Legal Process Outsourcing (also known as LPO) refers to the practice of a law firm or corporation obtaining legal support services from an outside law firm or legal support services company. When the outsourced entity is based in another country the practice is sometimes called Offshoring.
LPO services is at a nascent stage with relatively consistent market growth since early emergence of LPO in 1997.[1] LPO providers have established themselves in Canada, India, the Philippines, the US, Israel and Latin America. They traditionally offer services in the areas of document review, legal research and writing, drafting of pleadings and briefs, and patent services outsourcing.
In-house law departments of major multinational corporations outsource some of their work in order to limit costs.
Initially, legal process outsourcing gained traction in the Asian subcontinent. However, in recent years the so called "near shore", "back-door" "specialized legal firms" have sprung up to satisfy law firms and corporations that demand quality and confidentiality.
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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 $150–350 dollars/hour when performing rote services, legal process outsourcing firms can often charge a fraction of this. It has attracted major corporations to outsource specific work outside their legal departments.
In Gurgaon and Bangalore, India the industry has benefited from the Global Financial Crisis, due to the increasing number of litigations and bankruptcies. [1]
Teams of Indian lawyers have achieved notable success providing legal research and drafting services in high-profile U.S. litigation matters.[2]
As reported in the ABA Journal, "[t]he 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." [3]
As noted in USA Today, "[y]ou 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." [4]
One of the major concerns with legal outsourcing is the potential for breach of clients confidentiality. Secondly, another concern is that the people performing legal work may not be bound to the necessary ethical standards.[5]
However, there have been ethics opinions from various local bar associations (New York [6] San Diego [7]) and recently, the American Bar Association [8] that discuss ethical legal outsourcing and how to achieve it.
Finally, there is criticism that LPO's are in effect practising U.S law without a licence/U.S law degree. (e.g.writing memorandum, briefs, etc). Work traditionally given to a junior associate in a law firm.
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 U.S. Their expectations have not been met.[9] The major reason for this is that U.S. lawyers themselves have started looking at alternative fee structures due to the recession and job losses.[10] In spite of some setbacks, the LPO industry has seen growth of about 40-60% in the last one 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, among others, have gained ground, resulting in a good amount of business directed to LPO firms in India.
Legal outsourcing is entirely a different game. In other forms of outsourcing, there are issues like client confidentiality and data security. However, legal process outsourcing has more complicated issues such as the liability of service providers and violation of the Attorney-Client privilege. During the early years of legal process outsourcing, many law firms hesitated to outsource their work.[11] Attorney-Client Privilege 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.
Similarly, those people who are against legal process outsourcing claim that since communication is being sent to a country other than United States, the confidentiality is broken; hence, the privilege has been waived. However, American Bar Association clarified this in 2008, clearing the way for the development of legal process outsourcing.[12]
India has become one of the most popular destinations for companies wanting to outsource legal work. This is so because there are certain very obvious advantages like availability of English speaking, US and UK graduated, qualified lawyers working at less expensive rates. Besides the Indian legal system is based on English common law, much like the US, UK, and Australia. The other major LPO hubs are in Japan, France, Australia, South Korea, China, Argentina and the Philippines. Some companies are also looking at setting up their own establishments in these countries to save costs. Many LPO providers are even using US-licensed attorneys residing in foreign countries who are willing to work at discounted rates.[13] Countries like China and Sri Lanka are also stepping in as tough competitors to India. However, Indian legal professionals seems to be the most suitable ones due to their legal education system.[14]