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Legal Process Outsourcing and Consumer Behavior
Manish Sharma
ICFAI LAW SCHOOL, DEHRADUN, India
BBA+LLB (Hons.)
manish@legalservicesindia.com
ICFAI LAW SCHOOL, DEHRADUN, India
BBA+LLB (Hons.)
manish@legalservicesindia.com
INTRODUCTION
CONSUMER BEHAVIOR IN LPO
Legal outsourcing 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 process is called LPO. LPO has gained tremendous ground in the past few years in the United States and UK. Legal Outsourcing companies, primarily in India have had success by providing services such as document review, legal research and writing, drafting of pleadings and briefs and providing Patent services.
Consumer behavior is referred to as the study of when, why, how, where and what people buy or do not buy product and services. It blends elements from social, political, cultural, psychological, legal and economical factors which influences the consumer behavior in any market. It attempts to understand the buyer decision making process, both individually and in groups.
The target market for Indian LPO Industry
History of Outsourcing
A few thousand years back, when people started living in villages, in smaller families the also started producing goods like wheat, rice, vegetables, fruits etc. initially these items traded within there home communities first, then it was expanded to other villages , regions, and countries.
Industrial revolution changed the way company did business. Manufacturing was the first activity that began to move to offshore destinations. By the passage of time manufacturing companies realized that they could outsource the production of consumer goods to other lower cost labor countries, they also decided to outsource the portion of their business to other countries.
Information technology has changed the way of outsourcing.
Now the outsourcing sector increased its work not only to the field of insurance, accounting, customer services, medical transcription,(BPO), but they have also entered in knowledge process outsourcing industries and the recent example is Legal Process outsourcing.
Globalization, liberalization and privatization in India in early 1990s had become a best stage for outsourcing. The ITES/ BPO industry is a young and budding sector in India. Today Indian companies are offering a variety of outsourced services ranging from customer care, transcription , billing , data base marketing , to web – sales marketing , accounting , tax processing, transaction, legal drafting , document analysis , document management , telesales / telemarketing , HR hiring and biotech research etc.
Legal Outsourcing is the next segment that holds great promise due to the high skilled work force availability in India and its large English speaking population this sector is getting momentum day by day due to the quality work performed by the highly skilled and methodologically trained employees. Legal process outsourcing future in India is seen as bright and a promising career option for bright young lads.
General Electric was one of the first companies to realize the potential of IP outsourcing, starting the trend back in 2001 by opening its own office in India.
Origin of Legal Process Outsourcing (LPO)
Outsourcing
Outsourcing is the transfer of a business function to an external service provider. Outsourcing involves contracting with a supplier, which may or may not involve some degree of off shoring.
Off shoring
Off shoring is the transfer of an organizational function to another country, regardless of weather the work is outsourced or stays within the same corporation / company.
Business process out sourcing (BPO)
(BPO) is the long-term contractual delegation of management and operational responsibility for an IT-enabled business function, or process area, to an external service provider. BPO is a sort of business relation between the buyer of a service and its supplier in which the supplier is told what to do or how to do. Buyer is asked to produce the end results for which the buyer would pay appropriate fee.
Any wise business man running a company knows that if his competitor begins using low- cost offshore, he will have to do the same to remain competitive.
The sector witnessed considerable growth during 2003- 2004, various MNCs including Indian as well as foreign both come forward hiring the services of BPO.
Only those Services are offshored that can be carried out regardless of geographical location for instance call centers and back office work , credit card companies and debt retrieval by insurance , patent drafting and filing of new invention etc. The services that required physical presence cannot be offshored.
The size of BPO industry is growing rapidly
Knowledge Process Outsourcing (KPO)
Knowledge process outsourcing (KPO) is a form of outsourcing in which knowledge-related and information-related work is carried out by workers in a different company or by a subsidiary of the same organization, which may be in the same country or in an offshore location to save cost.
Legal Process outsourcing (LPO)
In the recent few years the global spending on legal services has been estimated to be over $250 billion (of which about two-third is accounted in the United States alone. With such demand for legal services, corporations and law firms need to handle the large volumes while keeping costs in check and maintaining profitability. This is where Legal Processing Outsourcing ("LPO") comes into the picture wherein core legal functions are delegated to external counsel to complete the assigned task on the basis of set parameters and fixed timelines.
There are three elements to any LPO transaction. The client - who is the source of the work and the vendor - i.e. the company that provides the LPO services and the project or work that needs to be executed. It also refers to the off shoring of different elements in the legal process by law firms, corporations and house councils (mainly in the US and UK) to offshore centers (like India, China and the Philippines, etc). When the outsourced entity is based in another country the practice is sometimes called offshoring.In fact, research conducted by Evalueserve shows that only 1,300 professionals are currently providing legal services to the US from India; however, this number is expected to grow to 5,200 by December 2010 and to 16,000 by December 2015. Evalueserve contends that Indian companies providing such services will generate approximately $56 million in revenue during July 2005-June 2006, $300 million in July 2010-June 2011, and $960 million in July 2015-June 2016.
LPO has become established sector now and will continue to grow in future.
Types of LPO Firms
There are four kinds of models in Which LPO firms are working.
Captive Centers: This model is formed when a large corporation starts its own center in foreign country responsible for its legal and business processing issues. In early 2005 General Electric became one of the first companies to set up a captive center. They did so by to employing Indian lawyers at its center in Gorgon, India. Now there are almost 30 lawyers at the center responsible for supporting the majority of legal work of the company.
Captive Centers formed by U.S./ U.K. firms and their subsidiaries: Indian laws currently do not allow foreign law firms to practice in India. As a result, some law firms in the U.S./ U.K are working with firms to India to set up subsidiaries to provide legal and paralegal services for export purposes only. For example, Fox & Mandal and ALMT Legal, two Indian based law firms, are teaming up with Patent Metrix, an Irvine-California based law firm.
Joint Ventures by U.S./ U.K. based firms: In this model a U.S./ U.K. law firm will enter into a venture with a LPO firm in India. An example of this new model is the announcement by Clifford Chance in 2006 that it would be setting up the world’s largest off shoring initiative by a global law firm in conjunction with Integreon Managed Solutions.
Third Party Vendors Providing Services to Law-Firms and In-house Corporate Attorneys: This is the model that typically comes to mind when legal process outsourcing is discussed. In this model, a law firm or in-house legal department for a company will hire a third party provider (i.e. a LPO company) with trained lawyers and non-lawyers to complete a task. Examples:- Acumen Legal Services(I) Pvt. Ltd. And the top LPO companies of 2008, according to the Black Book of Outsourcing, include LawScribe, Clutch Group, CPA Global, Integreon, and Mindcrest etc.
