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.