Are law firms getting cold feet on outsourcing?

There has been something of a trend towards outsourcing in the legal profession in recent years, mostly in relation to back office functions but sometimes also in relation to client work.  It is interesting therefore to see that two firms which have gone down that route, Osborne Clarke (“OC”) and CMS Cameron McKenna (“CMS”) have both decided to scale back part of their outsourcing agreements with Integreon.

OC set up its arrangements with Integreon in 2009, transferring a number of its back office staff to the outsourcer.  65 of those former OC employees will return to OC from Integreon following the changes to the outsourcing arrangements 4 years into the 7 year contract.  OC will bring back in-house client relationship management, IT, and events management.   OC is not cutting all ties with Integreon, which will continue a number of functions including information services and business intelligence.  It is not yet clear how many jobs will be lost in the process, but it is expected to be only a small number.

CMS, who have used Integreon since 2010 after agreeing one of the largest outsourcing contracts the legal market has ever seen (rumoured to be worth £600 million), have announced that they are looking for a different third-party provider to take over one element of the services currently provided by the outsourcer. They did not announce publicly which service this was.

So what should be deduce from all of this?  Is it a sign that law firms are having second thoughts about the outsourcing model?  Or is it that there are problems at Integreon which are unlikely to affect other providers?

OC are bringing a team of people back in house, but are also moving an element of their outsourced services to an alternative provider, Mitie, whereas CMS are simply looking for an alternative outsourcing provider.  This would seem to suggest that both firms still believe that outsourcing can be an effective solution, but that they are not happy with all of the elements currently serviced by Integreon.  It is clear that neither of the firms have lost faith in Integreon entirely – both were keen to stress that they would continue to work with the company, and indeed it appears that CMS are expanding the amount of legal process outsourcing that Integreon carries out on its behalf, so Integreon would seem to be getting something right.

What I suspect that is going on here is that firms are learning that outsourcing a huge range of functions, both back office and in some cases client facing work, to a single provider is a big ask.  There are very different skills sets required to provide an outsourced human resources function, or an IT help-desk, than to have teams of legal researchers.  Just because a business can run a top class out-sourced office management function, does that necessarily mean it is also well equipped to undertake client facing “KYC” requirements or document support?  Whilst it might be tempting to take the easy route of putting all out-sourcing requirements with one single provider, perhaps the experience of CMS and OC is showing us that firms need to be cautious about doing this if the range of services being out-sourced is particularly broad.

Local authorities to use ABS structures in bid to cut costs?

When lawyers think of the potential of ABS structures, it probably isn’t local authorities that spring to mind as amongst those most likely to seize the opportunities that they present. However, according to The Lawyer, South London boroughs Lambeth and Southwark are considering setting up an ABS vehicle in order to cut their legal costs, which currently amount to £8 million and £12 million respectively.

The two London authorities already co-operate together and share legal costs in a number of areas. 

Tandem Law becomes latest casualty of Axiom Fund fiasco

Tandem Law, the Group Litigation Order specialist law firm based in the North of England, appears to be the latest casualty of the Axiom Legal Financing Fund fiasco.

The firm relied on Axiom to finance its cases, a source of funding which has dried up since Axiom was been placed into receivership following allegations of mismanagement and fraud.   As a consequence, Tandem has begun a redundancy consultation and has reportedly given almost the entire workforce “at risk” notices, although the firm’s managing director, Andrew Lindsay, hopes that the actual number of redundancies to be made will be only a small percentage.

Lindsay has been quoted as saying his firm will sue Axiom’s fund manager and its directors for withdrawing funding. 

Axiom Legal Financing Fund Receivership - further info

As reported earlier this week, Cayman Islands’ judge the Honourable Mr. Justice Foster QC, granted an order appointing Grant Thornton as receivers for the Axiom Legal Financing Fund.  In so doing, Justice Foster rejected a proposal by City Equities to take over the running of the Fund in a bid to trade out of its current difficulties – a proposal which was opposed both by the Fund’s directors and by the Cayman Regulator, CIMA, due to perceived conflicts of interest. 

The City Equities proposal had aroused a great deal of suspicion from investors due to the fact that it is under common ownership with Tangerine Investment Management (“Tangerine”), the Fund’s former investment manager, which was sacked when the Fund’s many problems came to light.

The Fund’s directors supported the appointment of Grant Thornton following shareholder preference, despite having initially preferred the appointment of KPMG.

Justice Foster also ordered that Tangerine must pay 60% of the Fund’s costs of the receivership application.

And so it seems that the wheels are set for the winding up of the troubled Fund.  It remains to be seen how much can be salvaged for the investors who backed it, and whether any action will be taken against those responsible for its demise.

Axiom Legal Financing Fund Receivership approved by Cayman Court

The Axiom Legal Financing Fund was yesterday ordered into receivership by a Cayman Islands court, which rejected a "rescue bid" by a company connected with its former investment manager, Tangerine Investment Management.  More to follow.

