PayPal UK and Ireland head of legal, Tom Brown
7 July 2014 | By Jonathan Ames
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Online payment specialist PayPal is innovative and dynamic, and that’s how Tom Brown, UK and Ireland head of legal, demands his team to be too
PayPal is all about the future of money. Originally an online and now increasingly an offline payment business owned by Silicon Valley-based internet auction giant eBay, PayPal is an acute illustration of how the demise of cash is big business.
PayPal’s revenue hit $6.6bn (£3.8bn) last year. And its UK and Ireland head of legal is all about ensuring that external counsel get their hands on as little of PayPal’s own lolly as possible.
Tom Brown was brought in four years ago to reduce legal spend and he’s taken those orders seriously. Brown estimates he has slashed PayPal’s annual budget five-fold since he walked through the doors of the business’s British headquarters in London’s leafy Richmond.
The South Carolinian, who came to the UK after qualifying first as a New York lawyer, has achieved that staggering reduction by building up the in-house department while consolidating law firm panel membership, deriving better fee deals as a result.
When he arrived at PayPal, the UK and Ireland legal team consisted of just two “very stretched” lawyers. Brown has boosted headcount to five in addition to himself, and is looking for one more.
“My remit was to bring down legal spend and make a case for more in-house lawyers,” Brown confirms. “We wanted to establish a smaller law firm panel that really knew our business.”
He was keen to create a panel that could advise across Europe, as PayPal operates in all EU countries. For Brown – who was shortlisted as Inhouse Lawyer of the Year at this year’s The Lawyer Awards – the benefits of enhancing the in-house team boil down to simple maths.
The value of in-housers
“You can hire an in-house lawyer for, say, £70,000 and get them to work on contracts all year,” he says. “Whereas if I instruct a magic circle firm to advise on one contract, it will charge me £80,000.”
Creating a smaller, more tightly-knit panel is also crucial for Brown, who has scaled back significantly the number of firms used. Indeed, in his time at PayPal, Brown has instructed just four: Allen & Overy, Hogan Lovells, Olswang and Arthur Cox, the latter for purely Irish legal advice.
“If you concentrate your spend with a few firms you get a better rate,” he says, “and you have a closer relationship with the teams you work with. You can waste a lot of money while law firms get to know your business – and our business is highly specialised, cutting across a lot of functions. I take a lot of time briefing the external lawyers – it’s quite an investment in time on both sides.”
But that investment is worthwhile, says Brown, who is a big fan of secondee arrangements with panel law firms, pointing out that the banking and regulatory team at Hogan Lovells provided the PayPal legal department with a secondee for the best part of a year.
Closer relations with fewer firms means those making it onto the panel are willing to pitch in with CPD training for the in-house team. Panel firms are also more amenable to providing ad hoc advice when required at short notice and at competitive, if still hourly, rates.
Indeed, enthusiasm to foster closer relationships with firms on the PayPal panel does not translate into Brown being a soft touch in fee negotiations. He has instituted billing guidelines that panel firms must sign, stipulating a regime of capped fixed fees for larger pieces of advice and an hourly rate deal for ad hoc advice sessions.
Brown insists on electronic billing which he, in turn, approves electronically.
“I can track down to the last penny the legal spend for a quarter,” he says, adding that he also insists on quarterly billing reviews with panel firms.
Another rationale for boosting the in-house legal department contingent is to put lawyers at the centre of the business. Brown is proud of the fact that his team members are seen as de facto project managers for product development and marketing initiatives.
“We are embedded with the products team,” he says, citing as an example the release of the PayPal Here application, which the company claims is the first point-of-sale device linked to mobile phones via Bluetooth technology.
“Prior to that we were exclusively an online payment company,” says Brown. “This was our first hardware product, and the legal team and I were there every day with the products team looking at everything from design to manufacturing – including factory visits. It was very hands-on.”
Another example of the legal department being involved at ground-level is PayPal’s recently launched Samsung Galaxy fingerprint technology, an application allowing users to use their fingers to pay retailers without the need for passwords or login details.
“The legal team was involved from an early stage in developing that,” says Brown. “That’s different to how I’ve worked in other legal teams, where the development people come to lawyers much later in the process.”
Brown describes PayPal’s in-house department as being “a generalist team because we’re still quite small”.
But it is a fairly experienced team, with one lawyer having been in the profession for 30 years.
“He’s like our Jedi master,” jokes Brown, explaining that average PQE in the department is seven years.
Brown splits the in-house team between lawyers specialising in supplier agreements and those focusing on merchant services. He allocates a lawyer to hand-hold a product throughout Europe, with that individual responsible for collating advice.
“I tell my lawyers to consolidate legal advice and make it easy for the business to use,” he explains.
Brown also rotates responsibilities for areas once a year, with a three-month handover period.
“That gives everyone in the team a chance to develop their career,” he adds. ”Otherwise, people can get pigeon-holed.”
After qualifying at the New York bar, Brown came to the UK for a stint with consultancy Accenture, followed by a move to TSYS, a card-processing company providing services to banks.
In 2006 he joined the TMT department at Addleshaw Goddard as an associate, before being headhunted by Pinsent Masons as a senior associate about three years later. In February 2011, he moved to PayPal.
“The biggest issue for our business,” he says, “is that in the payments area the pace of change is so quick. We have to help the company design legally compliant products quickly – ones that customers will love and that have never been done before. The unique side of our legal team’s work is that we’re working on products no one has rolled out before. It’s like an arms race with our competitors – but most people don’t care about the details of payments, they just want the system to work well.”
Brown himself is one of PayPal’s biggest fans.
“I have to work in a place where I believe in what the business is doing, and I feel a strong connection here,” he admits.
“I love the PayPal products and have a lot of enthusiasm for the business. The spirit of innovation is amazing and the lawyers are key to driving that.”
Tom Brown, PayPal
Title: UK and Ireland head of legal
Industry: Financial services
Reports to: Director of legal and managing director of PayPal UK
Annual legal spend: Less than £200,000
Number of employees: 10,000-plus
Size of legal team: Six
Law firm panel: Allen & Overy, Arthur Cox, Hogan Lovells, Olswang
February 2011: Joined PayPal
2009: Senior associate, Pinsent Masons
2006: Associate, Addleshaw Goddard
2005: European contract manager, TSYS (card processing company)
2001: Legal counsel, Accenture (business consultancy)
2007: Admitted as solicitor in England and Wales
2004: Admitted to New York State bar
2001: Law degree, University of South Carolina School of Law
1998: MBA, University of Stirling
1997: History and classics degree, University of St Andrews