Services Which Are Outsourced
While discussing outsourcing in the legal field, question comes in everybody mind that “what is being outsourced?” LPO firms are typically restricted from supplying core functions like legal opinion, judgment, or crucial communication with clients etc. There is a wide range of non-core functions that LPO firm may offer for example-
• Document Review in the context of litigation, investigations, antitrust (Second Request)
• Organization and analysis of both hard and soft data (software as well data base system)
• Contract review and summarizing, including the population contract database.
• Legal Research- services including research methodology domain expertise required to provide practice legal research and services include statutory and case law research, much can now be done by electronic database.
• Document drafting like standard contracts, agreements, letters to the clients patent applications etc. Drafting includes employee contracts, non-disclosure agreements, licensing agreements, supplier agreements, lease agreements, vendor agreements, and distributor agreements. Many of these agreements follow a standard template, enabling foreign lawyers to produce a draft that can later be reviewed and modified by a U.S. attorney.
• Legal Billing activities like preparation of invoices, collation of time sheet, etc.
• Intellectual Property Research: This category represents one of the riskiest and fastest growing sectors in LPO. A patent application usually includes the following: prior art searching, drafting background, drafting specifications, drafting claims, drafting summary, preparing drawings, final review and modifications for filing. Only the final review must legally be performed by an attorney registered with the United States Patent and Trademark Office (USPTO). Depending on clients’ preference, LPO firms can have varying degrees of responsibility for preparing drafts of patent applications. The patent industry is in such high demand because it requires time-consuming repetitive research.
• Paralegal services: It is also known as legal assistance. A legal assistance is a person, qualified by education , training or work experience who is employed by a lawyer, law office, corporation, governmental agency or other entity and who performs specifically delegated substantive legal work for which a lawyer is responsible.
• Administrative and secretarial activities like following up with clients.
• Due Diligence Services: Due-diligence refers to the large amount of data lawyers must examine to verify legal and financial status of companies for mergers or acquisitions. This work involves sifting though data, confirming supplier agreements and checking company books, board resolutions and other documents to ensure there are no “surprises.”
• Document Discovery in Litigation: Foreign lawyers can assist in “document discovery,” a process in which lawyers must review large amounts of data in preparation for a case, often under pressure to meet a deadline. In this period, outsourcing can help firms negotiate the problem of having to either work overtime or hire temporary staff.
Why India is a main destination for LPO?
There are several reason that world is concentrating on India as a main destination for outsourcing.
• India maintains a large and highly skilled work force with strong English language capabilities.
• Indian lawyers have the built in advantage of a similar legal system based on British common law and many have additional training in U.S. law.
• Approximately 80,000 Indian lawyers graduate each year. For many of these lawyers, legal process outsourcing is a promising, profitable, and challenging alternative to the Indian legal market.
• Manpower ability with good information technology and technological prowess of BPOs are in India’s favor.
• What a lawyer earn in India in a month his counterpart abroad makes it in a few hours. For a high –end services, law firm charge $ 250 an hour. For low-end it may be about $8-10. The charges are more in case of UK. At entry level, an attorney makes $ 1,60,000 a year in the US, while his Indian counterpart makes a fraction of it at around Rs. 2-4 lakh.
• Another great advantage is in the form of the time zone.
India's legal services are affordable, efficient, and above all, skilled.
• India’s legal services are affordable, efficient, and above all , skilled .
• Outsourcing legal services to India cost up to 80% less cost of using the services of US law firms.
LPO and Other Laws
No Specific laws are made regarding Legal Process Outsourcing Industry.
The country’s cyber laws are contained in Information Technology act, 2000(IT Act).
From the prospective of Legal process Outsourcing in India this act contain some positive aspect that are as follows-
• E-mail now has become a legal form of communication it can be dully produced and approved in the court of law.
• Digital signature has been given legal validity and sanction in the act.
• Companies shall now be able to carry out electronic commerce using the legal infrastructure provided by this act.
• The act now allowing the government to issues notification on web thus heralding e-commerce.
• The Act also explains important issues of security, which are so significant to the success of electronic transactions.
• It shall now be possible for corporate to have a statutory remedy in case if anyone breaks into their computer or network and causes damages or copies data.
Other computer related offences under the Indian Penal Code.
• Sending threatening massages by email Sec. 503 IPC
• Sending defamatory messages by email Sec. 499 and 500 IPC
• Forgery of electronic records Sec. 463, 470, 471 IPC.
• Web –jacking Sec. 383 IPC
• Bogus websites, cyber frauds Sec. 420IPC
In India LPOs are registered under Companies Act, 1956.
Consumer Behavior and LPO
Consumer behavior is referred to as the study of when, why, how, where and what people buy or do not buy product and services. It blends elements from Demography, social, political, cultural, psychological, legal and economical factors which influences the consumer behavior in any market. It attempts to understand the buyer decision making process, both individually and in groups.
Why do we need to study the consumer behavior?
Because we can not trust on consumers for a longer period of time.
• Out of 11000 new products introduced by 77 companies, only 56% are present 5 years later.
• Only 8% of new product concepts offered by 112 leading companies reached the market. Out of that 83% failed to meet marketing objectives.
Now the question arises that “who are consumers for LPO?”
The target market for Indian LPO Industry is US, UK, Canada and Australia. Principle consumers from these countries are law firms, In House Counsels, Publishing houses, Attorneys, and other Organizations. Study of changes in behavioral patterns of the consumers to LPO’s becomes important owing to the competition in the market. Especially, due to the changing global economic scenario, the study of consumer behavior in relation with LPO industry becomes much more important. Therefore, the present study aims at analyzing the present Consumer behavior in relation with Demographic, Political, Social, Cultural, Legal, Economical and Psychological factors like Life Style changes, Values, Ethics etc.
Demography
By studying all these information about Demographics of legal industry in US we can conclude some facts that affect the consumer behavior.
According to American Bar Association (ABA) the numbers of lawyers are 1,180,386. (2008)
(1)PRACTICE SETTING
Findings:- In figure 1 we see that the number of Private Practitioner Lawyers are comparatively very high that is 68 -74% while others like those who are in government ,judiciary and educational fields are very less and their numbers have reduced on the passage of time . This fact is positive sign for LPO industries.
(2)PRIVATE PRACTITIONERS
% of private practitioners… 1980 1991 2000
Solo 49% 45% 48%
2 – 5 lawyers 22% 15% 15%
6 – 10 lawyers 9% 7% 7%
11-20 lawyers 7% 7% 6%
21 – 50 lawyers 6% 8% 6%
51 – 100 lawyers 7% 5% 4%
101 + lawyers * 13% 14%
(3)AGE
1980 1991 2000
29 yrs. or less 15% 10% 7%
30-34 21% 16% 12%
35-39 15% 18% 14%
40-44 9% 18% 15%
45-54 16% 18% 28%
55-64 12% 10% 13%
65+ 13% 10% 12%
Median age 39% 41% 45%
Findings:- In figure 2 and 3 it is very clear that Sole and lawyers with 2 to 5 members are very large in number and most of the lawyers are above the age of 40 years. Lawyers above to this age group are very orthodox type, some of them comes in baby boomer category, according to a study, outsourcing in Australia is set to crack AU$11 billion but Australia's dwindling IT baby boomer generation will cause problems with both outsourcers and in-house IT projects. So it is very difficult to make them understand about the benefits of outsourcing. Most of them consider outsourcing is a bad practice and this problem is faced by many LPO firms.
