Legal Process Outsourcing Perspective Paper

8/2/2019 Legal Process Outsourcing Perspective Paper

1/8

Legal Process Outsourcing A perspective

1

Legal Process Outsourcing (LPO)

What, Why and Where in Perspective

1. IntroductionThe Legal Process Outsourcing industry has oflate emerged as a key factor in the growth ofglobalization catching the curiosity and attention ofpeople and media worldwide. Right from its

inception, speculations were adrift surrounding thegrowth and challenges arising due to the verynature of work outsourced. Law firms areglobalizing their practice by merging acrossborders to cater to international companies and tobe ready for the new era of legalinternationalization.

1This legal globalization,

1 In a way legal globalization, which witness the merger ofvarious leading law firms throughout the globe, is not for costsavings but for attracting new business and for the

general standardization of commercial laws, costeffectiveness, availability of skilled professionals inthe field of law across countries make it plausiblefor firms to tap into global talent wherever it isavailable at a reasonable low cost. Hence,offshore outsourcing has been a dimension that

firms have used to expand markets as well asresource sourcing.

transformation of legal services from local to global and theincreased demand for such practices. Legal globalizationbrings about uniformity and commonly accepted standardprincipals of commercial laws across borders, which will furtheraid legal outsourcing. Legal outsourcing though aids legalglobalizations, mainly focuses on cost savings.


2/8


2

This article discusses the legal outsourcingindustry in context of its growth, hurdles andchallenges faced with a good insight intoaddressing few key questions regarding this newway of working.

2. What is Legal Process Outsourcing?

Legal process outsourcing in its generic definitionwould refer to a law firm availing legal supportservices from an outside law firm or from a legalsupport services company. While, the abovedefinition in its descriptive nature mentions lawfirms, it would in its generic definition includecompanies, firms, individual practice lawyers,corporations, and any entity that would requirelegal support.

Under a typical Legal Outsourcing arrangement, alawyer contracts, directly or through an

intermediary, with an individual/firm domiciledabroad (foreign lawyer or lay person) to performlegal support services, such as conducting legalresearch, reviewing document productions, ordrafting due diligence reports, pleadings, andmemoranda of law for remuneration. The entity towhich work is outsourced then gathers therequired infrastructure, skill and expertise on therelevant area of outsourced work and caters to thework requirement.

3. Why legal process outsourcing? Is qualityservice at low cost available?

Is it necessary for a firm to get assistance from anexternal legal support services for handling itslegal work? Is it beneficial to outsource work? Therecent trend of outsourcing legal work is advancedby firms and corporations that are realizingbenefits of good quality work being done in lessertime and at lower costs as compared to existingdelivery mechanisms. However, this new trendhas to be understood not only for the strengths butalso for the challenges that entail such aninitiative.

Legal work usually emanates from the legaldepartment of several companies (In-house legaldepartment), legal research firms, law firms, legalpublishing companies, and attorneys-at-law. Dueto the bulk of legal work generated, it becomesincumbent to take outside assistance for a timebased and efficient completion of work. This helpcan be contributed by services providers within thecountry or possibly, from overseas outsourcingvendors, who offer good quality work at a lowercost as compared to the former. The low cost

emanates primarily due to the fact that outsourcingcompanies invest substantially in infrastructureand in setting up the business to cater to theneeds and requirements of a number of clients.These investments are distributed among anumber of clients, which automatically reduces therisk and investment borne by the outsourcingcompanies. This along with the economic

disparities of countries and differential wagearbitrage help these vendors offer efficient andhigh quality services at a very competitive cost.

Cost saving, though not solely, is definitely apropelling factor for growth of the legal outsourcingindustry. With rates ranging from approximately$20 an hour at the low end of the service spectrumto $70 an hour at the high end, the savings cantranslate to as high as 60% percent for worktraditionally handled by junior U.S. lawyers, whocommand rates close to $200 an hour. This ratiolays emphasis on the fact that by offshoring, law

firms and companies stand to cut costs by asubstantial amount of more than 40%, even afterincorporating the cost of managing outsourcing aswell as productivity gaps that may exist betweenan offshore worker and an in-house member of thefirm. Another key factor is that, with the law firmoutsourcing quantitative low skilled legal work thatconsumed hours of input, the in-house counsels or


3/8


3

attorneys are now free to concentrate and focuson more qualitative, value added legal work,assisting clients with transactional negotiationsand building a stronger client relationship. Atypical example of saving costs and time onquantitative legal work will be outsourcing oflitigation support services. By the very nature of itswork, litigation is very complex and requires

extensive research, documentation, data gatheringand compilation. If this extensive documenation,part of the legal research and data compilation canbe outsourced, it would save the law firm and thecompany time and money. The work productdelivered by the outsourcing company can beanalyzed by the local attorney making the finalwork product ready in quicker time with equivalentqualitative standards as before.

