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Is ethical guidance for legal outsourcing imminent?

Is ethical guidance for legal outsourcing imminent?
Mark Ross
  • On September 6, 2010
  • http://www.integreon.com

Over the last five years the legal process outsourcing (LPO) industry has begun to take off with global law firms and corporations, including Simmons & Simmons, Microsoft, Allen & Overy and Rio Tinto announcing major LPO initiatives. The outsourcing of legal work does raise specific issues in relation to the outsourcing lawyer’s obligations to his client. However, up until recently the relevant regulatory bodies in the UK, the Solicitors Regulation Authority (SRA) and the Law Society have been virtually silent bystanders as market acceptance on both sides of the Atlantic of legal outsourcing has gathered momentum.

In the US, six Bar Association Ethics Committees and the American Bar Association (ABA) Standing Committee on Ethics and Professional Responsibility have issued opinions discussing the outsourcing of legal work. All of the opinions have concluded that US lawyers can outsource legal work whilst satisfying their ethical obligations. Arguably, the Opinion that carries the most weight is the one released by the American Bar Association in August 2008. It is noticeably supportive of outsourcing both generally and for lawyers. It comments that: “The outsourcing trend is a salutary one for our globalised economy.”

The Digest to the New York Opinion succinctly captures the major ethical considerations under generally prevailing US rules (each state has its own rules but they are much more similar than different):

“A New York lawyer may ethically outsource legal support services overseas to a non-lawyer, if the New York lawyer (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) when necessary, obtains advance client consent to outsourcing.”

In the UK there has been recognition over the last six months within the corridors of power at the Law Society that detailed consideration of this growing trend is necessary. Most recently The International Department of the Law Society established an ad hoc LPO committee to examine legal outsourcing in detail. It met with key stakeholders (general counsel, law firms, LPO providers and consultants) on a number of occasions to obtain a broad perspective and formulate ethical guidelines. The committee’s remit is to recommend to the Law Society and the Solicitor’s Regulation Authority (SRA) best practice for firms considering LPO.

The SRA very recently issued the first public statement on the ethical implications associated with legal outsourcing , although the guidance is limited to say the least. The statement appears to permit the practice of legal outsourcing contingent on the outsourcing lawyer’s compliance with his or her existing ethical obligations. The SRA released the statement to www.LPOEthics.com and is reproduced here:

Where law firms are outsourcing some of their legal or administrative work to other law firms or non law firms, the SRA’s guidance is that this is allowed on the basis that all relevant rules are complied with (Solicitors’ Code of Conduct 2007) and that the arrangement is made transparent and is agreed with the client.

Particular rules which would apply in legal outsourcing are:

Rule 4 Confidentiality

Rule 2 Client Care and Costs Information

Reserved activities/legal work must not be carried out by non lawyer organisations.

Indemnity insurance provision to cover acts/omissions resulting in issues of negligence or inadequate professional services

In accepting work from a client, the firm must always consider whether the work should be outsourced at all as they should have the necessary resources and competency to undertake the task. In summary a firm must act in the best interests of their client and comply with their core duties.

I expect there will be more to report on the ethics of legal outsourcing over the coming months from both sides of the Atlantic as the relevant bodies continue to study this rapidly growing industry. Whether in the form of amendments to the model rules of professional conduct (in the U.S.), or to the Solicitor’s Code of Conduct (UK), lawyers will welcome more detailed guidance. Watch this space!