(4)LAW FIRM SIZE
% of law firms with… 1980 1991 2000
2 – 5 lawyers 81% 75% 76%
6 – 10 lawyers 12% 13% 13%
11-20 lawyers 4% 7% 6%
21 – 50 lawyers 2% 3% 3%
51 – 100 lawyers 1% 1% 1%
101 + lawyers * 1% 1%
Total # firms 38,482 42,513 47,563
Findings:- There are categories of law firms on the basis of their size – Small, Medium, Big Law firms. The small and medium law firms are many in comparison to Big Law firms with having 2-20 lawyers. This will help the Indian LPO industry to grow because, these firms are having a good competition and to get most of the share out of market or to become number 1 they need to have competitive and low cost work force which they can not get without offshoing their work to LPO industries.
(5)LAW STUDENTS
Academic Year 2005-2006 2006-2007 2007-2008
Total JD enrollment 140,298 141,031 141,719
Gender
Male 51% 53% 53%
Female 48% 47% 47%
Findings:- There is no much difference between male and female law students; this reflects their level of broad thinking. Some of the countries have gender discrimination this indicates the fact that as much they are bias their work force is less as it should be in reality. This situation gives boost to the developed economy, so it is beneficial for any industry to work with developed country like America weather it is LPO, BPO, KPO or other industry.
(6)SALARIES AND FEES
For a high –end services, law firm charge $ 250 an hour. For low-end it may be about $8-10. The charges are more in case of UK. At entry level, an attorney makes $ 1,60,000 a year in the US.
Findings:-The data of salaries which is given in 6th figure gives a ground to compare between Indian Lawyers and US attorneys in relation with their salaries and fee. What a lawyer earn in India in a month his counterpart abroad makes it in a few hours. For a high –end services, law firm charge $ 250 an hour. For low-end it may be about $8-10. The charges are more in case of UK. At entry level, an attorney makes $ 1,60,000 a year in the US, while his Indian counterpart makes a fraction of it at around Rs. 2-4 lakh. This information also gives an idea that why India is no. 1 destination to offshore services for US law firms, In House Counsels, Publishing houses, Attorneys, and other Organizations.
These figures are collected from American Bar Association (ABA) [Lawyer Demographics].
Political Environment
Political Environment that affect the consumer behavior forces us to study the United States policies over outsourcing. Barack Obama’s policies over outsourcing are a bit confusing to the Indian firms. Some of his statement can be studied in this regard.
"Revolutions in communications and technology have sent jobs wherever there's an internet connection, that have forced children in Raleigh and Boston to compete for those jobs with children in Bangalore and Beijing," Obama said in a speech in Raleigh, North Carolina.
Barack Obama has also said that outsourcing of American jobs to India and China cannot be reversed. And finally he proposed abolishing tax subsidies for American companies who outsource work offshore.
Punitive measures in the United States to reduce outsourcing will no doubt affect Indian firms in the short term. Even now, a major chunk of revenue for these companies flow in from the US, and any protectionist measure will undoubtedly have a negative impact on the fiscal health as well as market capitalization of Indian IT companies.
Earlier, the Bush administration had argued that tax cuts and deregulation actually prevent American firms from needlessly exporting jobs, even though US regulations were weaker and corporate tax rates lower than those in most other countries. The argument also was that the efficiency of US capital would increase through optimal outsourcing policies and practices by rewarding companies with tax breaks for outsourcing work. These companies become more competitive globally and are also able to improve their bottom lines and enhance shareholder returns.
Firms which were off shoring there woke to India now will think a bit before off shoring there work because of this Tax policies of US. Undoubtedly this policies is going to help the US economy but in a long run it will give a adverse affect. US firms will lose the compatibility because at this moment they are using cream talent from the whole world by offshoring their work to other countries like India, China etc. and if the tax, and other boundaries are imposed in outsourcing they will certainly going to lose there present status in this competitive market.
These policies will affect the consumer behavior because consumer wants best work at low cost. But in the legal industry there is a huge difference between the US attorneys and Indian lawyers. What a lawyer earn in India in a month his counterpart abroad makes it in a few hours. For a high –end services, law firm charge $ 250 an hour. For low-end it may be about $8-10. The charges are more in case of UK. At entry level, an attorney makes $ 1,60,000 a year in the US, while his Indian counterpart makes a fraction of it at around Rs. 2-4 lakh.
US law firms, In House Counsels, Publishing houses, Attorneys, and other Organizations will go on to offshore there work to Indian LPOs because they provide best legal support services and paralegal services at low cost.
Economical Environment
Economical Environment of US highly supports their legal industry to offshore there work to Indian LPOs.
Contrary to common perception, information technology outsourcing benefits the us economy by increasing the no. of us jobs, improving real wages for American workers, and pushing the US economy to perform at a higher level ,according to a new study.
World wide sourcing of IT services and software generated in additional 257,042 net new US jobs in 2005, this no. will rise to 337,625 by 2010. Worldwide sourcing contributed $68.7 billion in real US GDP, according to a study conducted by Global Insight.
The benefits of free trade clearly provide a boost to the US economy, Global Insight chief economist Nariman Behrvesh said.
Despite the short term jobs loss associated with offshore outsourcing, it is expected that the practice will ultimately push US worker into a higher level “skill paradigm”. Those who are displaced by outsourcing they should be provided training programs by the companies and the government.
Because of outsourcing US companies have become most competitive in what they do best, their “core competencies.” Outsourcing allows companies to operate on an around-the-clock 24/7 production cycle, further adding to productivity and creating new opportunities.
Outsourcing delivers large and measurable benefits to the US economy. It reduces cost for information technology (IT) and other services by as much as 60 % , keeping US company competitive in the global market. Outsourcing promotes the demand for export of US-supplied computers, telecommunication hardware, software and legal, financial, and marketing services. Every $1 spent on foreign outsourcing creates $1.12 to $1.14 of additional economic activity in the US economy, according to a study conducted by Diana Farrell at McKinsey global Institute.
These facts relating to US economy will certainly create an impact on US law firms, In House Counsels, Publishing houses, Attorneys, and other Organizations to further develop there economy by promoting offshore their work to Indian LPOs.
