Legal outsourcing, also known as legal process outsourcing (LPO), refers to the practice of a
law firm
A law firm is a business entity formed by one or more lawyers to engage in the practice of law. The primary service rendered by a law firm is to advise clients (individuals or corporations) about their legal rights and responsibilities, and to r ...
or
corporation
A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and r ...
obtaining legal support services from an outside law firm or legal support services company (LPO provider). When the LPO provider is based in another country, the practice is called
offshoring
Offshoring is the relocation of a business process from one country to another—typically an operational process, such as manufacturing, or supporting processes, such as accounting. Usually this refers to a company business, although state gover ...
and involves the practice of
outsourcing
Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity which otherwise is or could be carried out internally, i.e. in-house, and sometimes involves transferring employees and ...
any activity except those where personal presence or contact is required, e.g. appearances in court and face-to-face negotiations. When the LPO provider is based in the same country, the practice of outsourcing includes agency work and other services requiring a physical presence, such as court appearances.
This process is one of the incidents of the larger movement towards outsourcing. The most commonly offered services have been agency work, document review, legal research and writing, drafting of pleadings and briefs, and patent services.
Outsourcing gives a perfect job environment for the people in other nations and significantly the states with the economic issues. Additionally, it would aid the companies to save more cash. Therefore, it can also aid the interior economy. Outsourcing is explained as turning over a project to an exterior provider that will execute the project on behalf of the central companies.
This phenomenon has been a part of the legal experience since the 1950s, where it was restricted only to patents. Later, firms began to contract certain services to back door firms. The process of subcontracting part of the legal process to different countries is at a nascent stage, with relatively consistent market growth. Legal process outsourcing has predominantly been to countries that had previously taken advantage of the
business process outsourcing
Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity which otherwise is or could be carried out internally, i.e. in-house, and sometimes involves transferring employees and ...
wave. LPO providers have established themselves in
Canada
Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by tot ...
,
South Africa
South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. It is bounded to the south by of coastline that stretch along the South Atlantic and Indian Oceans; to the north by the neighbouring countri ...
,
India
India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the so ...
, the
Philippines
The Philippines (; fil, Pilipinas, links=no), officially the Republic of the Philippines ( fil, Republika ng Pilipinas, links=no),
* bik, Republika kan Filipinas
* ceb, Republika sa Pilipinas
* cbk, República de Filipinas
* hil, Republ ...
, the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
,
Israel
Israel (; he, יִשְׂרָאֵל, ; ar, إِسْرَائِيل, ), officially the State of Israel ( he, מְדִינַת יִשְׂרָאֵל, label=none, translit=Medīnat Yīsrāʾēl; ), is a country in Western Asia. It is situated ...
, and
Latin America
Latin America or
* french: Amérique Latine, link=no
* ht, Amerik Latin, link=no
* pt, América Latina, link=no, name=a, sometimes referred to as LatAm is a large cultural region in the Americas where Romance languages — languages derived f ...
.
Overview
The concept of legal process outsourcing is based on the division of labour principle, prevalent in law firms, where various time consuming and onerous processes like due diligence are delegated to paralegals, document reviewers or interns. This allows the firm to address the various legal issues that arise on a daily basis while being able to streamline productivity.
The process involves a contract, with due consideration, between both firms. The following are the various methods by which the process could be initiated:
*Direct Contract – This is the most straight forward means of establishing contact. The firm needing legal services directly approaches the legal process outsourcing vendor.
*Managed Outsourcing – This is a case where the firm establishes contact with a legal process outsourcing vendor and retains a traditional law firm to coordinate the vendor's activities and to ensure quality control.
*Required Outsourcing – This form of outsourcing occurs when the firm mandates a certain level of outsourcing in the legal process, either to reduce costs or to fulfill statutory requirements.
*Multi-sourcing – This involves segregating the work assigned to LPO providers in order to reduce risk and take advantage of each provider's strengths. This approach is helpful in cases where expertise is required on matters of jurisdiction and merits. Having more than one provider "on deck" also allows a service recipient to obtain more favorable pricing. On the other hand, multi-sourcing can be more complicated than other approaches. Successfully managing multiple, competing providers requires strong and effective governance procedures.
Reasons
Among the leading proponents of this process have been corporate clients concerned with rising legal expenses. The legal departments of corporations began using the services of such providers. Soon these corporations began to pressure their legal representatives to outsource certain legal processes to cut costs.
Cost saving is the biggest attraction for the western firms that outsource their legal work. India's legal services are widely considered affordable, efficient, and above all, skilled. For a legal job outsourced in India, the U.S. firm pays hardly one-fourth or one-fifth of what it has to pay in the U.S. for the same work.
Advantages
Most firms and corporations outsource primarily to save cash, and this is considered the biggest advantage for legal outsourcing. While an attorney in major legal markets such as the US may charge from $150 to $500 per hour when performing rote services, legal process outsourcing firms generally charge a small fraction of that price. It has attracted major corporations to outsource specific work outside their legal departments. Many destinations for outsourcing have benefited from the upsurge in bankruptcies and litigations that have occurred in the wake of the
Global Financial Crisis
Global means of or referring to a globe and may also refer to:
Entertainment
* ''Global'' (Paul van Dyk album), 2003
* ''Global'' (Bunji Garlin album), 2007
* ''Global'' (Humanoid album), 1989
* ''Global'' (Todd Rundgren album), 2015
* Bruno ...
