From The Times June 19, 2009
Rio Tinto’s legal switch puts pressure on London
Rio Tinto has hired a team of lawyers in India to try to reduce its annual £60 million legal bill by 20 per cent. The move will send a shudder through Britain’s commercial legal market, which earns billions of pounds a year in fees from big banks and multinationals. The Anglo-Australian miner, with CPA Global, a legal outsourcing group, has recruited 12 lawyers in Delhi to work for it on tasks such as reviewing documents and drafting contracts.
The unit is expected to double in size within a year and will save the company 20 per cent of its annual legal budget, believed to be about $100 million (£61 million). Rio has 100 lawyers worldwide and uses law firms such as Linklaters and Baker & McKenzie for external advice.
It began a shake-up of its legal department as part of cost-cutting that that will lead to the loss of 15,000 jobs. Leah Cooper, Rio’s managing attorney, said: “We took a look at our internal costs and the amount we were spending on outside counsel and saw an opportunity to make significant changes.”
Rio Tinto estimates that its Indian team, which has operated since May 1, will be seven times cheaper than comparable lawyers in London. It said that it had already saved more than $1 million. Other big companies, which can spend from £10 million to £100 million a year on legal costs, are thought to be considering similar arrangements. Senior company lawyers are under increasing pressure to slash spending on outside lawyers. This has led to big law firms being squeezed on hourly rates for even complex work, such as tax.
Related Links
* Rio Tinto deal heralds huge changes
* Rio unveils BHP pact and $15bn rights issue
* Rio Tinto shuns China for BHP joint venture
Multimedia
* Graphic: weighing up the costs
Rio’s move is a particular blow. While some companies have outsourced standard legal work to India, Rio Tinto is believed to be the first big company to recruit a team of fully qualified lawyers to perform substantive legal work that otherwise would have been done by lawyers in London.
CPA Global is a private Jersey company with a $1 billion turnover. It specialises in trademarks and patents and acts for clients such as Microsoft. It has spent more than $50 million on legal facilities in Delhi and expects to recruit 500 lawyers there in nine months. In two years, it aims for 3,000 lawyers in Manila, New Zealand and South Africa.
* Have your say
When the Brits get over their collective funk they will realize that quality is available globally with dedicated sincere and hard working people.
Making blanket statements denigrating countries or people only demonstrates the vacuous and bone headed thinking You should do better than that.
r mayo, singapore,
I think this sort of exploitative outsourcing to developing nations will be relatively short lived. Call centres came back to the UK because no matter what management structures were put in place, quality could not be maintained: That’s for bloody call centres! There are good legal practices in India, but they have the same issues as all private practices – enormous P.I. cover for enormous deals, large overhead and staffing costs and the need to make a profit. Costs will more or less equalise over time but the quality of service may not.
Mark Husband, London,
Not a new concept - been happening in engineering for some time and the same lessons will apply: quality control and technical expertise are always issues so only routine or bulk work is suited to this model. Expect costs to rise as more companies follow and demand outstrips available resources.
Jon S, London,
Rio Tinto’s legal switch puts pressure on London
Rio Tinto has hired a team of lawyers in India to try to reduce its annual £60 million legal bill by 20 per cent. The move will send a shudder through Britain’s commercial legal market, which earns billions of pounds a year in fees from big banks and multinationals. The Anglo-Australian miner, with CPA Global, a legal outsourcing group, has recruited 12 lawyers in Delhi to work for it on tasks such as reviewing documents and drafting contracts.
The unit is expected to double in size within a year and will save the company 20 per cent of its annual legal budget, believed to be about $100 million (£61 million). Rio has 100 lawyers worldwide and uses law firms such as Linklaters and Baker & McKenzie for external advice.
It began a shake-up of its legal department as part of cost-cutting that that will lead to the loss of 15,000 jobs. Leah Cooper, Rio’s managing attorney, said: “We took a look at our internal costs and the amount we were spending on outside counsel and saw an opportunity to make significant changes.”
Rio Tinto estimates that its Indian team, which has operated since May 1, will be seven times cheaper than comparable lawyers in London. It said that it had already saved more than $1 million. Other big companies, which can spend from £10 million to £100 million a year on legal costs, are thought to be considering similar arrangements. Senior company lawyers are under increasing pressure to slash spending on outside lawyers. This has led to big law firms being squeezed on hourly rates for even complex work, such as tax.
Related Links
* Rio Tinto deal heralds huge changes
* Rio unveils BHP pact and $15bn rights issue
* Rio Tinto shuns China for BHP joint venture
Multimedia
* Graphic: weighing up the costs
Rio’s move is a particular blow. While some companies have outsourced standard legal work to India, Rio Tinto is believed to be the first big company to recruit a team of fully qualified lawyers to perform substantive legal work that otherwise would have been done by lawyers in London.
CPA Global is a private Jersey company with a $1 billion turnover. It specialises in trademarks and patents and acts for clients such as Microsoft. It has spent more than $50 million on legal facilities in Delhi and expects to recruit 500 lawyers there in nine months. In two years, it aims for 3,000 lawyers in Manila, New Zealand and South Africa.
* Have your say
When the Brits get over their collective funk they will realize that quality is available globally with dedicated sincere and hard working people.
Making blanket statements denigrating countries or people only demonstrates the vacuous and bone headed thinking You should do better than that.
r mayo, singapore,
I think this sort of exploitative outsourcing to developing nations will be relatively short lived. Call centres came back to the UK because no matter what management structures were put in place, quality could not be maintained: That’s for bloody call centres! There are good legal practices in India, but they have the same issues as all private practices – enormous P.I. cover for enormous deals, large overhead and staffing costs and the need to make a profit. Costs will more or less equalise over time but the quality of service may not.
Mark Husband, London,
Not a new concept - been happening in engineering for some time and the same lessons will apply: quality control and technical expertise are always issues so only routine or bulk work is suited to this model. Expect costs to rise as more companies follow and demand outstrips available resources.
Jon S, London,
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