Few other factors that facilitate the flow of legaloutsourcing work are:

a. The successfully demonstrated past

offshoring activitiesb. Access to skilled managerial and technicalresources at a significant wage differential.

c. Operational costs savedd. Minimal training or managing manpower

requirede. Overhead costs and office maintenance

costs savedf. Offload non-core functions like back-office

work and data management.g. Improves speed and serviceh. Increase customer/client approval and

satisfaction.i. Gain a more extensive research at a fixed

cost. j. Professional efficiency with timely outputk. Access to precisely and methodically

arranged data files.l. Provider's expertise in solving problems for

a variety of clients with similar challenges.m. Taking lead in a convergent economy.

4. Why is India attractive for LegalOutsourcing?

India has over the years been a favorite, reliable

and successfully tested option for various offshoreworks, namely, in areas relating to InformationTechnology, call centers, finance backoffice etc.Because of the past proven success in offshoring,India is once again a preferred destination for legaloutsourcing by foreign countries like U.S.A.,Canada and U.K..

The availability of 1.8 million lawyers as skilledmanpower, adequate infrastructure, proficiency inEnglish, proven track record in outsourcing, time

zone advantage enabling 24 x 7 operations iswhat gives India a competitive edge inoutsourcing. Today Indian LPO vendors cater tothe need of a number of law firms/in-housecounsels/individual practitioners in U.S. and U.K.by rendering services in areas ranging fromlitigation support, document review, corporatemaintenance, real estate among others. The

growing trend of legal offshore outsourcingindicates a tremendous growth in the ambit ofnature and scope of legal services offered by Indiain the coming years.

India is viewed as a potential and evident place foroutsourcing legal services mainly because of theavailability of English speaking lawyers trained incommon law system. . British colonization resultedin spread of western education in India and alsoparliamentary form of government in India. Indianlegal system is broadly based in British tradition ofcommon law systems. It can be emphatically

stated that due to the common law systemsprevalent in India, U.S.A. and U.K., the Indian lawgraduates who are trained in English are wellequipped to understand the U.S. legal system andprovide able legal support.

The time zone difference of 12 hours betweenIndia and U.S.A. gives the attorneys in U.S.A. theadvantage of getting trained lawyers workingthroughout the night to prepare a complete, highquality work product by the next morning. Thisensures that the attorneys now have more time toconcentrate in developing client relationships andimproving revenue streams.

Another key factor for choosing India as anultimate outsourcing destination can be attributedto the remarkable measures taken by the Indiangovernment towards liberalization and


4/8


4

deregulation. Recent reforms have visibly reducedlicensing requirements, and made foreigninvestments simpler and more attractive. TheIndian government has collaborated withNASSCOM (Indias nodal body that isbenchmarking best practices across the IT and ITenabled services industry) to ensure that Indiasdata privacy legislation is aligned with those of the

U.S.A.. All these factors attract and maintain asteady inflow of legal outsourcing work to India.

Establishment of a national body of legal servicesvendors in the form of National Association ofLegal Process Offshoring Companies (NALPOC)has been a key step in establishing best practicesand benchmarks in delivery, ethics, promotion andcollective initiatives to align the industry with theneeds of the firms outsourcing. Among its charteris an effort to standardize training procedures forlawyers who intend to join LPO companies, whichwould definitely assist in maintaining minimum

deliverable standards for legal services deliveredto international clients.

5. Evolution of the legal outsourcing industry

As observers and media debate on the future ofthe industry, one sees a remarkable growth in theindustry, which is currently estimated to be a $30-50 million market, and it is further expected togrow $5 billion by 2015, a 100-fold expansion inthe next 8 years.

