C to Z of foreign law firm debate – everyone knows A, B

In this article we analyze the issue of liberalization of Indian Legal sector and the scope of Advocates Act 1961 (hereinafter referred to as ‘1961 Act’) in non-litigious matters. One important judgment, a recent case filed and some eye-opening realities will help our assessment of the entire situation.

Lawyers collective Judgment: - In 1995, a Writ Petition (W.P. No. 1526 of 1995) was filed in the Bombay High Court by the name Lawyers Collective vs. Chadbourne, Ashurst and White & Case. This petition was filed by Lawyers collective in public interest as according to them, the permission granted by Respondent no. 8 (Reserve Bank of India) to the Foreign Law Firms, namely Respondent no. 12 to 14 (White & case, Chadbourne & Parke and Ashurst Moriss Crisp) to open liaison offices in India, was totally illegal and in gross violation of the provisions of 1961 Act. The Petitioner (a society) concerned with the practice of legal profession and particularly concerned in ensuring that the ethical practice prevails in the legal profession in India, sought declaration from the court that the permission granted by RBI was bad in law and further that Foreign Law Firms cannot be permitted to carry on both litigious and non-litigious activities in India unless they are enrolled as advocates under the 1961 Act. The petitioner argued that the practice of law in India included the practice of non-litigious matters such as drafting documents, reviewing and providing comments on documents, conducting negotiations and advising clients on international standards and customary practice relating to the client’s transaction etc. and therefore Foreign Law Firms cannot be allowed to practice in non-litigious matters without enrolling under the 1961 Act.

The High Court Bench, comprising Chief Justice Swatanter Kumar and Justice J.P. Devadhar, granting the prayer of Petitioner, held that the RBI did not have the authority to grant permission to these firms to carry on the practice of non-litigious matters, and also, that the practice of the profession of law, governed by the 1961 Act and the Rules of the Bar Council of India, includes the practice of non-litigious legal matters. Thus, "to practice in non-litigious matters in India, the Respondent Nos.12 to 14 were bound to follow the provisions contained in the 1961 Act." The court further held that the 1961 Act cannot be narrowly construed to be applicable only in litigious matter since in that case an advocate found guilty of misconduct in performing his duties while practicing in non-litigious matters cannot be punished under the 1961 Act. Similarly, where an advocate is debarred for professional misconduct can merrily carry on the practice in non-litigious matters on the ground that the 1961 Act is not applicable to the persons practicing the profession of law in non-litigious matters.

The above Judgment since then is deemed a precedent on the matter of entry of foreign law firms in India.

The Indian Legal Market and the Foreign Law Firms: - The Indian Legal Industry is estimated to be $800m worth. In the last two years the amount spent by India Inc. against charges and fees towards due diligence for mergers and acquisitions alone, is comparable to the GDP of a small country. India is fast emerging as legal supermarket and foreign law firms are keen to cash this opportunity. Apart from and other than advertising by organizing seminars on different international legal issues, below are some instances of the presence of foreign law firms:-

· Herbert Smith sponsored an essay writing competition in collaboration with Indian Law School,

· Clifford Chance had sponsored a moot court competition organized by the National Law School, Bangalore,

· Herbert Smith, Clifford Chance, Covington & Burling in the past few years shared their knowledge with law students by conducting short specialization courses,

· Linklaters financially supported setting up of new school near Delhi,

· There are about 38 ‘magic circle’ firms with their liaison offices or referral relationships with their Indian counterparts, while others strike up informal associations,

· Baker and McKenzie, have been amongst the most active law firms in India for the past two decades,

· Allen & Overy regularly advises on power projects, particularly in the oil & gas sector, acts for Indian banks, besides doing advisory work for corporate houses in India,

· CMS Cameron has advised the government of Orissa on privatization of the state electricity system,

· Denton Wilde Sapte’s Indian clients include Tata Electric and Gujarat State Energy Company,

· Linklaters represents clients in their disputes with the Maharashtra State Electricity Board,

· A large number of foreign accounting firms have already set up their offices and are clearly providing legal services in the area of Tax and Corporate Transactions,

· Indian law firms are reverse outsourcing high-end Patent application work to Foreign Law Firms in US,

· Allen & Overy sent their Singapore-based Capital Markets Partner, to allied firm, to boost its ailing capital markets practice,

· Linklaters and Clifford Chance have “best friend” alliances with Indian law firms and their managing partners stay in India for several months to improve integration.

So the Foreign Law Firms are already here.

The recently filed A. K. Balaji Case:- On 18th day of March 2010, one A. K. Balaji filed a writ petition W.P. No. 5614 of 2010, before the Madras High Court on the lines of the Lawyers Collective case (Supra). Respondent no. 9 to 40 are Foreign Law Firms, except Respondent No. 15 (Integreon) which is a Legal Process Outsourcing vendor. Other respondents include UK’s Allen & Overy, Clifford Chance, Linklaters, Freshfields and US law firms, WilmerHale and Shearman & Sterling. The Petitioner inter alia has alleged immigration law and 1961 Act violations. The Petitioner also claims that there is no true “reciprocity” as Indian Lawyers has to undergo cumbersome process, enormous conditions and restrictions and subjecting themselves to qualifying tests to practice law in US/UK whereas, to the contrary, Foreign Law Firms are silently capturing the Indian market through Unauthorized Practice of Law.

