Legal Services Outsourcing & Indian Openness

Corporate America has been outsourcing work to India for decades. The legal industry quickly followed suit.

Not only does sending work abroad cut down on labor costs, but it also keeps business open 24 hours.

By the end of 2009, the number of legal outsourcing companies in India exploded from 40 (in 2005) to 140, according to Valuenotes (via NYT), a consulting firm in Pune, India. By 2014, India’s legal outsourcing firms are expected to surpass $1 billion, which is an increase of 38 percent from 2008, Valuenotes estimates (via NYT).

Still, U.S. and U.K. firms outsourcing to India have faced serious barriers in the past. The biggest hitch to outsourcing legal services? Indian law restricts foreign firms from opening offices or practicing law in the country (via WSJ Law Blog).

However, the Wall Street Journal Law Blog reports that these roadblocks are gradually crumbling. India’s Law Minister Salman Khurshid and the U.K.’s Secretary of State for Justice Kenneth Clarke have recently agreed to work on an arrangement in which India would premit U.K. law firms to enter the Indian legal market, the Hindustan Times reports (via WSJ Law Blog).

In turn, the British would agree to accomodate more Indian firms in the U.K., according to the same article. While the U.S. has not yet entered the discussion, open dialogue is definitely a change toward the better in terms of international legal cooperation.

“We understand the U.K. firms want to open offices in India for non-litigation purposes—mainly drafting of business contracts, deeds, agreements and other similar works,” said Ashok Parija to the WSJ Law Blog, the chairman of the Indian body that regulates the legal profession. “We will negotiate with our UK counterparts to work out a principle of reciprocity, which will benefit both sides.”

In hard economic times, the ability to generate doc review overseas, for example, or the drafting of simple legal documents will be key to many struggling firms.

Companies are already making use of innovative tools to lower legal fees, such as “reverse auctions“, to outsource high-volume and routine work, such as tax filings and intellectual-property transactions, to the lowest bidder.

Given the freedom to outsource more business to India, law firms should be able to lower their expenses and, in turn, attract an increased number of these cost-cutting clients.

“We will continue to go to big firms for the lawyers they have who are experts in subject matter, world-class thought leaders and the best litigators and regulatory lawyers around the world—and we will pay a lot of money for those lawyers,” Janine Dascenzo, associate general counsel at General Electric, said about outsourcing legal services abroad (NYT).

At the same time, Dascenzo agrees, “You don’t need a $500-an-hour associate to do things like document review and basic due diligence.”

Unsurprisingly, in the field of law, there’s no comparison to a recession when it comes to opening borders, lowering barriers, and practicing complete free market economics.

-WB

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