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William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘BPO’

Risk Management of Important Issues of LPO

Posted by William Byrnes on July 23, 2009

Quote for this blogticle: “First weigh the considerations, then take the risks.” Helmuth von Moltke

In my last blogticle I listed the types of LPO services undertaken with a link to over 100 providers of LPO services.  Hereunder I address several important considerations concerning avoiding the sinkholes in the road to outsourcing. 

Attorney Ethical Issues

In 2006 the New York City Bar Association published a formal opinion regarding the ethical considerations of overseas legal outsourcing of services.  The New York City Bar considered whether a New York lawyer may “ethically outsource legal support services overseas when the person providing those services is (a) a foreign lawyer not admitted to practice in New York or in any other U.S. jurisdiction or (b) a layperson?”[1]  That bar association concluded that a lawyer may do so, upon meeting the following conditions (quoted from its opinion)[2]:

(a) rigorously supervises the non-lawyer, so as to avoid aiding the non-lawyer in the unauthorized practice of law and to ensure that the non-lawyer’s work contributes to the lawyer’s competent representation of the client; (b) preserves the client’s confidences and secrets when outsourcing; (c) … avoids conflicts of interest when outsourcing; (d) bills for outsourcing appropriately; and (e) … obtains the client’s informed advance consent to outsourcing.

Early last year, the Florida Bar Association addressed the same issue and it found no distinction between hiring contract paralegals in the US and contract foreign (specifically Indian) attorneys outside the US, concluding that contractual legal services do not aid the unlicensed practice of law if the Florida law firm provides adequate supervision.[3]


The legal and operational issues that perhaps attracts the most attention, and deservedly so, because of a few highly publicized cases, are privacy, confidentiality and the preservation of privilege.  These issues require a robust discussion of operational data security, institutional / LPO governance, and employee security as well as quality control for processes and compliance verification.

By example of addressing security concerns, outsourcing contracts mitigate the disclosure of documents by mandating the LPO employees’ computers have Internet access limited.[4]  Note that in India anyone with access to customer records is free to sell the data, or use it for direct marketing.  However, pending legislation (the Personal Data Protection Bill, 2006) will if passed protect data provided to the Government and private entities from being sold or used for direct marketing.

Professional Indemnity

By example of addressing professional indemnity and security liability concerns for which the US contracting source firm will inevitably be liable to its clients, LPO contracts may mandate professional liability coverage written by US based insurers, with a certificate of coverage provided annually.[5]  Naturally, heightened insurance and compliance/verification will increases the LPO firm’s operational costs, pressuring its margin and pricing.

Functional Equivalency & Education / Training

While India may have four times the amount of law graduates, are these graduates the functional equivalent of a US associate?  One of my colleagues poses the question that if the Indian graduate attorney was the functional equivalent, then why doesn’t his and other firms, like the technology industry, import Indian trained lawyers?  While it is not uncommon for United Kingdom trained solicitors to be employed by US firms, the same cannot be said of Indian graduates. 

Is the equivalency up to par with US paralegal training?  How can a US firm verify professionalism and level of expertise?  More importantly for the LPO industry, if components are missing in India’s legal education that impact functional equivalency, what are these components and can these be effectively transferred? 

By example, many India law graduates do attend one-year Master of Laws in the United States.  Is the LL.M. necessary to rectify any (perceived) differences?  Will staff’s passage of the penultimate multistate bar examination, by example in Washington DC, New York or California, provide Indian LPO firms competitive advantage to obtaining work, or disadvantage because the (now US) attorney may command a higher wage?

Some LPO providers state that as long as a Indian based U.S.-trained lawyer oversees the Indian staff, the work product will be of equivalent quality.  Because of the recent recession in USA legal services, the US has an ample supply of attorneys willing to relocate to India to oversee such operations.  May a US firm consider this supervision sufficient for certain contracted skill sets, such as document review?

As a counterpoint to this equivalency issue, some LPO marketers state that Indian law graduates are better, rather than equivalent, to their US associate counterparts, by example, because of the competitive motivation of the number of Indian graduates and fewer high paying attorney positions.

In my next blogticle, I will examine some tax issues associated with LPO with India.

Professor William H Byrnes, IV (www.llmprogram.org)

[1] The Association of the Bar of the City of New York Committee on Professional and Judicial Ethics, Formal Opinion 2006-3, August 2006.

[2] The Association of the Bar of the City of New York Committee on Professional and Judicial Ethics, Formal Opinion 2006-3, August 2006.