To wit:- While some contentions like Immigration law and 1961 Act violations are meritorious, I do not see any reason for LPO vendors to panic from the allegations raised against LPO companies in the petition. A managing partner of a magic circle firm coming to India on a tourist visa and conducting arbitration in hotel room is violation of 1961 Act and Immigration Act. The magic circle firm receives fees in its foreign account in a foreign location thus violating Income Tax and other Foreign Exchange Act. Clifford Chance had, in 1996 and 1997, advised foreign investors on English Law for the execution of certain power projects in India. The projects included the Bhadravathi Power Project, promoted by the Ispat Group, Electric de France and Alstom; Vizag Power Project promoted by the Machen Development and National Power; Ravva Oil Fields promoted by Cairn and Chase Manhattan and the Vemagiri Power Project promoted by GMR with investment from Avondale (Projects). The advisory work was undertaken by attorneys located outside India, and consequently, Clifford Chance's bills were raised and paid outside India. These issues need to be regulated if not restricted in the best possible manner taking the entire legal fraternity and governments of both countries in confidence. Since the matter is sub-judice I am hopeful that the court will do the needful.

Suffice it is to mention here that every country has body regulating unauthorized practice of law and both litigious and non-litigious matters are recognized as part of legal profession. To exemplify,

· The Court of Appeals of New York in the matter of New York County Lawyers Association (Roel) reported in 3 N.Y. 2D 224, inter alia held thus :-

“..........................Whether a person gives advice as to New York law, Federal law, the law of a sister State, or the law of a foreign country, he is giving legal advice. Likewise, when legal documents are prepared for a layman by a person in the business of preparing such documents, that person is practicing law whether the documents be prepared in conformity with law of New York or any other law. To hold otherwise would be to state that a member of the New York Bar only practices law when he deals with local law, a manifestly anomalous statement. .............................. As heretofore pointed out, the public is as liable to injury when an unlicensed person gives advice to an individual as to his legal rights under foreign law as it is with respect to his rights under domestic law. The State need not have separate examinations for those who will specialize in real estate law, patent law, mining law, foreign law, or any other law. There are many branches of the law that a Bar examination does not reach, but the test is a general one which all qualified applicants are required to take. And so all are equally subject to the same character qualifications. Thus it is not unreasonable to require that a person desiring to engage in the practice of foreign law be admitted to the Bar here and be subject to the same rules as every other member of the Bar of this State.”

· The Supreme Court of South Carolina in its opinion No.25757 reported in 2003 S.C. Lexis 293, inter alia held thus :-

“Based on the foregoing analysis, we hold that when nonlawyer title abstractors examine public records and then render an opinion as to the content of those records, they are engaged in the unauthorized practice of law. But if a licensed attorney reviews the title abstractor’s report and vouches for its legal sufficiency by signing the report, title abstractors would not be engaged in the unauthorized practice of law.”

· In the case of Legal Practice Board V/s. Wilhelmus Van Der Zwaan reported in (2002) WASC 133, the Supreme Court of Western Australia, has held thus :-

“The expression “administration of law” in s 77 is to be read as meaning “the practice of law” or “the practice of the law”. The practice of the law includes the giving of legal advice and counsel to others as to their rights and obligations under the law, and the preparation of legal instruments by which legal rights are either obtained, secured or given away, although such matters may not then, or ever, be the subject of proceedings in a court. If the giving of such advice and performance of such services affect important rights of a person under the law, and if the reasonable protection of the rights and property of those advised and served requires that the person giving such advise possess legal skill and a knowledge of the law greater than that possessed by the average citizen, then the giving of such advice and the performance of such services by one for another as a course of conduct, constitutes the practice of the law. Where an instrument is to be shaped from a mass of facts and conditions, the legal effect of which must be carefully determined by a mind trained in the existing laws in order to ensure a specific result and to guard against others, more than the knowledge of the layman is required. A charge for such service brings it within the term “practice of the law”.”

The allegations raised against Legal Process Outsourcing vendors are however abysmal. LPO’s work on a module wherein they are not a law-firm and do not provide legal advice in any domestic or foreign jurisdiction. LPO's train their peers not to get engaged in Unauthorized Practice of Law.

[Chanakya Legal is a Corporate Law firm based in North Bengal and specializing in 1) High Court Litigation - Writ Petition, 2) Non-Litigation -  FDI - Venture capital & angel investment; business incorporation; business name registration; importing/exporting; product safety; product standards; inter-provincial trade treaties; Legal Documentation; Vetting of complex global Agreements & Contracts; review of Banking & Finance related documentation; HR & Employment issues; IP protection; Transactional & commercialization issues; Cyber & IT laws; Review of procurement, Tender & RFP documentation; MSA, SLA, SOW & Amendments thereto; Due Diligence for Mergers & Acquisitions; Shares, Debentures & IPO; and training on Legal Compliances. While, preventing you - against entering bad agreement, criminal code, consumer protection, restrictive trade practices, deceptive advertising, infringement, and passing-off.]

Lawyer huh! who the hell are you?

A legal-science fiction enlightening electronic discovery of the extinction of Legal Profession. It comes in the form of a news article. Asia being the most developed region (in 2080) issues directives to formally announce the end of Law as a Profession. This was widely protested by legal deintus (a group representing phoenix of legal profession) and supported by Ex-metic (a group representing victims of legal vandalism and enjoying the end of Legal Eagle.) Azure committee, ethnodicy rare (a branch of ethnology that studies comparative legal systems) was appointed and given access to global ESI (Electronically stored information) repository to recommend the extinction of lawyer. This is how the article goes:-

Committee report suggests 'Game Over'.

