India Business Law Journal’s 2015 billing rates survey finds a moderate rise in average billing rates as 75 law firms disclose their hourly fees to widespread acclaim from in-house counsel. Vandana Chatlani reports
How much are you willing to pay for a lawyer’s time? In the public sector, if the price is right, very often nothing else matters. Lower is better. Unsurprisingly, this presents several dangers: reduced partner time, little incentive to commit to a matter, inadequate drafting and long delays, as examined in detail in last month’s issue of India Business Law Journal (see A triumph of price over quality?).
含羞草社区 private sector players, however, have matured in some ways from their days of simply focusing on legal costs. In no way does this suggest that price negotiation has become a dying art – this is India after all. Rather, many in-house counsel have shown a willingness to part with reasonable sums of money in exchange for smart, dedicated and efficient legal partners.
As this mentality becomes more prevalent, law firms are being forced to step up their game by creating innovative pricing models for coherent advice provided in a timely manner. Companies are less brand conscious, which means greater competition from lesser known firms except in cases where the stakes may be exceptionally high, or in court where influential veterans may play an important role.
It is against this backdrop that India Business Law Journal presents its ninth annual billing rates survey. This is our biggest survey to date. A total of 75 law firms disclosed their billing rates, marking a 25% jump in the number of participants from last year. An additional three firms reported that they have done away with such rates.
Transparency at a record high
We highlight some of our key findings through infographics, on this page and the following pages. Having seen these findings, Marcello Antonucci, a claims manager for technology, media and business services claims at specialist insurer Beazley in New York, says: “This is great! The visualization makes it easy and clear to understand. From my perspective, the comparison of Indian market rates in US dollars is useful and very helpful.”
It’s good to see more and more lawyers coming out in the open and disclosing their rates, says Himavat Chaudhuri, chief legal and regulatory affairs officer at Tata Sky. “Clients always like going to law firms which have transparent billing rates.”
“These are indeed interesting findings and realistically capture the market scenario,” says Sanjit Kaur Batra, the legal head for South Asia at DuPont. “It also provides good insights about the prevailing average billing rates.”
As with the previous eight years, 含羞草社区 largest law firms refused to share their billing information, citing issues of confidentiality and privacy. As a result, our findings are more representative of the trends prevalent at smaller and mid-sized Indian law firms. However, billing rates from firms such as Lakshmikumaran & Sridharan – which has 300 lawyers – may provide an indicator of the pricing one can expect from 含羞草社区 larger law firms.
Debolina Partap, the vice president of legal and general counsel at Wockhardt, simply says: “I think big firms should make their rates public.”
Vivek Mittal, head of legal at Lupin Pharmaceuticals, also strongly believes large law firms should disclose their rates.”Transparency is something we can expect from those who advocate openness in all other forums,” he says. “Lawyers always advocate fair play and transparency, so they should lead by example.”
India Business Law Journal’s ninth billing rates survey provides a wide snapshot of the price of legal services across India. With firms of between three and 300 lawyers from Ahmedabad, Bangalore, Chandigarh, Chennai, Delhi, Hyderabad, Kolkata and Mumbai, this is our broadest sample of firms to date.
This year saw a decrease in billing rates at the associate level, with the average hourly rate for a junior associate falling by 4.2% from US$120 to US$115 and the senior associate rate dropping by 4.3% from US$164 to US$157 per hour. Despite the falls, these fees represent a 28% and 21% increase respectively, in comparison with the rates in our inaugural survey.
By contrast, rates rose across all categories at the partner level. The average junior partner rate climbed 2.9% from last year from US$209 to US$215 per hour. Senior partner rates saw a modest rise of 1.8% from US$272 to US$277 per hour. The most dramatic increase was at the managing partner level where the average hourly fee shot up 8.4% from US$298 to US$323.
As with last year, the results reveal vast differences in the price of legal services. The hourly rate for a junior associate, for example, ranges from US$20 to US$250, while managing partner rates vary from US$65 to US$850 per hour.
