Law firms are going the extra mile to prove their intrinsic worth to corporate counsel, but are their billing innovations paying off? Vandana Chatlani reports
Almost 4,000 companies listed on India’s stock exchanges spent USD7.54 billion on legal fees in the financial year ending March 2023, 21% higher than the previous year, according to statistics generated by ET Intelligence Group, the Economic Times’ research wing.
While this may sound like music to a lawyers’ ears, Indian firms understand winning work from corporate counsel is not as easy as it used to be. Many in-house lawyers have built formidable legal teams in a bid to rein in work and control legal budgets. When they do rely on external lawyers, they expect deep expertise, timely delivery and value for money.
“Corporations in India are ramping up their in-house legal teams, so the focus is to do as much in-house work as possible,” says Akhil Prasad, country counsel director at Boeing India. “Outsourcing legal work is primarily for areas that an in-house team is not able to perform, like litigation.”
Law firms recognise that general counsel run tight ships. “More and more clients are asking for regular budgets on a monthly, quarterly and yearly basis,” says Pravin Anand, managing partner at Anand and Anand in Noida. “They are keeping tabs to match their budgets with the actual legal fee billed by us. Clients are unwilling to have a yearly price increase … they want to work on competitive rates.”
As fee negotiations and flexibility remain top priorities for clients, law firms are increasingly being forced to innovate when it comes to billing structures.
“Hourly billing is almost extinct,” says Anish Vohra, managing partner at Pier Counsel in Gurugram.
Rakesh Kumar Ojha, the managing partner at Asia Law Offices in New Delhi, adds: “Traditional hourly billing is facing competition from alternative models like fixed fees, retainers, success fees and outcome-based pricing. This trend is driven by both client demands for predictability and increased competition among lawyers.” (See Alternative billing structures on page 56).
Stiff competition has led firms of varying sizes to offer lower fees than their rivals to win assignments. “Billing rates continue to be under pressure with many small and large firms undercutting due to lower volumes in certain practice areas,” says Nitin Wadhwa, the managing partner at Wadhwa Law Offices in Gurugram.
The practice of undercutting is “spoiling the market”, says Rajesh Begur, the managing partner at Begur & Partners. Also problematic, he adds, are “the Big Four accounting firms are de facto law firms as no one is regulating them in India”.
Despite the rivalry and price wars, most firms have not shied away from moderately increasing their rates.
“Almost all firms have increased their fees,” says Shrikant Hathi, the managing partner at Brus Chambers in Mumbai. “We have increased our rates marginally [and], as a rule of thumb, we increase our fees by 8-9% every April.”
Average legal fees, especially among top law firms in major metro cities, appear to have increased by up to 10%, says Mayank Arya, the COO and practice head for data privacy at Ashwathh Legal in New Delhi. “Rising pay scales and expectations of legal talent, coupled with growing overhead costs, are driving this upward rate correction; however, rates are still lower compared to mature markets.”
Peaks and troughs across practice areas are also impacting billing trends.
“Whenever the capital markets are active, prices charged by law firms increase as capital markets transactions ensure more lawyers are occupied and therefore there is less bandwidth to take on additional work,” says Nihas Basheer, a partner at Wadia Ghandy & Co in Mumbai.
Although clients are wary about excessive legal spending, some, stung by the unforeseen circumstances resulting from the covid-19 pandemic, have adopted a more proactive approach when purchasing legal services, particularly in relation to litigation.
“There has been a shift where disputes are concerned – parties prefer to settle sooner than to litigate,” says Rohan Janardhanan, the managing partner at Rex Legalis in Mumbai.
Rishab Khare, a principal associate at UNUC Legal in New Delhi, says that in the aftermath of the global recovery from the covid-19 crisis, businesses have increasingly come to appreciate the significance of establishing a strong foundation in the pre-litigation stage. “The willingness of clients to increase spending on legal services suggests a heightened emphasis on preventive measures, consultations and legal strategies to minimise litigation risks.”
The results
Against this tide of rising competition and evolving billing practices, we present the results of our 17th annual billing rates survey. The survey is based on an analysis of 47 participating firms of between one and 300 lawyers from Bengaluru, Chennai, Indore, Kochi, Mumbai and New Delhi. We highlight our findings through a series of infographics throughout this article.
