Legal Outsourcing and the Global Financial Crisis

The phenomenon of legal outsourcing strictly speaking took its first hesitant steps in the 1950s when it all started with the patent process. There was a slow but steady growth over the years and the bulk of legal process outsourcing (LPO) was primarily dominated by countries that had taken an early lead in BPO (Business Process Outsourcing). This included the United States, Canada, India, the Philippines, and Israel. However, LPO really took off during the global financial crisis simply because cost-cutting measures dominated the thinking of major law firms around the world and outsourcing became the god-sent opportunity to achieve this objective.

But before going into this angle, it will be relevant to know the different aspects of LPO. A law firm or company can outsource to two different categories – within the country and offshore. In the case of the former, activities that are outsourced include legal research and writing, documentation, preparation of briefs and writing, patent services and even physical activities such as court appearances. If LPO is given to an offshore agency naturally court appearances are excluded and other work acquires priority. It may be mentioned here that LPO companies have highly skilled and knowledgeable legal personnel on their payroll who are fully conversant with the legal scenario and laws in the countries of the outsourcing agencies.

At a conservative estimate, studies have shown that LPO has really taken off after the global financial meltdown. Why has it been so –

• Coping with added work pressure – In the mayhem created by the global meltdown major financial institutions were brought to their knees and filing for bankruptcy became more of a rule than an exception. This was especially true for those financing real estate deals. Even countries defaulted on interest payments to international agencies and had to take drastic measures to stabilize their tottering economies. In the middle of this crisis, there was an exponential boom in the filing of legal cases that existing law firms were unable to handle on their own. It thus made sense to outsource the back office work such as research, documentation and writing briefs based on the laws of the country while keeping the core activity of court appearance with in-house experts.

• The rise of specialist services – There have always been agencies who have specialized in legal outsourcing work in definite areas but they really kick-started their operations on a massive scale on the back of highly increased workload levels after the global financial crisis. This was because outsourcing law firms preferred multi-sourcing to take advantage of each provider’s expertise in a specific field such as jurisdiction and merits. This, in turn, led to an overall improvement and growth of LPO as a crucial part of the outsourcing industry.

• Cost-cutting measures – The global financial crisis had also hit hard the law and solicitor firms around the world who had a difficult time retaining their existing charges which bankrupt litigants could ill afford. On the other hand, legal outsourcing services, especially to offshore countries, was done at a lower fee structure and this savings benefit was passed on to litigants in the form of competitive pricing of legal services.

It is thus seen that the financial crisis around the world indirectly led to the growth and stabilization of the LPO industry.

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