The legal document
review industry is going through a rather tumultuous period. Some
companies have made out rather well as they have been gobbled up by service
providers seeking to round out the spectrum of services offered to corporations
and law firms. Other companies are looking to reinvent themselves as one stop
managed review services shops by expanding into areas beyond their traditional
core competencies. Many legal services pundits consider this to be a risky
strategy, but it may well be the only strategy available for companies locked
into the diminishing hourly rate model of domestic document review. Let’s face
it, the number of attorneys that are available to do document review has exploded
over the past few years. You don’t have to have gotten an A in Economics 101 to
know that burgeoning supply is putting U.S. document review attorneys on track
for pay parity with their counterparts in India. As the rates paid to reviewers
continue to slide, the labor arbitrage benefits and the associated legal spend
cost savings, the primary impetus of shipping work off-shore, diminish
precipitously which effectively supports arguments to bring work back on-shore.
As services vendors do
the scramble and do the services shuffle to get their teeth into the next best
thing, something interesting has been developing in the Caribbean. Last
month, at the request of a of an attorney friend of mine, I recently visited two
islands to gauge their infrastructure and human capital readiness for off-shore
document review. I looked at a whole host of metrics ranging from literacy
stats, attorney pool size, specializations, facilities cabling (for
gig-ethernet networks), internet speed, disaster recovery, etc. My findings
were to be compiled to help my friend develop a comprehensive report and solid business
plan for Island based document review. As I met with Island government agencies
that were tasked with promoting and providing incentives for companies to do
business on the Islands, it rapidly dawned on me that labor arbitrage, a high
quality workforce and infrastructure were just a piece of what made these
places attractive.
What also made these
places stand out like pink polar bears on the Arctic tundra were the tax
benefits that could accrue to companies that setup and operate document review
facilities there - tax holidays on profits generated by certain entity types
and no restrictions on the repatriation of foreign currency provided the
business activities met certain requirements. In conjunction with the tax
benefits are significant financial incentives for U.S. and Canadian companies
that build out space and infrastructure for Caribbean operations which greatly
reduce both cap-ex and op-ex. Several top U.S. and Canadian insurance companies
have already established “captive” entities in non-traditional Caribbean jurisdictions
to take advantage of the domestic entity legal spend, off-shore captive entity revenue
off-sets to be had.
To make a long story
short, as I delved further into how to structure a document review company in
order to take advantage of these benefits, my friend (now my partner) and I developed
a turn-key model which we call a Multi-jurisdictional Off-Shore Safe Harbor Document
Review (MOSH for short). As someone who has developed document review practices
in Asia and the U.S., I am acutely aware of the data privacy and jurisdictional
issues that often arise when data from foreign jurisdictions is the subject of
U.S. based discovery and subpoenas. In addition to benefits applicable to
non-discretionary document review and production scenarios, the MOSH model provides
entities with low cost data remediation and contract management discretionary
services delivery capability. In educating prospective clients about this
service, we came up with tag line from the pages of Johnny Cochran – Alienation,
Remediation and Repatriation; Alienate the data, send it off-shore. Remediate the
data with contract lawyers and predictive coding. Then Repatriate the information
of business value.
In a few weeks, Rob
Miller, former Discovery Counsel for BP (who I had the pleasure of working with
on the Deep Horizon matter) and I will head back down to the Caribbean and it’s
not going to be for rum and sandy beaches!
