Legal watchdog set to scrutinise law firm outsourcing contracts

New Code of Conduct underlines SRA intent to review LPO deals

City law firms may have to renegotiate their outsourcing arrangements as the Solicitors Regulation Authority (SRA) moves to regulate outsourcing for the first time.

The new Code of Conduct to be published next week (6 April) sees the SRA assert that it should be given access to law firms’ outsourcing contracts and files, as well as potentially to outsourcers’ premises for regulatory checks. This would affect all legal and business process outsourcing arrangements the SRA deems critical to the firms’ activities.

The guidelines, coming into effect in October as part of the new Code of Conduct, state that the SRA expects firms to look at all existing outsourcing contracts. While it concedes it may not be possible to change them all before the terms end, the watchdog wants to see evidence that firms are reviewing contracts to ensure compliance.

The news comes as growing numbers of law firms are increasing their use of both legal and back-office outsourcing. It emerged this week that Allen & Overy is in the early stages of trialling outsourcing of some aspects of its corporate transactional work to Integreon, which it already uses for litigation support.

CMS Cameron McKenna is set to outsource the bulk of its back-office support function to Integreon next month.

SRA head of standards Richard Collins said: “Our primary aim is to ensure that outsourcing does not reduce our ability to thoroughly regulate what law firms do and that they can still prove that the work is up to our requirements.”

The plans have come in for criticism from compliance officers at City law firms who argue that they are intrusive, unclear and in need of revision. The SRA maintains it will not be changing the guidelines.

Norton Rose head of compliance Jonathan Ody (pictured) said: “The SRA has every right to approve the terms of an outsourcing contract but I don’t see how it can ask us to make sure it gains entry to the property of a third party, especially not if it is based in India, South Africa, or even Belfast. The SRA has no standing outside England and Wales.”

CC executive partner and general counsel Chris Perrin added: “The new rules, as they stand, are not viable for a number of reasons and also lack clarity. The SRA needs to be clear about what outsourcing they mean to focus on and make sure their plans are practical.”

Integreon president of global sales John Croft said: “If there are regulatory compliance reasons for us to open our doors then we would do that, but one would have to ask how practical it is for a London regulator to visit us in India.”

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