With the legal process outsourcing (LPO) industry hitting double-digit growth rates, regulators and representative bodies can no longer ignore this dynamic new market.
In the three main LPO markets – the United States, the United Kingdom and India – there is the potential for rule changes which could place outsourcing agreements under increased scrutiny or even have a material impact on the ability of law firms and companies to send legal work to external providers.
For these reasons many, industry insiders, including Fronterion which highlighted the issue in its Top 10 Trends for 2011 report, think regulation is the single most important issue in LPO this year.
The following is an extract from Fronterion’s monthly LPO newsletter Forefront, which was sent out today. To sign up for the newsletter, visit www.fronterion.com
The United States
The American Bar Association has set up a working group to examine the implications of advancing technology and globalisation for the legal industry: the ABA Commission on Ethics 20/20.
LPO is a key area of focus. The group has released proposed changes to the ABA model rules and has invited feedback from industry participants. The changes, which include a provision that the law firm outsourcing legal work should make sure it is in the best interest of clients, will not cause a major shift in the regulatory regime.
The ABA is due to submit its recommendations to the House of Delegates in August this year.
Independent from the ABA, a Connecticut lawmaker recently proposed a bill aimed at curtailing offshore legal outsourcing. While the bill is not expected to go anywhere, it sets off another round of debate regarding the unauthorized practice of law (UPL).
The United Kingdom
The Solicitors Regulation Authority (SRA) has been slower to respond to the burgeoning LPO industry in the UK, however, it has indicated that it is likely to carry out a ‘thematic review’ on the subject in 2011.
The website www.legalfutures.co.uk reports this will include whether the SRA will need to change regulatory requirements or increase its supervision of LPO arrangements. The body is already considering LPO as part of its consultation in the new Solicitors Handbook.
The Law Society, which has delegated regulation to the SRA but which still represents the legal industry, has also hinted that it will address LPO in 2011.
At a conference last year, the society released a report saying it should examine the impact of LPO on, in particular, the development of junior solicitors as more of their work is sent overseas, and the risks for firms in terms of professional indemnity insurance.
The report also heralded the emergence of a ‘third profession’ of legal providers. A spokesman for the Law Society told Fronterion this month the organisation is “looking at the possibility of providing guidance and information to its members” on the issue.
The jurisdiction where most outsourced legal work is carried out also has one of the most intractable regulatory regimes.
Among the most worrying developments is the Chennai Writ Petition, a legal action brought by local practitioners against 31 international law firms and one LPO provider aimed at preventing foreign firms from practicing in India.
While the writ is still ongoing, consultant Alison Hook, who runs Global Legal Market Consulting, says there is little cause for concern.
She thinks the Indian government is unlikely to permit anything which might damage the growing local LPO market.
However, the LPO industry should keep an eye on the Ministry of Law and Justice’s plans to tighten overall regulation of the corporate legal sector.
“This will probably move quite slowly but is an interesting statement of intent which could help to clarify the boundaries between the regulated legal sector and legal process outsourcers and ensure that the LPO industry does not get embroiled again in the foreign lawyer controversy in India’,” she says.
NOTE: Fronterion founder and managing principal Michael Bell will be speaking on the subject of regulation, as well as other key issues, at the IQPC LPO Summit in New York February 14-16, 2011.
About Fronterion: Fronterion is the leading international management consulting firm exclusively focused on advising law firms and corporate counsels on outsourced legal services. Fronterion clients, primarily based in the US and UK, include a variety of sizes and practice specialties. As the first organization to bring a highly structured approach to the assessment of the legal outsourcing market, Fronterion has helped clients tackle an array of outsourcing challenges and achieve transformational benefits through outsourced legal services. A strict adherence to independence from vendor firms ensures Fronterion’s objectivity in all client reporting.
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Fronterion is an independent legal outsourcing advisory firm that provides focused expertise enabling clients to confidently engage in successful legal outsourcing initiatives.