In the past 16 years, most of India’s highest-ranked law firms have refused to reveal their billing rates, citing discretion and confidentiality. Others say there are discrepancies between the rates published and those actually charged to clients for a variety of reasons.
This year, the larger firms that participated include ALMT Legal, Anand and Anand, Khurana & Khurana, LexOrbis, Spice Route Legal, Wadia Ghandy & Co and White & Brief.
Many participating firms openly say that they offer discounted and alternative rates to specific clients, indicating that the fees quoted in our table are a useful guideline and starting point to understand legal pricing averages across India.
“Our firm is always open to discussing alternative fee structures,” says Shardul Thacker, a senior partner at Mulla & Mulla & Craigie Blunt & Caroe in Mumbai. “We have adopted various models depending on the complexity and nature of the work involved and the urgency required, including but not limited to retainers, lump sum fees for an identified scope of work, blended rates and hourly rates.”
Clients are often rewarded for their loyalty. “We give discounted rates to several of our regular clients, as well as clients who give us a committed or guaranteed work volume,” says Thacker.
At DGS Associates, while the primary and preferred billing arrangement continues to be an hourly rate, the firm is progressively adopting customised project-based and blended rates.
“Our old clients, particularly in the US, UK and EU markets, continue to work with us on our hourly billing rates,” says DGS founder partner Ameeta Verma Duggal. “However, clients from Eastern Europe and the APAC region insist on pre-agreed project-based or blended fee structures. Our regular Indian clients are happier with the retainership model.”
General counsel appreciate the agility and variety of options offered by many firms.
“Indian law firms are exceptional and have very talented and knowledgeable lawyers,” says Boeing’s Prasad. “The firms are flexible on clients’ requirements and provide good quality work at acceptable rates.”
Priya Mehra, the chief legal, regulatory and strategic relations officer at Akasa Air, agrees, noting that, “Indian law firms are willing to invest in client relationships and provide bespoke billing structures to suit client requirements at different stages of their business”.
Rashi Suri, the managing partner at Upscale Legal Solutions in New Delhi, says: “There is a growing emphasis worldwide on value-based billing, in which the cost of legal services is based more closely on the estimated value of the services rendered than on customary hourly rates.”
Despite this, the majority of billing at some firms is still based on the hourly model.
At DLS Law Offices, about 70% of billing is based on hourly charges. “For a substantial majority of other matters, lump sum billing arrangements are provided, which are largely based on hours or time spent,” says Delhi-based founder and managing partner Dipti Lavya Swain. “Certain matters, for example, government matters or disputes, or pro bono matters, have factual considerations.”
Other firms where hourly billing predominates are: Spice Route Legal (80%); S&A Law Offices (74%); and AP Law Chambers (70%). (See Hourly v alternative billing on page 59).
Hourly billing rates increased across all categories this year with the exception of managing partners, perhaps because rates at this level of seniority saw the sharpest increase last year. Managing partner rates declined marginally this year, by 2.3%, with an average hourly fee coming to USD428 per hour.
Rates for senior associates and junior partners saw the highest jumps. The average hourly rate for a senior associate climbed 7.8% to USD215 per hour while the average hourly rate for a junior partner rose by 7% to USD290.
Junior associate rates also saw a substantial rise of 6.2% with an average hourly rate of USD154.
Senior partner rates increased slightly, by 2.1%, from USD339 to USD346 per hour. The average hourly rate for a lawyer overall also saw a similar increment, moving from USD271 to USD278 per hour, a 2.6% increase.
Loosening the purse strings
Law firms have realised that to attract clients, they must be able to provide value beyond simple legal acumen.
Medium and large-sized companies have created in-house legal teams and are handling most routine legal consulting and transactional advisory matters themselves, says Arihant Jain, the founder and managing partner at Intelia Law Offices. “This extends in some cases to M&A transactions. General counsel are willing to pay more for matters involving either complicated legal procedural requirements or the matter of representation and arguments. This shift means only elite and complicated matters are directed to external lawyers.”
Companies may be less inclined to consult external counsel for day-to-day matters, but if law firms are able to demonstrate niche expertise in specific areas, corporate counsel may be willing to loosen their purse strings.