.
As reported in the ''ABA Journal'', "
e market for outsourced legal work is booming in India. While lawyers there are doing a lot of routine work, they are also handling some interesting legal matters, including work for the makers of movies and television shows." As stated in ''USA Today'', "'
u could call it "Outsourcing 2.0" or maybe even "3.0." Now firms are increasingly trying to leverage expertise,' says Saikat Chaudhuri, an assistant professor in the business school at the University of Pennsylvania. Legal Outsourcing is 'growing very, very quickly.'"
LPO industry and the global financial crisis
LPO firms in India had predicted an annual growth of 200% due to recession related litigation and the increased need to save costs in the US. Their expectations have not been met. The major reason for this is that US lawyers themselves have started looking at alternative fee structures due to the recession and job losses. In spite of setbacks, the LPO industry has seen growth of about 40-60% in the last year. Although some areas of practice, such as real estate, have drastically collapsed due to the recession, some areas such as litigation, document review, and corporate compliance have gained ground, resulting in business directed to LPO firms in India.
Criticisms
One of the major concerns with outsourcing is the potential for breaches of client confidentiality. In legal process outsourcing the issue of client confidentiality assumes utmost importance. The
attorney–client privilege
Attorney–client privilege or lawyer–client privilege is the name given to the common law concept of legal professional privilege in the United States. Attorney–client privilege is " client's right to refuse to disclose and to prevent any ...
is a doctrine that says anything conveyed between an attorney and his client shall be treated with utmost confidentiality and is exempted from disclosure even in a court of law. However, when either party discloses confidential information to a third party or the opposite party, the privilege is deemed to be waived. During the early years of legal process outsourcing, many law firms hesitated to outsource their work. Critics and opponents state that, since communication is being sent to a country other than United States, the confidentiality is broken; hence, the attorney client privilege has been waived. However,
American Bar Association
The American Bar Association (ABA) is a voluntary bar association of lawyers and law students, which is not specific to any jurisdiction in the United States. Founded in 1878, the ABA's most important stated activities are the setting of acad ...
clarified this in 2008, clearing the way for the development of legal process outsourcing.
Another criticism is that people performing legal work may not be bound to necessary ethical standards. The process of Legal Outsourcing has come in conflict with the Model Code of Conduct issued by the American Bar Association. However, there have been ethics opinions from various local bar associations (New York, San Diego) and recently the
American Bar Association
The American Bar Association (ABA) is a voluntary bar association of lawyers and law students, which is not specific to any jurisdiction in the United States. Founded in 1878, the ABA's most important stated activities are the setting of acad ...
that discuss ethical legal outsourcing and how to achieve it. However, there is criticism that the use of legal outsourcing creates a breach of ABA Model Rule 5.4 which prohibits attorneys from sharing fees with non-attorneys and, also, the prohibition on the practice of law by foreign non-attorneys.
New frontiers
India is considered to be a major destination for legal outsourcing due to its availability of affordable English-speaking lawyers, some of whom are UK and/or US educated, and due to a legal system that is based on
English common law
English law is the common law legal system of England and Wales, comprising mainly criminal law and civil law, each branch having its own courts and procedures.
Principal elements of English law
Although the common law has, historically, bee ...
. Recently, new frontiers for legal outsourcing have emerged in geographic areas closer to their target client markets. Other established LPO providers can be found in Argentina, Australia, China, France, the Philippines, Singapore, and South Korea, each offering unique advantages concomitant with their distinctive geographic location, language capabilities and regional expertise. "There is natural arbitrage between the excellent talented and low cost professionals in India, compared to the US and other developed jurisdictions, especially in the litigation management space", believes Zia Mody, managing partner AZB & Partners, one of the biggest law firms in India. Argentina, for example, is an increasingly desirable LPO centre for the U.S. client market due to its proximity in terms of its western hemisphere location, time zone similarity, and cultural ties to the United States. Sri Lanka, as an additional example, is an Indian competitor whose success has come from a familiarity with British law, a strong economic infrastructure, online freedom, and marketing by Indian policymakers.
LPO providers in India and in these new frontiers are increasingly utilizing onshore and offshore US and UK-licensed attorneys as part of their outsourcing offering as a means to create greater quality controls, expand into more sophisticated offerings, and instill higher confidence in the ethical treatment of client sensitive data.
See also
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Outsourcing
Outsourcing is an agreement in which one company hires another company to be responsible for a planned or existing activity which otherwise is or could be carried out internally, i.e. in-house, and sometimes involves transferring employees and ...
*
Knowledge process outsourcing
*
Recruitment
Recruitment is the overall process of identifying, sourcing, screening, shortlisting, and interviewing candidates for jobs (either permanent or temporary) within an organization. Recruitment also is the processes involved in choosing individual ...
Notes
References
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*{{cite web, last=Vikas, title=The Rise of LPO Business Model and its Impact on Legal Industry, url=http://www.hitechlpo.com/blog/the-rise-of-lpo-business-model-and-its-impact-on-legal-industry/, publisher=Hi-Tech LPO, accessdate=11 Feb 2014
Legal professions
Outsourcing