Introduction

The Webster’s dictionary meaning of outsourcing is: “Paying another company to provide services which a company might otherwise have employed its own staff to perform, e.g. software development”. In a layman’s language outsourcing basically refers to the process of one entity involving another entity to do a part of its usual work load. It involves the transfer of a variety of activities starting from management functions to day-to-day execution of an entire business function to an external service provider. The client organization and the supplier enter into a contract that defines the transferred services. Under the agreement the supplier acquires the means of production in the form of a transfer of people, assets and other resources from the client. The client agrees to procure the services from the supplier for the term of the contract. Business segments typically outsourced include information technology, human resources, facilities and real estate management, and accounting.

Many companies also outsource customer support and call centre functions like telemarketing, customer services, market research, manufacturing and engineering. The latest activity to enter into the outsourcing business is legal process outsourcing which basically refers to the obtaining of legal support services from an outside law firm or legal support services company. “In early 2005 a company called Lexadigm was hired by an American law firm to draft a brief for a U.S. Supreme Court case. The case was complex and resource intensive and centered on applying the Fifth Amendment’s due process clause to a tax dispute.  The brief will ultimately be filed by the American law firm, which will be able to review and use part, some, or none of Lexadigm’s work in the final product.  The outcome is the same as if one of the firm’s associates had drafted the brief; except in this case the lawyers were operating out of India.” This is the new trend that is called “Legal Process Outsourcing (LPO)”.

The fundamental reason for the development of the LPO industry is the availability of cheap labour to do the time and manpower intensive legal work including document conversion, legal transcription, legal data entry, preparing briefs for the lawyers in various cases as well as legal indexing. As Ajay Raju of Reed Smith L.L.P. in an interview to NewLegalReview stated, “Why have a $300-per-hour lawyer do due-diligence when it can be done [more cheaply] by someone else?”Earlier LPOs’ consisted mostly of low-end transcription work, but this no longer holds true in the present scenario. It includes a vast range of legal processes like patent application drafting, legal research, pre-litigation documentation, advising clients, writing software licensing agreements and drafting distribution agreements. “The off shoring of U.S. legal jobs is already ramping up, as some experts predict that 79,000 lawyers' jobs are poised to move from the U.S. to countries like India by 2015.”

Need for a regulatory framework in the LOP industry in India

The Legal Process Outsourcing involves activities like legal research, document drafting like standard contracts, agreements, letters to the clients, patent applications etc., legal billing activities like preparation of invoices, collation of time sheets (arranging the amount of a professional’s time spent on each job into a standard order) etc., intellectual property research- substantive and administrative, paralegal services, administrative and secretarial activities like following up with clients, etc.As far as the LPO industry is concerned, although it can be said that India is the biggest and most common country to receive legal outsourced work, other countries like the Philippines, Australia, China, and South Korea are also in the market of offshore LPO. Outsourcing legal work to India began in 1995, when the 34-lawyer, Dallas-based litigation firm of Bickel & Brewer opened an office in Hyderabad. Co-founder and co-managing partner Bill Brewer, in an interview to the magazine ‘LegalAffairs’ explained that the idea was hatched during an informal discussion with his relative, C. S. Prasada Rao, was originally from India. Since then the outsourcing unit has been made into a separate company called Imaging & Abstract International, which handles work for Bickel & Brewer as well as other American clients. 

There are many benefits to off-shoring in India. Not only is it economical in the sense that it saves millions of dollars for these law firms each year but it also provides access to the skilled professionals in India. LPO firms in India have achieved higher standards of maturity and hence many tasks like IP processes, legal research, pre-litigation documentation, document analysis, preparing software licensing agreements is outsourced to India. Professionals provide patent related services for a resulting fee of as little as $2000 as against $8000-$12000 that is usually charged by US firms. The Indian legal system is similar to the legal systems of the UK, US, Canada, and parts of Europe. Indian litigation and dispute resolution methodologies are also well founded on the classic Constitution of the biggest Democratic Republic in the world and are understood universally. Furthermore the Indian legal system is one among the most researched and informed legislations which ensures uniform and practical interpretation of the legislation throughout the country.

Beyond just serving as a cheaper labour market, India offers a number of political, legal, and historical advantages. The Indian government has given a lot of incentives to the outsourcing units like multiple year tax holidays and exemptions from import and export duties to U.S. legal outsourcers. The outsourcers have also been given the assurance that the infamous bureaucratic regulations, notorious in India, would not be an obstacle for the operation of the company’s business. It has also promised that despite the culture of bribery in Indian society, the harassment would not occur. The other advantage of outsourcing legal processes to India is that being a common law country, it can easily relate to the processes of the other common law country that prove to be the key outsources of legal processes. Efficiency of professionals is further increased by the “time-zone” advantage, which enables Indian lawyers to begin their work as their U.S. employers are going to bed.

