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Outsourcing Your Legal Work? Think Again

Why Hiring an Offshore Legal Firm May Cost You More in the Long Run

In an increasingly competitive global marketplace, many US companies are looking overseas for cheaper workforces to cut costs and increase their company's bottom line. Law firms are no different. The latest trend is for US law firms to "outsource" their legal work to counter-act rising lawyer costs in the US.

Traditionally, legal outsourcing is a viable option for US firms for several reasons. With the advent of the internet and faster communications networks, projects can be assembled in different time zones and different countries, thus cutting a project's turn-around time and increasing productivity and revenues. Also, some cultures don't mind working around the clock and through the weekend, which also increases productivity. However, the most compelling reason for legal outsourcing is the significant savings a firm can achieve by hiring non-US lawyers to perform the work they would normally pay American lawyers to perform.

Though these reasons may seem valid and attractive, there is a downside to hiring offshore firms to cut legal costs for your company. In fact, outsourcing your legal work can be more costly in the long run than it would be to hire fully licensed and accredited US attorneys.

It's Usually More Work For You to Find a Reputable Offshore Legal Firm

Currently, no regulations or accreditation programs exist to ensure that a foreign law firm is reputable, reliable and ethical. The responsibility is on you to fully research a company to determine if that company uses lawyers that are trained in and knowledgeable on US law. Also, legal training differs from country to country and the American Bar Association does not always consider another country's legal education to be comparable to US training.

There are other concerns that your company should consider before hiring a foreign law firm.

Does this company have secure financial backing? And from what sources?
Can I be assured that there is no conflict of interest for this company in regards to their other clients?
Where do their lawyers come from and what kind of licensing do they have?
Do the foreign firm's ethics and rules regarding confidentiality and security comply with those of US law firms?

Taking the time to ensure that the foreign company that you are hiring is safe may require more work from your firm than simply using a US attorney in the first place.

The ABA Feels that US Law Firms Should Pass the Savings onto their Clients

The American Bar Association has expressed a formal opinion on the matter of the savings that hiring a non-US law firm can bring. The ABA feels that it is improper to levy a surcharge on fees that the non-US firm is charging the hiring US firm, and that the US firm would then charge the client. So, in essence, your firm has to charge your client exactly what the outsourced legal fees are and nothing more. So, the savings that you have achieved for your firm are effectively zeroed out as you have passed the savings onto your client.

However, as there is no law stating that your firm must disclose that you are using an offshore firm for legal services, this issue falls under the ethical code by which your firm operates and how you choose to deal with billing your clients. But if the client finds out through another method that you have sub-contracted out their casework, that may not reflect kindly on your firm's reputation.

If Something Goes Wrong, Your Firm is Ultimately Responsible

If the foreign legal service you have contracted does indeed fail you, and you have not disclosed your use of said service, your credibility in the eyes of your client is severely tarnished and that can be much more valuable to your firm's financial well-being than any savings you may have gained from legal outsourcing.

Ultimately, however, your firm is responsible for all legal work for a client, whether you have outsourced that work or not. Using a foreign law firm can be a gamble. The country where that firm is located may have a plethora of issues to consider before contracting services.

Is the country politically stable?
Does it have the proper infrastructure to conduct business, such as a reliable electricity grid or Internet service?
Does the culture respect US law and businesses (which is becoming more and more of an issue)?

To conclude, there are many questions and concerns that your firm must consider before contracting legal services from an overseas source. It may just seem as though your firm is saving money and time, when in fact, you are losing both.