As Rio Tinto Saves Millions, Other Corps. Will Outsource, Too, Counsel Says

J.D.
Jul 28, 2009 8:35 AM CST

When the gov’t talks about “creating jobs” via socialist policies, we really have to ask WHERE these jobs are being created. This is happening in all industries and it’s not much of a stimulus in the homeland.

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B. McLeod
Jul 29, 2009 11:35 AM CST

All I can say is, this company must have some really excellent consultants.

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nn
Jul 31, 2009 6:51 AM CST

Thanks Rob - I was wondering the same thing about the privious comments. I’m not quite sure how the man who has been in office for less than a year is responsible for the jobs lost to overseas for the past - oh 8 years or so.

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Karen
Jul 31, 2009 8:28 AM CST

This is penny wise, pound foolish.  Rio Tinto has no control over confidentiality,  no quality control over what is done in India.  Maybe one can farm out simple doc review or doc production (what does that mean? were they photocopying?) to foreigners, but when there are issues of confidentiality, you have to wonder whether the malpractice exposure is worth it.  If Leah Cooper, the counsel to RIo Tinto,  has no problem taking the fall for problems associated with her Indian lawyers’ work, she is fine to make whatever decision she wants.  I wouldn’t do it.  She can sue a local law firm for problems with work product, but good luck getting those offshore Indians.

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JT
Jul 31, 2009 9:08 AM CST

This post caught my attention because of the company name, Rio Tinto.  They are the name sponsor of the MLS soccer stadium in Sandy, UT, for the Salt Lake Real.  Maybe they should consider filling their stadium with staff attorneys from India, instead of local Utahns.  I’ve wanted to take my family to a game this summer, but now I definitely won’t support the team because of the association with Rio Tinto.

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B. McLeod
Jul 31, 2009 9:49 AM CST

But until then, the GC can take long lunches at the New Delhi.

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B. McLeod
Jul 31, 2009 10:10 AM CST

Law firms were doing it too.  The margin on Indian attorneys is much higher than on lazy, domestic “associates.”  Of course, once the clients find out (e.g., Rio Tinto), the logical step is to cut out the middlemen.

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Multi Jurisdiction
Jul 31, 2009 10:34 AM CST

There are no issues concerning unauthorized practice as long as the workers in India are either licensed to practice in the jurisdiction (or, if they are performing legal support functions, they are supevised by a licensed attorney).  Surely some of the commentators on this thread have licenses in more than one jurisdiction?  I do, in Texas and Colorado.  It doesn’t matter where I am sitting when I perform the work, as long as I am licensed.  I am not in favor of outsourcing to India, but we all need to realize it is happening.  And some of the comments suggesting that the quality will suffer, etc., shows a lack of knowledge about modern Indians.  You are talking about people with all the intelligence, education, and skill needed to practice at a BigLaw firm in the US.  For quality of life reasons, they have chosen to return to India.  Indian lawyers have attended either a foreign law school or a US law school, but in either case simply come to the US and take and pass the bar exam.  When they return home, the $50/hour they make from Rio Tinto goes just as far as $200-$300 in the US. The cost of living is greatly reduced there.  And the same technology that lets me sit in a Starbucks in Colorado and handle cases in Texas, lets an Indian lawyer in Mumbai handle Rio Tinto’s doc reviews for US ligitation.

More importantly, we should all consider what we and the ABA can do to protect our market position and our own economic interests.  It is selfish, but then the AMA is quite active in trying to lobby and protect doctors.  Other professions are the same.  Why shouldn’t we expect the same from the ABA?

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B. McLeod
Jul 31, 2009 12:06 PM CST

Eichler1, you have an excellent point (especially re. CEOs). 

Multi Jurisdiction, the reason the ABA does not take a more protective role is that it can’t.  The association does not speak with one voice.  I reiterate that it was law firms that actually started the outsourcing to India.  It was conceived out of greed, to rake in more (undisclosed) margin with leverage cheaper than what is possible with “associates.”  Perhaps in their greed, the originators of the concept did not consider how the practice might turn on them.

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Pedro
Jul 31, 2009 1:57 PM CST

Once you are licensed in any country you should be able to practice anywhere in the world.  That is what malpractice is for.

We need a one world government.  One set of rules for the world, one currency, no borders, one language, one religion.

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Charis P
Jul 31, 2009 3:50 PM CST

@#6 MG - No the Indian lawyers are not licensed to practice in the United States but they are not glorified paralegals and, even if they were, there would still be savings.

If you’re an actual practicing attorney anywhere in the United States you should realize that there are certain very basic tasks such as low level document review and production that do not require exceptional legal skills to perform and can readily be performed by foreign attorneys in places like India.  In the past this was a big cash cow for Big Law firms that would dole out the tasks to staff attorneys and junior associates.

Arguably there are some seasoned corporate paralegals that are capable of doing this kind of work as well, but the traditional Big Law business model does not tolerate having the work done by assets with such lower billable rates, and for many Big Law firms, of late, it also doesn’t allow for the training of paralegals to do such work.  You don’t seem to have a sense of the magnitude of the difference between the cost of living in India and in U.S. city where a Big Law office is located.  An Indian attorney can get along quite well on a fraction of what even a U.S. big law corporate paralegal makes.  That difference is reflected in the billable rate of Indian attorneys.  Note that in the article in American Lawyer, the managing attorney for Rio Tinto states that the Indian attorneys cost her 1/7 of what it would cost to use outside counsel.  A Big Law seasoned corporate paralegal’s billable rate is significantly greater than 1/7 the billing rate of a junior associate or staff attorney, so even if a Big Law firm were to exclusively use paralegals for basic document review and document production, it still could not compete with these overseas legal service companies.

Big Law firms attempting to use the same legal service companies themselves make any profit off of such a practice unless they charge a middleman fee which, of course, takes away the value of using a Big Law firm over simply going directly to the overseas service provider (assuming the client has in-house attorneys to supervise the work).

This brings us to the other issue which people raise, which is the licensing of these Indian attorneys.  I am rather surprised that so many attorneys are oblivious to the ABA’s position on the use of these kinds of legal services.  It’s been rather conspicuous for several years and is likely to have a significant impact on law firm business models in the not too distant future.  The way attorneys must handle the use of these kind of resources is similar to the way they must handle the use of paralegals within the United States.  The attorneys that handle the work overseas are not licensed to practice law in the United States.  Therefore their work must be reviewed and supervised by a licensed attorney within the law firm or law department of the company using such services.  As long as the work is limited to very basic legal tasks like document review then this kind of practice is possible without violating any licensing issues.  Keeping the tasks basic also helps to address confidentiality and conflict issues as such work doesn’t require knowledge of confidential information of a client.

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