[3] Professional Ethics Of The Florida Bar (Opinion 07-2); January 18, 2008

[4] Legal Outsourcing to India Is Growing, but Still Confronts Fundamental Issues, Anthony Lin, New York Law Journal, January 23, 2008.

[5] Legal Outsourcing to India Is Growing, but Still Confronts Fundamental Issues, Anthony Lin, New York Law Journal, January 23, 2008.

Posted in Legal Process Outsourcing | Tagged: , , | 2 Comments »

Legal Process/Service Outsourcing Focus on India

Posted by William Byrnes on July 20, 2009

This week I will break from wealth management and turn to a series of blogticles on legal process / service outsourcing to India.  The blogticles will present an overview of issues relating to the discussion held in our Masters course (see www.llmprogram.org).  Whereas our course also addresses our groundbreaking technology and pedagogical developments for educating the Indian legal process outsourcing workforce, within this blog we will focus on basic outsourcing issues such as types of outsourcing, compliance, and two tax issues being (1) India source based taxation / permanent establishment considerations, and (2) transfer pricing considerations. 

I will provide citations to relevant sources that you may jump start your research for legal process outsourcing for India.  Please contact me if you require more detailed suggested resources to continue you research.

Economic Comparison: BPO and LPO Growth

Since 1994 I have observed, and participated in the rise of technnology, business, service, and finally legal process outsourcing.   Originally I leveraged South African accountants for service fullfillment for projects overseas, transferring information via the Internet.   Many South African accountants immigrated overseas, and India’s bandwidth grew stable and robust enough that its labor force could be effectively leveraged.  Fees in India generated from USA sourced legal services are estimated to increase to $640 million within the next two years, employing 32,000 legal staff (from $146 million employing 7,500 in 2006, and only $80 million in 2005).[1]  In the past three years, legal outsourcing revenue has grown approximately 60% annually.[2]  From just 2006 to 2007, growth of US companies outsourcing legal services to India increased from 37% to 51%.[3]  By 2015 Forrester Research projects $4 billion in legal services outsourced to India. 

By contrasting example, last year India’s IT outsourcing revenues reached $64 billion, growing 33%, and breached the two million employment level.[4]  As Indian has accomplished phenomenal growth since 1994 with its BPO information technology sector, so it is likely to in the BPO legal services sector though as a much faster pace.

My Background Relevant To Legal Process Outsourcing

In 1994-95, I was a senior consultant for a significant non-resident Indian acquisition of an India manufacturer, requiring leveraging of the Mauritius double tax agreement and working with Mauritius and Indian tax and exchange control authorities.  In 1996, I followed up that experience by outsourcing to India a substantial text capture project in agreement with Kluwer Law International for the creation of HTML hyperlinked online materials for our online law program.  Since 1995, I have spoken numerous times in India at conferences and trainings held by organizations such as the Bombay Management Association and for Bangalore’s charted accountants.  Last year the All India Federation of Tax Practitioner invited me to address its membership on legal education for Indian tax process outsourcing.  Recently I co-authored the Indian chapter for Oxford University Press’ treatise Global E-Business Law & Taxation (distributed electronically through www.ibls.com).

Prior to my tenured academic career I was a senior manager then associate director, international tax, Coopers and Lybrand (South Africa), which subsequently amalgamated into Price Waterhouse, whereby I sourced multinational structuring and investment projects, completing the work cost effectively for the clients via competently educated South African advisors. 

In the next blogticle, we turn to examine the issues of Litigation Cosst, Compliance Costs and Document Review & Customization Costs.

Prof. William H. Byrnes, IV (www.llmprogram.org)

[1] Offshoring Legal Services to India: an Update (Market Research Report), Valuenotes Database Pvt. Ltd., July 2007 and Legal Outsourcing to India is Growing, but Still Confronts Fundamental Challenges, Anthony Lin, New York Law Journal, January 2008. – see Mittal – NASSCOM

[2] U.S. Legal Work Booms in India, Rama Lakshmi, Washington Post Foreign Service, May 11, 2008.

[3] India Lures Corporate Outsourcing, Jonathan Hill, Law Technology News; October 14, 2008.

[4] Indian IT-BPO Industry Factsheet, NASSCOM, August 2008 (available at http://www.nasscom.in/Nasscom/templates/NormalPage.aspx?id=53615).

Posted in Legal Process Outsourcing | Tagged: , , | 3 Comments »

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