You’ll certainly be hearing a lot in the coming days about Rio Tinto’s offshoring legal work to India.
Pundits are alarmed that “this time it’s different” because (a) the company is going direct to the provider, rather than through outside counsel, and (b) it’s not just the usual scutwork, they’re supposedly recruiting fully qualified lawyers to do substantive work.
This is supposed to be a “wakeup call” for firms. We say they should hit the snooze button, and have more-interesting information about the company, after the jump.
According to the WSJ Law Blog,
Rio Tinto estimates that its Indian team, which has operated since May 1, will be seven times cheaper than comparable lawyers in London and will hope to save the company 20 per cent of its annual legal budget, believed to be about $100 million (£61 million).
We say, “meh.” We’ve used Indian legal services and the quality just isn’t there yet – not even for the routine stuff that’s really supposed to be in their sweet spot (document review, contract summarization, etc.). Call us in five years and maybe this will be a story. We’re betting they pull the work back in six months when they see how much supervision and review is required to actually get usable work product.
But let’s talk about this bold company. If the name sounds familiar, it’s because the massive mining group has been all over the headlines lately for dropping a $19.5 billion bid for Aluminum Co. of China and switching to a 50/50 JV with BHP Billiton. As if bringing one girl to the prom and leaving with another isn’t bad enough, Rio Tinto spent most of last year fending off hostile offers from BHP.
That fickleness is another reason we won’t be surprised when they change their minds.
Still, I’m pretty sure the lawyers won’t mind document review being sent to India as long as they get to keep a client who flips from one complicated, multi-jurisdictional, mega deals (we mean mega – the BHP deal was worth $66 billion) to another.
Linklaters, Slaughter & May, Herbert Smith, Davis Polk, and others have had significant roles in the transactions.
They’re the lucky ones – Rio Tinto’s flip flopping cost Nomura and Blackstone $30 million in lost fees on the ChinAlCo bid. Easy come easy go. There’s $400 million in fees on the line for the rights offering.
As if all those transaction fees weren’t enough to cancel the fees lost to any of the routine stuff going to India, the company is also a regulatory cash cow. Most recently, China, possibly feeling jilted, is threatening an investigation into the anti-competitive effects of the Rio Tinto/BHP JV. More fees!
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hahahahaha, good jpeg!!!!
hahahahaha, good jpeg!!!!