Rio Tinto’s cost cutting campaign brings windfall to Indian lawyers
19 Jun 2009
With debt-ridden mining giant Rio Tinto outsourcing its legal work to India as part of aggressive cost cutting measures to reduce debt, a New Delhi-based law firm has reaped a windfall.
The world's third largest diversified mining company had announced in December that it would slash $5 billion in expenses and increase asset sales as part of an aggressive cost-cutting campaign to reduce its massive $42 billion debt. (See: Major shake up at Rio Tinto to reduce debt)
The Anglo-Australian miner said yesterday that it has entered into a legal services outsourcing agreement with CPA Global that is projected to save Rio Tinto up to 20 per cent annually in legal costs.
CPA Global, a legal outsourced services provider, has hired 12 lawyers in Delhi, whose job will be to review contracts, drafting, legal research and document review and the scope of work may expand to cover other routine legal services work traditionally handled in-house by Rio Tinto or shared amongst the company's panel of law firms.
Rio's ultimate goal is to have CPA assemble a team of lawyers in India to as an extension to the company's in-house legal department, freeing up Rio Tinto lawyers to handle more complex legal matters. Moreover, it hopes to save on the hefty fees charged by external counsels abroad.
Apart from its in-house lawyers, Rio has about 100 lawyers globally and avails of the services of well-known law firms for legal advice including the world's largest law firm by revenue, the Chicago-based Baker & McKenzie.
In May 2009, the miner started using 12 Indian lawyers and is said to be increasing the number, that would help it bring down its approximately $100 million annual legal budget by 20 per cent.
The cost-cutting exercise in its legal department will make 15,000 jobs redundant at the company worldwide. Rio's managing attorney Leah Cooper 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.''
According to the company, since Indian lawyers are seven times cheaper than their counterparts in London, shifting part of the legal work to India from 1 May 2009 has already bought savings of more than $1 million.
Although some international companies had outsourced legal work to India, Rio Tinto's move will be widely watched by other global giants keen on cutting legal costs by outsourcing work to English-fluent Asian and other countries.
Cooper said, "By shifting work to CPA Global, our internal team will be freed up to get involved in some of the more complex and challenging legal matters, which in the past might have been sent to outside counsel at significant cost.
"As more of our standard legal work is filtered through to CPA Global, we will have more time to lift our heads up from the day-to-day reactive delivery of legal services and focus on being more proactive. We will have more time to spend with the business, develop stronger relationships and understand what we can do to prevent legal issues developing in the first place with a stronger focus on prevention rather than cure," he added.
Bhaskar Bagchi, CPA Global's country head – India, said, "CPA Global's India team will serve as an extension of Rio Tinto's internal legal department. They are handpicked, well trained legal professionals who will work on a whole range of Rio Tinto legal matters from across the globe."
Jersey, Channel Islands-based CPA Global is one of the world's leading providers of legal process outsourcing (LPO) services, employing more than 1,200 people in 16 offices in eight countries has clients in over 100 countries.
In 2007, CPA Global opened a new, state-of-the-art 85,000 sq ft office in Noida, from where CPA CEO Peter Sewell had announced that the firm would invest $50 million in India over the next five years.
The firm says it is recruiting about 500 lawyers in the next nine months in India to cope wioth the expected work flow.
CPA Global also has an alliance with Los Angeles-based Integreon, a legal support services company with offices in Delhi and Mumbai, to establish a dedicated offshore legal process outsourcing centre in Mumbai, India.
