Rio Tinto goes East

Mining giant Rio Tinto has become the first company to hire lawyers in India to bypass outside counsel, in a cost-cutting exercise that has sent shudders through the London legal market.

Rio Tinto, which uses international law firms, predicts the move could reduce its annual £60m legal budget by 20%. Its Indian team will do substantive legal work that would otherwise be done by lawyers in London.UK commercial lawyers are watching to see if other multinationals follow suit.

Ben Hawkins, strategic marketing manager, solutions, LexisNexis, says: “I think this may well set a trend. Many large in-house legal teams have been considering legal process outsourcing as an option but few have implemented plans, largely because of difficulties in identifying the right types of work that can be processed by an outsourced function.

“Rio Tinto’s stated objective to reduce external legal costs by 20% puts a new slant on the thinking. Traditionally, in-house legal functions have provided a more cost effective way of processing the routine work types, reserving the other outsourcing option—to panel law firms—for the high end work that is complicated or high impact. This means that in many general counsels’ eyes, legal process outsourcing is a strategy to reduce internal headcount so has perhaps not been pursued as enthusiastically as it will if Rio Tinto meets its objectives.”