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international-globeLEGAL OUTSOURCING IN INDIA

Author: Katarzyna Trazpiola
Date: 27-12.2010

“I think the toothpaste is out of the tube”
Mark Ford ,director of Clifford Chance’s Knowledge Center New Delhi office with 30 Indian law school graduates who serve Clifford Chance’s global offices

Legal Process Outsourcing (LPO) involves in-house legal departments, law firms and other organizations to outsource legal work from geographic areas where it is costly to perform to geographic areas where it can be performed at a decreased cost.

I. India is a primary destination of legal outsourcing in the current years. The number of legal outsourcing companies in India has mushroomed to more than 140 at the end of 2009, from 40 in 2005. According to Valuenotes, a consulting firm in Pune. Revenue at India’s legal outsourcing firms is expected to grow to $440 million this year, up 38 percent from 2008, and should surpass $1 billion by 2014. A study by the Indian outsourcing industry group Nasscom and Evalueserve, another LPO, predicts that revenue from corporate paralegal services alone will reach US$300 million by the end of 2010.Whereas Forrester Research predicts that $4 billion in legal work may head to India by 2015.

– New York-based Pangea3 is a global leader in legal outsourcing, probably the largest LPO company with 240 lawyers in three Mumbai offices. The company achieved high success two years after its 2004 founding it garnered a $4.4 million investment by GlenRock Capital. In 2009 the company scored a $7 million investment by venture capital firm Sequoia Capital, which also helped shepherd Yahoo, PayPal and You Tube.

– Intellevate, another LPO, says it provides paralegal, docketing, technical research, proofreading and bookkeeping functions for the legal departments of two Fortune 100 companies.

– New York-based Quislex which is another leading LPO company with around 130 lawyers in the southern Indian city of Hyderabad in 2009 entered a joint venture with Strategic Legal Solutions, a leading domestic contract attorney agency, the venture – called SQ Global Solutions – markets offshore and onshore outsourcing options together.

II. Several international law firms and legal departments of large corporations are outsourcing their legal work to reduce costs and increase efficiencies. Cash-conscious Wall Street banks, mining giants, insurance firms and industrial conglomerates are hiring lawyers in India for document review, due diligence, contract management and more. Specific examples of businesses that are outsourcing include American Express, GE, Microsoft, Morgan Stanley, Motorola and Oracle and specific examples of law firms that are outsourcing include Allen & Overy, Clifford Chance, Bickel & Brewer, Millbank Tweed, Orrick and Chadbourne Park.

– In 2001 General Electric (GE) became the first foreign conglomerate to offshore its in-house legal work to India. Its GE Plastics unit hired a lawyer to work in Gurgaon, outside Delhi, to write and review contracts with vendors. GE executives say the India team saved the company US$500,000 in 2001 and US$700,000 in 2002.

– Microsoft has outsourced patent work to attorneys in Bangalore.

– The in-house legal department at American Express has teamed up with Indian lawyers.

– Investment bank Morgan Stanley decided to offshore to India some of its legal operations like checking of documents for compliance with various requirements, such as netting [a technique used in aggregating financial settlements].

III. Currently, legal process outsourcing provided in India encompass both higher-end and lower-end services:

1) Secretarial documentation services

Under this service offering, offshore teams provide assistance to clients in preparing minutes and agendas for board committee meetings, notices, memorandums and other corporate governance documents.

2) Legal support services

Most of these activities can be categorized as rather support services involving document management:
a) data management, carrying out electronic and other file reviews,
b) conducting analysis involving discovery requests, internal investigations and corporate due diligence
c) creating electronic files with documents searchable by subject, issue, author, recipient, date and document type, allowing clients to retrieve needed documents
d) searching and analyzing large numbers of agreements, creating spreadsheets or other databases presenting the relevant information.

3) Legal research services

Such services are conducted by trained legal researchers familiar with the global legal systems and proficient in delivering reports in the format for legal memoranda. The searches are conducted using databases such as Lexis Nexis, Westlaw and other offline sources.

