Alternative patterns rival hourly billing as legal fees escalate. Vandana Chatlani reports
The rupee’s tumultuous journey over the past few months may have upset deal-making in corporate India but, luckily for the country’s lawyers, currency woes have had little impact on the pricing of legal services. Indeed, some have profited from the depreciation. “As most of our clients are based out of India, the fall of the rupee has obviously increased our revenue,” says Diljeet Titus, the managing partner at Titus & Co in New Delhi.
The rupee crunch has “helped us maintain or even cut down our rates in dollar terms a little bit,” says Gautam Khurana, the managing partner at India Law Offices in New Delhi.
Wise clients purchased rupees overseas and remitted their legal dues in the currency, “thereby pocketing all the exchange rate profits,” says an amused Rajan Gupta, a partner at SRGR Law Offices.
Others have been less fortunate. Noida-based Fidus Law Chambers requires new Indian clients to pay a foreign associate’s estimated dues in advance for projects outside India and then remits those fees once it receives an invoice from overseas. “Even a few days’ holding time impacted us severely this year because of the daily currency fluctuations,” says managing partner Shwetasree Majumder.
For the most part, however, Indian lawyers have escaped the sting of the rupee’s freefall. Clients, by contrast, are feeling the heat as their legal fees reach record highs.
Up, up and away
India Business Law Journal’s seventh annual billing rates survey collates data from 58 law firms – the highest number of participants since the survey began in 2007. We have also collected our most geographically diverse set of results, with firms from Mumbai, Delhi, Chennai, Cochin, Bangalore, Kolkata and Ahmedabad choosing to publish their rates.
The average hourly rate at Indian law firms has risen this year across all categories. As in the past, 含羞草社区 larger law firms are conspicuous by their absence and thus the survey paints a picture of the rates prevalent at small and mid-sized firms in the country.
This year’s rates in every category are the highest we have seen. The average junior associate rate is US$115 per hour, a 7.4% increase from last year and a 27.8% increase since our first survey in 2007. Senior associate fees have risen to an average of US$168 per hour, up 4.3% from last year. Partner level fees have climbed to an average hourly rate of US$210 for a junior partner, US$265 for a senior partner and US$308 for a managing partner. This is equal to a 5%, 6.4% and 1.6% hike in rates respectively compared with last year.
The results show substantial variations across the broad spectrum of firms. The hourly fee for a junior associate, for example, ranges from US$25 to US$300 while for senior associates fees range from US$40 to US$450 per hour.
Of this year’s respondents, 38 submitted their rates last year. Of these, 18 firms kept the same hourly billing rates, 14 firms increased their rates, and six firms reduced them, suggesting an upward trajectory for the pricing of legal services in the coming year.
Shipping specialist Brus Chambers in Mumbai said it planned to push legal fees up by 7% after the Indian festival of Diwali on 3 November and would maintain the new rates rate until 31 March 2015. “Considering the market condition and demand for quality work, we estimate that there will be an increase in legal fees of approximately 15-23%,” says Shrikant Hathi, a partner at the firm.
Manoj Kumar, the managing partner at Hammurabi & Solomon, believes clients should be prepared to fork out more for top level lawyers who are hired to handle progressively more complicated matters. “I expect the role of senior partners and managing partners to grow in facilitating complex and very specific transactions [and so their] fees will increase,” he says.
Facing the inevitable
Over the years, law firms have faced mounting pressure to develop more predictable structures such as flat fees or a lump-sum arrangement to replace the hourly billing model. This is a global trend.
A survey conducted by Legal Week earlier this year showed that a high percentage of law firm partners believe that hourly fees offer a more accurate way of billing than other models.
Richard Lewis, a partner at Eversheds, told Legal Week that despite the preference to charge on the hour, the move towards fixed fees is “inevitable”.
He added that while hourly billing is still often used as a starting point to assess costs for a matter, it is used much less frequently than in the past. “The ability to quote a fixed fee depends on the amount of information you’ve got – the more you can get from the client at the beginning, the easier it will be,” he said. “People have become more scientific at the outset. They are having longer conversations and working up much more methodically.” Partners and clients can ensure high quality services using alternative billing practices with the help of “good communication and implementing project management-style strategies,” Lewis said.
How to get value for money
In-house counsel share tips on keeping legal costs under control
含羞草社区 in-house legal professionals are increasingly reining in outside legal work to avoid clocking up costs. Those representing smaller companies may have a tougher time doing so due to a lack of staff. Legal teams at larger companies have more flexibility but keeping the work in-house requires investment in building skills along with legal and business acumen.
To avoid jousting over legal fees, in-house counsel have come up with various practical ways to keep legal costs under control. At Hindustan Unilever (HUL), for example, if a consumer or a business customer has a grievance with the company and threatens or files a legal complaint, HUL seeks to resolve the matter through an ombudsman scheme instead of contesting the matter in court.
“The ombudsmen are reputed retired high court judges with experience in mediation and arbitration,” explains Dev Bajpai, the executive director, legal, and company secretary at HUL. The decision of the ombudsmen is binding on the company but optional for the counterparty. “This position has helped in bringing about greater credibility to the process and … has helped us resolve a large number of consumer and customer disputes,” he says. It is also “a cost-efficient and faster manner of resolution of disputes and saves us on legal costs”.
Continually improving internal training, systems and processes is another way to cut costs. Bajpai says HUL has developed internal capabilities through training, which helps supplement the efforts of external legal service providers.
