Monday, December 7, 2009

Rio Tinto’s legal switch puts pressure on London - Times Online

Rio Tinto’s legal switch puts pressure on London - Times Online

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.

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.

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