In the morning, U.S. employers can review the documents that were produced while they were sleeping. This advantage reduces the response time that is usually required and has huge advantages for tasks that operate under a strict deadline, like legal research and document discovery. In addition to this India seems to possess rigorous processes, high productivity, confidentiality, sound HR policies and good risk management skills — all in the right proportions. Processes like high level customer interactions, integrated with customer relationship management (CRM) skills, on-time delivery processes, quality checks while ensuring compliance and yet confidentiality to the clients are now an integral part of the Indian corporate culture. Ninety percent of a lawyer's work is legal research and drafting, and all these are now done through legal process outsourcing. In the past three years, the industry of legal process outsourcing in India (LPO in India) has grown substantially. Legal Process Outsourcing is a booming new industry in India.  

For many law graduates litigation research and drafting legal contracts for US and UK companies as well as law firms in India are becoming a brilliant and happy career move getting valuable exposure to judicial system, commercial law firms in India and their prompt way of working. At present, the services provided by LPO industry in India can be broadly classified into three different categories of services that differ on the basis of work involved. The first one is low-end work like record keeping; the second one is middle-level services like legal advice and HR mobility; and the third category involves high-end legal advisory services. However, as per the present scenario and for some in future, the growth areas for the LPO industry in India are expected to include work in litigation document review services, contract management services, and IP services.Although the LPO industry is one that is fast growing, it faces its own set of challenges that are threatening the existence of this industry in India. This is primarily because companies in the Philippines are moving to greener pastures.

As a regard to this, the LPO industry requires immediate attention, so as not to lose out on the business which has many other options. Some of the major challenges faced by the LPO industry are that of the quality of the legal services provided, the conflict of interests and the ethical concerns that arise thereto. This has been supported by Jerome Shestack, the former President of the American Bar Association who said: “I do have concern about confidence, confidentiality, privacy, conflict of interest, ethical values, and those are issues that are a real concern.”The quality of the legal services that are provided by the LPO firms is one of the major challenges facing the LPO industry today. Due to the lack of any form of regulatory framework there can be no assurance of the quality of legal services that these firms provide. If through a regulation we can introduce uniformity, there will be a standardization thus ensuring quality. Once there is assured quality in the services that we order, there will be a growth in the industry as a whole. T

Here are many factors that are responsible for the questions of quality being raised. The first factor can be said to be the education of the people working in these outsourcing units. One of the major concerns for the law firms and legal departments in countries like India and the Philippines which outsource their research is the education and qualification of the people who work in the legal processing firms. Ideally the entire workforce should be graduates of law, who are well versed with law in the international context as well as the English language. But this may not be the case all the time. The companies that outsource their work can be said to have no way of knowing the quality of the workforce in these firms except for past experiences they have had with the firm and the reputation the outsourcing unit enjoys. For this purpose there is a need for a regulatory mechanism which will prescribe a standardised method through which the recruitment of the workforce can be done so as to maintain the quality of work carried out by the outsourcing unit. This would in turn increase the client satisfaction and thereby increase the profits and induce a growth in the industry. This would prove to be one of the attractions for the foreign companies which would in turn promote the growth of the industry in India.

The next factor that affects the quality of work provided can be said to be the step that follows the recruitment process which is the training of the candidates recruited. Even though it can be said that the standardised mechanism of recruiting the workforce would solve the problem of the quality of work provided, it is not completely true. If the quality of available workforce itself is poor, much cannot be done at the recruitment stage. Thus, the focus must then move to the improvement of the quality of the workforce that have been recruited. The ones who are recruited have to be given proper training in order for them to have an accurate idea about the atmosphere and conditions of the work that they have been recruited to do. One must remember that the professionals working in the LPO industry are not trained in legal matters by the legal firms themselves. Also, these firms do not supervise the training of the professionals. As a result, these firms are sceptical about the kind of training that these professionals get. Hence if India were to have a uniform regulation standardising the training that these professionals undergo, that would be a big step in ensuring quality and would hence improve the industry’s prospects.

Apart from the factors of recruitment and training of the workforce, there are a lot of other factors that affect the quality of the services provided by the legal process outsourcing units. These factors can include the conflict in time zones of the two countries in which the outsourcing unit and its client are situated. This might seem like a trivial factor, but in fact it plays a major role in the efficiency of the people working at the outsourcing units. But the presence of a regulatory mechanism for these two factors would play a major role not only to standardise these two factors but also would lead to the standardisation of all other issues that would lead to the improvisation in the overall quality of services provided by the LPOs.

The next problem faced by the LPO industry is the professional ethical issues involved in the outsourcing industry in general. In the case of LPO firms there are a lot of ethical issues that need to be discussed. In the actual practice of the law, the ethical conflict does not arise as much as in the Legal Process Outsourcing sector. This is mainly due to the fact that most of the solution to the possible problems that can arise in the legal profession is clearly laid in the code of professional ethics. Thus if any conflict arises, the answers may be found in the code of professional ethics. But in the LPO industry it becomes a big issue because there is no clearly defined code that the professionals and firms working in this sector can follow. This sort of ethical conflict arises due to the lack of regulation. Thus there needs to be a standard procedure for the foreign firms to repose confidence in the LPO sector in India and develop the industry in the country. In particular with respect to the United States, the problem of unauthorised practice of law arises. American Bar Association Model Rule of Professional Conduct 5.5 (a) states:

“A lawyer shall not practice law in a jurisdiction in violation of the regulation of the legal profession in that jurisdiction or assist another in doing so.”