According to NB Shankara Subramaniam, senior manager of legal and compliance at Gimpex in Chennai, in-house legal departments should have a library of business-related law books and subscribe to law journals, a law directory and online case reports. “Without providing such basic needs for an in-house legal department, big companies cannot expect their legal teams to function effectively”.
Murali Neelakantan, global general counsel at Cipla, says better partnerships between law firms and company lawyers will improve efficiency. “We think of external firms as cost – there I see a valuable partner,” he says. “On a transaction, the external firm will do the work for us, but how do our lawyers get better at identifying risk and reaching out for advice? For someone in-house to ask external counsel intelligent questions, they will require some amount of tooling and training. [Equally] we need to work closely so that [external firms] learn our business through secondments so they can go back and be ambassadors for the business.”
Himavat Chaudhuri, chief legal and regulatory affairs officer at Tata Sky, says mapping out the details of a project and identifying what parts will be done in-house and what will be outsourced is most important. “In whatever is being outsourced I have found that arriving at fixed fees before the transaction has been the best way to control external counsel costs,” he says.
Saurabh Mittal, CEO at S Chand in New Delhi, agrees. “Keep it on a fixed assignment basis with a very clear defined scope and don’t let the lawyers stretch the transaction,” he says.
Clients should also make clear that they will not pay for research “which is more for a firm’s learning rather than directly used for client consumption,” suggests Jasmeet Wadehra, general counsel for International Paper in India. “Clients may also break up projects into specific assignments and should use legal process outsourcing and smaller firms for low end assignments.”
Bajpai notes, however, that while controlling costs is necessary, value addition is also crucial. “We want to see a lot of ownership from [law firms],” he says. “We are discreet in selecting our legal service partners and choose those who we think can add maximum value to the issue on hand.”
Echoing Neelankantan’s sentiments, Bajpai adds that this value can only materialize with input from both sides of the table: “We recognize that for us to expect them to provide what we want from them requires us to play a role as well and our approach is to strengthen their hands and get the best out of them.”
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How do you bill?
Law firms in India generally bill clients using a combination of hourly and alternative patterns (see table on page 51). Many strive to formulate rates based on daily, weekly or monthly retainers, milestones achieved and an estimated number of hours to be spent on a matter.
Chennai-based IP boutique Selvam & Selvam uses flat fee billing for filing and prosecution services and hourly billing for matters involving strategic advice. “Billing cannot be strictly divided into flat fee or hourly billing,” says Raja Selvam, an attorney at the firm. “On many occasions, taking into consideration the delays in the Indian judicial system, we are unable to predict the number of hours a matter will take. So for clients with a fixed budget, the firm opts for capped billing to create a win-win situation for both sides.”
Another Chennai IP boutique, LR Swami Co, has never charged hourly rates.
“Preparing court briefs, filing them in court, getting them listed for early hearing, etc., are areas which work on a fixed fee model,” says Ajit Sharma, the managing partner at JM Sharma & Co, a litigation specialist which has recently launched its corporate practice. “Appearance in court is typically charged on a per hearing basis as is the norm in most appellate forums. Similarly in arbitration, senior counsel and other advocates raise invoices for each appearance, while the preparation and filing of briefs is charged to our clients on a fixed cost basis.”
Nasikwala Law Office, a specialist firm which advises on dispute resolution, direct tax, real estate and other areas, recently moved away from hourly billing and believes it can run a tight ship and improve lawyer productivity through fixed fee and per day billing. “Hourly billing has an in-built aspect of inefficiency since out of two lawyers with the same output, the one spending more time – the inefficient one – would be able to bill more,” says Freddy Daruwala, a partner at the Mumbai-based firm.
Daruwala adds that law firms persevering with hourly billing will do themselves a disservice given the stiff competition not only from other law firms but from chartered accountants, company secretaries and specialized consultancies. “We feel hourly billing is not suitable if the firm’s cutting edge and competitiveness is to be maintained and enhanced.”
Nasikwala Law Office offers clients the option of daily billing rates of US$4,500 to US$5,500, exclusive of expenses such as travel costs, mostly for work done outside Mumbai. This option accounts for 10% of the firm’s total billing.
Zulfiquar Memon, the managing partner of Mumbai firm MZM Legal, says he prefers alternative billing and asks clients for a one-time retainer fee for any particular mandate. The firm also gives clients an estimate of external costs that may be incurred when engaging a senior counsel, or when extra payment is required for travel. “We believe this system to be far more transparent than others as the client knows what the complete charge for the mandate is and is kept in the loop for all additional charges that may arise,” says Memon. He adds that his counterparts at law firms in the US have welcomed this method of billing.
Many of SRGR Law Offices’ clients request a hybrid billing model combining a retainership fee (which includes a fixed minimum amount per month or quarter covering limited hours of work during that period) and a blended hourly rate for any additional hours spent. “Such arrangements are generally requested when we advise clients on day-to-day legal and compliance affairs and not for one-off transactions,” says Gupta.
Hourly billing rates of Indian law firms
Hourly billing rates of Indian law firms
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The above information was supplied by participating law firms with their consent for it to be published in India Business Law Journal. Law firms that declined to have their rates published are not included. The figures quoted are the average hourly billing rates for each category of lawyer. Actual rates may vary depending on the nature and complexity of work. Law firms may sometimes bill on a project basis rather than an hourly rate. These figures are indicative of hourly rate billing only. The average rates for each law firm have been calculated as the mean average of the billing rates provided for each category of lawyer. India Business Law Journal has not verified the accuracy of the billing rates supplied by participating firms.