Social and Cultural Environment
Social and cultural conditions of US and UK are in favor of outsourcing legal services to India. The main thing is language that is English. India maintains a large and highly skilled work force with strong English language capabilities. India has highly skilled workforce in technological, scientific, financial and legal field. English language is considered a business language in the country and a core component of a good education program. India alone produces 2 million English- speaking college graduates and 300,000 post-graduates annually.
The development of India’s communication infrastructure over the past decade has also played a significant role in enabling its companies to work more closely with its counterparts in other countries.
High-speed Internet connections in urban areas are standard today, enabling Indian companies to send and receive large data files in seconds to and from the U.S.
Trade Promotion and Business Advisory Councils: Export Promotion Councils (EPCs) have been set up for the purpose of promotion and development of exports from India. In addition, several countries seek to forge business alliances with India, recognizing India as a both growing market in terms of service provider and consumer. For instance, the U.S.-India Business Council established in 1975 by the governments of India and the United States, is the principal U.S. industry voice promoting policy to strengthen bilateral commercial ties between the two countries.
Memberships in International and Regional Associations: In order to build an atmosphere of peace, goodwill and harmony as well as to promote international business, India is a member of prestigious international and regional associations including The United Nations (UN), The International Monetary Fund (IMF), The World Bank, The World Trade Organization (WTO), The Association of South East Asian Nations (ASEAN), The South Asian Association for Regional Cooperation (SAARC). India also maintains free trade agreements with different countries.
India is a talent-rich country: India has a large number of educational and training institutes of international repute, offering some of the best programs in the world. The presence of renowned technical, law and business schools in India ensures the availability of professionals proficient in diverse domains.
Outsourcing to India provides the core benefits of technological agility, quality, flexibility, cost control and, time-to-market and competitive advantages. In addition, the language and cultural barriers faced while outsourcing to other countries are non-existent as Indians are proficient in English language skills and inter-cultural understanding.
Legal and Ethical environment
Legal and Ethical implication are very descriptive to understand the consumer behavior. Consumer will prefer the dealing which are highly ethical and supported by laws. Here are some Ethical implications in LPO industry.
Quality Assurance and Supervision
In 2006 the New York Bar Association opined that foreign lawyers who are not certified to practice law in the United States are legally “non-lawyers.” In this regard, Rule 5.3 of the ABA Model Rules requires lawyers have a “direct supervisory authority” over a non-lawyer employed and the lawyer must make reasonable efforts to ensure that the non-lawyer’s conduct is “compatible” with the professional obligations of the lawyer.
Foreign lawyers technically have no legal obligation to American laws. The ethical standards they are bound by may differ from U.S. standards at crucial points; for example, client confidentiality. Furthermore, there is a practical difficulty in providing adequate supervision over an employee working in another country. The 2006 New York Bar Association Opinion did not state that a U.S. attorney working with foreign lawyers or non-lawyers was responsible to ensure compliance with the Disciplinary Rules of New York, but it did imply obligations of supervision. These include the responsibility for the U.S. lawyer to ensure non-lawyers are competent to perform the tasks, uphold standards of confidentiality, and take reasonable measures to ensure that they do not violate New York code.
Confidentiality
Confidentiality is a fundamental principle of a client-lawyer relationship. ABA Model Rule 1.6 addresses the issue, and a further comment on the rule explicitly states that a lawyer must act to safeguard unauthorized information from lawyers or other people under the lawyer’s supervision that may be working on the case.
Offshoring presents specific challenges to confidentiality in terms of security of connection and legality of transferring information. For some back office or “vanilla tasks,” like document review, it is possible for companies to upload documents on a secure Intranet site, have foreign lawyers work on it, and then return it to the client. In this case the foreign lawyers only need limited information and do not need to know the larger context of the case. However, with the trend toward complex patent drafting and legal research, it is necessary for foreign lawyers to be privy to more information. Patent applications can be especially tricky because there exist laws that regulate what technology can be shipped abroad without a license. One way to deal with these issues is to not share any confidential information when outsourcing thus Security concerns will continue to be a limiting factor to the complexity of work that is offshored.
Disclosure and client Consent
The sensitivity of information involved in much of the work being outsourced is a natural transition to the ethical issue of disclosure and client consent. ABA Model Rule 7.5(d) “articulates the underlying policy that a client is entitled to know who/what entity is representing the client” Although this suggests full disclosure would be necessary. All services, with the exception of “back office” processes, the client should be consulted and consent to an offshoring agreement. This requirement is further colored by the nature of the work being offshored and the level of supervision between the lawyer and offshoring company. In practice, LPO and law firms operate under a working guideline that relates disclosure to the level of supervision and type of work being offshored.
Fee Sharing
The guiding principle for all fee sharing, regardless of offshoring, is in ABA Model Rule 1.5. It states: “the fee should be reasonable under the circumstances.” Offering little in terms of specifics, the Rule is somewhat difficult to apply to LPO fee sharing.
The issue of fee sharing is an important ethical issue to discuss as it gets to the heart of what some think will be the LPO revolution of the legal industry. Many cite the profitable pyramid structure based on billable hours of western law firms as the driving force behind LPO.
Conflicts of Interest
ABA Model Rule 1.7 calls on lawyers to develop “reasonable procedures” and suggests in the case of temporary contracting, the responsibility falls primarily on the hiring firm and the actual lawyer performing the work to monitor for conflicts of interest. Lawyers have an important duty to identify and resolve conflicts of interest in their legal work.
Discipline
The question of discipline is key to insure protection if there is a problem with offshoring, but it is still not clear what ethical standards an outsourced lawyer will be held accountable to.
Legal Regulation
The American legal community has yet to take a definitive stance on LPO. This could be reflective of the size and diversity of the legal community: some lawyers are leading the march to India, others are protesting the threat to legal profession, and the majority is uninvolved, or in doubtful disbelief of LPO’s sustainability. Discussion of ethics have revolved around current ABA Model Rules and Formal Ethic Opinions, however, there remain issues regarding ambiguity in the rules and the applicability of these guidelines to offshoring.
State Bar Association Ethics Opinions
There have been three formal State Bar Association opinions addressing the specific issue of legal offshoring: New York (August 2006), San Diego (2007), and Florida (September 2007). In June 2006 the Los Angeles Bar Association considered the issue of fee sharing in relation to domestic contracting and issued an opinion that has relevance to offshoring. The opinions are useful in that they contribute to a growing consensus as to how offshoring should proceed.
Psychological factor that effects the Consumer Behavior
• Cost effectiveness
• Reliability, Trust
• Confidentiality, Security
• Promotion of Business
• Adherence of Norms and Ethics
• Sincerity
CONSUMER BEHAVIOR IN LPO
Legal outsourcing 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 process is called LPO. LPO has gained tremendous ground in the past few years in the United States and UK. Legal Outsourcing companies, primarily in India have had success by providing services such as document review, legal research and writing, drafting of pleadings and briefs and providing Patent services.
