Legal Process Outsourcing | Explained
Legal Process Outsourcing | Overview Introduction Concept and Need Types Services Included Benefits of LPO Drawbacks Conclusion Legal Process Outsourcing (LPO) is becoming increasingly common in law firms in the Global North, particularly countries like the United States, Canada, and the United Kingdom. It involves overseas law firms performing the “grunt work” which forms the basis of a… Read More »
Legal Process Outsourcing | Overview
Legal Process Outsourcing (LPO) is becoming increasingly common in law firms in the Global North, particularly countries like the United States, Canada, and the United Kingdom. It involves overseas law firms performing the “grunt work” which forms the basis of a largely mutually beneficial relationship.
This article examines the concept, evaluates the need of LPO, delineates the types of legal process outsourcing providers as well as the services included, looks at the pros and cons of outsourcing legal process work, and arrives at a conclusion.
Introduction
Legal process outsourcing (LPO) refers to the process of a company, usually a legal firm or the in-house legal department of a company, seeking the legal services of an outside law firm, usually one outside their country. When it takes place in a foreign country, the process is called “offshoring.”
LPO has grown immensely since when it first came into existence mid-20th century; today, it is a major practice with law firms in the Global South exporting legal services to typically white-shoe law firms in developed countries at a much cheaper cost to them.
Concept and Need
Legal process outsourcing is essentially based on the idea of outsourcing tedious work—drafting briefs, reading through discovery, legal transcription, document conversion, researching—to another company (typically based in a less developed country and therefore charging much less for the same service). With law firms doing this, they are able to focus on more crucial work such as representing their clients in person and providing counsel.
The need for legal process outsourcing arose from the rising legal costs in countries in the Global North, particularly the United States, the United Kingdom, Canada, etc. For example, in the United States, the Los Angeles Daily Journal reported that attorneys just starting off at white-shoe law firms reportedly can rake in around $160,000 (that’s Rs 1.2 cr. almost) a year. Thus, these law firms increasingly saw the need to export mundane and tedious work to foreign law firms for a fraction of the cost.
Types
Broadly speaking, legal analysts have identified four types of legal process outsourcing providers:
- Captive centres of corporate legal departments
- Captive centres of large legal and audit firms
- Third-party niche providers, and
- Third-party multiservice providers.[1]
Services Included
The services included in legal process outsourcing is usually on the “lower end of the legal spectrum.” The services include, but are not restricted to:
- Secretarial including presentations
- Legal transcription
- Legal publishing services
- Document review, including e-discovery
- Legal research
- Business/market research
- Litigation support
- Contract drafting and review services
- Intellectual property, such as patent application and appliance
- Administrative, such as accounting and billing.[2]
Benefits of LPO
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Financial incentives
LPO can be incredibly cost-effective for the outsourcing legal firm or department. As stated above, in countries like India, attorneys and paralegals will perform the same work—usually monotonous in nature—for a fraction of the cost of a newly hired attorney at a top law firm in the United States.
Big law firms estimate hundreds of thousands of dollars in savings for them. For the legal firms which take up this work too, the financial incentives can be incredibly rewarding: foreign law firms tend to pay more than their local counterparts. Thus, this becomes financially beneficial for all the parties involved.
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Better working hours
For the outsourcing law firm, the time difference between, say, Los Angeles in the US and Bombay in India would mean that attorneys could work the entire day, have Indian lawyers perform their outsourced work in the night, and return the next day to the completed work.
Meanwhile, for the Indian lawyer, her working hours at an LPO would be much better than an Indian law firm: Indian law firms are notoriously burdensome vis-à-vis their work hours whereas an LPO would be very likely to respect international norms of a workday.
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Organized efficiency
The fact that the prosaic work of document review and legal research is outsourced to an external law firm means that lawyers have more time to dedicate to core practices: representing their clients in court and providing effective counsel.
The law firms in countries like the US therefore become far more efficient and organized in terms of representing their clients: with ‘minor’ work out of the way, they can turn their unbridled attention to representing their clients in earnest.
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More attention to detail
LPO firms are typically organized around the objective of reviewing documents and discovery and work such as that. Therefore, their lawyers would be more focussed on doing a better job given that they don’t typically have the additional work of representing clients or providing legal counsel.
Thus, the output at the end of an outsourced legal process is typically more attentive to detail and thorough.
Drawbacks
There are also a few drawbacks to LPO which have not been sufficiently addressed and pose a hindrance before its full acceptance by the legal world.[3]
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Violations of attorney-client privilege
Attorney-client privilege is one of the sacraments of the legal profession. Any information confidentially disclosed by a client to her attorney cannot be divulged to anyone else without her permission.
However, with LPO, this information would be disclosed to the foreign firm where the work is outsourced. Therefore, many American bar associations have opined that legal work containing a client’s confidential information can only be outsourced with her full and informed consent. Given the logistical difficulties involved, some law firms have chosen not to do that, with cases subsequently being filed against them for their violation of attorney-client privilege.
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Possibility of breach of confidentiality
The law firms to which they are outsourced could, potentially, breach the client’s confidentiality with few legal consequences. This could represent a massive problem, especially if the case concerned involves huge sums of money.
Fortunately, however, the legal profession has not witnessed any reported cases of a law firm breaching a client’s confidentiality in this manner.
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Conflicts of interest
There is a possibility of a legal service provider offering services to two law firms who are on opposing sides on a particular case. Therefore, American law firms have issued advisories to lawyers to ensure that these overseas firms do not represent conflicts of interest.
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Billing clients
There is also the quandary of whether the American law firms that outsource legal work should be allowed to bill their clients in full, thereby churning a profit in the bargain. There are conflicting opinions on this, but broadly speaking, many have taken the view that it would be unconscientious for a law firm to make a profit of their client in this manner.
- Banal work
The work on offer here is not fulfilling legal work. Attorneys who work at LPO firms have to perform incredibly rudimentary work. And while the compensation is good, that does not erase the fact that reviewing documents and conducting legal research with no opportunity to argue that yourself in court or before legal partners can feel stifling to them.
Conclusion
Legal process outsourcing is a fairly efficient practice by now, with significant benefits. The cost differential between an American white-shoe lawyer vis-à-vis an Indian attorney is obvious enough for numerous American law firms to outsource their legal work to countries like India. India, in fact, is poised to become the largest recipient of offshore legal work.
However, there are numerous ethical concerns involved in the equation as well. Lawyers who partake in offshoring legal work cannot afford to ignore these. Thus, a careful effort must be taken in the process: to avoid the bad whilst preserving the good.
[1] Contract with India: Legal outsourcing, Jim Middlemiss, Financial Post (Canada), April 25, 2008.
[2] Offshoring Legal Services to India: an Update (Market Research Report), Valuenotes Database Pvt. Ltd., July 2007. Also see Why and What Lawyers Should Consider Outsourcing, Ron Friedmann LLRX.com, Sept 1, 2008 (available at http://www.llrx.com/features/legaloutsourcingoptions.htm).
[3] The Good Law Blog, Outsourcing Legal Work – A Survey of The Good, The Bad, and The Ugly. Available here.