LegalForce to challenge the traditional model of legal services delivery

This week sees the launch of an innovative new business in the legal services sphere.  LegalForce is launching simultaneously in the US and UK a business aimed at servicing the technology industry through highly unusual retail-style premises (styled LegalForce BookFlip) which could easily be mistaken for a trendy coffee shop or a high street book-store.

The business is focused on tech-start-up businesses which need advice on intellectual property protection and general commercial legal services but which may not have the budget to hire one of the mainstream commercial firms, and delivers its services in a manner which is a long way from the traditional stereotype of a stuffy law firm.  Customers can drop into the retail-feel store, and use on-line do-it-yourself precedents, with guidance and advice where needed from a team of lawyers at a knock-down rate ($45 for 15 minutes in the US) and without the need to make an appointment.

The stores will sell a wide range of books, documents and tablets as well as having lawyers available to offer legal advice, and will run workshops on subjects designed to appeal to entrepreneurs.

The 8,000 square feet US store front has just opened in Silicon Valley, a short stroll from Stanford University, with a look and feel designed to appeal to the uber-cool vibe beloved by tech entrepreneurs.  The store is open unconventional hours for a law firm – including evenings and weekends.   

In the UK, the intention is to open a store front in either Soho or Shoreditch – both centres for a lot of high tech business start ups.  Initially, the UK business will be run by south London law firm Freeman Harris (who are also part of the QualitySolicitors network and a member of Rocket Lawyer’s panel), but if the business model succeeds then it is planned to add a number of other firms into the network to broaden the range of advice that will be provided. 

LegalForce was formerly known as Trademarkia, which launched in 2009 as an online trademark search service and which bills itself as being the world leader in US trade mark applications, with over 23,000 trademarks having been registered.  Over the course of the last year been morphing into a wider commercial e-law brand, and the opening of the physical stores is an attempt to re-engineer the way in which young tech entrepreneurs access legal services.

It is interesting to see a legal services business which started up as an entirely on-line business moving into having physical premises through which it interacts with customers, at a time when many others are moving in the other direction.  However, I can't help but think that this is a shrewd move which is well aimed at a particularly part of the legal-services-buying public, and I have high hopes that it will be a great success.

Axiom Legal Financing Fund - CIMA takes a stance

The various stakeholders caught up in the Axiom Legal Financing Fund fiasco show no signs of agreeing a route forward any time soon, but last week saw the Cayman Islands Monetary Authority (“CIMA”) taking a visible role for the first time.

The Fund’s directors believe that the fund should be put into receivership, and would prefer KPMG to carry out that function.

These plans are opposed by Tangerine Investment Management (“TIM”) - the company which was sacked as the fund’s manager last year, following serious allegations of mismanagement and possible fraud – who do not want the fund to be wound up at all, but to be allowed to trade out of its present difficulties. 

The beleaguered investors (or at least some of them) are believed to have been convinced by the directors that receivership is the most appropriate course, but disagree as to who should conduct the receivership, favouring Grant Thornton over KMPG due to perceived conflicts of interest relating to KPMG.

Taylor Moor, who promoted that fund, have vocally lobbied for it being liquidated rather than being put into receivership, in the belief that a liquidator will have greater flexibility and will be better placed to investigate what has gone wrong with the fund to bring it to such a sorry current state, but agree with the other investors that Grant Thornton are best placed to take the role.

In the meantime, City Equities Limited (“CEL”), an FSA regulated company who has no official standing in the situation at all, is calling on the fund’s investors not to wind up the fund, but instead to allow CEL to take over its investment management function, in the belief that it can make a success of the business.  An optimistic view in the circumstances one might think, but they are reported to be offering to pull off this feat of management brilliance by charging significantly lower fees than the fund was hitherto bearing. But the plot thickens further.  CEL is reported to be owned by BVI company Otterswick Limited, which also owns TIM, and both companies are represented by BVI law firm, Forbes Hare.  Although the beneficial ownership of the companies involved is not a matter of public record, it is hard to avoid the conclusion that they are all owned by the same individual(s) – in all probability Tim Schools, who is himself facing investigation by the Solicitors Regulation Authority in the UK. 

After months of public silence on the matter from CIMA, the Cayman regulator has finally put its head above the parapet and taken a stance in the sorry saga, saying that it will oppose CEL’s bid to take over management of the fund because of the perceived conflict of interest, but that it has no objection to the appointment of Grant Thornton as receiver.  It is difficult to see how CIMA could possibly support CEL’s bid in the circumstances.

The hearing of the application took place on 31 January 2013 and 1 February 2013, but the judge has reserved judgment for the time being and so investors will have to wait a little longer before they learn the outcome of their fund’s future.