Editorial Board Roundtable - Who's Who Legal 2012
The International Who’s Who of Business Lawyers has brought together three members of our editorial board to discuss key issues facing lawyers today.
Jose Alberto Cerutti
Who’s Who Legal: When will you enlist the advice of external advisers? Do you see yourself hiring the firm primarily, or the individual?
Hans Peter Frick: Legal matters are managed by the legal department and, in principle, legal work is done in-house.
Where there is a need for specific expertise, such as in areas outside of the core business of the company - litigation, debt recovery, and repeat business such as R&D or where there is a sudden peak in the workload - external advisors may be engaged.
External advisors are often engaged to complement the in-house team for M&A projects and transactions, multijurisdictional commercial or new media, advertising matters and IP matters. They typically manage the main transaction documents while the in-house lawyers do the business transition agreements, such as supply and manufacturing agreements and IT transition services agreements.
I have always considered external advisors as an extension of my legal department. Hence, it was important that the firm had an excellent reputation and that the individuals would blend into our culture. At the end, should an individual –my external advisor- have left a firm, I would have moved with him/her to the new firm. Law is a people’s business.
Jose Alberto Cerutti: I prefer to hire the individual. The firm is very important because it gives the guarantee of a name, tradition, expertise and experience but the relationship is generally with an individual. Usually we deal with an individual working in a firm, who we know very well because he/she has collaborated with us previously; based on this experience we decide to hire him/her again in future projects.
Artyom Podshibyakin: If we are faced with a big threat (risk) where the possible loss or potential impact to the business is serious and eliminating the risk will be too time and labour consuming for the in-house department, we will enlist the advice of external lawyers. We also enlist the advice of external advisors if the risk we are faced with is untypical, rare or unique. Sometimes we need a second (external) opinion to ensure the company chooses the best legal strategy. Certain tasks and processes can be outsourced entirely.
Primarily I will hire an individual. From my point of view, legal firms are mostly coats for individuals and sometimes these coats all appear to be very similar to each other. On the other hand within the legal firms that have very high and very strict standards of services - it almost does not matter whom I turn to as I will undoubtedly receive services of a very high quality.
Who’s Who Legal: What skills do you require in external counsel?
Hans Peter Frick: Besides being great lawyers, I expect the firm to invest in the relationship, learn about the business we are in, to understand the strategy and the internal mechanism of how the company operates and what makes management tick.
External counsel are not needed to read the law but to offer a legal solution that solves the business problem at hand.
It is also important that external counsel and in-house lawyers are on the same learning curve with regard to the development of the company and identifying future challenges and legal risks. This requires in-house lawyers to invest an important amount of time with external counsel.
External counsel must be able to build up and maintain a high comfort level with the client so that business people can concentrate on minding their business.
Jose Alberto Cerutti: External counsel is necessary to confront and solve complex legal issues that in-house lawyers cannot deal with because they lack the resources or very specialised information.
External counsel need to have the knowledge and experience to manage these issues, particularly in litigation. She/he needs to have the ability to work with objectivity and independence. A right balance of business/legal risks is always necessary, together with a very practical approach to find the right solution.
Artyom Podshibyakin: Reputation, reliability, a deep knowledge of the law, wide practice and experience, a deep understanding of business to give good commercial advice, a willingness to know his client and needs, flexibility, a kind of adventurism and the ability to overwork for long periods of time.
Who’s Who Legal: What do you find to be the least acceptable behaviour among external advisers?
Hans Peter Frick: Overall, I have had great experiences working together with outside counsel. Once the ground rules are established, things went very well. Mostly, we do not want “armies of lawyers” on a project, I want to have one interlocutor, and I do not accept that “my lawyers” also work for our main competitors.
Jose Alberto Cerutti: Not being objective and independent when giving the advice we request. If the external advisor puts the interest of the firm before that of the client I will immediately decline to continue the collaboration. Also, I will not accept outside counsel inappropriately extending his/her time or scope of work when the only objective is to increase the fees.
Artyom Podshibyakin: Treating the client as just a source of money, attempting to use information received from the client to get something from a counterparty or third parties without the client’s consent, sending litigation documents for review and approval the day before the litigation, exceeding the pre-agreed budget without the client’s consent. Many external advisers prefer to give advice only, but mostly companies need implementable legal solutions and qualified staff to implement them.
Who’s Who Legal: What measures do you use to control or monitor fees? Have you used any creative alternatives to billing by the hour? Is e-billing becoming increasingly common?
Hans Peter Frick: Controlling or monitoring legal fees is the job of the lawyer who instructs the firm and manages the project in-house. This often ends up being random checks as in-house lawyers have more important things to do than check bills.
As part of a ‘Deal Management System’ we included a function that would measure the spend against the budget at any moment of the transaction. This allows for anticipating legal spend and making adjustments, if necessary.
In a global legal function with some 50 local departments, one sees all kinds of creative alternative billing methods. Mostly though, billing by the hour for smaller matters and capped and fixed fee arrangements for bigger transactions are the norm. E-billing has not been widely used so far.
Jose Alberto Cerutti: We usually review and check the pro-forma invoices - comparing it with our internal minutes, files or notes of the project, to monitor the performance of the work. However, because the relationship with outside counsel is based on trust we do not make a strict and meticulous formal control of it. I understand that the common practice is billing by the hour, however in many cases we prefer to negotiate the fees based on the particularities and complexities of the project in question and not only on the time dedicated to it.
