In the regulators’ sights and with plants on the Russia-Ukraine border, Amcor’s tobacco packaging division needs all the help it can get from GC Damien Clayton
Despite the advent of e-cigarettes, the world still loves an old-fashioned fag. Research published in the Journal of the American Medical Association shows that between 1980 and 2012 smoking globally rose by more than 34 per cent – from 721 million people daily to 967 million.
Of course, there are many more people on the planet than there were three decades ago, but tobacco producers – and those servicing the industry – do not appear to have to worry about extinction just yet.
Which is a relief for Amcor and Damien Clayton, the general counsel for the group’s tobacco packaging division. Regardless of the health arguments swirling around smoking it is a massive business and Amcor, as a leading supplier, faces a range of legal issues, not least with regulation.
“What becomes an issue for our customers,” says Clayton, “becomes an issue for us.”
An obvious hurdle is the move to impose plain packaging requirements on manufacturers. That trend is led by regulators in Australia, but there are signs that the UK and the wider EU could follow.
“The regulatory side makes this side of the business challenging,” admits Clayton. “Other parts of Amcor don’t have to contend so much with that regulatory environment.”
A more immediate issue for Clayton is the EU’s 10-year-old Tobacco Packaging Directive, amendments to which were passed in Brussels in May. These are now being implemented by member states.
The beefed-up directive covers issues including banning flavoured cigarettes, stipulating that health warnings must cover 65 per cent of packages and introducing a track and trace system to combat illicit trade and falsified products.
The latter two points have a direct impact on Clayton and his small, Zurich-based team of one legal assistant.
Headquartered in Australia, Amcor claims to be the largest packaging business in the world, with annual sales of some £5.2bn and 27,000 worldwide employees split into four divisions: rigid plastics, flexibles, flexibles Asia and tobacco packaging.
The tobacco side specialises in paper-based, hinged boxes, and it is diversifying into chewing gum and other packaging. While Clayton’s is the smallest legal group, the other divisions also run small in-house models, with the overall business heavily relying on outside counsel around the world.
That means panel reviews are conducted every two or three years, with Clayton running the last one for the tobacco packaging side in 2011, following Amcor’s merger with fellow packaging business Alcan. That suggests another is due, but Clayton will not confirm details. However, he is happy to discuss what he looks for in panel firms.
“Expertise in several areas is essential,” he specifies, particularly in HR, litigation, regulation and IP.
“We’re a manufacturing business with plants around the world, so it’s important to have advisers on the ground. That is particularly important in the US, where the law is localised on a state level. We often need an adviser in the state in which a plant is operating, who knows the law in a number of areas.”
He adds: “We don’t just look to have the biggest law firms, we look to have firms in certain locations to service specific practice areas. It’s a very dedicated focus.”
Clayton also hammers home a familiar refrain heard across the in-house world.
“We run a model across the group in which we view our advisers as business partners – we expect them to know the business,” he insists. ”That means not just knowing what one business group does but the others too. Because even if the lawyers are not working with those groups now, they may do in the future.”
Those bidding for Amcor work in any forthcoming tendering exercise should bear in mind a core Clayton principle.
“We want more flexibility from our advisers,” he says, with an eye on billing structures. “That doesn’t mean we’ll never work with hourly rates and only with a fixed cap, but we generally like to have certainty around what we’re going to be billed for a matter.
“Cost is certainly a factor when choosing our advisers, although we recognise that different types of work require different fee rates. And the primary focus is on the quality of advice and the advisers behaving in a commercially focused way. That means our advisers becoming business partners.”
The last point is crucial for Clayton.
“When you work with legal advisers who are too remote they won’t know what you do well enough,” he warns. ”So the advice you get is not structured or commercially focused – it becomes just a legal opinion, as opposed to a useful steer.
“Instead of receiving 10 pages of advice without any guidance or conclusions on our options, we want something more structured. We need our lawyers to know what might and might not work commercially for our business.”
Clayton says his stints in private practice gave him a solid grounding in the alternatives to hourly billing, as he specialised in two fields accustomed to fixed and capped fees – private equity and M&A.
He started practice as a trademark attorney in his native Australia before qualifying as a solicitor in London with legacy SJ Berwin in 2006. Five years later he moved in-house to Amcor’s flexible packaging division, and was promoted to his present role in 2013.
A flashpoint of interest to Clayton is the conflict on the Russia-Ukraine border. Amcor’s tobacco packaging division has two large plants in Russia and a smaller one in Ukraine. In addition to the increasingly violent atmosphere, Western trade sanctions have complicated the business environment, with Clayton leaning heavily on Baker & McKenzie for advice in that field.
“There’s also the potential of Ukraine being split in two, and how that would affect us,” Clayton points out. “We’re monitoring the situation, but the safety of our employees and their families is paramount, followed by the need to ensure that the plants are safe. At the moment our customers and suppliers in the region are still operating.”
Does all this stress drive Clayton to indulge in the odd soothing puff?
“I used to smoke, but not anymore,” he insists.
Damien Clayton, Amcor
Position: general counsel, tobacco packaging division
Reports to: Zurich-based executive management team and president
Annual legal spend: €1m-plus
Main external law firms: Baker & McKenzie (international), Browne Jacobson (UK employment), Kim & Chang (Asia Pacific), King Wood & Mallesons SJ Berwin (corporate and competition), Troutman Sanders/Davies Ward Phillips & Vineberg (US