Law firm billing rates survey 2017

India Business Law Journal’s 2017 billing rates survey finds that hourly rates fall across the board as lawyers face cut-throat competition, undercutting and high demand for alternative fee structures. Vandana Chatlani reports

India’s corporate legal sphere is spinning fast, racing to keep up with regulatory rhythms and legal labyrinths. The competition has never been stiffer with law firms of all shapes and sizes expanding operations, promoting specializations and getting to grips with technology to streamline their offerings. For general counsel, there has never been more choice, particularly as both veterans and young hungry lawyers leave established firms to go solo. With minimal overheads, these practitioners can offer quality advice at a fraction of the cost. But with competition so fierce, and a burning desire to seize prestigious mandates, even the largest firms are willing to drop their prices considerably.

“There is increased competition and major undercutting of fees,” says Prem Rajani, the managing partner at Rajani Associates. “Even when clients agree to a fee or sign mandate letters, it takes a while for them to release the payment.”

As general counsel assume greater responsibility, authority and influence, they have become skilled purchasers of legal services. Some also have insider knowledge of what it is like to work on the other side of the table, having been in private practice before. Shuva Mandal and Priya Mehra are good examples. Mandal, the new general counsel of Tata, worked previously with Shardul Amarchand Mangaldas & Co and AZB & Partners, while Mehra, the new general counsel at Indigo Airlines, has practised with AZB, Jones Day and Gibson Dunn & Crutcher. Such lawyers know exactly how to buy legal services, having sold them before. They understand the inner workings of law firms, how to maximize efficiency, demand adequate partner time and negotiate a fee structure that doesn’t spiral out of control.

Rachika Agrawal Sahay, who worked at Trilegal early on in her career, is now the general counsel at Ostro Group. “I think little is done by Indian firms to structure their teams,” she says. “As a result, clients get billed mostly for the learning curve. That’s why most clients look for capped fees, and matters that cannot be capped such as negotiations, become a pain point between clients and the law firm.”

This tight rein on legal budgets in-house has forced law firms to rethink their pricing strategies. Many recognize that because in-house legal departments are continuously growing, general counsel can afford to spend less on outside counsel and be decisive about what is outsourced, to whom and at what cost. As a result, several law firms have taken a step back from the conventional hourly billing model to offer more flexibility and predictability with regards to legal fees.

“We have moved away from traditional hourly rates to bespoke billing structures in a large number of matters,” says Pravin Anand, the managing partner at Anand and Anand, and a loyal supporter of India Business Law Journal’s billing rates survey. He explains that the trademark and patent departments, for example, work on fixed rates per activity rather than billing by the hour. He says that the firm’s use of hourly billing has not disappeared altogether, but explains that this model is normally used for matters such as large patent litigation, which is based on a blended rate.

Anand Prasad, who set up Chambers of Anand Prasad after leaving Trilegal earlier this year, has moved to “value-based billing” instead of the normal hourly rates and has “no definite fee structure”.

“Clients are moving towards lump sum fee arrangements instead of hourly rates,” says Seema Jhingan, a partner at LexCounsel. “Our firm has signed many such fee arrangements over the last year.”

Rajesh Ramanathan, a partner at Factum Law in Chennai, agrees with this. “The hourly billing system has reduced considerably,” he says, estimating that only 25% of matters at his firm are billed using this model. Other firms which only occasionally use the hourly rate are Altacit Global, Athena Law Associates and ROYZZ & Co. “Only 10% of our billing is based on unforeseen circumstances, which is without a pre-estimated cap,” says ROYZZ managing partner Mahua Roy Chowdhury. Nasikwala Law Office, meanwhile, has done away with hourly billing altogether.

Fee fever

In this landscape of tightly controlled legal budgets, India Business Law Journal presents its 11th annual billing rates survey. As always, the survey is highly anticipated by in-house lawyers in India and beyond. “I really appreciate the topic chosen, which concerns all corporate counsel,” says Nandan Kumar Baranwal, the senior legal manager and company secretary at Felguera Gruas India in Vishakapatnam. “It is much discussed internally by various business unit heads and also in the boardroom.”

The survey is our largest to date, with an analysis based on 82 participating firms of between three and 630 lawyers from Ahmedabad, Bengaluru, Chandigarh, Chennai, Cochin, Delhi, Hyderabad, Kolkata and Mumbai. We highlight our findings through a series of infographics and present the full table of billing rates below (for subscribers only).