India Business Law Journal’s 2016 billing rates survey finds legal fees increase across the board, according to our 10th annual survey.

Vandana Chatlani reports

A close look at India’s legal market reveals sharp contrasts: industry titans rule the roost, while new entrants find their feet; ambition and entrepreneurial drive rival age and experience; and specialists fight to win work away from generalist practices. Some embrace technology and flaunt marketing panache – others are media shy and comfortable with antiquated modes of management. The differences in quality, expertise and attitude are as stark as the places where lawyers spend many a sleepless night – some confined to four walls in the basement of their homes, while others pull all-nighters in sprawling offices with grand fixtures.

The diversity can’t be denied, but one goal unites them all: the fight for profit.

Yet courting clients is no easy task, especially at a time when competition is so fierce. With law firms mushrooming by the month, the only way to win work is through legal expertise, efficient delivery and innovative pricing. Clients are tightening their purse strings, demanding concise, consistent, creative and commercial legal advice at a very attractive cost.

According to The Future of Legal Services, a report published in January by the Law Society of England and Wales, in-house counsel and other buyers of corporate legal services “are wielding greater bargaining power” due in large part to “(i) greater access to information that enables clients to more effectively compare the cost of legal services; (ii) the ability and increased willingness to unbundle legal services and source them to the most cost-effective provider; and (iii) the expanding availability of alternatives to top law firms from which to source work”.

While the report analyses trends in England and Wales, its findings are consistent with changes observed in other jurisdictions, including India. And global developments become even more relevant with the long-awaited liberalization of India’s legal market now imminent. As in other countries, clients in India are insisting upon fees that are tailored to their specific needs, forcing law firms to move away from rigid billing practices and the conventional hourly billing model.

Referring to a YouGov study, the Law Society’s report also recognizes changes in the way legal services are purchased: “Clients will buy services they need as and when they need them. Fixed-fee services are now commonplace and the traditional model of a solicitor charging fees based on an hourly rate is gradually disappearing.”

Indian firms such as Delhi-based Nasikwala Law Offices and Ahmedabad-based Nanavati Associates have done away with hourly billing altogether and instead offer a variety of other billing options such as fixed fees, lump-sum charges, a daily rate, stage or activity-based charges, and per appearance charges for court matters.

Nishith Desai Associates is “consciously moving to a value-billing philosophy”, says Vivek Kathpalia, a partner and head of the firm’s Singapore office. “We also have a happiness billing policy … Clients pay if they are happy. This in turns makes us work in the most efficient manner and deliver the highest value to the client.”

Kathpalia goes on to explain what makes the firm’s client process so rigorous. “Each one of us spends nearly 30-35% of our time on research, academics and thought leadership so that we can perform clients’ work in the shortest possible time whilst delivering the highest value. This is where our clients see … true value.” The firm charges its clients based on scope, complexity, time, effort, urgency and eventually the value contributed by its lawyers. “We therefore don’t necessarily do what most firms do as far as hourly rates and fees are concerned,” he says.

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Hemant Batra, the founder and managing partner of Kaden Boriss, believes billing practices have become “more pragmatic, practical and logical”. An organized application of international billing and professional standards has replaced the “random unrealistic approach of the past”.

But some in-house practitioners say there is still room for improvement, particularly where hourly billing is used. “I would definitely like more transparency in terms of the manner in which billable hours are captured at a law firm,” says Amrita Mukherjee, vice president of legal at Hotstar. “Firms should also ensure uniformity among their associates in capturing billable timings. At the end of the day I should be billed only for the time spent on a particular matter that is justifiable.”

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FEES, FACTS AND FIGURES

It is against this backdrop of competitiveness and innovation that India Business Law Journal presents its 10th annual billing rates survey. With 81 firms of between three and 300 lawyers from Ahmedabad, Bangalore, Chandigarh, Chennai, Delhi, Hyderabad, Kolkata and Mumbai, this is our largest and broadest sample of firms to date. We highlight our findings through a series of infographics and present the full table of billing rates on page 69.

As with the previous nine years, most of India’s top tier law firms declined to share their billing rates, citing issues of privacy and confidentiality. So although some larger firms, such as Lakshmikumaran & Sridharan, which has 300 lawyers, participated in our survey, our findings are more indicative of the trends within small and mid-sized Indian law firms.

“These days we are talking about transparency in all spheres, whether judicial, legislative or administrative,” says Lalit Bhasin, the president of the Society of Indian Law Firms. “Why should law firms not disclose their billing rates? They should.”

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This year saw an increase in billing rates across all categories from junior associate to managing partner, with the average hourly rate for a lawyer rising 11.2% to US$238 from US$214 last year. The hourly rate for a junior associate rose 6.9% to US$123 from US$115, while the senior associate rate jumped 10.1% to US$173 from US$157 per hour. The average junior partner rate increased 12% to US$241 from US$215 per hour. Senior partner rates climbed 11.5% to US$309 from US$277 per hour. The most dramatic increase was at the managing partner level, where the average hourly rate soared 13.9% to US$368 from US$323.

As with last year, the results reveal vast differences in the price of legal services. The hourly rate for a junior associate, for example, ranges from US$30 to US$500, while managing partner rates vary from US$150 to US$2,000 per hour.