Boeing’s Prasad notes that India is a very price-sensitive market, where a premium for services is uncommon. However, he admits “emerging areas of law like technology, cybersecurity, data privacy and the like, where a deep understanding of international practices is necessary, may perhaps command a premium for services”.
Companies often allocate larger budgets for areas such as litigation, M&A, intellectual property, regulatory compliance and cybersecurity, says Manisha Singh, the managing partner at LexOrbis. “General counsel may pay more for specialised expertise, strategic advisory services, and risk mitigation or crisis management due to their critical impact on the company’s strategy and bottom line.”
Ishita Dasgupta, associate vice president at Spice Route Legal, says: “Consistent with the previous few years, we have seen a flight to quality. Clients seem increasingly willing to pay above market rates for complicated work.” In particular, Dasgupta has seen clients flock to external counsel for advice on regulatory issues, digitisation and sustainability.
Sonia Gupta, the managing partner at Ashok Dhingra Associates, has seen higher spending for litigation, regulatory and compliance work.
Multiple regulations across sectors such as data privacy, environmental law and labour law are prompting companies to invest heavily in external legal advice and representation to ensure compliance and avoid penalties, says Asia Law Offices’ Ojha.
Anupam Prasad, the founder partner of AP Law Chambers in Mumbai, has noticed rising interest and higher spending in new areas of law such as fintech regulation, especially where a company’s in-house legal team lacks adequate expertise.
Ojha adds: “GCs increasingly value lawyers who understand their business and can provide strategic legal advice beyond just technical proficiency. This can involve assessing risks, advising on long-term legal implications of decisions, and proactively identifying potential legal issues.”
Akasa Air’s Mehra shares this view. “Services that are very specialised and require deep industry knowledge are very niche and [those] that provide insight into the perspective of a regulator in a relevant jurisdiction can command higher fees than the ordinary course of services,” she says.
Law firms may also gain favour with general counsel if, in addition to strategic advice, expertise and risk mitigation, they use innovative, cutting-edge methods and technology to improve efficiency, says Suri from Upscale Legal.
Government gains
Central and state government bodies have been known to choose the lowest bidder when selecting a law firm. Some say their attitudes towards legal spending have changed in the past few years, however others say the status quo persists. “Nothing has changed on that front, but [the government] now prefers boutiques over big law,” says Pier Counsel’s Vohra.
Janardhanan, at Rex Legalis, says: “The tendency to choose low bidders has deepened recently. For low-profile cases like land acquisition matters, the bidding has gone even lower. However, a few of the high-profile cases do attract some reasonable billing.”
Daizy Chawla, the managing partner at S&A Law Offices, says government bodies need to rethink their payment policies if they want committed lawyers at the table. “It’s not that the firms or advocates chosen by them are not qualified, however they will often lack motivation knowing that despite the efforts or resources they put in, they are still going to get peanuts.”
Others are more optimistic. Sumes Dewan, the managing partner at Lex Favios in New Delhi, says government appointments are fair and consider both a firm’s expertise and its price point. “The central and state government bodies choose bidders on the basis of a firm’s experience and fee quote,” he says. “The technical bid is equally important and only once a firm qualifies for a technical bid is the financial bid taken into consideration to ensure the firm they hire has credentials and can deliver.”
Lalit Bhasin, the managing partner of Bhasin & Co in New Delhi, agrees with this assessment. “Depending on the nature of the work involved, central and state government bodies go for the lowest bidder if the work is of a routine nature, but for specialised work where expertise is required they tend to go to the best talent available, even though it may not be the lowest bidder,” he says.
Rajesh Ramanathan, a partner at Factum Law in Chennai, shares a similar view. “Our experience with government agencies shows that initially they go with the lowest bidder, but once they realise the potential of the firm, they try to retain them for a slightly higher price.”
The government has partly shifted its view after realising the cheapest option can create problems in the long run. “There have been instances where the lowest bidder lacked the necessary expertise or resources, leading to poor performance, missed deadlines and even unfavourable judgments,” says Ojha. “This has made government bodies more cautious about solely focusing on cost.”
Ojha says several measures are used to encourage the government to ensure quality is factored into the final decision. “The Supreme Court of India, in a landmark ruling in 2018, discouraged the practice of selecting lawyers based solely on the lowest bid,” says Ojha. “The court advised government bodies to consider qualitative aspects like experience and expertise along with cost.”
