Monday, November 26

India Ready to In-source Outsiders? Clifford’s Chance is More than Cheap IT.

As we reported earlier, India is getting more and more foreign legal work from the States – cheap stuff here like document review that's even cheaper when done over there. Well, it's not just this side of the Atlantic that's hemorrhaging the boring stuff. The UK has been moving work to India, too, reports, and they are taking drastic steps to do so.

From the article:

Then there's Clifford Chance's more radical bid to cut costs. In 2004 the firm outsourced part of its document production function to an Indian center operated by Integreon Managed Solutions Inc., a global outsourcing specialist, which then advised Clifford Chance on setting up its own facility in New Delhi. To date, the firm has focused on moving basic accounting and IT functions to India, covering such things as payments to suppliers, invoices, expenses and IT system development.

In contrast to outsourcing efforts by other Magic Circle firms, Clifford Chance's Indian staff are all direct employees of the firm. "It's all fairly small-scale compared with what financial institutions have done, but having 100 people in New Delhi will be a big deal for us," Childs says. Two senior members of staff, operations director Wayne Phillips and financial controller Jo Harvey, have relocated to India to manage the office.

Wow. A whole office devoted to IT and support services. But wait – even if setting up a New Delhi office is cheaper than doing IT work in London, how is it possibly cheaper than outsourcing that work to a company like Integreon that is already equipped? The likely answer is that it's not – and I'm thinking Clifford Chance has another reason for investing a little capital in "the final legal frontier".

Here's a hint: ask yourself why a firm would outsource its doc review to a 3rd party even though it has an office in India, then click the jump.

Why? Because India doesn't let foreign lawyers practice law within its borders. And the UK (along with the rest of Europe) is doing everything they can to get it changed. From InsideCounsel:

In March key members of India's legal community converged in London on the invitation of the Law Society of England and Wales. The Society made its aim clear: it wanted to convince India's government to lift its ban on foreign attorneys practicing in India. As late as the end of August, the Press Trust of India reported India's government was discussing the matter with India's legal community, which opposes liberalization out of fear that Indian firms will lose business to large international firms.


"In many countries, [in-house counsel] can reach out to a White & Case or a Mayer Brown, but you're not going to be able to do that in India," says Greg Kalbaugh, director and counsel of the U.S.–India Business Counsel. "So you're going to have to build up a repository or a connection with a domestic law firm."

The "charm offensive" didn't work. The Bar Council of India (BCI) released a statement not long after the schmoozing saying opening the borders would hurt the Indian legal market.

The ban, based on a 1991 interpretation of Indian law, is being reconsidered by the Indian legislature, and the fight is definitely on over the country's "liberalisation". UK lawyers, obviously, support the plan to open India's borders, while the BCI has released a series of statements admonishing the legislature to confer with it before any decision is made. From LegalWeek:

The [latest] statement, which was issued last weekend (18 November) during a conference on liberalisation hosted by the BCI, calls on the Indian Government to delay relaxing its rules on foreign lawyers until further consultation with the body, which says liberalisation will damage the local market.

However, the conference did authorise the BCI to discuss restrictions on Indian lawyers abroad and reciprocal arrangements with the UK's trade and justice ministries, as well as the legal regulators of other countries.

The developments come as the Indian Government attempts to overturn a 1991 ruling that saw foreign lawyers banned from practising in India under the terms of the Advocates Act.

The Government filed a counter-affidavit in the Mumbai High Court this week arguing that the Act applies only to domestic lawyers and that no legislative changes are therefore required to allow foreign lawyers to practise in the country.

The UK firms argue that being banned from India is hurting their clients who want to do business in the company. Indian attorneys are quick to point out that there are lawyers in India they can call. So it's the lawyers against the governments of both India and the UK. We wish them well. And what's the prize? Well, that part's easy. From The Times Online:

In their quest to grow revenues and profits, European firms are disappointed to be missing out on an increasing amount of lucrative work coming out of India. With estimates of annual growth ranging between 7 and 9 per cent, its economy is one of the fasting-growing in the world. Even more importantly, the type of economic activity that European law firms are likely to profit from is growing even faster.

The firms want to work on large, cross-border deals. Last year, the value of acquisitions by non-Indian companies of Indian companies jumped 200 per cent. Since 2000, the value of takeovers by foreign buyers has grown from $4.4 billion to more than $30 billion so far this year, according to Thomson Financial. (This year's total has already passed last year's despite fears of a global slow down.)

There is a clear picture: European law firm's clients are buying in India but protectionist rules means their fees are going to Indian law firms.

So, ok, back to Clifford Chance. Hopefully by now it's easy to see why it may be worthwhile to open a Delhi office for administrative work, rather than truly sourcing it out. The day the High Court opens that gate, the Clifford Chance website is going to have a significantly more colorful map than any of its competitors. The real question in my mind is, how is it possible that they're the only firm with their name on a door over there?