While global awareness of the potential of offshorelegal outsourcing is increasing, it is not a recentphenomenon.The first legal outsourcing to Indiastarted back in 1995, when the 34-lawyer Dallas-based litigation firm of Bickel & Brewer opened anoffice in Hyderabad. The next thing to trigger animpetus to the industry was when General Electric,in 2001, added a legal division to their currentlyexisting base of operations in India. This legal cellwas specifically started to handle legal complianceand research for GE plastics and GE consumerfinance (Divisions of GE capital). Thereafter, theindustry witnessed a steady upswing in demandfor outsourced legal services from India. Today, in

2007, the estimated number of people serving thisindustry is around 6,000 but is projected toincrease to 40,000 within the next 3 years.

The U.S. legal industry, according to governmentdata, is a $184 billion behemoth with roughly amillion trained attorneys and about 800,000support personnel such as paralegals and legalassistants.U.S. firms outsourced an estimated $5billion in litigation support in 2006. According toForrester Research, a Cambridge, Mass.-based

market research firm, this year 12,000 legal jobsmoved offshore -- less than one percent of thetotal jobs that will be eventually offshored. Thisclearly outlines the percentage of untappedpotential of the legal market. Forrester estimatesthis number to triple by 2010, and further doubleby 2015, thus leading to more than 80,000 jobsadded in India by 2015 to support the U.S. legal

industry alone.

Many of the leading law firms abroad havedisplayed confidence and comfort in offshoringtheir work. For example, the worlds largest firmClifford Chance has begun outsourcing much of itsadministrative work to India, in what will be thebiggest move offshore ever undertaken in the legalprofession. This decision will factor in more than$18m (9.5 m) in annual savings for the law firm.

2

6. Nature of legal work outsourced

The very nature and expertise skills required fortransacting legal work indicates that there has tobe selective screening of work that can beoutsourced. Legal services can successfully beprovided in quantitative low skilled work as well asareas of high skilled qualitative works. One canoutsource work depending upon the clientsrequirements and nature of legal servicesrequired.

Quantitative or low skilled work includes:a. Data managementb. Word Processingc. Data creation and file maintenanced. Litigation supporte. Book-keeping and reconciliations

Qualitative work would includes:a. Document reviewb. Summary preparationc. Due diligence reports researchd. Corporate transactionse. Patent and trademark researchf. Drafting motions, contracts, pleadings,

briefsg. Reviewing litigation documents and

agreementsh. Fifty state surveys

2The Guardian on October 28th

2006 reported that CliffordChance, the world's largest law firm, would outsource much ofits administration work to India, in what will be the biggest moveoffshore ever undertaken in the legal profession. The proposalis expected to yield more than $18m (9.5m) in annual savings.


5/8


5

The services provided by the outsourcing vendorsare only to assist the attorney, and are not final orindependent work. The work done by theoutsourcing companies gains creditability onlyafter the attorney reviews the work. An interestingdevelopment here to note is that few LPO vendorshave U.S. attorneys onboard so that they cancontribute high value work.

The more complex the activities outsourced, themore intense the legal training and skilleddocumentation that is required. Such work thatrequires minute surveillance by locally trainedlawyers is best outsourced if it is supervised by anU.S. attorney at the vendor site.

Legal Outsourcing today does not clearlydemarcate the type, nature or extent of workoffshored. Each firm based on the nature, skillrequired for the work and comfort level decides onthe work that could be outsourced. The law firm or

the in-house counsel assumes a managerialposition over the offshoring initiatives whilst beingfree to tackle core complex high quality strategiclegal issues and client meetings.

7. Some Questions

Legal services traditionally demand high-levelaccuracy, high-level proficiency and intricateknowledge of the laws that would safeguard theinterest of the client. The legal industry demands ahigh level of professional conduct, confidentiality,

suitable application of mind and professional moralethics to be maintained.

Several questions that spring up to a firm that isevaluating legal outsourcing as an option wouldinclude;

i. Whether it is ethical and professional ofthe American lawyers to rely onnon-lawyer legal support services.

ii. The accuracy and high level proficiencythe nature of legal work demands

iii. Time Zone differences.iv. Quality Assurance

v. Renunciation of responsibility.

