Growth of LPO industry in Industry

December 6, 2008

Contributed by: Clairvolex Research Team

What began as an idea has now become a robust industry. The LPO industry started out with only a few vendors and has grown steadily. It has spread to other common law jurisdictions. As of 2008, the LPO industry employs thousands of lawyers in India and other parts of the world in order to service the needs of their common law jurisdiction clients. Forrester research, in its 2005 Valuenotes Study of “Offshoring Legal Services to India”, cites the value of legal process outsourcing services to be $61 million; and it projects the value of these services to be $605 million by 2010.

The current challenging times with the global economies struggling, these are undoubtedly testing but it seems that, for the legal services sector, the opportunity has knocked in the form of the legal process outsourcing (LPO) industry. The simple labour arbitrage strategy of outsourcing certain legal task to offshore jurisdictions has enabled businesses to continue to grow in increasingly competitive environments. It has become one of the necessary weapons in any law firm’s or legal department’s arsenal with savings in the order of up to 70%, according to a news report. Outsourcing the “simpler”, more “routine” legal tasks to LPO providers offshore becomes very attractive.

Inevitably however, the ethical questions surrounding LPO has to be addressed. Typically the questions center on conflicts of interest, confidentiality and unauthorized practice of law. The legal academic community sees no prohibition against offshore outsourcing legal services but from an ethical standpoint, the lawyer remains responsible for the quality of the work. This is also consistent with the approach being taken by the Bar committees in New York City, San Diego County, Los Angeles County and more recently the American Bar Association. The Bar associations in the United States have essentially ruled, that US lawyers may outsource legal work to foreign lawyers (or non-lawyers) outside the US, provided the US lawyer:

supervises the foreign/non-lawyer;
preserves the client’s confidences and secrets when outsourcing;
avoids conflicts of interest when outsourcing;
bills for outsourcing appropriately;
when necessary, obtains advance client consent to outsourcing.

According to legal experts, referring to bar opinions, these rulings take settled principles and familiar rules and apply them to a slightly different setting. The road is now clear for US lawyers to outsource legal work, including to lawyers or non-lawyers outside the United States, if the US lawyers adhere to ethics rules requiring competence, supervision, protection of confidential information, reasonable fees and not assisting unauthorized practice of law.

The global legal landscape is changing rapidly due to globalization and rapid advances in technology. The increasing demand from clients for greater value for their money, Law firms and legal departments cannot afford to ignore Legal Process Outsourcing.

The description of outsourcing by the American Bar Association as “a salutary trend in a global economy” is definitely seeing a clear attitudinal shift towards LPO.

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