May 18, 2080. Asian News Services. Amidst huge protests and allegations of biasness from deintus the Committee today submitted its report on 'Lawyer....who are they?' It has made a recommendation to formally announce the extinction of the Legal Profession. Inter alia this would mean that law will lose recognition as a degree course and high-end Legal Services Programming would be the only subject left to be taught and researched. The Ex-metic, rejoiced by the recommendations, have asked the Administration to execute it with immediate effect. "We can no longer carry this backlog of shackles which ended twenty years back in 2060", exults an Ex-metic supporter. "Our administrators have succumbed before the mighty software companies", states a frustrated deintus.

The Committee, appointed last month, has submitted its detailed report on the global study of legal services from 1960 to 2060 in four different phases (the last phase being residuary phase). A brief synopsis of the Committee's report is as under:-

1960 – 1991 First Phase. (LAW AS A TRADITION). Since inception (time immemorial) till the late 1980's law was widely considered to be the art of conducting cases in courts, both by arguments and by the manner of proving evidences to convince the court or jury, as the case may be. Things were traditional, paper filings, face to face interactions with client, voluminous books of precedents, typewritten court reporting's, a lot of efforts were required with the developing system.

The first technological advancement was recorded with the publishing industry, who brought in the concept of online databases of legal precedents. Though law originated from the Rome, it was UK and US where it flourished the most, the dominance of Anglo-American Legal System was widely accepted. The concept of law firms, which started in US sometimes around the American Civil War, became popular in US,UK and other developed countries by 1960. However, by the mid of 1960's, there was decline in the income of lawyers as compared to other professionals and it was then that the legal industry's management consultants, started pushing time-based billing as a parameter for determining what practice areas were profitable, a formula for assessing utilization, driving revenue and assessing the big law firms. It worked spectacularly well and rocketed the income of lawyers (at least for those in private practice in big firms). All was well in the legal community, but to the contrary the business community was continuously struggling internally and externally to cut cost and increase margins. Things turned more competitive by the beginning of 1990's, when companies trading globally, shifted their focus, yet again, towards cutting costs to further boost profitability and competitiveness. Companies started introspecting and scrutinizing non-essential business functions that could be performed by Third Parties. Legal Departments of companies, not generating revenues, were obviously pressurized to cut costs. By the end of 1991, large Corporates and Law firms started searching ways to cut cost and increase profits. However, nothing substantial was evidenced within the legal fraternity and it continued to preserve its traditional and conservative sanctity, almost untouched by globalization.

1992 – 2020 Second Phase. (TECHNOLOGY CONVERTED LAW AS A COMMODITY). The Second Phase was of universal recognition that the practice of law and the economic and personal lives of lawyers was on a brink of profound transformation. A realization, that Law is not because of lawyers, but because of 'rule of law.' It was an era of lawyers, inventing their participation in future, or risking being left out with no alternative, a period where lawyers were forced to change their mindset or accept being blindsided. A tenure of legal profession struggling to overcome the blame for selling time by the hour, rather than result by values. A Mantra, that commodities which can be bundled and packaged, can transit seamlessly and can be processed anywhere. Finally, an acceptance that legal profession was not immune from globalization as most of its component were by then, streamlined and channelized. But these were not spontaneous and at times were restrained with humorous contentions.

The beginning of 1992 evidenced the birth of e-mail (electronic mail). E-mail was introduced as a communication tool, used by different people and in different ways, and used just as much, if not more, for personal rather than business reasons. This social networking concept however was subject to wide criticism by the Legal Fraternity. Most lawyers declared they would never use e-mail, as a medium of communication with clients, as it would compromise the Attorney-Client Privilege and peril confidential communications. But surprisingly by the end of 1995, e-mail was widely accepted as a medium of communication by lawyers.

The concept of Business Process Outsourcing though was generally widening, the legal profession was more or less untouched. Outsourcing generally began in the later part of 20^th century, when companies started contracting some of their business aspects to those who provided specialized services. Before outsourcing was implemented companies carried all its activities from raw material to finishing, and manufacturing to marketing, internally. This largely led to wastage of time and resources and quite often deviation from core competencies. To prevent sink and enhance margin, subcontracting of non-core competencies enlarged. The world started flattening and shortening, and by 2020, it was as big as a football ground. Not only all the players were known, their moves could also be predicted and foreseen. The legal fraternity was however, late in jumping into the outsourcing bandwagon. Although the first recorded instance of Legal Process Outsourcing was in 1995 when Bickel and Brewer, a Dallas based law firm, first opened its satellite office in Hyderabad (South India), it best flourished from 2005 to 2020. Although everyone understood the dynamics of change, and the accelerating commoditization of legal work, most were reluctant to accept it. The biggest resistance came from bigger law firms. It was not easy to convince, partners (millionaires) that they must begin to think differently, innovating designs to produce efficiently and effectively. By 2005, technological advancements enabled service providers to make LPO more responsive, useful and acceptable to Corporations and Law Firms in the United States and United Kingdom. 2009-2010 evidenced one of the worst global recession, which further catalyzed offshore outsourcing of legal processes. This was the 'thinking beyond box' time for legal professionals. The initial phase of Legal offshoring began with processing of legal work, which were routinely done, were annoying yet necessary and could easily be outsourced. The initial models of offshore legal outsourcing were TPSP (Third party service providers), Captive, JV, BOT, BTO, FTE and other common incubation and/or customized strategies.

By 2010, the Legal Process Outsourcing industry became more mature and added more services and values. Mainly separation of fatuous and feasible components in legal services and segregation of core competencies from combo bundles triggered more and more outsourcing. Although solo practitioners, small-size and mid-size law firms together as a group constituted 90% of US and UK legal market, they were hardly outsourcing to offshore destinations. 2010-2015 was witness of large scale legal offshore outsourcing, boosted by solo's and small law firms. By 2015, the Industry further transformed and LPO's were segregated into CRMO (Contract Review and Management Outsourcing), LRO (Legal Research Outsourcing), PPO (Patent Process Outsourcing), LSO (Litigation Support outsourcing), BFO (Bankruptcy and Foreclosure Outsourcing), DRO (Document Review Outsourcing) etc. based on their specialized services. Changes were also noticed in the models of Legal Process Outsourcing and concepts like AptCaptive™ were popularly accepted. LPO's converted from 'cost-savers' to 'transformational platforms' between 2010-2015.

