Oil giant Shell is to open an offshore legal centre to support its in-house legal work worldwide, following the example of several international law firms in finding cheaper locations for mainly back-office work.
The centre’s location has not been decided, but is part of a drive for ‘greater efficiencies’ and cost reduction.
The decision to set up an offshore legal centre is linked to persistently low oil prices, Shell’s legal director Donny Ching told the Gazette. ‘We are operating in the reality of a “lower-for-longer” oil price environment, and to remain competitive Shell is taking essential steps to building a more sustainable and resilient company.’
Ching said the move would relate to ‘some specific parts of our work where it makes sense to consolidate services, increase efficiencies and reduce costs’. Those specific parts would not be limited to traditional back-office work, but could include elements of more complex legal advice.
The in-house team has form when it comes to saving Shell significant sums. The Gazette reported in 2014 that by developing standard commercial contracts covering the 70-plus jurisdictions in which the company operates it has halved the numbers of lawyers involved and saved ‘billions of dollars’ in external spend.
The offshore legal centre would not be possible without the work on standardised contracts.
The plan fits a trend set by international law firms. Norton Rose recently announced the creation of a global service centre in the Philippines. Dentons is to establish Dentons Business Services EMEA in Poland.
The model has been most extensively tested by global firm Baker & McKenzie, which opened ‘global services Manila’ in 2000. By 2012 it had 550 employees. Such moves, Baker & McKenzie has said, cannot be driven by cost alone. Standardising processes was also about improving the work that supported the firm’s 4,000 lawyers working across its 72 offices.
The pressure on in-house legal budgets that began with the global financial crisis has also led law firms to open lower-cost legal centres within the UK. These include Allen & Overy, Herbert Smith Freehills and Baker & McKenzie’s legal services hubs in Belfast, Hogan Lovells’ centre in Birmingham, and CMS’s Bristol office.
Near-shore operations are within the comfort zone of more law firms.
But those considering sites in Manila, Warsaw and Indian cities will note the growing number of firms willing to go further afield, and the choice of a significant client like Shell will receive particular attention once known.