Consumer behavior is referred to as the study of when, why, how, where and what people buy or do not buy product and services. It blends elements from social, political, cultural, psychological, legal and economical factors which influences the consumer behavior in any market. It attempts to understand the buyer decision making process, both individually and in groups.
The target market for Indian LPO Industry
- US,
- UK,
- Canada
- Australia.
- law firms
- In House Counsels
- Publishing houses
- Attorney offices
- Legal Research Companies
- Organizations.
- Demographic
- Political
- Social and Cultural
- Economical
- Legal and Ethical
- and Psychological
History of Outsourcing
A few thousand years back, when people started living in villages, in smaller families the also started producing goods like wheat, rice, vegetables, fruits etc. initially these items traded within there home communities first, then it was expanded to other villages , regions, and countries.
Industrial revolution changed the way company did business. Manufacturing was the first activity that began to move to offshore destinations. By the passage of time manufacturing companies realized that they could outsource the production of consumer goods to other lower cost labor countries, they also decided to outsource the portion of their business to other countries.
Information technology has changed the way of outsourcing.
Now the outsourcing sector increased its work not only to the field of insurance, accounting, customer services, medical transcription,(BPO), but they have also entered in knowledge process outsourcing industries and the recent example is Legal Process outsourcing.
Globalization, liberalization and privatization in India in early 1990s had become a best stage for outsourcing. The ITES/ BPO industry is a young and budding sector in India. Today Indian companies are offering a variety of outsourced services ranging from customer care, transcription , billing , data base marketing , to web – sales marketing , accounting , tax processing, transaction, legal drafting , document analysis , document management , telesales / telemarketing , HR hiring and biotech research etc.
Legal Outsourcing is the next segment that holds great promise due to the high skilled work force availability in India and its large English speaking population this sector is getting momentum day by day due to the quality work performed by the highly skilled and methodologically trained employees. Legal process outsourcing future in India is seen as bright and a promising career option for bright young lads.
General Electric was one of the first companies to realize the potential of IP outsourcing, starting the trend back in 2001 by opening its own office in India.
Origin of Legal Process Outsourcing (LPO)
Outsourcing
Outsourcing is the transfer of a business function to an external service provider. Outsourcing involves contracting with a supplier, which may or may not involve some degree of off shoring.
Off shoring
Off shoring is the transfer of an organizational function to another country, regardless of weather the work is outsourced or stays within the same corporation / company.
Business process out sourcing (BPO)
(BPO) is the long-term contractual delegation of management and operational responsibility for an IT-enabled business function, or process area, to an external service provider. BPO is a sort of business relation between the buyer of a service and its supplier in which the supplier is told what to do or how to do. Buyer is asked to produce the end results for which the buyer would pay appropriate fee.
Any wise business man running a company knows that if his competitor begins using low- cost offshore, he will have to do the same to remain competitive.
The sector witnessed considerable growth during 2003- 2004, various MNCs including Indian as well as foreign both come forward hiring the services of BPO.
Only those Services are offshored that can be carried out regardless of geographical location for instance call centers and back office work , credit card companies and debt retrieval by insurance , patent drafting and filing of new invention etc. The services that required physical presence cannot be offshored.
The size of BPO industry is growing rapidly
Knowledge Process Outsourcing (KPO)
Knowledge process outsourcing (KPO) is a form of outsourcing in which knowledge-related and information-related work is carried out by workers in a different company or by a subsidiary of the same organization, which may be in the same country or in an offshore location to save cost.
Legal Process outsourcing (LPO)
In the recent few years the global spending on legal services has been estimated to be over $250 billion (of which about two-third is accounted in the United States alone. With such demand for legal services, corporations and law firms need to handle the large volumes while keeping costs in check and maintaining profitability. This is where Legal Processing Outsourcing ("LPO") comes into the picture wherein core legal functions are delegated to external counsel to complete the assigned task on the basis of set parameters and fixed timelines.
There are three elements to any LPO transaction. The client - who is the source of the work and the vendor - i.e. the company that provides the LPO services and the project or work that needs to be executed. It also refers to the off shoring of different elements in the legal process by law firms, corporations and house councils (mainly in the US and UK) to offshore centers (like India, China and the Philippines, etc). When the outsourced entity is based in another country the practice is sometimes called offshoring.In fact, research conducted by Evalueserve shows that only 1,300 professionals are currently providing legal services to the US from India; however, this number is expected to grow to 5,200 by December 2010 and to 16,000 by December 2015. Evalueserve contends that Indian companies providing such services will generate approximately $56 million in revenue during July 2005-June 2006, $300 million in July 2010-June 2011, and $960 million in July 2015-June 2016.
LPO has become established sector now and will continue to grow in future.
Types of LPO Firms
There are four kinds of models in Which LPO firms are working.
Captive Centers: This model is formed when a large corporation starts its own center in foreign country responsible for its legal and business processing issues. In early 2005 General Electric became one of the first companies to set up a captive center. They did so by to employing Indian lawyers at its center in Gorgon, India. Now there are almost 30 lawyers at the center responsible for supporting the majority of legal work of the company.
Captive Centers formed by U.S./ U.K. firms and their subsidiaries: Indian laws currently do not allow foreign law firms to practice in India. As a result, some law firms in the U.S./ U.K are working with firms to India to set up subsidiaries to provide legal and paralegal services for export purposes only. For example, Fox & Mandal and ALMT Legal, two Indian based law firms, are teaming up with Patent Metrix, an Irvine-California based law firm.
Joint Ventures by U.S./ U.K. based firms: In this model a U.S./ U.K. law firm will enter into a venture with a LPO firm in India. An example of this new model is the announcement by Clifford Chance in 2006 that it would be setting up the world’s largest off shoring initiative by a global law firm in conjunction with Integreon Managed Solutions.
Third Party Vendors Providing Services to Law-Firms and In-house Corporate Attorneys: This is the model that typically comes to mind when legal process outsourcing is discussed. In this model, a law firm or in-house legal department for a company will hire a third party provider (i.e. a LPO company) with trained lawyers and non-lawyers to complete a task. Examples:- Acumen Legal Services(I) Pvt. Ltd. And the top LPO companies of 2008, according to the Black Book of Outsourcing, include LawScribe, Clutch Group, CPA Global, Integreon, and Mindcrest etc.
Services Which Are Outsourced
While discussing outsourcing in the legal field, question comes in everybody mind that “what is being outsourced?” LPO firms are typically restricted from supplying core functions like legal opinion, judgment, or crucial communication with clients etc. There is a wide range of non-core functions that LPO firm may offer for example-
• Document Review in the context of litigation, investigations, antitrust (Second Request)
• Organization and analysis of both hard and soft data (software as well data base system)
• Contract review and summarizing, including the population contract database.