Till the late 2018, although the Legal Offshore Outsourcing market was mainly dominated by large companies, there were new trends, which nevertheless, and no more than by 2020, pulsated new embryos. The concepts of Virtual Assistants and firmsourcing amplified incalculable shift from rudimentary practice of business to business, to peer to peer outsourcing. Firmsourcing as a concept meant offshoring of legal processes by one law firm (at posh area with rich clientele) to another law firm (at remote location with penurious clientele), thereby saving smartly the costs but retaining the same quality. The advantages of firm to firm relationship were, first, no formalities and technicalities, thereby creating direct relationship with other law firms, which resulted in a better turn around time (TAT) and, second, since the law firm was not a company (and did not have to manage overhead expenses under different heads), it had opportunity to deliver competitive work product at a highly affordable price. Till 2020, the concepts of Virtual assistants, firmsourcing and AptCaptive™ were universally endorsed. But the role of lawyers was confining day by day because of their biggest competitor, the Software.

2020 – 2060 Third Phase. (SOFTWARE OVERPOWERS LEGAL PROFESSION). The new generation software's were zealously expanding their great empire. Slowly, but definitely by 2030, they had mapped with unprecedented precision, the lawyers work in entirety. Even a layman could easily comprehend and frame motions, petitions, subpoenas, applications, briefs etc. by filling fields in the user-friendly, macro enabled E-filing software's. The web had plethora of legal material available, and legal advice from a lawyer was unmerited. Software's could easily segregate the case laws and arguments that were apposite to a particular issue. Communications being largely made in electronic forms, were readily available and served as reliable evidence. Courts encouraged e-filing portals; these portals suggested litigants to construe their filing documents to be compatible with court rules. Private players came up with unprecedented high-end programming which overpowered law as a profession. The legal profession was withering away like dry leaves of tree, not all at once, but slowly and surely. The one who resisted change, were the most outdated, the one who adapted to the changes, were the most progressive.

Drastically, the decline of lawyers' heralded the beginning to the end of legal profession. By 2040, only one category of lawyers survived. These were called "lex versatilists". Versatilists lawyers applied depth of skill to a progressively widening situation by gaining expertise, competency and dominance from every challenge faced. Continuous learning and growing, converted them into specialty tool, par excellence to software. The extinction of Versatilists, the last preserver of legal profession, around 2060, brought the death of legal profession. Some existing versatilists are now mainly associated with software companies and help them achieve updated version of legal software's.

To wit,

Globalization (Benefit from the economies of scale) -> Outsourcing (do what you can do the best, delegate the rest to Third Party) -> Onshoring (outsourcing within country) -> Farmsourcing (onshoring to lower cost of living location) -> Offshoring (Outsource beyond boundaries) -> Reverse Outsourcing (Asia outsourcing work to erstwhile West) -> Firmsourcing (Firm to Firm outsourcing) -> lex versatilists -> End of legal profession.

Can this be undone?

Trust me you, it can't. We can regret, relish, ridicule or get ready for it, but definitely cannot repress, reprieve, reverse or renounce it.

Quotations on Globalization and Outsourcing

"If you deprive yourself of outsourcing and your competitors do not, you're putting yourself out of business."

Lee Kuan Yew

"Quantitatively, outsourcing abroad simply cannot account for much of the recent weakness in the U.S. labor market and does not appear likely to be an important restrain to further recovery in employment."

Ben Bernanke

(American economist, and the current Chairman of the United States Federal Reserve)

"Outsourcing and globalization of manufacturing allows companies to reduce costs, benefits consumers with lower cost goods and services, causes economic expansion that reduces unemployment, and increases productivity and job creation."

Larry Elder

(American, libertarian radio and television personality)

"The other part of outsourcing is this: it simply says where the work can be done outside better than it can be done inside, we should do it."

Alphonso Roy Jackson

(13^th United States Secretary of Housing and Urban Development (HUD))

"The best companies outsource to win, not to shrink. They outsource to innovate faster…"

Thomas L. Friedman (The world is flat)

"In the long run, outsourcing is another form of trade that benefits the U.S. economy by giving us cheaper ways to do things."

Janet Yellen

(Chief Economist to President Bill Clinton)

"Outsourcing does not reduce the total number of jobs in America."

Robert Reich

(Secretary of Labor in the Clinton Administration)

"Only 5% of the global population lives in the U.S. That means that 95% of our potential market is outside the U.S. We need to stay engaged with the rest of the world, to keep those markets opened to our farmers, our service industry and our manufacturers – to businesses like yours."

John Snow

(Treasury Secretary, 2004)

"A truly global co. is one that uses intellect and resource of every corner of world. India is a developed country as far as intellect capital and Human Resource is concerned."

Jack Welch (GE)

"Globalization has changed us into a company that searches the world, not just to sell or to source, but to find intellectual capital - the world's best talents and greatest ideas."

Jack Welch (GE)

"Globalization is a reality. And this makes most leaders today realize that populist illusions can't be sustained before they collapse into stagnation and leave their political supporters deeply disillusioned. You can't inflate away your troubles or allow mountains of debt to build up if, as a country, you have to make your living in a globally competitive environment... Building prosperity requires caution and patience. It requires time. Populism is a short cut that doesn't work."

