on Legal Process Off-Shoring
In 2008, the American Bar Association via its formal opinion 08-451, granted an ethical sanction to the entire off-shoring process. The opinion stated that a lawyer could outsource legal or non-legal support services provided the lawyer remained ultimately responsible for rendering competent legal services to the client.[7]
New York
In August 2006, the Committee on Professional and Judicial Ethics of the Association of the Bar of the City of New York, published its formal opinion on legal off-shoring and stated that an attorney was ethically allowed to off-shore legal support services to foreign lawyers, even though such lawyers were not allowed to practice in any US jurisdiction and such off-shoring would not violate the New York Code of Professional Responsibility.[8]
San Diego
In 2007, the San Diego Bar Association stated that an attorney did not assist in the unauthorized practice of law or violate the California Rule of Professional Conduct 1-300 when he or she used the services of an outsourcing firm to perform research and drafting services on behalf of a client.[9]
Florida
The Florida Bar Association has also followed suit, and in January 2008, via its ethics opinion 07-2 states that a lawyer is not prohibited from engaging the services of an overseas provider to provide paralegal assistance as long as the lawyer adequately addresses ethical obligations relating to assisting the unlicensed practice of law, supervision of non-lawyers, conflicts of interest, confidentiality, and billing. The lawyer should be mindful of any obligations under law regarding disclosure of sensitive information of opposing parties and third parties.[10]
Ohio
The Ohio State Bar is the latest bar association to grant its blessing to legal off-shoring. In its opinion issued on the 14th of August 2009, the association has stated that [t]he Ohio Rules of Professional Conduct do not prohibit an Ohio lawyer or law firm from outsourcing legal or support services domestically or abroad, either directly to lawyers or non-lawyers or indirectly through an independent service provider, but applicable rules do impose significant ethical requirements.[11]
With the ABA and several State Bar Associations granting a seal of approval to legal off-shoring, the industry is fast gaining momentum. As service providers perfect their processes they are bound to climb higher up the spectrum. A fact that is evident from the services that are now off-shored in comparison to when legal off-shoring first began. According to the Legal Director of Pinsent Masons, (a global 100 UK law firm which is among the first to outsource work done by UK lawyers), their decision to outsource was made not only due to client pressure to reduce expenditure, but was also driven by a desire to provide clients with innovative and cost effective solutions for their legal problems.[12] Therefore, with both clients as well as law firms supporting the outsourcing agenda, it wont be long before legal off-shoring revolutionizes the legal industry.
Legal Off-shoring and the future of the legal industry
Continued technological advancements combined with economic pressures indicate that the legal off-shoring industry is here to stay. Some may see this as a potential threat to be avoided at all cost. Others will embrace the opportunity to provide clients with greater value with limited resources.
[1] http://legalcareers.about.com/od/jobmarket/a/Offshoring.htm
[2] http://www.evalueserve.com/Media-And-Reports/HTML-Press- Releases/Recent/Legal_Process_Outsourcing-Hype_vs_Reality.aspx
[3] http://www.reuters.com/article/pressRelease/idUS155123+16-Jun-2009+PRN20090616
[4] http://business.timesonline.co.uk/tol/business/law/article6523920.ece
[5] http://www.articlemaniac.com/article/230521/estimated-trends-in-legal-process-outsourcing-lpo-for- 2010-beyond.html
[6] http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/06-16-2009/0005044958&EDATE
[7] http://www.abanet.org/media/youraba/200809/article11.html
[8] http://www.nycbar.org/Ethics/eth2006.htm
[9] http://www.sdcba.org/index.cfm?Pg=ethicsopinion07-1
[10] http://www.floridabar.org/tfb/tfbetopin.nsf/SearchView/ETHICS,+OPINION+07-2?opendocument
[11] www.supremecourt.ohio.gov/Boards/BOC/Advisory_Opinions/2009/op_09-006.doc
[12] http://blog.law-scribe.com/2009/07/global-100-uk-firm-goes-public-on-legal.html