• Legal Research- services including research methodology domain expertise required to provide practice legal research and services include statutory and case law research, much can now be done by electronic database.
• Document drafting like standard contracts, agreements, letters to the clients patent applications etc. Drafting includes employee contracts, non-disclosure agreements, licensing agreements, supplier agreements, lease agreements, vendor agreements, and distributor agreements. Many of these agreements follow a standard template, enabling foreign lawyers to produce a draft that can later be reviewed and modified by a U.S. attorney.
• Legal Billing activities like preparation of invoices, collation of time sheet, etc.
• Intellectual Property Research: This category represents one of the riskiest and fastest growing sectors in LPO. A patent application usually includes the following: prior art searching, drafting background, drafting specifications, drafting claims, drafting summary, preparing drawings, final review and modifications for filing. Only the final review must legally be performed by an attorney registered with the United States Patent and Trademark Office (USPTO). Depending on clients’ preference, LPO firms can have varying degrees of responsibility for preparing drafts of patent applications. The patent industry is in such high demand because it requires time-consuming repetitive research.
• Paralegal services: It is also known as legal assistance. A legal assistance is a person, qualified by education , training or work experience who is employed by a lawyer, law office, corporation, governmental agency or other entity and who performs specifically delegated substantive legal work for which a lawyer is responsible.
• Administrative and secretarial activities like following up with clients.
• Due Diligence Services: Due-diligence refers to the large amount of data lawyers must examine to verify legal and financial status of companies for mergers or acquisitions. This work involves sifting though data, confirming supplier agreements and checking company books, board resolutions and other documents to ensure there are no “surprises.”
• Document Discovery in Litigation: Foreign lawyers can assist in “document discovery,” a process in which lawyers must review large amounts of data in preparation for a case, often under pressure to meet a deadline. In this period, outsourcing can help firms negotiate the problem of having to either work overtime or hire temporary staff.
Why India is a main destination for LPO?
There are several reason that world is concentrating on India as a main destination for outsourcing.
• India maintains a large and highly skilled work force with strong English language capabilities.
• Indian lawyers have the built in advantage of a similar legal system based on British common law and many have additional training in U.S. law.
• Approximately 80,000 Indian lawyers graduate each year. For many of these lawyers, legal process outsourcing is a promising, profitable, and challenging alternative to the Indian legal market.
• Manpower ability with good information technology and technological prowess of BPOs are in India’s favor.
• What a lawyer earn in India in a month his counterpart abroad makes it in a few hours. For a high –end services, law firm charge $ 250 an hour. For low-end it may be about $8-10. The charges are more in case of UK. At entry level, an attorney makes $ 1,60,000 a year in the US, while his Indian counterpart makes a fraction of it at around Rs. 2-4 lakh.
• Another great advantage is in the form of the time zone.
India's legal services are affordable, efficient, and above all, skilled.
• India’s legal services are affordable, efficient, and above all , skilled .
• Outsourcing legal services to India cost up to 80% less cost of using the services of US law firms.
LPO and Other Laws
No Specific laws are made regarding Legal Process Outsourcing Industry.
The country’s cyber laws are contained in Information Technology act, 2000(IT Act).
From the prospective of Legal process Outsourcing in India this act contain some positive aspect that are as follows-
• E-mail now has become a legal form of communication it can be dully produced and approved in the court of law.
• Digital signature has been given legal validity and sanction in the act.
• Companies shall now be able to carry out electronic commerce using the legal infrastructure provided by this act.
• The act now allowing the government to issues notification on web thus heralding e-commerce.
• The Act also explains important issues of security, which are so significant to the success of electronic transactions.
• It shall now be possible for corporate to have a statutory remedy in case if anyone breaks into their computer or network and causes damages or copies data.
Other computer related offences under the Indian Penal Code.
• Sending threatening massages by email Sec. 503 IPC
• Sending defamatory messages by email Sec. 499 and 500 IPC
• Forgery of electronic records Sec. 463, 470, 471 IPC.
• Web –jacking Sec. 383 IPC
• Bogus websites, cyber frauds Sec. 420IPC
In India LPOs are registered under Companies Act, 1956.
Consumer Behavior and LPO
Consumer behavior is referred to as the study of when, why, how, where and what people buy or do not buy product and services. It blends elements from Demography, social, political, cultural, psychological, legal and economical factors which influences the consumer behavior in any market. It attempts to understand the buyer decision making process, both individually and in groups.
Why do we need to study the consumer behavior?
Because we can not trust on consumers for a longer period of time.
• Out of 11000 new products introduced by 77 companies, only 56% are present 5 years later.
• Only 8% of new product concepts offered by 112 leading companies reached the market. Out of that 83% failed to meet marketing objectives.
Now the question arises that “who are consumers for LPO?”
The target market for Indian LPO Industry is US, UK, Canada and Australia. Principle consumers from these countries are law firms, In House Counsels, Publishing houses, Attorneys, and other Organizations. Study of changes in behavioral patterns of the consumers to LPO’s becomes important owing to the competition in the market. Especially, due to the changing global economic scenario, the study of consumer behavior in relation with LPO industry becomes much more important. Therefore, the present study aims at analyzing the present Consumer behavior in relation with Demographic, Political, Social, Cultural, Legal, Economical and Psychological factors like Life Style changes, Values, Ethics etc.
Demography
By studying all these information about Demographics of legal industry in US we can conclude some facts that affect the consumer behavior.
According to American Bar Association (ABA) the numbers of lawyers are 1,180,386. (2008)
(1)PRACTICE SETTING
% of lawyers in… 1980 1991 2000
Private Practice 68% 73% 74%
Government 9% 8% 8%
Private Industry 10% 9% 8%
Retired/Inactive 5% 5% 5%
Judiciary 4% 3% 3%
Education 1% 1% 1%
Legal Aid/Public Defender 2% 1% 1%
Private Association 1% 1% 1%
Private Practice 68% 73% 74%
Government 9% 8% 8%
Private Industry 10% 9% 8%
Retired/Inactive 5% 5% 5%
Judiciary 4% 3% 3%
Education 1% 1% 1%
Legal Aid/Public Defender 2% 1% 1%
Private Association 1% 1% 1%
Findings:- In figure 1 we see that the number of Private Practitioner Lawyers are comparatively very high that is 68 -74% while others like those who are in government ,judiciary and educational fields are very less and their numbers have reduced on the passage of time . This fact is positive sign for LPO industries.