Fernando Henrique Cardoso

(34th President of the Federative Republic of Brazil)

"India is an emerging power in IT sector. India is handling most sophisticated projects in the world. I am impressed with the talent we have in our India."

Bill Gates (Microsoft)

"We are expanding our presence in India to take advantage of the ample research and development talent available."

John Chamber (Cisco)

"India can become a major part of dells operation and a major source of human capital that dells take on as a company and we are taking further opportunities to take advantage of skilled labor."

Michael Dell (Dell)

"Every morning in Africa, a Gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a Lion wakes up. It knows it must outrun the slowest Gazelle or it will starve to death. It doesn't matter whether you are a Lion or a Gazelle... when the sun comes up, you'd better be running."

Old African Quote

"They sell us stuff they make cheaper or better, and we sell them stuff that we make cheaper or better. Over time, we all fare better than we would with self-sufficient economies. That's the lure of free trade."

Published in The Missoulian, Mar.14, 2004

"Do what you can do the best and outsource the rest"

Tom Peters

Management Guru

"You cannot do today's job with yesterday's methods and be in business tomorrow."

Nelson Jackson

Indian law on Ethics, Confidentiality and Conflict of interest.

Ethics, Confidentiality and Conflict of Interest are three most bonafide contentions in the mind of a strategist looking for a long-term outsourcing relationship at an offshore location like India. Infact legal profession has always had a cautious approach in wake of any paradigm shift from conservatism to liberalism. When in 1992, the e-mail usage became popular and there were talks about attorney's using e-mail to communicate with their client's, the legal professionals unanimously ruled out such possibilities. The contention throughout the legal profession was that Attorney-Client communication generally involved interchange of confidential data and thus fell within the Attorney-Client privilege doctrine and that being so, attorney's should discourage e-mail communication with their client's as this may not be a secure and confidential means of communication. However, even though at a snails pace the fraternity not only accepted these electronic mails as a secure medium of communications but also started effectively deploying it.

Interestingly, offshore outsourcing, like any other field, is also not devoid of associated risks and impediments. But when the risks are countered head on and the benefits are overpowering enough then the results make histories. The Year 2009 laid a very strong foundation of the LPO industry when some of the biggest names jumped into the offshore outsourcing bandwagon. This trend is projected to continue in 2010, the details of which is discussed in a previous post and is not repeated for the sake of brevity.

In this article we would cover India's answer to any contention regarding Ethics, Confidentiality and Conflict of Interest. Though not directly binding the LPO professionals, the Bar Council of India Rules, to a minimal, are indicative of the fact that India has similar laws governing lawyers on important aspects like Confidentiality and Conflict of Interest. In India, The Advocates Act 1961 and the Bar Council of India Rules govern the practice of Law and professional ethics. Let us proceed to analyze the Indian and U.S. provisions on some important aspects of Professional Ethics.

Unauthorized Practice of law

The U.S. Model Rule 5.3 addresses a lawyer's responsibility to supervise non-lawyer assistants thereby placing the ultimate responsibility on the US attorney for any deliverable. Likewise, the Indian Counterpart is bound by a similar provision contained in the Bar Council of India Rules. Part VI – Rules Governing Advocacy – Chapter II – Standards of Professional Conduct and Etiquette – §IV – Sub Section 37 of the Rules state that, "An advocate shall not permit unauthorized practice of law by any agency". This Rule read along with §29 of The Advocates Act 1961 recognizes advocates duly registered with the Bar Council as the only class of professionals eligible to practice law and bind them with a duty to discourage UPL (Unauthorized practice of law).

Conflict of Interest

The U.S. Model Rule 1.7 outlines the basic rule regarding Conflict Of Interest, namely that "a lawyer shall not represent a client if the representation involves a concurrent conflict of interests" i.e. representation of one client would negatively impact simultaneous representation of another client. The Bar Council of India Rules, Part VI – Rules Governing Advocacy – Chapter II – Standards of Professional Conduct and Etiquette – § IV – Sub Section 14 checks Conflict of Interest in Indian legal profession. The Rule states that "An advocate shall, at the commencement of his engagement and during the continuance thereof, make all such full and frank disclosures to his client relating to his connection with the parties and any interest in or about the controversy as are likely to affect his client's judgment in either engaging him or continuing the engagement".

Confidentiality

In U.S., confidentiality of client's information is governed by Model Rule 1.6, which states, "a lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent…………", the elaborate discussion to this is in the Formal Opinion 2006-3 (NY). The NY Opinion recommends US attorneys, looking to outsource their legal process to offshore jurisdiction, to ensure that foreign non-licensed workers understand the heightened duties imposed on attorneys in US (emphasis applied). This makes it all the more necessary and desirable for us to understand the Indian perspective for it. Although, India does not have a legislation specifically dealing with confidentiality of data, nevertheless, the Bar Council of India Rules - Part VI – Rules Governing Advocacy – Chapter II – Standards of Professional Conduct and Etiquette – § IV – Sub Section 24 states that, "an advocate shall not do anything whereby he abuses or takes advantage of the confidence reposed in him by his client". This needs to be read together with - Part VI – Rules Governing Advocacy – Chapter II – Standards of Professional Conduct and Etiquette – § IV – Sub Section 19 – " an advocate shall not act on the instructions of any person other than his client or his authorized agent". The joint reading of both these provisions reflects the Indian Lawyer's statutory requirement to abide with client's confidentiality.

