Style counsel: in-housers adopt a higher profile
5 June 2011 | Updated: 6 June 2011 10:00 am
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The Lawyer Awards 2011 shortlist contains some outstanding pitches from in-house lawyers.By Joshua Freedman
In-house lawyers pride themselves on being critical to their organisations, so it is little wonder that the shortlist for The Lawyer Awards 2011’s In-house Commerce & Industry Team of the Year shows the legal department becoming less of an advisory arm and more an integrated part of a company.
These lawyers’ roles stretch from briefing management on legal risks to sitting on boards as commercial advisers.
As the shortlist also shows, times are hard. Cost-efficiency is a common thread in the stories of many of the shortlisted in-housers, and general counsel show a marked consciousness of the size and structure of their teams. But they are also adamant that shrinking legal teams and taking shortcuts are not the best ways to face the post-recession challenges.
Instead legal bosses have turned their minds to cutting waste and increasing the value of their teams’ operations. Those in the running for the award have used innovative ways to cut spending and ensure their expertise plays a more central role in the day-to-day running of their companies.
Contract databases and mechanisms for transferring knowledge around the company feature in nominees’ pitches for the category, alongside the more traditional panel reviews and drives to bring work in-house.
Few have had more success in streamlining legal functions than Bupa, which achieved savings of up to 50 per cent in some cases thanks to establishing its first UK panel, a process that involved a virtual auction.
“The bottom line is that the company needs advice and support from outside counsel at the right price,” says Bupa legal director Paul Newton. “But you can’t sacrifice advice for price. The cost of advice is aligned to the value to the business.”
The healthcare provider has also kept close tabs on its functions by undertaking a thorough analysis of the performances of its external lawyers, and even ranking itself for legal spend against other in-house legal teams.
Internally, the team has placed itself close to the action in the rest of the company, establishing a legal risk assessment framework for ensuring non-legal managers are clued-up on the risks they have to deal with, and are capable of managing these independently.
“Our role as in-house lawyers has changed enormously and is continuing to change,” Newton adds. “We’re having to become more expert in helping the company understand and manage its legal and regulatory risk rather than simply be lawyers who offer legal advice. At Bupa there’s a significant expectation that lawyers will be more than just lawyers.”
For example, the legal head of Bupa’s Spanish business Sanitas is also responsible for strategy, property and government relations, while most of the organisation’s lawyers report to both the general counsel and the head of the relevant commercial unit.
Bupa is far from being the only company whose in-house team is upping its footprint within the organisation. The Football Association (FA) has introduced a searchable centralised online contract database enabling employees across the company to access documents.
“It’s been a fantastic tool for the organisation, allowing people to access contracts and not slip up on renewal dates,” says Alistair Maclean, group legal director and company secretary at the FA.
Few corporations have to deal with the type of issues affecting the FA, whose busy schedule of fixtures and concerts, as well as intense subjection to media scrutiny, puts the legal team in an unusual position.
Yet the FA has managed to cut costs through setting up its first legal panel and taking on trainee secondees. This has resulted in a 25 per cent reduction in legal spend.
It revamped the team’s structure following a move to the new Wembley Stadium, replacing the senior solicitor position with a senior commercial solicitor and a senior litigation solicitor.
For Premier Foods, cutting costs has been a necessity. The food production giant, whose brands include Hovis and Mr Kipling, has suffered from falling consumer confidence and went through a number of restructurings and disposals in an attempt to address balance sheet issues.
The nine-strong legal team, headed by general counsel and company secretary Suzanne Wise, oversaw the disposal of the meat-free business (including the Quorn brand) to Exponent Private Equity for £205m. The slim in-house team worked around the clock to close the transaction.
But for Wise, this is far from the only reason to maintain the size of the legal department.
“From what I can see there’s an increase in the size of legal teams,” she says. “Companies do more in-house to cut costs. I don’t see in-house teams retrenching in size because that’s a false economy.”
Premier did, however, review its panel of external firms in April 2010, reducing the roster to just three firms. The move slashed legal spend and gifted the company a free secondee for 12 months.
Royal Dutch Shell finds itself in a rather different situation to the streamlined Premier team. With 700 lawyers worldwide, the company has a number of legal teams, reflecting a reorganisation in 2009 that saw the merger of its exploration and production business with the gas and power unit into an ’upstream’ entity and, separately, the establishment
of an ’upstream international business’ (UIB) unit to manage its liquified natural gas portfolio around the world.
Complicated it may be, but then there is no shortage of complex deals for Shell’s Hague-based team to manage. The company acquired Arrow Energy in a joint deal with PetroChina and swapped two Norwegian fields for oil company Hess’s upstream portfolio in Gabon and interest in the Clair field in the North Sea.
“Given the number of jurisdictions involved [in the Hess swap], there were a lot of legal issues over pre-emption agreements,” says UIB legal head Stephen Rees.
Yet keeping work in the family is still the best plan, despite the challenges of an unstable industry.
“Energy-related work can have peaks of activity,” adds Rees, who goes on to insist that “our model is to do all legal work in-house”.
The air care bunch
British Airways (BA) manages these fluctuations by bringing in extra staff when needed.
“There are spikes in activity from time to time and we can bring in contractual resource to support the team,” says Andrew Fleming, head of legal at BA.
The past year or so has seen no shortage of spikes. The team had to negotiate clearance from the European Commission so it could clinch an alliance with American Airlines.
his followed previous failed quests to obtain a green light from the authorities. And that is not to mention the widely publicised merger with Iberia, a deal that cleared EU merger regulation in July 2010.
