Who’s Who Legal brings together three leading in-house practitioners, Jacobo Cohen Imach of Mercado Libre, Christian Matton of Galderma and José Alberto Cerutti of Bristol Myers-Squibb, to discuss the changing role of corporate counsel, their interaction with private practice and developments within their respective industries.
Jacobo Cohen Imach,
Vice President and General Counsel,
Vice President and Corporate General Counsel,
Switzerland José Alberto Cerutti,
Senior Corporate Counsel,
WWL: Several sources have commented that companies are increasingly handling legal matters in-house and thus limiting the circumstances in which external counsel is sought. Is this something you have noticed and does your company have any plans to expand their in-house legal team in the future?
Jacobo Cohen Imach: This is something I have certainly seen, not only at this company but generally in the corporate counsel market. It is very important to decide whether to have a small, focused legal group or build a larger practice, at Mercado Libre there are 25 people in the team and we try to handle everything internally. We regularly look to bring professionals to the team and do a lot more specialised work in-house than in previous years.
We tend to hire directly from law firms rather than in-house – we only delegate to external firms when going through a major M&A transaction or a highly specialised matter. Doing more legal work in-house also keeps costs and expenses under control, and organisations are seeing that corporate counsel have a more vested interest in the development and welfare of the business which is a major advantage.
Christian Matton: More and more companies are becoming conscious of the advantages of “internalising” the legal support function. This is for several reasons. First, cost: in-house legal support is less expensive than outside counsel. Second, business acumen: in-house counsel understands the business of the company, the culture and the language – which is to say, the way of thinking – of the management. And third, accessibility: in-house counsel is much easier to reach than outside counsel. This trend has been going on for the last decade or so, but only at companies with a certain critical mass. SMEs still tend to limit in-house recruitment because of “overhead” costs. For the latter, ad hoc legal support is still less costly than hiring. Galderma reached that critical size years ago and is continuously developing its legal support function. Emphasis is now going to emerging markets.
José Alberto Cerutti: In our company we have a balance in the use of in-house resources and external advice. Whenever possible we prefer to manage legal issues internally, as the answers are faster and the knowledge of the business is better, but we also understand that in many circumstances we do not have the same level or specialisation of an outside counsel. There is no competition, but rather a complement between both figures. We do not have specific plans to expand or reduce this working system.
WWL: What is the extent of your interaction with external counsel consulted by the company, and what are the key factors in deciding which firms to instruct and retain? Does the in-house legal team play an active role in the decision-making process?
Jacobo Cohen Imach: When we do look to retain law firms for major projects, the key attributes we look in a lawyer are knowledge, commitment, business sense and common sense. Given that Mercado Libre specialises in e-commerce and online auctions, we show a general preference towards the more niche firms as they are able to provide tailored solutions to specific and technical issues – it is often a challenge to find external lawyers from larger firms who can demonstrate a strong understanding of our specific legal needs and business considerations. Consulting specialists also allows the company to get things done within a shorter time frame.
The legal team does play a key role in the retention of external counsel, and actively looks for lawyers who have common sense in abundance; we closely analyse the individual to be retained rather than choosing the biggest law firm name. As a secondary measure we will look at the firm and their reputation for delivering business-oriented and practical advice.
Christian Matton: Galderma works with many different law firms for two kinds of project: large, complex projects, mostly M&A; and routine small projects, mostly corporate housekeeping, labour law, etc. The vast majority of law firms are chosen and managed by the legal department. In some exceptional cases, senior management expresses a preference for one or the other law firm.
José Alberto Cerutti: Basically, the law department of our company tends to manage the majority of general legal issues; outside counsels are mainly engaged to complement the internal team (i.e. getting second opinions) or for very specific projects that require a high level of specialisation (mergers and acquisitions, projects and transactions, intellectual property issues, local administrative matters). Moreover, outside counsels are always appointed to handle litigation, an area which needs particular dedication and expertise. In this latter case they work side by side with internal resources to optimise the results of the projects. Another area in which we mainly use external resources is credit collection (but for different reasons), because of its low added value, cost and time consumption.