4) Legal drafting services
Services include drafting of legal papers such as: legal briefs and memoranda, contract drafting, review, and analysis, discovery documents, appeals, summaries of witness statements, as well as the creation of print, videotape and animation exhibits for trial.
5) Intellectual property rights services

These includes specialized patent services ranging from high-end patent drafting, patent illustration, prior art searches, patent mapping and landscaping services to generic services like patent proofreading.

Further these services include patent prosecution which require involvement of scientists’, engineers’ and doctors’ knowledge. Law firms which do not have such personnel outsource to specialists from LPO firms.

6) Document processing services

Providers offer services which traditionally fallen under the category of knowledge process outsourcing but require more technical analysis at some stage during the process. This includes immigration visa and health insurance claims processing.

Depending on a client’s request, these providers may either simply flag to the client items that require further analysis or, in some circumstances, undertake the analysis themselves by applying guidelines given to them by the client. The offshore teams typically involved in document processing services understand the importance of certain data or information and
thus are tasked with vigilantly flagging issues that arise

IV. Advantages of legal process outsourcing in India:

– The main benefit of outsourcing are cost saving measures (LPO salaries for Indian lawyers are generally well below $10,000 a year). Thanks to India’s low wages and costs and a big pool of young lawyers, outsourcing firms charge from one-tenth to one-third what a Western law firm bills an hour.

– Legal process outsourcing gives onshore personnel the ability to spend more time on higher value-added activities as the offshore legal workforce takes care of the details. This bifurcation of duties and the ability of teams to work around the clock on matters can lead to realtime benefits for onshore attorneys and clients alike.

– The time difference between India and the United States allows for work to be done overnight.

– Many people in India’s enormous workforce are college-educated and English-speaking.

– Certain LPO firms in India claim that they can do better job than western firms, since the temporary lawyers typically hired to perform document review on major litigation have minimal skills and zero motivation, whereas Indian LPO is capable to attract the best and the brightest young lawyers in India, fluent in English and trained in English common law.

– LPOs in India help many global companies and law firms to improve their ability to serve customer in the most cost effective, efficient manner by providing legal support services such as legal research and writing, summarization of deposition transcripts, drafting of memoranda, pre-litigation support, preparation of trial and appellate-level pleadings and briefs, contract review, document review, discovery and patent services – quickly, efficiently, at a very affordable price and with confidentiality.

V. There are certain issues which needs to be carefully examined by the law firm before deciding to outsource any services and choosing a proper service provider such as:
– Quality
– Confidentiality
– Conflict of interest
– Unauthorized practice of law
– Response time
– IP
– Payment

The Opinion issues by the American Bar Association in August 2008 states:

“A lawyer may ethically outsource legal support services overseas to a non-lawyer, if the New York lawyer (a) rigorously supervises the non-lawyer, so as to avoid aiding the non-lawyer in the unauthorized practice of law and to ensure that the non-lawyer’s work contributes to the lawyer’s competent representation of the client; (b) preserves the client’s confidences and secrets when outsourcing; (c) avoids conflicts of interest when outsourcing; (d) bills for outsourcing appropriately; and (e) when necessary, obtains advance client consent to outsourcing.”

According to the rules issued by the Solicitor’s Regulation Authority (SRA):

Where law firms are outsourcing some of their legal or administrative work to other law firms or non law firms, the SRA’s guidance is that this is allowed on the basis that all relevant rules are complied with (Solicitors’ Code of Conduct 2007) and that the arrangement is made transparent and is agreed with the client.
Particular rules which would apply in legal outsourcing are:
Rule 4 Confidentiality
Rule 2 Client Care and Costs Information

QUALITY

Indian LPOs are capable of employing most talented law graduates. Joining a Legal Process Outsourcing Firm is very attractive option because leading LPOs offer many attractions to Indian lawyers. The top law firms in India tend to be family affairs, with few chances for advancement for those lacking the proper connections. On the other hand, LPOs offer a technology startup-like environment. Considering that there is one million lawyers in India and 70,000 graduating from law schools every year, LPOs have enormous opportunities to attract most skilled lawyers in the country.