PRICING PREFERENCES

With hourly billing rates taking a backseat, corporate counsel are always exploring pricing options to match their lean budgets. “Increasingly, clients are insisting on lump-sum fees or hourly rates with caps,” says Rupin Pahwa, the managing partner of Juris Legal.

Mukherjee at Hotstar confirms this observation. “As an in house lawyer, I always prefer a fixed fee.” She recognizes that this is not always possible due to difficulties in estimating the work required for a certain task and in those cases opts for a cap on billable hours. She then asks a firm to obtain her consent before incurring any additional hours on the matter.

“We see a regular push for fixed fees … even amongst larger clients,” says Mathew Chacko, a partner at Spice Route Legal. “Given the seniority of the partnership and our preference for longer term engagements, we are able to effectively estimate fees – and tend to work within those estimates.”

Anurag Chauhan, head of legal and corporate vice president at Max Life Insurance, is among those who prefer to avoid hourly charges. “Hourly billing may work well in certain cases, especially one-time opinions, but this model comes with an inherent risk of having expensive partners working on the mandate, so it is advisable to opt for alternative fee arrangements,” he says.

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Chauhan advocates a range of billing options including fixed fee quotes for high-ticket transactions, fees charged per document or per appearance, and blended rates as opposed to hourly billing. “A retainership model provides incredible value for a host of legal issues for routine, mundane, predictable business and is a cushion against padding hours,” he says.

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PM Devaiah, a partner and general counsel at Everstone Capital Advisors, describes other drawbacks of hourly charges. “From a law firm’s perspective it is fair that professionals are paid well for time spent. But most of the time, deals drag on for nothing, quantity takes over quality and engagement gets somewhat static. Hourly billing in those situations is unfair to clients.”

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BIG FISH, GLOBAL PONDS

So where do Indian firms stand on the global stage and how do their legal fees compare with firms in other jurisdictions? “Indian law firms still charge less than global firms,” says Chauhan. “They could, however, fare better in transparency and consistency of pricing.”

In Devaiah’s experience, some top Indian law firms are as expensive as international ones. However, he notes that this does not guarantee quality: “A few top and many mid-sized law firms have done better both on quality and billing,” he says.hourly-versus-alternative-billing

SR Kamalacharan, a partner at Sundaraswamy & Ramdas in Bangalore, believes law firms have become more conscientious and focused on quality because general counsel are more aware of service standards and legal costs. “Scrutiny of bills has increased on account of stronger internal audit by clients,” he says. “This has led to better efficiency from lawyers and firms.”

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Srishti Ojha, the founding partner at Verist Law, says that across all firms, “there tends to be a visible variance in the ‘card’ rates and the finally negotiated rates”. She also notes how billing models have evolved for specific types of work. “Rates for ‘vanilla’ transactions in the mid-market are softening; rates for premium top-bracket transactions are rising; and rates for advisory are stronger due to higher perceived regulatory risk,” she says.

Salman Waris, a partner and head of intellectual property and technology, media and telecommunications at TechLegis, laments the “concerted effort by some of the bigger firms to destroy the market by offering ridiculous and practically impossible billing rates just to secure work. This is a negative trend which could ultimately damage the profession in the long term.”

A senior member of a large Indian law firm, who wished to remain anonymous, shares this view. “In addition to smaller firms using price as an entry strategy, it appears that larger firms too have begun to follow suit,” he says. “This is accelerating the commoditization of legal services and muddying waters for the entire fraternity.”

But as Chauhan points out, some large firms may seek to avoid price wars. “The bigger names charge for the brand name in addition to the legal work … [they also] tend to lure away talent with bigger pay cheques, so undercutting may not be a sound option for them … most have a threshold below which they will not bag business, especially in litigation practice.”

Badrinath Durvasula, senior vice president and general counsel at Adani Group, shares this experience. “Larger firms continue to maintain their billing pattern as they understand well that good corporate houses cannot avoid them,” he says. “The market for mid-sized firms and those at the top end is very different from a client’s perspective.

DELIVERING VALUE

While attractive pricing will always be a draw, corporate counsel also look for promises of quality legal services. What do they see as “value for money”? “Good value is a sum total of experience, endurance and exuberance that a firm displays over a period of time, and not linked to the amount billed,” says Badrinath Durvasula, senior vice president and general counsel at Adani Group.

Mukherjee believes value is derived when a firm understands her business needs and provides sound and satisfactory advice at a reasonable cost. “The availability of senior partners’ time and attention at short notice is also a great value proposition,” she says.

Chauhan defines good value as “a lucid, business-friendly, on-the-ground and timely opinion at a competitive price”. He says newer firms are more willing to offer value for money “in a bid to increase their share in the pie”.

Devaiah says an individual lawyer’s performance matters more than reputation of the firm. “Good value is high quality input to a client that protects the client’s interests, facilitates transactions, and delivers the service in a timely manner,” he says.

average hourly lawyer fees graph from junior associate to managing partner 2007-2016

So what does the future hold? As Devaiah sees it: “Everyone wants more and more money. A senior partner of a firm recently complained that I don’t give him work. When I told him I would when I had an opportunity to do so, he said in jest, ‘That’s fine, but send me an advance payment in the meantime!’”

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