ABA Ethics Committee Approves Outsourcing – Why the Philippines is Your Best Option

Just in case you had any doubts…it’s official: legal outsourcing is here to stay! In an August 5, 2008 opinion, the ABA Ethics Committee approved the practice of outsourcing. The ABA opinion heralds what those of us in outsourcing have been telling clients for years: “[t]he outsourcing trend is a salutary one for our globalized economy.” ABA Formal Opinion 08-451, at 2. “Outsourcing affords lawyers the ability to reduce their costs and often the cost to the client to the extent that the individuals or entities providing the outsourced services can do so at lower rates than the lawyer’s own staff.” Id. The opinion confirmed what outsourcers have known for years: outsourcing enables firms “to represent a client…effectively and efficiently” Id.

Expanding on the principles laid out in Bar Opinions from New York, Los Angeles and San Diego, the ABA opined that“[t]here is nothing unethical about a lawyer outsourcing legal and non-legal services, provided the outsourcing lawyer renders legal services to the client with the ‘legal skill, knowledge, thoroughness and preparation reasonably necessary for the representation, as required by Rule 1.1.’” Id. When outsourcing to foreign lawyers you need to assess whether their legal education is comparable to that of lawyers in the U.S. Id. at 3. “In some nations, people can call themselves ‘lawyers’ with only a minimal level of training. Also, the professional regulatory system should be evaluated to determine whether members of the nation’s legal profession have been inculcated with core ethical principles similar to those in the United States, and whether the nation’s disciplinary enforcement system is effective in policing its lawyers.” Id. at 3-4.

The last two points are particularly important, and underscore why the Philippines is the best option for legal process outsourcing. I agree with the ABA. When outsourcing U.S. legal work, a complete understanding of the U.S. legal system is imperative. It comes as no surprise that the Filipino attorneys have a complete understanding of the U.S. system. As a result of the Spanish-American War, the Philippines was part of the U.S. (territory) from 1898 through 1946. During that time the United States had an enormous influence on all aspects of Filipino life not only in government, law and business, but culturally as well. In fact, English (U.S. dialect) is one of the two official languages of the Philippines, and is the predominant language used by professionals, including Filipino attorneys who write briefs and motion papers and argue in English.

The Filipino educational system, including university and graduate school, is modeled after the U.S. system. As in the U.S., a prospective student must complete a four year undergraduate degree and then obtain a J.D. The Filipino law school curriculum includes subjects that mirror the typical U.S. law school curriculum:

Administrative Law, Law on Public Officers
Civil Law Review I and II
Civil Procedure
Commercial Law Review
Conflicts of Law
Constitutional Law I and II
Constitutional Law Review
Corporation Law
Criminal Law I and II
Criminal Law Review
Criminal Procedure
Elections Laws
Electives (four)
Evidence
Forensic Medicine
Fundamentals of Thesis Writing
Insurance
Labor Law I and II
Land Titles
Legal Ethics
Legal Research
Legal Technique and Logic
Legal Writing
Negotiable Instruments
Obligations and Contracts
Partnership and Agency
Persons and Family Relations
Philosophy of law
Practice Court I and II
Property
Public International Law
Remedial Law
Sales
Security Transactions
Special Proceedings
Statutory Construction
Succession (Wills)
Taxation I and II
Torts and Damages
Transportation

See, e.g., http://www.admu.edu.ph/index.php?p=1064 . Any of these sound familiar?

In order to practice law in the Philippines, law school graduates must sit for the national bar exam. Considered one of the hardest bar exams in the world, the pass rate fluctuates between 18% and 28%, which is below California’s 2007 pass rate of 36.8%.

Moreover, the Philippines legal system is very similar to that of the U.S. It adopted the U.S. government structure, legal system, and principles of common law. U.S. Supreme Court decisions are often used as guidance by the Supreme Court of the Philippines. The Philippine Rules of Evidence are modeled after the U.S. Federal Rules of Evidence. Its laws—contract, tort, the parol evidence rule, statute of frauds, securities regulation, intellectual property and negotiable instruments—are similar, if not identical, to the U.S. equivalent. The Philippines even has a codified attorney client privilege rule. The Philippine Bar’s ethical rules, which are set out in the Code of Professional Responsibility (S.C., June 21, 1988) (Phil.), and their disciplinary enforcement under the Revised Rules of Court (Phil.) are very similar to U.S. rules and procedures. See, e.g., http://www.supremecourt.gov.ph/rulesofcourt/RULES%20OF%20COURT.htm#rule_139