Legal education in India is conducted in English therefore lawyers are fluent in this language.
Most of the LPOs have access to the relevant legal information of foreign jurisdictions by using online databases such as LexisNexis and Westlaw and subscribing foreign legal journals

CONFIDENTIALITY

There is an expressed concern that if someone who’s not a part of the company or law firm, particularly a non-lawyer, has access to certain types of information, that it is difficult to protect the confidentiality of the information. In the case of transfer of sensitive and confidential information, concerns about a leakage or abuse arise. Since western companies are under increasing pressure from legislation that insists on them guaranteeing the privacy of their customers’ financial and medical data, Indian LPOs realize that they need to scale up their security in order to cater to these concerns before they actually turn out to be a problem.

Proactive measures are being taken to ensure that India’s unique value proposition is “trustworthy outsourcing”. Many of the fears and insecurities are unwarranted since Indian companies have as much to lose as their clients if an incident were to occur. This is why efforts to counter any mishaps and establish trustworthiness are being taken.

Measures set up between companies which outsource to India and Indian vendors ensure that there is little left to chance. One example is to store confidential data on the servers of the companies that are outsourcing and their Indian vendors have tightly controlled access.

Indian LPO are aware of the fact that their foreign partners are bound not to reveal information relating to the representation of a client unless the client gives informed consent therefore certain clauses are inherit in the agreement in order to secure protection of confidentiality, provide for audit and inspection rights, data security.

LPOs undertake technical and procedural measures to protect confidentiality of client information and data: transfer of data may be made through secured ftp; research centers and servers may be under physical inspection and guarded by login id and password

INTELLECTUAL PROPERTY

Management of intellectual property is an important element of every outsourcing contract. Where the services involve the development of new intellectual property, be that software programs, business processes or documentation as in the context of LPO, the parties should have a clear understanding from the outset as to ownership of such developed intellectual property. Where ownership of developed intellectual property rights which are critical to the evolving service delivery is not assigned to the customer of the service provider, it is particularly important for the customer to agree in advance what rights it will have post-termination, so that it can continue to receive the services as necessary from the original service provider (at least for a transitional period), a new service provider, or in the event it brings the services back in-house.
Third party rights used in the performance of the services, for example pursuant to software licences, will also need to be properly licensed or sub-licensed. Each party will need to understand its rights to use and permit use of third party items in the context of the outsourcing, and any requirements to procure additional or direct license rights in advance of contract execution, and the associated costs, will need to be assessed.
Each party, in using proprietary or third party intellectual property supplied by the other party, will be at risk of third party claims if that intellectual property is not properly licensed, and accordingly the parties should seek to protect themselves through appropriate cross indemnities which address this risk.

UNAUTHORISED PRACTICE OF LAW

In the context of outsourcing the risk of unauthorized practice of law does not constitute a serious barrier. It is common nowadays that lawyers assign work to non-lawyers; e.g., a summer associate, paralegal or secretary performs certain tasks for a lawyer. That work is not unauthorized practice of law because the lawyer accepts responsibility for the work and because such work is performed under the supervision of a lawyer. The same principle should apply in the context of legal process outsourcing. A lawyer who outsources legal work is accepting responsibility for the work that is being outsourced. Such responsibility includes the obligation to review work performed to ensure that it complies with instructions, is being performed properly. Competence would presumably include evaluating carefully the facility chosen, investigating the quality of work, investigating the facility’s protocols, checking references, interviewing management and team members and being familiar with the site itself.

CONFLICT OF INTEREST

Although in a literal sense the service provider is not necessarily bound by the same conflict rules as a lawyer which outsource to India, it is important to be certain that the facility doing the work for Client A is not also doing the work for the client’s adversary in a related matter, Client B. Even in situations where there may be a screen at the facility and even if different teams will be working on the matters for the two adversarial parties, the general presumption in practice has been that such a situation should be avoided. From a vendor selection perspective, appropriate procedures should be in place to ensure that conflicts of interest are avoided.