One of the major concerns about legal outsourcingopined by both legal experts and media is whetherprofessional conduct, ethics and the right ofclients secrecy and confidentiality could bemaintained. This has been an issue of debate anddiscussion from the time legal outsourcing startedand recorded a phenomenal growth. The LosAngeles County Bar Association (June 2006), TheNew York bar of professional conduct and ethicsand the San Diego Bar Association

3have in length

considered, and given their views on theoutsourcing industry. The San Diego BarAssociation bar has opined that while outsourcingis permitted, it does not dilute the attorneysprofessional responsibilities. It is necessary thatCalifornian attorneys should have sufficientknowledge to supervise the outsourced work. It isobligatory on the attorney to ensure that therewould be no compromise on the quality,confidentiality or in observing any other dutiestowards the clients.

4The New York Bar and the

Los Angeles Bar while considering this issue haveconcluded that outsourcing is ethical, if certainprecautions and limitations are taken intoconsideration.

These considerations include:

3 http://www.nycbar.org/Ethics/eth2006.htm

4 The san Diego country Bar association has considered theprofessional ethics by emphasizing that the California Attorneyhas a duty under the applicable law and rules to act loyally andcarefully at all times. Outsourcing does not alter the Attorneysobligations to the client; even though outsourcing may help theAttorney discharge those obligations at lower cost.(http://www.sdcba.org/ethics/ethicsopinion07-1.htm.)


6/8


6

I. Client Attorney confidentiality

While working on a matter, an attorney is privy toalmost all-confidential information of his client andhence it is of utmost importance that the Client-Attorney relation is kept private and confidential.The main question that would arise here iswhether such information can be passed to a non-

lawyer or to a third party and if that would breachthe confidentiality agreement.

Entering into confidentiality agreements, andproviding limited access to client information, tothe outsourced company, can easily overcomethis. In addition, the attorney can also first assureherself about the genuineness and good will of thecompany to which the work is proposed to beoutsourced.

II. Is it ethical for a lawyer to outsource hiswork to a non/ foreign lawyer?

One immutable obstacle is the guild-like nature ofthe U.S. legal profession. Government regulationsmandate that only lawyers who are licensed in theU.S. can give legal advice on American law. Thateffectively means Indian trained lawyers who arenot registered to practice anywhere in the U.S. areseverely restricted in the types of legal work theycan perform. The code describes both a foreignlawyer not admitted to U.S. jurisdiction and alayperson as a nonlawyer.

5The major ethical

question that would arise here would be whetheroutsourcing to non-lawyers leads to unauthorizedpractice of law by the U.S. lawyer and whether itattracts the provisions under DR 3-101(A) andArticle 478 of judiciary law.

6

In U.S.A., it is common practice for attorneys todelegate their work to paralegals. A lawyer oftendelegates tasks to clerks, secretaries and otherlaypersons. Such delegation is proper if the lawyer

5 The California Supreme Court has refined the scope of theunauthorized practice of law to include legal work by New YorkAttorneys in connection with prospective private arbitration in

California. (Birbower, Montalbano, Condon & Frank, PC v.Superior Court (1998) 17 Cal.4th 119 (Birbower).California Business and Professions Code section 6125, part ofthe State Bar Act, states: No person shall practice law inCalifornia unless the person is an active member of the StateBar.

6 DR 3-101(A), [a] lawyer shall not aid a non-lawyer in theunauthorized practice of law. Judiciary Law 478 makes itunlawful for any natural person to practice or appear as anAttorney-at-law . . . without having first been duly and regularlylicensed and admitted to practice law in the courts of record ofthis state and without having taken the constitutional oath.

supervises and reviews the work and isresponsible for the end product. Thoughparalegals do not give legal advice, they do manyof the duties traditionally performed by lawyers.

A review of the present nature of work outsourcedindicates that work outsourced as of now, ismainly work done by paralegals and hence can be

outsourced by an Attorney by supervision and bytaking proper care to ensure that the clientsinterests are well protected. A reasoned anddebated view on this issue by the New York, SanDiego and Los Angeles bars underlines thatlawyers can ethically outsource work to foreignlawyers without violating the code of professionalresponsibilities, provided they follow certain ethicalconsiderations. The ethical considerations that anattorney is recommended to observe whileoutsourcing work are:

a. Supervise and represent a Client

competently

In N.Y. State Opinion 721 (1999), the committeehas opined that a New York lawyer can ethicallyuse a research firm if the lawyer exercises propersupervision. Without proper supervision by a NewYork lawyer, the legal research firm would beengaging in unauthorized practice of law.

