12 June 2000
This year has been a positive one for Rio Tinto.
The mining giant, which has a dual listing in the UK and Australia, has strengthened its business by acquiring the remaining stake in alumina and aluminium producer Comalco.
Rio Tinto already holds a 72.4 per cent stake in the company but the purchase of the rest of Comalco consolidates its position in the Australian market.
In March, Rio Tinto announced an 83 per cent increase in net profits for last year and it is finally settling unrest with the International Federation of Chemical, Energy, Mine and General Workers in Australia over a number of issues including the right to collective bargaining.
The problems with the union are something that Charles Lawton, head of legal at Rio Tinto, is aware of, but something he would rather not get involved in.
He says: "The Australian industrial relations legal framework is extremely complicated. We actually employ a firm called Freehill Hollingdale & Page which does most of that work because it is a specialist in doing it.
"I think it would be a brave UK solicitor who thought they would be able to fight their way through that system."
Lawton only gets involved in the Australian operation if the company is embarking on a large deal, such as buying up the final stake in Comalco, which Allen Allen & Hemsley acted on.
Only then will the in-house legal departments in London and Australia, which hold five lawyers each and are the largest in the group, come together to discuss who should be used on
Lawton says: "I don't think we have ever had a major disagreement. I can only think of one recent case where we went to a firm of our choosing where the people in Australia had chosen another firm."
Lawton stresses that each division in Rio Tinto's international set-up, which includes the US and South Africa, is responsible for its own choice of local law firms.
He says: "Each of the overseas lawyers work within a business unit and will report to the managing director of that division.
"However, when we appoint senior lawyers overseas I do get involved in the recruitment process."
Lawton says that the in-house lawyers in each jurisdiction tend to opt for local firms when outsourcing work - but only to a certain extent.
"We are always happy to get advice from local lawyers but then we don't normally get them to draft our agreements, we tend to draft our own agreements which is probably typical of English lawyers.
"You will have to tinker around with it to make it in tune with what other people in different parts of the world are familar with," he says.
As for his own method of choosing firms, Lawton is disdainful about the idea of a panel, dipping into a list of preferred suppliers rather than having a set line-up of firms.
He says: "When I hear people say that they are interviewing their panel I think that they must not have enough work to do. I can't imagine having time to do it.
"From my perspective, if a firm we have got is giving good service, good value for money and knows our business, then quite frankly I think I would be a fool to go and choose somebody else just for the sake of what appears to be a saving of a few pounds on a chargeable hour. I think it is a huge risk."
Lawton says: "The last really big matter we used it on was when we acquired all of BP's mineral assets in 1989.
"It used to do a lot of work with the company we merged with in 1995 and so because we had a big stake in that company we were also getting the benefit of its work.
"I trained with Slaughter and May and think that it is a first class firm. But the difficulty is that unless Linklaters is conflicted, which is always possible, I really haven't got any particular wish to move away from people who do so much work for us and do a good job like they do."
Rio Tinto uses some of the biggest players in the City. Lawton says he has sought advice from Allen & Overy in the past, specifically for arbitration work, and the company also sends out personal injury claims work to Davies Arnold Cooper and property issues to Lewis Silkin.
Lawton says: "The biggest firms are really only focused on the high-rate, high-end work, such as corporate market advice. But the smaller firms have a lot to offer."
Lawton also says that he is committed to keeping as much work as possible in-house.
He says: "Although we are a large company, the number of transactions running through at any one time that require external advice is not that many. We try with our five lawyers here to do as much of the work as we can."
Does Lawton think it is unusual for an in-house team to be so self-sufficient?
"It probably is," he says. "But that is what we like to do. We regard ourselves as a sort of mini legal practice.
"Each person has their own specialisation. We have two people who do a lot of M&A work, I do quite a lot of competition work. We also have in-house expertise in stranger areas like mineral law and exploration and development."
Head of legal
|FTSE 100 ranking||29|
|Head of legal||Charles Lawton|
|Reporting to||Robert Adams, director of planning|
|Main location for lawyers||London and Australia|
|Main law firms||Linklaters & Alliance, Lewis Silkin, Davies Arnold Cooper (UK), Sullivan & Cromwell (US), Allen Allen & Hemsley and Arthur Robinson & Hedderwicks (Australia)|