These rules are indicative of the fact that legal profession in India is no less a noble profession. Indian lawyers have similar Professional Ethics and have Disciplinary Committees guiding them. Now when the Indian LPO's hire these lawyers, they undergo formal induction to be trained and made attuned to the different aspects of the LPO functioning. They are further made to acclimatize with the corporate working environment, confidentiality and responsible behavior as mandated. Essentially, these concepts of Confidentiality, Ethics and Conflict Of Interest are instilled within the DNA of these LPO professionals. Even otherwise there is no difference between a US based Contract Attorney and an Offshore Attorney. To illustrate, when a New York based attorney hires an attorney from outside NY but within US to do some portion of his work then by the virtue of definition the latter is not an attorney vis-à-vis the former's jurisdiction. Now the same impediments of Confidentiality, Conflict of Interest and Unauthorized Practice of Law is sustained in retaining a Contract Lawyer as from India as much from outside NY. Inter alia this is a plain and simple view of answering the bonafide contentions in the mind of an individual looking to offshore location like India to outsource his legal processes.

Impact of the new health care legislation on the outsourcing industry

President Barack Obama had a hard won victory on Saturday night (the 7-8^th day of November 2009) when the landmark health care reform legislation (HR 3962) was passed with 220-215 votes. Now if everything goes the Obama way, then by the end of the year '09 "Affordable Health Care for America Act" would apply as a law impacting almost fifty million US lives. But what does this Act actually imply? How does it stand to impact an average US life? How does the Act affect the outsourcing industry at large? Through my article below I endeavor to answer these and many more questions.

Ab-initio we will refresh the fundamentals of federalism, stating the Roles, Duties, Nature, Scope and Restrictions on the government in a written federal constitution. Next we proceed to see whether the above attempt by the federal government to accede healthcare legislation is ultra-vires the powers granted by the US Constitution.

What is Federalism?

According to the traditional classification followed by the political scientists, constitutions are either unitary or federal. In a unitary constitution, the powers of the government are centralized in one government viz., the Central Government. In the federal constitution, on the contrary, there is a division of power between the federal and the state governments in a way that they are both inter-dependent and independent at the same time.

As we all know that Constitutions are organic documents which operate as fundamental law. The governments and their organs owe their origin to the constitution, derive their authority from the constitution and discharge their responsibilities within the framework of the constitution. The judiciary has the power to declare a law unconstitutional if the law is found to have contravened any provision of the constitution. The American Constitution is the oldest and a well praised example of federalism.

What are the powers granted by the US Constitution to the State Government?

Powers reserved for State Governments are:

• Establishing local governments
  
• Issuing licenses (driver, hunting, marriage, etc.)
  
• Regulating intrastate commerce
  
• Conducting elections
  
• Ratifying amendments to the U.S. Constitution
  
• Providing for public health and safety
  
• Exercising powers which are neither delegated to the Federal Government nor were prohibited from the States by the Federal Constitution (residuary powers)
  
• Framing other domestic law (for example, setting legal drinking and smoking ages etc.)
  

What are the powers granted by the US Constitution to the Federal Government?

Under the Constitution, powers reserved for the Federal Government are:

• Printing of money
  
• Declaration of war
  
• Establishing the armed forces
  
• Entering into treaties with foreign governments
  
• Regulating commerce domestically and internationally
  
• Establishing post offices and issuing postage
  
• Making laws necessary to enforce the Constitution
  

What are the powers shared by Federal and State Government?

Under the Constitution, the shared, or "concurrent" powers are:

• Setting up courts
  
• Creating and collecting taxes
  
• Building highways
  
• Borrowing money
  
• Making and enforcing laws
  
• Chartering banks and corporations
  
• Spending money for the betterment of the general welfare
  
• Acquiring private property with appropriate compensation
  

What is the HR 3962 Act ?

The HR 3962 Act conceptualizes a new, voluntary, public, long-term care insurance program to help purchase services and support for people who have functional limitations. The Act endeavors to form a new national program to provide affordable coverage for those who can't get health insurance today because of pre-existing conditions. Under this, the insurance companies must spend 85 cents out of every premium dollar on medical services, thereby fostering the expansion of Medicaid and improving the Medicare. Under this, the young adults, till the age 26, are covered within their parents' policies.

The Obama administration intends to attain this by creating mandates. As a self-sustaining public insurance option (that is financed not by tax dollars but by insurance premiums), this provides an alternative to and competes with private health insurance companies, on a level playing field. Additionally, the Act intends to eliminate the antitrust exemption for health insurers and medical malpractice insurers thereby fostering competition thus targeting the existing monopolies in the health insurance market. It aims to establish a new mandatory essential benefits package that shall become the minimum quality standard for employer plans, with the passage of time. The package places a cap for annual out-of-pocket spending, at a maximum of $5,000 per individual and $10,000 per family to prevent bankruptcies from medical expenses.

This Act requires the employers to either provide insurance to their employees or contribute to the cost of their coverage through the public plan/exchange, though the small businesses are exempted from this requirement.

Arguments regarding Constitutionality of HR 3962

The legal fraternity is divided between two schools of thought about the constitutionality of the Act. First school believes that the Act is unconstitutional and places reliance on Articles I §8 and V of the US constitution and on Tenth Amendment. They claim that their argument is supported by the celebrated case of MARBURY v. MADISON, 5 U.S. 137 (1803) and some federalist opinions. The second school of thought places reliance on Article I §8 and the celebrated case of McCulloh v. Maryland, 4 Wheaton 316 (1819); Steward Machine Co. v. Davis, 301 U.S. 548 (1937); United States v. Butler, 297 U.S. 1 (1936) and some federalist opinions. An in-toto analysis of these school of thoughts would conclude that the true interpretation of the word 'general welfare' in Article I §8 of the U.S. Constitution can only determine the constitutionality of an Act like HR 3962. Till date the court opinions have been more inclined towards Hamilton (Federalist 33, 83 etc.) and Story rather than Madison (Federalist 41, 45 etc.).