Clearly, the Philippine legal education and legal system are comparable with those of the U.S. This is not the case with our Indian outsourcing colleagues. Their formal and practical legal education is heavily modeled after that of the U.K. For example, law is a five year undergraduate discipline and the curriculum contains substantial liberal arts elements - such as history, economics, and political science. Most Indian lawyers do not take any type of bar exam, joining a regional bar council based on credentials and references instead. The Indian political and legal systems are patterned on those in the U.K., and legislation is often based on U.K. statutes. India does not employ the same or similar concepts of attorney client privilege as we do in the U.S. According to the Bar Council of India rules, an “advocate” may not be a full-time employee of a person, government, firm, corporation or concern. In-house attorneys are not recognized as advocates—a situation which can have far-reaching implications for issues of privilege. Although most corporate communications are protected under confidentiality agreements, such communications are not privileged because in-house attorneys are not considered “advocates.” Despite India’s and the U.S.’s roots in early British Common law the two are not compatible. If the lack of crossover or the meager credentials needed to become an “advocate” in India are not enough to convince you that India is not your best option, then perhaps the fact that outsourcing groups in India are currently plagued with rampant falsification of credentials will tip the scale for you. See, “Outsourcing groups battle India’s CV Cheats,” Financial Times, August 25, 2008. I could go on, but do I need to?

You don’t need to take my word for it. Earlier this year I attended the IQPC 5^th E-Discovery Conference where a member of DuPont’s in-house legal team sat on a panel discussing companies’ experiences outsourcing in India and the Philippines. He said flat out that, when it came to legal outsourcing, the Philippines was superior to India. I couldn’t have said it better myself!

Legal Outsourcing – A New Frontier or Yesterday’s News?

Lately I have heard a lot of buzz about outsourcing as the new trend in litigation. This is simply not true. Outsourcing has been around for a while…but not everyone has been paying attention. The Webster’s definition of outsourcing reads “to procure (as some goods or services needed by a business or organization) under contract with an outside supplier”. I have news for you - major law firms have been outsourcing since the 1980's. For example, during my early days in practice we outsourced copying and the creations of exhibits to the likes of Ikon and even outsourced manual document review to per diem attorneys (a.k.a., contract attorneys). Today, a firm in Los Angeles may have its review team in Kansas – move over Toto! – or spread across the country working virtually. In fact, a few well established firms have set-up review facilities throughout the middle of this country – where the going hourly rate is well below what you would pay for attorneys in New York or Los Angeles. To put it simply, outsourcing is not new; it has been firmly embedded in the practice of law for decades.

Outsourcing off-shore is really no different than the common practice of using contract or staff attorneys. The only difference is location, location, location. Does location really matter? No, it doesn’t. Bar committees in Los Angeles County, San Diego County and New York City have all ruled that “lawyers may contract with foreign lawyers not admitted to practice in any jurisdiction in the United States, or with non-lawyers outside the United States, to perform legal work for U.S. clients” without aiding the unauthorized practice of law. Steven J. Mintz, Ethics Opinions Allow Foreign Legal Outsourcing, ABA Litig. News Online, July 2007, at: http://www.abanet.org/litigation/litigationnews/2007/july/0707_article_outsourcing.html; see also Professional Ethics of the Florida Bar, Proposed Advisory Opinion 07-2 (Sept. 7, 2007) (also considering the issue and favorably citing the decisions of Los Angeles County and New York City). Under North Carolina Proposed 2007 Formal Ethics Opinion 12 a lawyer may outsource limited legal work to a foreign lawyer or non-lawyer, provided that the U.S. lawyer properly selects and supervises the foreign assistants, ensures the preservation of client confidences, avoids conflicts of interests, discloses the outsourcing, and obtains the client’s advanced informed consent. North Carolina State Bar, Proposed 2007 Formal Ethics Opinion 12 (July 12, 2007). Essentially, it doesn’t matter whether you are outsourcing to a contract attorney sitting in another state (and not licensed in your state) or a foreign national (attorney, or not) sitting in Manila or Bangalore. Both are outsourcing and both are treated the same way by bar associations across the country.

To outsource or not to outsource is not the question. If you are practicing, you are probably outsourcing. Instead, the question is “what is your outsourcing strategy?” I, for one, am curious…