Artyom Podshibyakin: I prefer to use pre-agreed fixed budgets or billing by the hour with a cap. Of course there are some cases when it is almost impossible to have a reasonable prediction of all the work to be done in a certain project and you simply can not limit it in advance. In these instances we go for billing by the hour with some discount. In Russia approving a preliminary budget is often done by e-mail, but a hardcopy of an invoice is still necessary as a ground for payment in most cases.
Who’s Who Legal: Do law firm panels still play an important role for companies? Have you used any e-procurement or outsourcing methods to select panels or distribute work among panel members?
Hans Peter Frick: Depending on the size of the companies, panels are a great approach to streamline legal external support and to have a great match of various competences. In some jurisdictions, such as the US and Europe it makes great sense, as the business volume may justify the investment in going through a detailed selection process.
There are service providers, like AdvanceLaw, that put panels together with great firms outside of the expensive cities which can offer great support and very competitive prices.
Jose Alberto Cerutti: They are not so important for us. In our company we prefer other methods and, particularly - as stated above - the relationship with specific individuals of the selected firms.
Artyom Podshibyakin: In our country we do not have such a practice. In Russia legal firms often use outsourcing (when certain task [or part of the task] can be outsourced from another law firm focused on such type of work or when legal firm has no branch in certain region). Usually the primary legal firm (something like General Contractor) does not disclose the name of the local partner being used for the task.
Who’s Who Legal: What are the biggest challenges facing in-house counsel?
Hans Peter Frick: A big challenge for in-house counsel is to stay put in the challenging environment, with the competitive intensity, the ever increasing density of the regulations and laws, dealing with the ambiguities and the volatility and to balance all this with an accelerating performance of the business.
Overall cost pressure will become more intense and the in-house counsel will have to find new ways and means to support the business and focus on what really matters for the company.
Jose Alberto Cerutti: The biggest challenges are represented by the ever-increasing complexity of the legal & regulatory setting and the difficulties to follow these changes in the day to day work.
An in-house counsel usually works under constant demands from internal clients with many different projects contemporaneously. This activity requests - at the same time –the capacity to deal with stress and take decisions in due course, with an exact and updated knowledge of the evolution of the law. External advisers have more resources and time to deal with the projects of a specific client, while an in-house counsel needs to work all these processes in parallel, with fewer resources. (Obviously the need to cope with these projects and have specialists are the main reasons to hire external counsels).
Artyom Podshibyakin: In-house counsel must be professional in many spheres, not only in law. IT, IP, Internet, compliance, commercial issues, risk management – all these are of great importance to in-house lawyers nowadays. One of the biggest challenges for all lawyers now is new IP laws and generally new social relations in this sphere. Lawyers must study new social relations connected with social media, social networks and the Internet as a way of content distribution etc, and find a fair way to regulate it. Before it is done one of the most important challenges for in-house lawyers is to understand how to efficiently implement yesterday’s legislation in the changing modern landscape.
Who’s Who Legal: How has the role of the in-house counsel changed? Is compliance-related work becoming a larger part of the role?
Hans Peter Frick: I often told my lawyers that we are not here to practice law.
Of course, the in-house lawyer has to stay current, but when it comes to advising the business people, they need to bring solutions, sound and business relevant advice with the business insight they gained through the years with the company. This is the competitive advantage of the in-house lawyer over the external advisor.
Compliance-related work, in my opinion, must stay with the compliance department, which should not be part of legal. The business lawyer’s role is to support the business and help to achieve the results. Compliance lawyers are to assure that everybody has the knowhow and the attitude to comply with the law, rules and regulations.
Jose Alberto Cerutti: The role has changed mainly because of the complexity of the regulatory environment. It requires more information and the right balance of business needs and legal risks when evaluating an issue.
Presently, the role has become more distinct and structured within organizations which have ultimately recognized the importance of internal law departments.
Compliance is certainly an important part of the role. It has called for the implementation of internal processes, procedures and systems, the permanent monitoring of these processes and its constant update.
Artyom Podshibyakin: From my point of view, in-house lawyers are getting closer and closer to businesses. In more and more cases they are leaders (project leaders), not only experts in law. In-house counsel must be more than lawyers – they must be managers as well. Definitely, compliance-related work becomes a larger part of the role.
Who’s Who Legal: When dealing outside your home jurisdiction, how do you find counsel?
Hans Peter Frick: I was lucky to manage a well-established global function, with a well-established local network of counsel. When it came to select counsel in a jurisdiction that was new to us, or for that purpose in an area of the law where we did not have any experience, I trusted most my personal network of General Counsel which I established over the last 25 years.
A personal experience and recommendation from a colleague is of inestimable worth.
Jose Alberto Cerutti: Usually this is based on advice from colleagues or my local outside counsel who can make a referral. Sometimes I check websites, other sources in organizations like IBA or Who’s Who Legal; but I will check these names that I find with in-house counsel in the other jurisdiction or my trusted outside law firms.
Artyom Podshibyakin: If I have to find counsel outside my home jurisdiction, first I check specialised web-sites to know more about counsel in foreign jurisdictions. I also check the possibility of hiring counsel or get in touch with counsel abroad via Russian offices of international legal firms. In addition, I will take the advice of the legal community.