7The

supervisory responsibilities of law firms andlawyers are set forth in DR 1-102 (C) and (D) 1-104 9 (C).

8

The San Diego Country Bar Association in its

Ethics Opinion 2007-1 quoted that some legalethics experts, like Stephen Gillers, believe,[t]here is no problem with offshoring, becauseeven though the lawyer in India is not authorizedby an American State to practice law, the reviewby American lawyers sanitizes the process. (EllenRosen, Corporate America Sending More LegalWork to Bombay, NY Times, March 14, 2004.)

7 Orange County Bar Formal Opinion No. 94-002 (1994) opinedthat a paralegal who does work of a preparatory nature, suchas drafting initial estate planning documents, is not engaged inthe unauthorized practice of law where the Attorneysupervising the paralegal maintains a "direct relationship" with

the client.

8 DR 1-104(C) A law firm shall adequately supervise, asappropriate, the work of partners, associates and non-lawyerswho work at the firm. The degree of supervision required is thatwhich is reasonable under the circumstances, taking intoaccount factors such as the experience of the person whosework is being supervised, the amount of work involved in aparticular matter, and the likelihood that ethical problems mightarise in the course of working on the matter. DR 1-04(D)articulates the supervisory responsibilities of a lawyer for aviolation of the Disciplinary Rules by another lawyer and for theconduct of a non-lawyer employed or retained by orassociated with the lawyer.


7/8


7

An attorney needs to adequately supervise thework and take responsibility to ensure that theforeign lawyer or any person employed or retainedby or associated with the lawyer does not violatethe disciplinary rules. It is necessary that theattorney has full control over the representation ofthe client and has exercised independentjudgment in reviewing the draft work performed by

any legal help she has resorted to. Her fiduciaryduties and potential liability to her corporate clientfor all of the legal work that was performed wereundiluted by the assistance she obtained fromlegal works. Further, the attorney should alsoensure that the foreign lawyer is capable ofdischarging the duties assigned to him. She can judge the capability of the foreign lawyers byinterviewing in advance to ascertain the ability ofthe lawyer/firm to do the work. She can conductreference checks and constantly supervise andreview the work assignments done by the nonlawyer.

b. The duty to preserve the clients confidenceand secrets

DR 4-101 imposes a duty on a lawyer to preservethe confidence and secrets of the clients. This dutycan be observed by obtaining clients prior consentin disclosing confidences and secrets. The clientsmust also be made aware of the difference inconfidentiality rules in foreign lands. In India,lawyers and law firms maintain the attorney clientconfidentiality rigorously.

9Professional conduct

and ethics of advocates in India also profess

maintaining client confidentiality. Hence, attorneyscan also rely on these rules of conduct of Indianadvocates while outsourcing work to such firms.

Attorneys may preserve client confidentiality byproviding limited access to client confidences andsecrets, entering into confidentiality agreements,contractual provisions addressing confidentiality

9 Section 126 of the Indian Evidence Act defines Professionalcommunications - No barrister, Attorney, pleader or vakil, shallat any time be permitted, unless with his client's expressconsent to disclose any communication made to him in thecourse and for thee purpose of his employment as such

barrister, pleader, Attorney or vakil, by or on behalf of his client,or to state the contents or condition of any document withwhich he has become acquainted in the course and for thepurpose of his professional employment or to disclose anyadvice given by him to his client in the course and for thepurpose of such employment. Provided that nothing in thissection shall protect from disclosure 1. Any communication made in furtherance of any illegalpurpose,2. Any fact observed by any barrister, pleader, attorney or vakil,in the course of his employment as such showing that anycrime or fraud has been committed since the commencementof his employment.

and remedies in the event of breach, and periodicreminders regarding confidentiality.