(2)PRIVATE PRACTITIONERS
% of private practitioners… 1980 1991 2000
Solo 49% 45% 48%
2 – 5 lawyers 22% 15% 15%
6 – 10 lawyers 9% 7% 7%
11-20 lawyers 7% 7% 6%
21 – 50 lawyers 6% 8% 6%
51 – 100 lawyers 7% 5% 4%
101 + lawyers * 13% 14%
(3)AGE
1980 1991 2000
29 yrs. or less 15% 10% 7%
30-34 21% 16% 12%
35-39 15% 18% 14%
40-44 9% 18% 15%
45-54 16% 18% 28%
55-64 12% 10% 13%
65+ 13% 10% 12%
Median age 39% 41% 45%
Findings:- In figure 2 and 3 it is very clear that Sole and lawyers with 2 to 5 members are very large in number and most of the lawyers are above the age of 40 years. Lawyers above to this age group are very orthodox type, some of them comes in baby boomer category, according to a study, outsourcing in Australia is set to crack AU$11 billion but Australia's dwindling IT baby boomer generation will cause problems with both outsourcers and in-house IT projects. So it is very difficult to make them understand about the benefits of outsourcing. Most of them consider outsourcing is a bad practice and this problem is faced by many LPO firms.
(4)LAW FIRM SIZE
% of law firms with… 1980 1991 2000
2 – 5 lawyers 81% 75% 76%
6 – 10 lawyers 12% 13% 13%
11-20 lawyers 4% 7% 6%
21 – 50 lawyers 2% 3% 3%
51 – 100 lawyers 1% 1% 1%
101 + lawyers * 1% 1%
Total # firms 38,482 42,513 47,563
Findings:- There are categories of law firms on the basis of their size – Small, Medium, Big Law firms. The small and medium law firms are many in comparison to Big Law firms with having 2-20 lawyers. This will help the Indian LPO industry to grow because, these firms are having a good competition and to get most of the share out of market or to become number 1 they need to have competitive and low cost work force which they can not get without offshoing their work to LPO industries.
(5)LAW STUDENTS
Academic Year 2005-2006 2006-2007 2007-2008
Total JD enrollment 140,298 141,031 141,719
Gender
Male 51% 53% 53%
Female 48% 47% 47%
Findings:- There is no much difference between male and female law students; this reflects their level of broad thinking. Some of the countries have gender discrimination this indicates the fact that as much they are bias their work force is less as it should be in reality. This situation gives boost to the developed economy, so it is beneficial for any industry to work with developed country like America weather it is LPO, BPO, KPO or other industry.
(6)SALARIES AND FEES
For a high –end services, law firm charge $ 250 an hour. For low-end it may be about $8-10. The charges are more in case of UK. At entry level, an attorney makes $ 1,60,000 a year in the US.
Findings:-The data of salaries which is given in 6th figure gives a ground to compare between Indian Lawyers and US attorneys in relation with their salaries and fee. What a lawyer earn in India in a month his counterpart abroad makes it in a few hours. For a high –end services, law firm charge $ 250 an hour. For low-end it may be about $8-10. The charges are more in case of UK. At entry level, an attorney makes $ 1,60,000 a year in the US, while his Indian counterpart makes a fraction of it at around Rs. 2-4 lakh. This information also gives an idea that why India is no. 1 destination to offshore services for US law firms, In House Counsels, Publishing houses, Attorneys, and other Organizations.
These figures are collected from American Bar Association (ABA) [Lawyer Demographics].
Political Environment
Political Environment that affect the consumer behavior forces us to study the United States policies over outsourcing. Barack Obama’s policies over outsourcing are a bit confusing to the Indian firms. Some of his statement can be studied in this regard.
"Revolutions in communications and technology have sent jobs wherever there's an internet connection, that have forced children in Raleigh and Boston to compete for those jobs with children in Bangalore and Beijing," Obama said in a speech in Raleigh, North Carolina.
Barack Obama has also said that outsourcing of American jobs to India and China cannot be reversed. And finally he proposed abolishing tax subsidies for American companies who outsource work offshore.
Punitive measures in the United States to reduce outsourcing will no doubt affect Indian firms in the short term. Even now, a major chunk of revenue for these companies flow in from the US, and any protectionist measure will undoubtedly have a negative impact on the fiscal health as well as market capitalization of Indian IT companies.
Earlier, the Bush administration had argued that tax cuts and deregulation actually prevent American firms from needlessly exporting jobs, even though US regulations were weaker and corporate tax rates lower than those in most other countries. The argument also was that the efficiency of US capital would increase through optimal outsourcing policies and practices by rewarding companies with tax breaks for outsourcing work. These companies become more competitive globally and are also able to improve their bottom lines and enhance shareholder returns.
Firms which were off shoring there woke to India now will think a bit before off shoring there work because of this Tax policies of US. Undoubtedly this policies is going to help the US economy but in a long run it will give a adverse affect. US firms will lose the compatibility because at this moment they are using cream talent from the whole world by offshoring their work to other countries like India, China etc. and if the tax, and other boundaries are imposed in outsourcing they will certainly going to lose there present status in this competitive market.
These policies will affect the consumer behavior because consumer wants best work at low cost. But in the legal industry there is a huge difference between the US attorneys and Indian lawyers. What a lawyer earn in India in a month his counterpart abroad makes it in a few hours. For a high –end services, law firm charge $ 250 an hour. For low-end it may be about $8-10. The charges are more in case of UK. At entry level, an attorney makes $ 1,60,000 a year in the US, while his Indian counterpart makes a fraction of it at around Rs. 2-4 lakh.
US law firms, In House Counsels, Publishing houses, Attorneys, and other Organizations will go on to offshore there work to Indian LPOs because they provide best legal support services and paralegal services at low cost.
Economical Environment
Economical Environment of US highly supports their legal industry to offshore there work to Indian LPOs.
Contrary to common perception, information technology outsourcing benefits the us economy by increasing the no. of us jobs, improving real wages for American workers, and pushing the US economy to perform at a higher level ,according to a new study.
World wide sourcing of IT services and software generated in additional 257,042 net new US jobs in 2005, this no. will rise to 337,625 by 2010. Worldwide sourcing contributed $68.7 billion in real US GDP, according to a study conducted by Global Insight.
The benefits of free trade clearly provide a boost to the US economy, Global Insight chief economist Nariman Behrvesh said.
Despite the short term jobs loss associated with offshore outsourcing, it is expected that the practice will ultimately push US worker into a higher level “skill paradigm”. Those who are displaced by outsourcing they should be provided training programs by the companies and the government.
Because of outsourcing US companies have become most competitive in what they do best, their “core competencies.” Outsourcing allows companies to operate on an around-the-clock 24/7 production cycle, further adding to productivity and creating new opportunities.
Outsourcing delivers large and measurable benefits to the US economy. It reduces cost for information technology (IT) and other services by as much as 60 % , keeping US company competitive in the global market. Outsourcing promotes the demand for export of US-supplied computers, telecommunication hardware, software and legal, financial, and marketing services. Every $1 spent on foreign outsourcing creates $1.12 to $1.14 of additional economic activity in the US economy, according to a study conducted by Diana Farrell at McKinsey global Institute.
