While mining giant Rio Tinto is making waves courtesy of its troubles in China, it has also made a splash in recent days in that other emerging economic giant, India. Rio announced on June 18 that it has decided to outsource a huge swathe of its legal department’s work to US based legal services outfit CPA Global’s Indian operations, taking the concept of outsourcing to whole new level.

Rio’s move is an intriguing one and it represents one of the first forays by a major Australian — or as in this case partly Australian — corporate to send one of its most important functions offshore. The wide scope of the Rio outsourcing deal has taken law firms and other corporations by surprise across the globe.

Announcing the deal, CPA Global and Rio said that initially, “the work undertaken by CPA Global includes contract review and drafting, legal research, and document review. However, it is anticipated that the scope of work will expand to cover other routine legal services work traditionally handled in-house by Rio Tinto or shared amongst the company’s panel of law firms.”

The losers out of this deal are high cost law firms in places like London, Sydney and Melbourne. These firms have traditionally relied for profits on the continuous stream of drafting, reviewing, advising and compliance work that inevitably emanates from corporations such as Rio Tinto. But Rio says it can expect to save 20 percent of its annual $120 million legal bill through this outsourcing arrangement — that’s a big saving.

CPA Global currently employs around 550 lawyers in India in Noida and Gurgao and has announced it will hire almost 1500 more now that it has secured the Rio contract, with a new centre to be established in either Pune, Bangalore or Hyderabad.

It has no problem finding lawyers to satisfy Rio and other corporates’ requirements because there are around 80,000 law graduates being churned out by Indian universities and specialist law colleges each year. The beauty for Rio is that as one US lawyer put it recently, for the cost of hiring a new lawyer in the US you can hire and train 10 Indian graduates. Indian lawyers are trained in the English common law tradition which means that they can easily understand Australian, American or English law.

The Rio legal outsourcing deal is one of the largest yet in an industry that started in 1995. It is also nothing short of revolutionary. As one industry observer Jordan Furlong noted last month:

Rio Tinto’s move feels like a momentum shifter. Its own sheer size as a client, and the mammoth scale of the outsourcing commitment it’s making, should have enough critical mass to really get things moving within a legal marketplace that, despite recent upheavals, has yet to make real, radical alterations to its business.

What Rio Tinto is showing by sending most of its legal work to a group of lawyers sitting in India, is that when it comes to outsourcing it is not only low level and routine jobs like telemarketing that are susceptible to being moved en masse from the developed to the developing world. The hollowing out of large Australian, American and British law firms with their luxury waiting areas and catering services for clients has begun. Rio says so.