Regulatory pressure tipped to drive further change in legal services in 2010

Increasing government regulation has set the stage for a more dynamic legal landscape in 2010, a leading consultancy has said. In a new report, corporate advisory group Fronterion predicts that regulation spurred by the global economic crisis will lead to a wider use of external vendors as law departments seek to cover their risk exposure.

The prediction takes the Number One spot in Fronterion's Ten for 2010 announcement – a top ten of forecasts for developments in legal process outsourcing (LPO) that the group expects will unfold next year. Fronterion's vision of a dynamic market in which regulation is a key driver echoes findings released in October by global law firm Fulbright & Jaworski. Its 'Sixth Annual Litigation Trends Survey' of US and UK corporate counsel found that 11% of US in-house lawyers are planning to spend more on regulatory work in the coming year.

In the US, increased enforcement actions by agencies such as the Food and Drug Administration (FDA), the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) have intensified the workload for corporate law departments. Meanwhile, as Fronterion's forecast notes, UK lawyers will spend 2010 preparing for the 2011 implementation of the Legal Services Act: legislation that will regulate joint ventures between lawyers and non-lawyers in what is sure to be an ever more competitive marketplace.

The US regulatory atmosphere has been heightened by the Obama administration's response to investment scandals that have typified, and in some cases worsened, the financial crisis. As the enforcement agencies work to combat the problem of non-compliance, they are raising the bar for legal work by exercising their subpoena power – a process that is affecting individual executives, single companies and entire industries alike.

Currently tackling this environment is a new practice established by leading LPO and IP services provider CPA Global. Based in the US, the practice has been set up for the specific purpose of helping the company's corporate clients work through regulatory actions.

CPA Global's director of legal services outsourcing, Paul McGolpin, said: 'Government agencies have thrown down the gauntlet across multiple industries and we don't anticipate the current regulatory environment easing up any time soon.'

Montgomery Kosma – a former competition counsel with high-profile law firms – has been appointed to co-chair CPA Global's new practice. 'The paradigms for conducting large-scale investigations and litigation have changed dramatically in recent months,' he said. 'Government action and private lawsuits are moving so rapidly that companies need to respond more quickly than ever before, constructing a rational narrative of events, identifying key issues and providing a lucid analysis to present to regulators.

'The greatest challenge in this process,' Kosma added, 'is the need to gather and organise massive troves of data – much of it through electronic discovery – without racking up a huge legal bill.' This issue was another highlight of Fulbright & Jaworski's findings, which showed that 16% of US in-house lawyers plan to step up their spending on e-discovery in 2010.

But although e-discovery is a key element of LPO services, the new CPA Global practice proves that the distinction between LPO providers and law firms is eroding. As Paul McGolpin told IP Review Online earlier this month, 'If you've got the engagement level right and the quality of lawyers right, you will be capable of delivering more complex services.'