For BA, regulatory issues dominate the agenda.
“There’s a huge amount of regulation in our sector,” Fleming adds. “An important part of our role is to support the business in understanding the requirements of the various rules.”
But Fleming cannot ignore the question of efficiency, with the team set to introduce cost-cutting measures, including e-billing.
Regulatory compliance was central to United Utilities Group’s 2010. The company had to comply with PR09, the price review set by regulator Ofwat, and slashed the size of its legal team, reducing numbers by almost 50 per cent. The headcount and budget cuts were completed in time for a hectic year of restructuring deals overseen by general counsel Tom Keevil and head of legal Simon Gardner, including disposals with a combined value of some £600m.
Choo choo review
Porterbrook Leasing Company, meanwhile, underwent a massive refinancing that involved establishing a £3bn multicurrency programme for the issuance of secured guaranteed bonds. The company issued £520m of bonds to repay the equivalent amount of debt, a process requiring a large legal team working to a tight timescale and budget.
“It was the first of its kind in relation to the sector I’m in,” says Porterbrook legal director Stephen McGurk. “It was breaking new ground.”
He says working with other parties was a challenge, adding: “It’s not a sector investors were necessarily aware of at the outset.”
Partnerships between local authorities is the name of the game as public sector legal teams push ahead with cost-cutting drives.
The list of nominees for The Lawyer’s 2011 In-house Public Sector Team of the Year shows councils are increasingly working together with neighbours or forming cross-council groups as ways of making their cash go the extra mile.
“With mounting budget pressures councils are looking for new and innovative ways to save money,” says Terry Osborne, director of governance and law and monitoring officer at Waltham Forest Council. The authority, together with Kent County Council, successfully challenged the Secretary of State for Education’s decision to axe the Building Schools for the Future programme. The cuts had threatened to cost the two authorities £500m.
“Forming partnerships across authorities is one way to achieve savings in certain areas, but sharing information, good practice and expertise are other ways councils can improve efficiency,” Osborne adds.
The two councils dealt with the case entirely in-house, another decision based around efficiency, as they felt they had enough expertise in their teams. “This meant we were able to save money for the authority without compromising on quality,” explains Osborne.
Jessica Farmer, head of legal services at Harrow Council, which is allied to several other London authorities, says the principle of linking up with other councils is fine so long as the size of the partnership is kept under control.
“It’s a good way of streamlining functions,” she explains. “We’re working on similar things and have similar needs, but a partnership shouldn’t get too big.”
Farmer suggests a limit of 10 boroughs.
Harrow plays a central role in the London Boroughs Legal Alliance, a 10-borough partnership with a panel of 15 law firms, a cost-free training programme and a system for sharing work between councils so less needs to be outsourced. Aside from this the council carries out all education tribunal advocacy in-house and introduced a wellbeing programme for staff that led to a drop in the sickness rate from eight days per year per employee to one.
Legal Services Lincolnshire (LSL) is markedly different. The partnership of six councils cut members’ annual external legal spend from £1.2m to £338,707 in the first year. It even sells legal services to public sector bodies nationally. It takes work away from the council clients, freeing up capacity, and has broad enough expertise to offer advice on a range of matters.
“We don’t suffer from being under-resourced - we’ve got people who can cover all the bases,” stresses Eleanor Hoggart, assistant practice director at LSL.
Glasgow Housing Association (GHA) spent £1.2bn modernising homes in the city, a project that required major negotiations with the Government to convince it that the money was being well spent.
Gordon Moir, who featured in The Lawyer Hot 100 2010, was parachuted in as company secretary to take the project by the scruff of the neck.
“When I took on the role the organisation was in turmoil,” he says. “The Government was challenging its existence. We had negotiations with the regulator to convince it we were spending money wisely.”
Moir has since left GHA to join Webb Henderson as a telecoms partner.
“One of the biggest issues we faced was achieving total cost-efficiency,” adds Moir. “Public organisations are being squeezed quite hard. We did huge litigation, but in a cost-efficient manner.”
Moir kept the finances under control by setting up an LLP to sell legal services externally, auditing the team’s performance constantly and setting targets for team members. He also placed the team at the heart of the organisation’s actions, making it clear to everyone how crucial its role was.
“We felt that in-house legal staff were close to the organisation,” says Stephen Tonner, strategic legal support manager at GHA, on the decision to keep work in-house for key deals, including the purchase of a major piece of real estate in a prime area of Glasgow. “They don’t just have a badge that says they are agents of the GHA. They choose to work in housing - they’re legally qualified, but they’re paralegals and lawyers who choose to work in housing.”
Equally crucial was the Pension Protection Fund’s legal team, which works with the rest of the organisation on every issue.
“We’re very much part of the business - as the business has grown, so have we,” says Fiona Holden, a senior lawyer at the fund that was created by the Pensions Act 2004 and which pays compensation to pension scheme members whose employers have failed or had schemes that were funded inadequately.
Meanwhile, the London Development Agency (LDA) has had to deal with thorny issues such as the sale of the Olympic Park site to the Olympic Park Legacy Company and the closure of the LDA, which is to be abolished by March 2012. Caroline Moore, director of law and governance since 2008, says her predecessor expanded the legal team to keep costs down.
“We have a much bigger in-house team with a wider range of expertise, which has helped to cut costs,” Moore says.
The LDA sees the benefit of working with others in a similar position.
“We work closely with other members of the Greater London Authority group and share training opportunities,” adds Moore.
It seems the partnership idea is catching on.