8 ASIAN LEGAL BUSINESS – INDIA E-MAGAZINE SEPTEMBER-OCTOBER 2023 The ageless popularity of the hourly billing model commonly employed by Indian law firms is centred on the principle that a lawyer’s most limited and, hence, valuable resource is time. In the business of law, it makes sense for lawyers to earn profit based on time spent working on a matter. But with growing competition among law firms, emergence of a class of boutiques and technological disruptions, general counsel are taking a more pragmatic approach to negotiating hourly billing mandates thrown down by law firms. This does not mean that GCs are not appreciative of the need and value of hourly billing for law firms, particularly on matters with open-ended work and time commitments. But if GCs are willing to throw in the big bucks, they expect mandates to be goal-oriented, address inefficiency and accountability, and be open to rationalisation. Reports suggest that partners at top-tier law firms in India charge hourly rates anywhere between $300 - $500, which slips down to $100 - $250 at lower-tier law firms. These rates are often discounted based on whether the client will pay in dollars or rupees, with international clients often being charged the highest. Where scope of work and time can be defined, general counsel prefer not to agree to an hourly mandate. Dispute resolution is one example where companies tend to ask for fixed cost – or at least hybrid cost – payment models, says Hiten Sampat, general counsel at civil construction giant Patel Engineering. Costs can be fixed for drafting documents and court/arbitration appearances, but firms prefer to bill hourly for undefined work that can take substantial amounts of time, like research in high stakes, complicated disputes, Sampat says. On transactional work, law firms push for hourly billing, particularly in high-value deals. This is particularly true when it is difficult to assess the length of negotiations, says Smriti Subramanian, general counsel at e-commerce company Snapdeal. “Law firms insist on hourly billing where it’s difficult to assess the time or effort,” she says. While Subramanian appreciates the need for law firms to bill hourly in such cases, she says rationalisation is key in keeping costs feasible and law firms accountable. RATIONALISING IS KEY When negotiating mandates with law firms, Subramanian looks at various measures such as rationalising the size of the team on the transaction, rationalising hours spent by multiple team members on calls and meetings, rationalising time sheets submitted, as well as ensuring the firm provides a reasonable pre-estimate and revises hourly rates in case of overruns and delays. Another GC at a prominent Indian tech company says on condition of anonymity that in M&A deals, she prefers to have billing caps based on scope of work and time spent, to ensure efficiency and goal-driven work from law firms. “Where dynamic negotiations are required, we also fix half and full-day rates for the partner (with no overtime rates). We also get a blended rate for the negotiations phase, and normally only the partner’s time will be counted even if more than one person attends along with the partner,” she says. Blended rates and single-person billing are popular approaches among GCs, especially at larger organisations that undertake long-term mandates with large scopes of work. Blended rates are a single rate charged across the board by law firms for all levels of partners and associates. This prevents partners from charging exorbitant rates for hours spent on the matter. General counsel also negotiate to be charged for a single attorney’s time, even when multiple members of a team are attending a meeting or working on a matter. Partners and senior attorneys often will over-allocate associates on RETHINKING THE BILLABLE HOUR General counsel in India do appreciate a law firm’s need to use the hourly billing model, but with some flexibility and rationalisation, it could be much more attractive. BY NIMITT DIXIT Image: Sergii Gnatiuk/Shutterstock.com
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