These facts relating to US economy will certainly create an impact on US law firms, In House Counsels, Publishing houses, Attorneys, and other Organizations to further develop there economy by promoting offshore their work to Indian LPOs.
Social and Cultural Environment
Social and cultural conditions of US and UK are in favor of outsourcing legal services to India. The main thing is language that is English. India maintains a large and highly skilled work force with strong English language capabilities. India has highly skilled workforce in technological, scientific, financial and legal field. English language is considered a business language in the country and a core component of a good education program. India alone produces 2 million English- speaking college graduates and 300,000 post-graduates annually.
The development of India’s communication infrastructure over the past decade has also played a significant role in enabling its companies to work more closely with its counterparts in other countries.
High-speed Internet connections in urban areas are standard today, enabling Indian companies to send and receive large data files in seconds to and from the U.S.
Trade Promotion and Business Advisory Councils: Export Promotion Councils (EPCs) have been set up for the purpose of promotion and development of exports from India. In addition, several countries seek to forge business alliances with India, recognizing India as a both growing market in terms of service provider and consumer. For instance, the U.S.-India Business Council established in 1975 by the governments of India and the United States, is the principal U.S. industry voice promoting policy to strengthen bilateral commercial ties between the two countries.
Memberships in International and Regional Associations: In order to build an atmosphere of peace, goodwill and harmony as well as to promote international business, India is a member of prestigious international and regional associations including The United Nations (UN), The International Monetary Fund (IMF), The World Bank, The World Trade Organization (WTO), The Association of South East Asian Nations (ASEAN), The South Asian Association for Regional Cooperation (SAARC). India also maintains free trade agreements with different countries.
India is a talent-rich country: India has a large number of educational and training institutes of international repute, offering some of the best programs in the world. The presence of renowned technical, law and business schools in India ensures the availability of professionals proficient in diverse domains.
Outsourcing to India provides the core benefits of technological agility, quality, flexibility, cost control and, time-to-market and competitive advantages. In addition, the language and cultural barriers faced while outsourcing to other countries are non-existent as Indians are proficient in English language skills and inter-cultural understanding.
Legal and Ethical environment
Legal and Ethical implication are very descriptive to understand the consumer behavior. Consumer will prefer the dealing which are highly ethical and supported by laws. Here are some Ethical implications in LPO industry.
Quality Assurance and Supervision
In 2006 the New York Bar Association opined that foreign lawyers who are not certified to practice law in the United States are legally “non-lawyers.” In this regard, Rule 5.3 of the ABA Model Rules requires lawyers have a “direct supervisory authority” over a non-lawyer employed and the lawyer must make reasonable efforts to ensure that the non-lawyer’s conduct is “compatible” with the professional obligations of the lawyer.
Foreign lawyers technically have no legal obligation to American laws. The ethical standards they are bound by may differ from U.S. standards at crucial points; for example, client confidentiality. Furthermore, there is a practical difficulty in providing adequate supervision over an employee working in another country. The 2006 New York Bar Association Opinion did not state that a U.S. attorney working with foreign lawyers or non-lawyers was responsible to ensure compliance with the Disciplinary Rules of New York, but it did imply obligations of supervision. These include the responsibility for the U.S. lawyer to ensure non-lawyers are competent to perform the tasks, uphold standards of confidentiality, and take reasonable measures to ensure that they do not violate New York code.
Confidentiality
Confidentiality is a fundamental principle of a client-lawyer relationship. ABA Model Rule 1.6 addresses the issue, and a further comment on the rule explicitly states that a lawyer must act to safeguard unauthorized information from lawyers or other people under the lawyer’s supervision that may be working on the case.
Offshoring presents specific challenges to confidentiality in terms of security of connection and legality of transferring information. For some back office or “vanilla tasks,” like document review, it is possible for companies to upload documents on a secure Intranet site, have foreign lawyers work on it, and then return it to the client. In this case the foreign lawyers only need limited information and do not need to know the larger context of the case. However, with the trend toward complex patent drafting and legal research, it is necessary for foreign lawyers to be privy to more information. Patent applications can be especially tricky because there exist laws that regulate what technology can be shipped abroad without a license. One way to deal with these issues is to not share any confidential information when outsourcing thus Security concerns will continue to be a limiting factor to the complexity of work that is offshored.
Disclosure and client Consent
The sensitivity of information involved in much of the work being outsourced is a natural transition to the ethical issue of disclosure and client consent. ABA Model Rule 7.5(d) “articulates the underlying policy that a client is entitled to know who/what entity is representing the client” Although this suggests full disclosure would be necessary. All services, with the exception of “back office” processes, the client should be consulted and consent to an offshoring agreement. This requirement is further colored by the nature of the work being offshored and the level of supervision between the lawyer and offshoring company. In practice, LPO and law firms operate under a working guideline that relates disclosure to the level of supervision and type of work being offshored.
Fee Sharing
The guiding principle for all fee sharing, regardless of offshoring, is in ABA Model Rule 1.5. It states: “the fee should be reasonable under the circumstances.” Offering little in terms of specifics, the Rule is somewhat difficult to apply to LPO fee sharing.
The issue of fee sharing is an important ethical issue to discuss as it gets to the heart of what some think will be the LPO revolution of the legal industry. Many cite the profitable pyramid structure based on billable hours of western law firms as the driving force behind LPO.
Conflicts of Interest
ABA Model Rule 1.7 calls on lawyers to develop “reasonable procedures” and suggests in the case of temporary contracting, the responsibility falls primarily on the hiring firm and the actual lawyer performing the work to monitor for conflicts of interest. Lawyers have an important duty to identify and resolve conflicts of interest in their legal work.
Discipline
The question of discipline is key to insure protection if there is a problem with offshoring, but it is still not clear what ethical standards an outsourced lawyer will be held accountable to.
Legal Regulation
The American legal community has yet to take a definitive stance on LPO. This could be reflective of the size and diversity of the legal community: some lawyers are leading the march to India, others are protesting the threat to legal profession, and the majority is uninvolved, or in doubtful disbelief of LPO’s sustainability. Discussion of ethics have revolved around current ABA Model Rules and Formal Ethic Opinions, however, there remain issues regarding ambiguity in the rules and the applicability of these guidelines to offshoring.
State Bar Association Ethics Opinions
There have been three formal State Bar Association opinions addressing the specific issue of legal offshoring: New York (August 2006), San Diego (2007), and Florida (September 2007). In June 2006 the Los Angeles Bar Association considered the issue of fee sharing in relation to domestic contracting and issued an opinion that has relevance to offshoring. The opinions are useful in that they contribute to a growing consensus as to how offshoring should proceed.
Psychological factor that effects the Consumer Behavior
• Cost effectiveness
• Reliability, Trust
• Confidentiality, Security
• Promotion of Business
• Adherence of Norms and Ethics
• Sincerity
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