Badrinath Durvasula, the vice president and head of legal at Larsen & Toubro, says the rise of fees at the partner level is discouraging and requires review, partly because developing a relationship with a partner takes time. “Firms, in my view, should maintain their billing rates for a cycle of three years as a company’s association with a firm requires that period of maturation.” Since trust and reliability form a large part of the bonding exercise between firms and clients, Durvasula suggests that the legal costs quoted should incorporate a success fee “to encourage risk-sharing”.
Akhil Prasad, India country counsel for Boeing, says India Business Law Journal’s survey “is an excellent effort”. He notes that the cost of legal advice in India is “much lower than international rates”, but says if the costs were to rise drastically, the pressure would be on Indian clients to find alternative strategies to keep their budgets in check. “External counsel need to invest in qualitative manpower and up-to-date infrastructure for which there is indeed a pressure on the hourly rate.”
Quality is king
With greater exposure to foreign investment partners, complex cross-border transactions and first-hand engagements with numerous law firms, clients are becoming more discerning about the “quality quotient” of legal advice. “We view this construct of value as a composite of responsiveness, communication clarity, ability to identify risks, expertise, track record, etc., and not just a euphemism for billing rates per se,” says Anand Krishna, director of strategy at Fox Mandal & Associates in Bangalore.
Mittal drives this point home, observing that service delivery does not always correlate with costs. “Indian law firms have the desire to charge the same rates as established international law firms without always matching the quality of service,” he says. “We want to see law firms being more honest about their ability to contribute and offering us a fee proposal that is commensurate with this contribution.”
Priyank Srivastava, a legal adviser at ONGC Videsh, says he has seen various law firms adjust their hourly rates to win work. He argues that this is a flawed and unsustainable approach because quality and timely legal support are what motivate large companies to engage particular lawyers.
“Value-based billing is ideal,” says Srivastava. “Corporates these days are more concerned with the timely delivery of quality services. The number of hours actually invested by law firms becomes less relevant.”
The death of hourly billing?
Veta Richardson, the president and CEO of the Association of Corporate Counsel in the US, says the use of alternative pricing structures is becoming more common there, especially as outside counsel are feeling the pressure to be more service-oriented and deliver more value for their fees. “Growing attention to these alternative billing practices and other value principles demonstrates the increased business savvy of in-house counsel,” she says. “Similar to their counterparts worldwide, Indian firms are still adjusting to the use of non-hourly billing practices.”
Sasha Mirchandani, the managing director and founder of private equity firm Kae Capital, is encouraged by the number of firms that are now open to providing alternative billing models compared to a few years ago. “This shows good flexibility … and a commitment by law firms to meet the needs of companies,” he says.
Chaudhuri at Tata Sky finds other billing options more favourable because “hourly rates are almost never in a client’s interest except for specialized transactions”.
Mumbai law firms Jehangir Gulabbhai & Bilimoria & Daruwalla and Nasikwala Law Office and Kolkata-based Sinha & Co are three firms that have done away with hourly rates altogether. Sinha & Co opts instead to charge fixed fees for drafting and filing of applications and petitions, and a daily rate for court appearances. The per day rate is mutually agreed in advance and depends on the nature of the case. Nasikwala Law Office offers a fixed fee model, per day billing for matters outside Mumbai, per appearance fees for counsel practice, and a monthly retainer based on a fixed number of hours and standard queries.
Saugata Chakravarty, the general counsel for Siemens in South Asia, says he generally asks for blended rates and does not pay for internal discussions or consulting. Two alternative billing models he favours are fixed lump sums for deals and fixed lump sums with dedicated hours or a specified scope for other matters.
Mittal says alternative billing is always the route for any work which is long term, while negotiated hourly rates are preferred for short-term assignments.
In-house lawyers in India are increasingly handling the lion’s share of legal work at their companies, partly to rein in costs. As a result, there is strong demand for predictable alternative fee arrangements from external counsel which leave little room for discretion.
“The preference is to have a partner at a law firm who provides high quality, efficient and cost-effective services instead of simply reaching out to the top names in the industry,” says Batra at DuPont. “The survey results portray this growing trend, which is bound to gain momentum in the times to come.”
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.