In 2020, the state government of Maharashtra implemented a pilot project where law firms were evaluated 70% in terms of their quality and 30% for cost. The project was deemed successful and is being considered for wider implementation, says Ojha.
In 2021, the central government’s Department of Legal Affairs revised its empanelment process for lawyers, introducing a two-stage system, says Ojha.
“The first stage evaluates firms based on qualitative criteria, and only shortlisted firms compete in the second stage based on financial proposals,” he says. “While the shift away from the lowest bidder model is still gradual, these examples demonstrate a growing awareness within central and state government bodies of the importance of balancing cost with quality when choosing legal services.”
Ojha believes the trend is likely to continue with a focus on obtaining efficient, effective and value-driven legal representation for public interest matters.
ALTERNATIVE BILLING STRUCTURES
LAWYERS SHARE EXAMPLES OF DIFFERENT BILLING MODELS OFFERED TO CLIENTS
Buoyed by client requests for more predictable billing, law firms are slowly moving away from hourly fees towards other tried and tested revenue generating methods.
Clients engaging law firms for dispute resolution have an array of billing options at their fingertips.
At Kachwaha & Partners, a lump sum quote is offered for drafting or opinions where the firm’s lawyers can ascertain the work involved, and also for court appearances and arbitration hearings. “Hourly rates are for cases that don’t fall in these categories,” says partner Tara Shahani.
Nitin Gera, the founding partner at Aretha Legal, says: “Clients are keener to have a fixed-fee model arrangement … especially in dispute matters.”
At UNUC Legal, clients can opt for appearance-based billing where court hearings are concerned. “This approach ensures that clients are billed proportionally for the specific legal services rendered during court proceedings, allowing for more precise cost control in litigation matters,” says Rishab Khare, a principal associate at UNUC Legal in New Delhi.
Rajesh Ramanathan, a partner at Factum Law in Chennai, says clients are happy paying a one-off fee for disputes, or paying in two instalments: one at the filing stage and the other before a trial or final hearing.
Firms handling corporate and non-litigious work provide a range of alternative fee structures, too. V Law Partners gives clients a choice of monthly retainer fees and fixed fees in addition to hourly rates.
At LexOrbis, most of the IP preparation and prosecution services are charged on a flat-fee basis. At AP Law Chambers, clients can enjoy a hybrid billing model where fees are fixed for a certain time, after which blended hourly rates are used.
Wadhwa Law Offices provides clients with options of a fixed fee, milestone-based billing, retainership, and in litigation and IP, a fee schedule for each activity.
At Brus Chambers, if clients are not comfortable with hourly rates, the firm calculates rates according to stages. “We estimate our fees and expenses up to a certain stage and ask for an advance payment until that stage,” says managing partner Shrikant Hathi. “We commence our work once we receive the advance payment.”
At Upscale Legal, retainer fees, flat fees and milestone billing are on offer, but lawyers have also worked on equity-based compensation where professionals may receive a share of equity in a client’s business in lieu of, or in addition to, traditional fees.
Chasing payments
Law firms across the spectrum share one common pain point – payment delays. Even the best billing plans do not guarantee that invoices will be settled on time.
There are a variety of reasons for this including: requests for discounts towards the end of a matter or transaction; billing issues arising when a transaction fails to close; and companies being unable to pay when they become insolvent.
Wadia Ghandy & Co’s Basheer says his firm faces challenges when the fixed fee rate is adjusted because of an increase in the original work estimated. “We try to speak to clients before the mandate and explain the assumptions very clearly, and we have hired more people to help with recovery,” he says.
Having experienced the same problem, PM Thimmaiah, a senior partner at MD&T Partners in Bengaluru, says his firm now states upfront that additional work will be billed separately. “We inform clients once the initial scope of work is completed and new work is initiated.”
Suri, of Upscale Legal Solutions, calls this “scope creep”, where “unexpected modifications or extra work beyond the originally specified scope may cause disagreements or payment issues”. In these cases, she recommends implementing change order procedures, providing precise project scope definitions and ensuring clear communication. “Open communication on pricing, billing frequency and the entire billing process can help set clear expectations and prevent misunderstandings.”
