Legal process outsourcing or ‘LPO’ has flourished in the US where document review, research, drafting of pleadings and briefs, and patent services outsourcing have been growing steadily for about a decade. LPO is a more nascent segment of the market in the UK, but is gathering momentum.

LPO generally involves the delegation of document review, legal research, drafting and other services which can be farmed out to lawyers based offshore who are overseen by a lawyer qualified and admitted to practice in the customer’s jurisdiction. Even in the more mature US market outsourcing is concentrated on three main categories of work: discrete, self-contained matters which don’t involve direct client interaction; standardized, process-driven work which can be done by junior staff using checklists and forms and who don’t need real-time access to the customer-lawyer responsible for the advice; and work for which local rules don’t prohibit non-lawyer involvement. The types of work commonly outsourced include high volume documentary due diligence, document drafting, large-scale filings (such as company secretarial work or IP portfolios) and litigation support such as the management of document bundles. 

The key issues for law firms when outsourcing arise from professional rules of conduct, quality of output and confidentiality. But there is nothing intrinsically to prevent lawyers outsourcing work, despite considerable misgivings on the part of many. Lawyers have always used trainees, paralegals and others to help deliver services – none of these qualified to practice – knowing that it’s the lawyer who remains responsible for the quality of the work and for compliance with professional rules.

Professional rules of conduct

In England and Wales the Solicitors Regulation Authority (SRA) overseas the solicitors profession and publishes its rule book, the Solicitors Code of Conduct. Similar arrangements apply elsewhere, such as the American Bar Association’s Model Rules of Professional Responsibility. Country-specific requirements vary but the issues are essentially the same.

In England and Wales only authorized persons can undertake “reserved work” such as litigation, conveyancing and exercising rights of audience in court (Solicitors’ Code of Conduct 2007, Rule 20). Any sort of work which is not “reserved” may be carried out by non-lawyers and so can be freely outsourced. However, even reserved work can be delegated to unqualified staff provided it’s done at the direction and/or under the supervision of an authorized person (Solicitors’ Code of Conduct 2007, Rule 5). This gives flexibility, subject to compliance with the SRA’s ethical rules which centre on what are called the core values:

1. •justice and the rule of law – i.e. upholding the rule of law and the proper administration of justice;
   

2. •integrity;
   

3. •independence;
   

4. •acting in the best interests of clients and providing a good service; and
   

5. •behaving in a way which will not diminish public trust in the legal profession
   

        (Solicitors’ Code of Conduct 2007, Rule 1).

In addition, Rule 2 requires that solicitors notify clients of the name and status of the person dealing with a matter and the person responsible for supervising them. The precise extent of disclosure will depend on what elements or proportion of a matter are outsourced and perhaps the way fees will be charged. In any event, disclosure is good practice and given the SRA’s (and clients’) focus on transparency it would be a brave firm which outsourced work without client approval.  

Quality of service

Quality of service is important for two reasons. First, because clients expect it and will not remain clients for long if quality suffers. Secondly, because professional rules of conduct require it as well. The SRA’s “Guidance to rule 1” of the Solicitors Code of Conduct states that: “You must provide a good standard of client care and of work, including the exercise of competence, skill and diligence.”

“Competence, skill and diligence” applies to the supervision of junior staff and non-lawyers if they are working on a matter. Clearly, if work is moved offshore then one must add language, culture and time zones to the list of issues which arise when managing other lawyers.

Confidentiality

This takes two forms: the confidentiality of clients’ affairs, and the confidentiality of a firm’s relationship with outsourcing suppliers.

Rule 4 of the Code of Conduct requires solicitors to keep the affairs of all clients and former clients confidential. Rule 3 deals with conflict of interests – in essence, a solicitor may not act in any matter where a conflict arises. Law firms exercise stringent controls internally to protect client confidentiality and deal with potential conflicts. Outsourcing suppliers should be required to do the same. This should include appropriate physical security (security staff; keypad or fingerprint access to work areas), electronic controls on access to confidential materials, systems to monitor and manage conflicts of interest, and comprehensive staff training. The importance of these measures are magnified by geographical distance and by the risks associated with breaches (such as insider trading, compromised security, fraud and the inadvertent waiver of legal privilege).

The Law Society’s practice note on client care letters (current version dated 10 March 2010) highlights the risk to client confidentiality when outsourcing work on client files. It recommends that firms put confidentiality agreements in place with outsourcing suppliers, disclose to clients that they outsource work, alert clients to potential confidentiality risks and invite them to notify the firm if they object.

More and more lawyers are outsourcing client work, and more and more corporations are outsourcing the work of their in-house legal functions. Law firms in particular however tend to be very wary about advertising the nature and extent of what they outsource (while recognising the requirements for disclosure to clients). Clear confidentiality provisions should be built into the LPO agreement to reflect this approach.

The legal and reputational risks associated with LPO are substantial and so comprehensive due diligence when selecting a supplier is essential. Most of the key questions are the same as for any other offshore service: physical and electronic security; business continuity and disaster recover; quality of infrastructure and the competence of those who will provide the service day to day; the terms of the supplier’s insurance coverage. But a number of other issues apply uniquely to legal services and must be tested and assessed as part of the business case and buying decision. For example: practice management (i.e. the management of work flow, time recording and reporting; and the qualifications and working practices of those overseeing the work); monitoring and dealing with conflicts; and perhaps also the nature of the legal system and culture in the offshore jurisdiction because this will influence the supplier’s approach to legal issues and client service.