While this does not expressly prohibit outsourcing, the question arises when one interprets the meaning of “practise of law”. The question arises as to whether just working on a brief or doing the research for a particular US case can be considered to be working beyond the jurisdiction. Thus this leads to a lot of confusion and chaos. Ethical issues include the conflict of interest that these firms might face as well as the confidentiality issues that come up. Conflict of interest occurs when the firm providing legal outsourcing service to a client takes a project, knowingly or unknowingly, which is detrimental to the interest of the client. The law firms are clear about these very ethical issues. They do not take up a case which would put the interest of the client in jeopardy. But this issue has not been sorted out in the case of the LPO industry. The question of ethics arises when the firm takes up a case and another part of the firm takes up the client on the opposing side.

This question would be a non-issue in law firms where they would not take up such cases and even if they did, they would suffer a major blow to their reputation, not to mention the law suits that they would face from the jilted clients. But in the case of LPO firms the clear path is not chalked out, leaving a lot unsaid in this regard.  As a result there are major questions regarding the ethical issues that come up. Another major issue is that of confidentiality. Confidentiality is a fundamental principle of a client-lawyer relationship.  Legal Process Outsourcing is the process wherein a firm exports its legal work to another firm usually in a developing country. This involves the actual transfer of data from one country to another. Off-shoring presents specific challenges to confidentiality in terms of security of connection and legality of transferring information. While the lawyer-client confidentiality is ensured even in India, it deals with only lawyers. It doesn’t apply to the legal process outsourcing firms. The client discloses certain terms on the attorney client privilege. Such information may contain certain incriminating evidence.

During such a transfer there is a high risk of breach of confidentiality. But do these very same principles apply to the LPO firms is a question in itself. One way to deal with these issues is to not share any confidential information when outsourcing and instead include hypothetical anecdotes to steer the researcher. However, even providing hypothetical situations is not a feasible solution as the crux of an issue may be overlooked or misunderstood in a hypothetical situation. It also reduces the scope of ingrained research about similar past cases which may involve the same parties. This restricts the scope of legal acumen that can be employed while working on a case.  In addition to this, there remain real concerns of the security of any transaction over the Internet. There are many drawbacks to this method.

By using the hypothetical examples to steer the researcher, there may be a huge difference in quality of the work. This is because however detailed and close to the real case the hypothetical example, it is still not equivalent to the original case. This again brings us back to the question of quality in the LPO industry. Further this is also not a foolproof method, as there is much vulnerability in this method. Thus security concerns will continue to be a limiting factor to the complexity of work that is off-shored. Further with the internet being more vulnerable than ever before, the threat of a leak in the chain has increased manifold. The next issue is that of the disclosure and client consent. The client has the right to know who is representing him. In the case of an LPO firm, the question arises, is there complete disclosure of information regarding the representation to the client and has the client consented to this?

More often than not the legal firms pass off the work done by LPO firms under the broad as well as the vague terminology of “Legal Research” and the client is billed for the work done by the LPO firm. For instance, “two lawyers in California were contracted by a business to defend a complex intellectual property dispute.  Both attorneys had limited experience in the field, but they took the case and assured the client they would be able to handle it.  Without informing the client, the attorneys contracted on an hourly basis with Legalworks, an LPO firm in India.  The attorneys reviewed the work, signed all documents, and proceeded as counsel in court. They billed the client for the work done by Legalworks under the broad category of “legal research” and “preparation of pleadings.” The client won the case and inquired as to how the attorneys developed the case and were able to do it so inexpensively. The attorneys informed the client that virtually all work had been done by Legalworks.” Thus these are the ethical issues which have been outlined in the ethical code of a particular country. How far these are followed is the pertinent question.

Conclusion

Following a detailed discussion about the lacunae present in the Legal Process Outsourcing sector, the question that arises is that of the consequences of the absence of a regulatory mechanism and the possibilities of tackling the problems. While there is no regulation as such in India regarding the LPO industry, certain steps have been taken by the industry themselves like the formation of the Global Legal Professional Certification Test. This test was devised in April, 2007 by the recruitment and training firm Rainmaker that focuses on the LPO industry in collaboration with three other LPO firms namely, JuryMaterix, Bodhi Global and Quislex. This test aims at testing candidates on skills needed in LPO: English fluency, technology and professional skills, personal effectiveness and legal knowledge. While this test may be the step in the right direction, and was devised by reputable companies, it is still a private initiative which neither has recognition from all LPO firms in the country, nor does it have legal recognition in the global market. This step would be more effective if it were done in collaboration with the Bar Associations of the various countries that outsource their legal work to countries like India.