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In-house lawyers are struggling to keep pace with a turbulent business environment. With the crunch tightening its grip on businesses and law firms, financial constraint was high on the agenda at this year’s Corporate Counsel Forum Europe. Leigh Jackson reports

With the credit crunch starting to impact on businesses outside the property and investment sectors, one of the key issues discussed at this year’s Legal Week Corporate Counsel Forum Europe was the effect of financial constraints on in-house legal functions.

The credit crunch and its influence on the relationship between general counsel and external firms came in for major scrutiny at the event, which was held on 23-24 September in Switzerland.

HSBC’s head of legal Richard Hennity noted that law firms had been successful in protecting their clients from litigation risk in the fallout of the credit crunch.

He said: “Litigation lawyers have been rubbing their hands with glee waiting for litigation to hit and I haven’t seen it happen. I do not know what that says about firms trying to protect their clients’ interests, but it appears they have done a reasonably good job.”

Fellow panellist Mike Henley, commercial and dispute resolution partner at Hammonds, suggested that while the credit crunch continued, law firms would, as a result, pick up more work from their clients.

Henley said: “We are starting to see a pick-up in litigation between corporate clients, who have more reason not to pay and more things to argue about. Also in financial services, with institutions looking at the possible falling of asset values and what they can do about that.”

But what will the upshot of increased litigation mean for client fees? InBev chief legal officer Sabine Chalmers hinted that relations between advisers and clients would increasingly depend on fee levels. She said: “There is a lot of talk about cost and trying to keep cost down. The two main areas that freak us out are legal fees and investment banking fees. How will firms react to the level of fees?”

With risk high on the agenda, HSBC’s Hennity said general counsel would be looking for a new approach to risk management through their contracts.

He said: “There is a focus on risk. Risk has become a buzz word. Risk managers deal with numbers – lawyers deal with words. We could reach a point where legal contracts work on a numerical scale of one to 100.”

The discussion also touched upon the importance of maintaining control over in-house legal teams as a means of combating the effects of the crunch. Richard Shoylekov, group company secretary and general counsel of Wolseley, said it was important that the legal head and the internal function had clear goals to sustain a healthy future for the business.

“One of the important things that I would like to achieve is clarity in the reasons for the team working with you,” Shoylekov said. “What are the values sustaining your long-term business propositions?”

Lawyers as leaders

Domestic general counsel have long glanced across the pond at their American counterparts and seen lawyers who have more responsibility and a stronger leadership brief with their business.

In recent years, UK-based general counsel have emerged somewhat from the shadows, but a healthy debate was held on how lawyers can establish themselves as leaders within their business.

David Brimacombe, the head of legal and compliance, Middle East, Pakistan, Africa and Europe for Standard Chartered Bank, said the most important attribute in legal leadership was integrity. “Without integrity you cannot be a leader,” he said.

“You have to be firm and fair; you have to be able to deliver to the corporation but also to your team.”

Brimacombe added: “There is an old adage which says it is better to be feared than loved. That is true, but what you really need is to be respected.”

The Royal SunAlliance (RSA) Insurance Group’s legal director Humphrey Tomlinson, suggested that leading as a lawyer involved working closely with your team and taking stock of their needs.

He said: “To lead you have to know what is going on. You have to be looking for areas where you can make actual change.

“You have to get people in the team inspired by following collective goals and you must unlock doors for your team.”

One of the issues raised was how general counsel were able to know if they were doing a good job and how they could measure their leadership skills.

Jeremy Barton, general counsel of The Boston Consulting Group, said without a system of performance metrics all steps taken to ensure better leadership would be rendered useless.

“One of the key questions is: how can all these things be measured?” Barton added. “You have to keep a clear focus on how the team is performing and how you measure up in reality.

“Reviews and feedback are crucial to the process.”

CCF off the record: clients and panel reviews

There’s nothing like attending a conference for in-house lawyers to be reminded that the relationship between client and external counsel and can be complex and often fraught.

A Chatham House rules debate on the etiquette for managing panel reviews illustrated a general theme – general counsel, if they don’t want to feel like they are being taken advantage of, have to learn to be a good deal more assertive.

Firms, on the other hand, are generally felt to have no problem being assertive – whether clients like it or not. They are confident, demanding and happy to stand their ground stubbornly – or so we are led to believe.

The session kicked off with a role play in which the facilitators acted out a discussion between an old-school, cringe-worthy relationship partner and a modern, assertive client hoping to squeeze value out of her old-fashioned counterpart.

No sooner had the curtains come down on the opening theatrics, than the audience began dishing out tips. “I draw up a specific shortlist and any new people invited to tender I like to meet face-to-face,” an in-house lawyer proclaimed. “Partner supervision is vital and audit is fundamental to the process.”

Another said: “We are very specific on what we want, so ask firms to show their expertise, cultural fit and trends – it works very well and we can find out if they are a fit or not. One firm I asked about their corporate social responsibility said that there was no point in having one.”

At this point partners, perhaps feeling under pressure, began speaking up, urging clients to be clear on what they wanted from the relationship.

“The quality of the docket is key,” one partner said. “As a firm we like to have as detailed information as possible. Sometimes it is too vague so we can only give a vague response.”

Another declared: “The best approach I’ve seen is a 10-page document asking us to describe why we were a good fit. We did very well on that one.”

Striking a more conciliatory tone, the session ended with firms and in-housers writing short lonely-hearts adverts. Cue talk of lawyers looking for trust, long-term relationships and enduring friendship – if only bringing firms and clients together was this simple in reality.

Five tips on tendering for law firms – Ian Leedham, senior counsel-commercial, National Grid and Diana Newcombe, senior associate, Eversheds

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