Simply put, when the government mandates welfare as a quid-pro-quo for premiums collected, such welfare translates to nothing but a tax liability for the country men. Such an attempt by the government to regulate insurance sector by masquerading as an industry player is inspired from socialism. I personally feel that socialism is a Marxian concept and may not go well in an economy with capitalist foundations. The good thing is that people all over the world should buy insurance; this however turns bad when the government forces people to do so.

What are the implications of HR 3962 on the Outsourcing industry?

The object clause to the Act states that it is meant to provide affordable, quality health care for all Americans and reduce the growth in health care spending.

In reality, the act is a victim of haste. Ideally if the intention of the Obama administration and the object clause of the Act were actually in-sync then the administration should have awaited a confirmed indication of the end-of-recession. The administration should have first looked at strengthening the fundamentals of the economy, by:

• better regulating the existing insurance sector,
  
• improving the US agrarian culture and making the country self sufficient regards its food requirements,
  
• checking the cost-of-living index and
  
• creating more jobs in the private sector.
  

But if the intention is to make more and more Americans dependant on Federal Government for basic requirements, then the attempt is bang on.

Impact on the outsourcing industry:

Prima-facie it may seem complex but there are clear indications for the outsourcing industry to benefit once the HR 3962 is implemented. The benefit roots from the fact that the employees will become expensive for the employers post this Act's applicability. Now given the very competitive market scenarios, thin profit margin and the inability of the employer to transfer this increased cost to the end consumer, the employer is forced to search for the less costly alternatives. It is needless to say here that the Act magnifies the already existing labor arbitrage opportunities internationally. To appreciate the existing labor arbitrage opportunities you can refer to my older blog post in my blog on Legal Process Outsourcing.

Document Review : The X-Files revealed

• Introduction.

  Document Review (popularly ‘doc review’) is a task performed by an attorney in anticipation of legal proceedings or during the discovery phase of litigation. Generally, Document Review process is a part of pre-trial discovery procedure (i.e. during the production of evidence/document phase in litigation). The term Document Review includes analyzing, organizing, compiling and summarizing of documents, e-mails, correspondences, contracts, spreadsheets, reports, invoices, memos and attachments in order to make them ready to be filed in court as evidence. Basically, the whole need for Document Review arises when one party to the litigation (requesting party) wishes to have access to other party’s (producing party) documents.

  Document Review requires the attorneys to assess the relevance and/or responsiveness of documents, utilizing the legal expertise to the facts of the case and the issues of law. Later stages of document review (also known as ‘privilege review’ or ‘second level review’) further analyzes documents as privileged (on the basis of attorney-client communication and/or work product) and not privileged. The Privileged Document may be either withheld from production or redacted for content. The actual review of the documents is generally performed electronically (e-mails, files, scanned copies of documents). With proliferation in electronically stored data, an e-discovery first level document review estimates 75% of the average litigation cost.

  ‘Outsourcing of Document Review’ is a term commonly used for delegating all or some portion of the e-discovery process to a LPO company. Primarily like all LPO processes, Document Review involves intelligible analysis of data into useful work product. Data explosion, technological evolution, and the sudden increase in Electronically Stored Information (ESI) has catalyzed steep growth in offshoring Document Review work, as the total quantity of documents has multiplied several times over the years. With more and more streamlining and channelizing of legal processes, a need is felt to cut upon the cost involved in Discovery Processes. Offshore outsourcing to India has emerged as an effective and economical tool for managing Document Review needs. The LPO company conducts searches and evaluates the data (in the form of e-mails, pictures, design or sketch) for Relevance, Confidentiality and Privilege, and related activity such as redaction as per client’s requirements.

  Besides in litigation, Document Review is also performed in matters of regulatory compliance and corporate due diligence.

  Rule 26(f) of Federal Rules of Civil Procedure (FRCP) expects the litigating parties to establish methods and formats (such as TIFF, Native file, etc.) for production of ESI (Electronically Stored Information) early on in the litigation.

  The Discovery Process

  During the Document Review process quite often millions of documents have to be searched and identified for

  · Relevancy and responsiveness

  · Confidentiality

  · Privileged /protection such as attorney-client and work product

  · Client defined "key” or "hot" status,

  For large scale Document Review processes the Privilege filters are implemented as soon as documents are received, even before they have been reviewed by an attorney.

  The litigating parties participate in the initial meet and confer sessions to reach an agreement as to the:

  - Identification of all sources of discoverable data,

  - Collection of data (from sources such as tapes, drives, portable storage devices, networks, etc.) and

  - Processing of data (which involves reducing the overall set of data collected by filtering out duplicate or irrelevant files, and determining whether additional data extraction of relevant data may be required).

  Search techniques that software like Attenix has to offer for the purpose of culling are:Keyword, Boolean, proximity and concept searching. Such techniques, as used by the in-house IT dept. of the client, facilitate the process of initial culling of the documents, including de-duplicating, before a LPO company is provided access to them for the purpose of review. Processing also involves maintaining a full copy of all data collected, creating a duplicate set of the culled data for further de-duplication, processing, review, analysis, production and presentation.

  Rule 26(b)(5)(B) of FRCP contains responses to the mistaken release of privileged information. Such a provision of the FRCP enables the producing party to recover back its identified confidential documents which inadvertently were passed on to the requesting party. This provision is called “Claw-Back” clause.