Outside counsel are selected by the law department, taking into consideration their reputation, trustworthiness, deep knowledge and practice of the law. Besides this, we request a good understanding of our business and how our company operates in the market.
WWL: Contributors have remarked that moving in-house is becoming an increasingly attractive proposition among private practice lawyers, one factor being the likelihood of a slower progression from trainee to partner in private practice than was previously the case. What do you identify as being the key reasons for this, and is it a trend you see continuing for the foreseeable future?
Jacobo Cohen Imach: I can confirm this trend and see no sign of it slowing; the vast majority of my legal team have come directly from other major law firms. There are a number of contributing factors to the trend, one being that many lawyers choose to move on the basis of attaining a greater life-work balance. This is not always the main reason but it is a large incentive for them. At the big law firms, lawyers – especially associates and younger practitioners – have to invoice a certain amount of hours and stay in the office even if there isn’t much to do. Of course companies can make the same demand, but in my experience companies such as ours tend to be more flexible and this can be a big draw for lawyers.
Many also cite a desire to be more involved in the operation of a business as a reason for making the change, with some commenting that they would enjoy some more variety in the work they do. While law firm work can be rewarding, some lawyers who are fortunate enough to act for major corporations are retained to give limited advice on very specific cases, without seeing the bigger picture. Working in-house usually enables them to see their advice in the context of its impact on the business.
In-house counsel work also gives the opportunity to be involved in the whole negotiating process; many want a new challenge, rather than advising on issues at the same point of transactions. Legal practitioners at a company are more involved with new challenges and have the opportunity to see a project through from start to finish.
Christian Matton: It’s a continuous trend with advantages on both sides. Legal departments like candidates with private law practices because it helps them with managing outside counsel (understanding the process, fee structures etc). For the candidate, the perspective of career growth is slightly better in-house (management structure, development into business functions); also, the fact of being closer to the decision makers and in some cases being the decision-maker is a substantial differentiator.
José Alberto Cerutti: It always depends on personal preferences. Many lawyers prefer to work in law firms and will never change their position, while many others move to become in-house lawyers. In other cases they start their career directly at the law department of a company and never move to a law firm. I haven’t noticed a particular trend in moving from outside to a company, but it is less usual that an in-house lawyer goes to work in a law firm than the contrary. The key reason for this trend, especially for young lawyers, is that working in a company gives more security for their future.
WWL: With the increasing prominence of in-house legal teams as well as the emergence of non-law firm and alternative business models, how do you see the corporate counsel field developing over the coming years? Are there any other key developments within your industry that you would like to highlight?
Jacobo Cohen Imach: The role of corporate counsel is becoming increasingly complex all the time. As mentioned above, in the e-commerce and telecommunications industry corporate counsel are becoming more involved in the business of the company than before.
Previously, organisations in the sector didn’t need to consult lawyers with such regularity, but the environment is changing. E-commerce is now a much more legally complex and technical industry, as the internet is becoming very regulated. Therefore the situation of different companies in Latin America is such that corporate counsel is much more necessary, with in-house lawyers involved in corporate policy and business decisions to a much greater extent than they were 10 years ago. Regulations are so closely entwined with the business of the company that directors of the company and lead counsel are both involved in the development of business strategy.
In fast-moving industries like this, it is important for in-house practitioners to be very alive to changing business models and legal developments, and to be creative in providing legal advice which enables businesses to grow.
Christian Matton: In-house counsel will develop to become a “business partner” and a “risk manager”, with more than the traditional “legal advice” function they have in a lot of companies. In-house counsel will be more embedded in the business structure of the company, as opposed to being a corporate support function. This is a general trend that applies equally to finance and HR support functions.
José Alberto Cerutti: A corporate counsel must be an excellent professional in many areas, not only in legal matters. He or she is more of an adviser than a technical lawyer, who deals with many complex situations using the right level of knowledge (compliance, IT, IP, risk management, etc) and a holistic approach to give good advice to internal clients. In the end, this is the main difference between these individuals and outside counsel, who give support in very defined areas but who sometimes lack the vision of the entire business from the inside of a company.
The importance of compliance and the complexity of sector regulations have increased substantially over recent years, requiring more information and the right balance of business and legal risks for a better management of the issues.