10

c. Duty to check conflicts

DR 5-105 (E) requires a law firm to maintaincontemporary records of prior engagements andto have a system proposed engagements againstcurrent and prior engagements. An attorney beforeoutsourcing work should get adequate informationon whether the non-lawyer has performed or isperforming any activities adverse to the interest ofthe clients. There can also be a written reminderabout the need for the non-lawyer to maintainclient confidentiality and to safeguard secrets ofboth, current and former clients. As a thresholdmatter, the outsourcing lawyer should ask theintermediary, which employs or engages theoverseas nonlawyer about its conflict checkingprocedures and about how it tracks workperformed for other clients.

d. Duty to bill appropriately

By definition, the non-lawyer performing legalsupport is not performing legal tasks, but supporttasks only and hence the charging on the clientsaccount should therefore be proportional. It cannotbe charged as the legal fees of an attorney.Further DR 3-102 (A) prohibits a lawyer fromsharing legal fees with a non-lawyer. Further, TheModel Rules of Professional Conduct emphasizesthat a lawyer must disclose to a client the basis onwhich the client is to be billed for both professional

time and any other charges11. Hence, an attorneycan charge the client for the actual cost incurredfor outsourcing and plus a reasonable allocablesum attributed to overhead charges incurred whileavailing this service.

a. Duty to obtain clients consent in advance

The "reasonable expectation" of the client is thatthe attorney retained by the client, using the

10 Under DR 4-101, a confidence is information protected bythe Attorney-client privilege under applicable law, and a

secret is other information gained in the professionalrelationship that the client has requested be held inviolate orthe disclosure of which would be embarrassing or would belikely to be detrimental to the client. In N.Y. City FormalOpinion 1995-11, this Committee addressed a lawyerssupervisory obligations regarding a non-lawyers maintainingclient confidences and secrets. This Committee noted, thetransient nature of lay personnel is cause for heightenedattention to the maintenance of confidentiality. Lawyers shouldbe attentive to these issues and should sensitize their non-lawyer staff to the pitfalls, developing mechanisms for promptdetection of . . . breach of confidentiality problems.

11 ABA formal opinion 93-379, December 6 1993


8/8


8

resources within the attorney's firm will perform thework required to develop the legal theories andarguments to be presented to the trial court, andthat the attorney will have a significant role inpreparing correspondence and court filings. Theoutsourcing attorney may take the consent of theirclients if they are outsourcing strategic and anyother work, which client would expect any senior

lawyer of the firm to perform.

f. Taking responsibility of end product.

The attorney outsourcing the work should taketotal responsibility for the end work product. Theattorney should ensure that the end work productconforms to legal standards and to theexpectations of clients. It has to be clearlyunderstood that responsibility cannot beoutsourced. The work done by the outsourcingcompany gains authority and recognition only afterthe attorney outsourcing the work reviews and

ratifies the end work product.

8. Conclusion

Legal outsourcing has been prevalent, and of lateoffshoring has been an additional dimensionadded to this. The offshore legal outsourcing hasrecorded an exponential growth in the past 3years. The reason mainly attributed to the fact thatthe overseas attorneys get timely and efficientlegal work executed at low costs. Moreover, theissue surrounding the ethics of outsourcing issettled by the well-reasoned view, A lawyer mayethically outsource legal support services to a non-lawyer if the ethical principal considerations suchas supervision, responsibility and clientconfidentiality are maintained. That work will gowhere the worker is has been facilitated by

advances in technology that make the functioningof teams split across the globe seamless.

The LPO industry started with low-end activitiesbut has quickly ramped up to support law firmsand in-house counsels across a wide variety ofactivities right from research, drafting and analysisto word processing and litigation support. It is upto

the firms to see the benefits and the inevitability ofthis phenomenon of a global delivery model. It isfor them to adapt change within their firms tosuitably integrate legal outsourcing to not onlybuild better efficiency, but also propel growth byredeploying organization capital and resources tothe most productive avenues in the firm.

Note

This paper puts in perspective the facts on theground with a view to inform the reader on thenuances of legal outsourcing and does not obviate

the need for caution and diligence in suchinitiatives.

About the Author

This perspective paper has been authored byKshama N., Corporate Attorney at ManthanServices. Manthan Services is the leading LegalOutsourcing vendor based in Bangalore, India. Wework with over 85 U.S. law firm clients delivering

legal, paralegal and secretarial services.

Feel free to send in your comments and queries [email protected]. You can know moreabout how Manthan is transforming the operationsin law firms by visitingwww.manthanlegal.com.

Documents

Legal Process Outsourcing Perspective Paper