  Data Preservation - When outsourcing to an LPO, the client is most concerned about preserving its metadata. Therefore, all the documents uploaded on to the third party software are not original, but duplicates of the original. Backup tapes of the original documents are also maintained. This is done to maintain a valid chain of custody and authenticity protocols, including full preservation of metadata, ensuring that all ESI is protected against destruction or alteration.

  The Production Process - Typically, the production format is at the option of the requesting party, unless that format can be shown to be unduly burdensome. FRCP 34(b) overtly states that the requesting party may select the method of production, subject to producing party’s objection. However, if the requesting party fails to specify a particular method, the producing party may produce the documents in any electronically searchable form.

  Data Collection - For the purpose of having the documents reviewed, the client (one of the parties to the litigation) may either directly approach the LPO or may come through a third party vendor.

  In case an LPO is approached by the client through a third party vendor which has the software to showcase the documents in the agreed format, such vendor coordinates between the LPO and the client regarding the username, password, license for accessing the software (license ordinarily being accorded keeping in mind the number of reviewers that the LPO company engages for review). Such software acts as a web-based user interface, and facilitates access to offsite database. This whole process is called “customization of software”.

  Data Analysis

  ANALYSIS Process - Before getting down to tagging the documents on the software, it is important for an LPO company to seek summary information from the client regarding the subject-matter of litigation to which the documents to be reviewed pertain. This helps with important early decisions as regards the criteria to be set when assessing the documents for various sensitivity levels.

  REVIEW Process – The review process involves segregating all privileged and confidential documents, and preparing a Privilege Log, say, an excel sheet that LPO reviewers will prepare, describing every document. Even though the tagging of the documents into Hot, Confidential, Not Privileged, Questionable, etc. is done on software’s as part of first pass review, it is advisable to maintain an excel sheet in order to track any later changes in the tagging of certain documents made in consultation with the client.

  After the first pass review is over, the client accesses the documents through the common software provided to both the client and the LPO by the vendor, (such software thus acting as a bridge between the client and the LPO). The client would then express its concern regarding the flagging of the documents after spot checking, and if clients conveys satisfaction about the tagging done so far, the LPO company would begin with privileged review, which entail further sub-categorization of documents tagged as “Confidential” into “Work Product” or “Attorney-Client Privilege” or both (commonly referred to as AC/WP).

  If a document is tagged as “Work-Product”, it means that the document (which may be an e-mail with an attached document proposed to be submitted in the court) contains matter prepared or discussed in anticipation of litigation.

  On the other hand, any correspondence or exchange between the client’s attorney and the client that discusses the progression of the case, the strategy to be followed or any future court dialogues, etc. are flagged as and protected under “Attorney-Client Privilege”.

  Share of offshore document review

  To start with, it was the “e-Discovery Laws” of US Regulations, 2006, which brought to fore the need to find solutions to the problem of non-availability of affordable attorneys and the management of the enormous workload owing to these Regulations. So the obvious answer to this was to outsource these services to a country with relative cost advantage and with no compromise of quality of work.

  India became an answer to this owing to, firstly the similarity between the legal systems of India to that of US & UK. Secondly, due to the availability of inexpensive but highly educated and experienced attorneys and above all, because of its high quality standards of work.

  Offshore Outsourcing of Document Review: - Three important reasons inspiring the growth behind offshore outsourcing of Document Review process to India are:- 1> Cost, 2> Quick TAT(turn around time) and 3> Concentration on other core aspects. Almost all the LPO’s in India and locations like Philippines are into the document review process.

  Cost

  The cost per hour charged by an US Attorney when compared with the Indian Counterpart falls around 1/10^th (as detailed below).

  Quick TAT (turn around time)

  The time difference and the availability of 24x7 support staff fostered outsourcing. The time difference between India and US is 10.5 hrs., this reciprocity of day and night helps documents to be reviewed in a 24 hr. schedule. Also for an attorney heading home, this implies that he could assign the work to an Indian LPO and be assured that the work would be finished, as per his requirements, before he reaches office the next day.

  Concentration on other core aspects

  By outsourcing Document Review like processes, the client can better concentrate on other important and core aspects of litigation thereby saving time and monies.

  Indian Offshore Market

  Document Review and Litigation Support services comprise approximately 35% of the total offshored legal services revenues in India. Indian offshore revenues from legal services were $225 m for the calendar year 2007 and are expected to reach $610 m by the end of 2010. There are over 100 vendors in the Indian market offering document review services.

  India meets many elements necessary to cater the challenges and emerge as a primary destination of global cost-saving workforce. Largest pool of graduates, English as the medium of education, 80,000 law graduates churning out every year from privileged law schools, English Common Law based Indian Legal System and Time Zone advantage areinter-alia the factors inspiring growth in the LPO industry.

  Offshore document review maturity

  The outsourcing industry is all about getting rid of time consuming stuffs. Substandard deliverables is a perception left long behind. In recent times, there has been a rapid acceleration in high end processes like Contract Review and Management and Litigation Support. Indian vendors are satisfactorily delivering briefs, pleadings and motions apart from Legal Research to US/UK based clients. To wit, the Legal Outsourcing industry is in the initial stages of developments. The maturity level however is vertically raisin. From First level review to Second and Privileged Review they are all now within the circumscribing limits of legal outsourcing to India.

  Billing methods

  Typical billing rates

  Hourly rates for Law Firms and associates in US market now begin at more than $200 and average more than $300

  Hourly rates for service providers other than law firm e.g. contract professionals in the US market typically average between $60 and $150.

  Typical hourly rates for offshore attorneys in India range from $10 to $30 for a lawyer.

  For large scale document which involves high level of efficiency and quick Turnaround time Indian outsourcing companies also offer $1 to 1.5 per document.