LEGAL OUTSOURCING - BUBBLE OR REALITY?

Indiatimes.com
December 25, 2005.

NEW DELHI: Outsourcing is gradually becoming the backbone of Indian service sectors. In the last fiscal India earned $6.7 bn by providing services in software, technology and manufacturing outsourcing.

Legal services are the next destination for a "cool" BPO. According to a study by the US-based Forester Research, the current annual value of legal outsourcing which is worth $80 mn can rise up to $4 bn and can fetch 79,000 jobs in India by 2015.

"The benefit of the outsourcing companies in the US would translate into a cost saving of about 10-12 per cent. The potential of the Indian resources to absorb the increasing demand in legal outsourcing is because India enjoys the economic advantages of the wage difference and less perks and overheads," the report says.

National Association of Software and Service Companies (NASSCOM) also projected that Legal Processing Outsourcing providers (LPOs) in India will soon rise up to $3-4 bn.

But this glossy figure has many challenges ahead. The most important challenge to the newly-born sector is the need for Indian lawyers to pass US Bar exams, conflict of interest rules and data security.

"Legal outsourcing is different from any other knowledge process outsourcing in a fundamental sense. In most jurisdictions lawyers have to be qualified and enrolled in order to advise their clients. Lawyers have to be licensed to practice law (within a certain jurisdiction). Hence legally, one cannot advise, as a lawyer, on laws one is not licensed to practice.

"Similarly, one cannot wholly sub-contract one's legal work to non-lawyers in other jurisdictions," says Sumeet Kachwaha of Kachwaha and Partners.

Still the work is of a secretarial nature and includes patent drafting, legal research, contract review and monitoring. However, experts are hoping to receive high-end sophisticated contracts, which require a strong legal base of international standards.

On the flip-side, the Indian Advocates Act, which deals with the professional conduct of lawyers, does not support work for other countries.

On the bright side, certain branches of law, which are of a global nature, like Intellectual Property laws (patents and trademarks) can give LPOs a filip in their endeavour.

Even, in specific laws governing companies and trade in securities, which hugely differ from one country to another, may limit LPOs to paralegal and secretarial work.

"As per Bar Council Rules, a lawyer cannot take another job while he is on the roll. He would have to get his licence suspended as a pre-condition. Lawyers would not be able to take employment in legal outsourcing outfits without having to give up their right to be called 'lawyers'," says Sumeet, indicating that it will be difficult for LPOs to retain the interest of its employees in such a case.

Meanwhile, Khaitan & Co, a leading law firm from Kolkata has already started an LPO by floating a new company 'Neoworth' and engaged 10 US-enrolled lawyers.

"Although the legal system in India and US are different, the analysis part of the work is the same. We are ready to receive high-end jobs," says Pinto Khaitan, partner of the Khaitan & Co.

Many lawyers are thinking on the lines of Khaitan. According to them, an Indian lawyer can be as good as his American counterpart in US Federal laws if properly trained in US law. What is required of an attorney, either Indian or American, is not that he should be aware of all laws and regulations but that he should be ready to acquire that knowledge.

"Documentation, standard agreements, plaints, etc, can be drawn up in India, quickly processed and implemented through a BPO," says Asha Nayar Basu of S Jalan & company.

But not all of Basu's friends agree with her.

"Such businesses will be operated mostly by existing BPOs, junior advocates with an entrepreneurial bent of mind and probably smaller law firms. The larger law ones will not be interested in taking such work as they may not find it intellectually stimulating and rewarding," says Diljeet Titus of Titus & Co.

Another group reject this idea for a reason more impersonal - technical problems.

There is a strong political opposition in the US against outsourcing as may affect the livelihood of US attorneys may also serve as a roadblock.

Titus estimates the LPO industry in India to be worth $50-100 mn by the year 2010.

He sees a prospective clientele for legal outsourcing in MNCs but not in reputed international firms, especially after the Law Society of the UK said firms would be liable to bear the loss to the client if it had outsourced work.

"In a short while, this model may prove to be successful primarily because of a large inflow of fresh graduates into the profession, attractive pay-packages and lure of metropolitan cities," says Titus.