Data, cyber and accountability were all in the spotlight at this year’s Managing Risk and Litigation Conference (MRL), as lawyers debated their role within an organisation and the importance of data security and recording data.
The full-day event had a packed agenda consisting of five panel discussions, five roundtables, plus presentations and a fireside chat.
Over 80 senior in-house counsel, litigation heads and risk and compliance officers gathered at the event to share best practice and discuss some of the most pressing and challenging issues faced by their organisations, from managing challenges of housing data and the implications for dispute resolution, to the consequences of litigation funding and how to respond when a cyber-attack is taking place and in its aftermath.
The speaker line-up included Telefonica’s disputes head Sophie Service, Lloyds Banking Group’s general counsel Tom Spender, co-founder of Augusta Ventures Robert Hanna, the SRA’s director of regulatory management Miles Alexander, Dechert partner Timothy Bowden and One Essex Court barrister Daniel Hubbard.
The morning kicked off in exciting fashion – with the Metropolitan Police’s detective sergeant in the cybercrime unit Mat Stanley’s keynote speech discussing the threats posed by the dark web, its links to cryptocurrency and the dangers posed by cybercrime.
All about governance
The first panel of the day, chaired by Dechert partner Timothy Bowden, debated the role of in-house litigators within organisations. The legal sector has come under scrutiny since the financial crisis, with one panellist stating that it was “unusual” for a lawyer to be investigated prior to the 2007 crash. The panel agreed that there is more scrutiny on lawyers now, than ever before.
While there was agreement that the role of an in-house litigator is to protect and defend a business, lawyers must remember that they are trained with ethics and must operate in the most ethical way.
“The role of being an in-house lawyer is to be part of the protection of the business. There is now a greater onus on the lawyer itself – everyone wants to work in an open culture and when you can’t have that dialogue there is probably something wrong. Your role is that you are acting for the client or company and there can be times when there could be a conflict. I think the training and experience we have means people can trust and rely on the advice we give them – that helps you be the trusted advisor to the business.”
With increased scrutiny, the role of in-house lawyer has gone beyond being the first line of defence – “we ask legal questions but also moral and ethical questions, it is broader now. Lawyers are able to see the risk and it is our role to point out those risks and assist in finding a fair legal and transparent way to do the business.”
The greater integration into a business means that in-house lawyers remember what “you have to do and know” as a lawyer and making sure that “you are delivering decisions effectively and recording that decision. It is all about governance.”
The panel agreed that lawyers need to be hyper-vigilant about how material is recorded, otherwise any potential investigation is reliant on someone’s memory.
One panellist said: “There isn’t an archive for possible future litigation, and there shouldn’t be should there? But the question is should something have been written down? Often you just don’t know if things need to be written down.”
“The longer you do the job the more you get a sense of what needs to be preserved but you can’t anticipate everything. With the benefit of experience, you do get a sense of whether something is in the moment or whether it has the potential to go wider and then the way you act is different and you know you need to be much more careful.”
One panellist cited the HP Autonomy dispute – a plain M&A deal which years down the line led to a multimillion-pound dispute – as a case where a document retention schedule is important. An in-house litigators job isn’t just to handle litigation now – their role is now in the pre-litigation.
Keep your friends close… and the regulators closer
The second panel, chaired by Eversheds Sutherland partner Claire Carroll, looked at the pressures placed on businesses by regulators. In-house lawyers play an important role in working with the regulators, whether this is Ofcom in the media sector or the Financial Conduct Authority (FCA) in the financial services sector. A tough balancing act was highlighted – ensuring consumers are protected while encouraging competition within their respected panels, all under the guise of regulators.
One panellist highlighted the need to empathise with regulators, he said: “It is helpful to have a good working relationship with the regulators and understanding the pressures they have and where they are coming from.”
Understanding the pressures regulators have and keeping them informed and updated on new developments is key, whether this is for compliance reasons or enforcement reasons. While Ofcom doesn’t have reporting obligations, the FCA take a more diagnostic view to supervision. “Enforcement starts at a much earlier stage at the FCA, so it is important to keep that in mind.”
On the other side, Ofcom is a more permissive regime, “we don’t have reporting obligations, we have a mature, deep and complicated relationship. There is a high degree of mutual trust and respect. We don’t have a supervisor team that looks after us, we have an account manager. Where there are issues it is a good and open and respectful relationship.”
All the panellists agreed that consistency is important. One said: “Sometimes it’s a left hand and right hand problem, you don’t want to be telling one regulator one thing and another regulator another thing. You must work out the pecking order and keeping all of them informed can be a challenge.”
Regulators are also focussing increasingly on individual accountability, looking at the root causes and expectations at an earlier stage than previously. One panellist said there is “much more” focus on individuals and regulators expect privilege to be waved to gain the full facts.
Data is currency but it is also your friend… sort of
Sandwiched in between roundtables and a fireside chat, the third-panel discussion, chaired by FTI consulting’s Sonia Cheng, looked at whether data is a friend, foe or frenemy. Data is currency – with one panellist citing recent M&A deals involving WhatsApp and Fitbit as examples of acquisition’s where the value ascribed to it is predominately on the data: “A large purchase price cannot be tied to anything else other than the data”
Data has also become an important part of managing litigation risk. The panel emphasised that it is important to know “what you have, what you need to keep and identifying where you have data that you can’t justify keeping.”
The risks associated with data gathering and data retention are growing but it can also be a tool for lawyers to manage risk. The panel agreed that it is important to be accountable with large volumes of data but also to be aware of potential data breaches.
One panellist said: “One of the complications of large data volumes is being accountable with the data. We have seen a tremendous increase in awareness, asking questions about what data you hold and what you are doing with that data.
“Every division will be impacted and getting the right level of accountability raises a number of challenges, should we now be treating privacy as risk and making it front and centre? It hasn’t played a front and centre role, but this is changing.”
The panel agreed that data can be your friend if used in the right way. Governance is key in relation to data, “we can’t live without data, it is becoming increasingly important. You need the right governance around that.”
Another panellist added that data can help a litigator make a case in both a substantive and market context,” but added that it is a “chance card.”
Is litigation funding the future?
The penultimate panel of the day, chaired by Augusta’s co-founder Robert Hanna, discussed the growing role of litigation funding. Litigation funding has been a hot topic among the disputes market for a long time now, but it has only emerged as a tool for claims in London in the last decade.
There was a hearty debate on the future of litigation funding, with one panellist stating that it is a business that will continue to grow.
“The obvious point is that some people cannot afford to bring a claim and they rely on litigation funding to bring a claim. Funding is becoming a necessity. It also gives claimants more certainty over their limited resources and helps the budgeting process.”
However, another panellist was more sceptical about third party funding, stating that Damages Based Agreements are a cheaper option and several claims are now being advanced which would never get off the docks.
“The advantage I can see is not having to fund litigation, but much of the claims we get. I am not sure why litigation funding would be better than a DBA.” However, according to another panellist, funding and DBA’s can work hand in hand – DBA’s will rise but it doesn’t mean the end of funding and funders will fund the law firms behind the scenes rather than cases.
All the panellists agreed that the funding market is going through a change, and there is a consolidation – highlighted by Fortress’ takeover of Vannin and Bentham and Omni Bridgeway’s merger – there might be less competition in the short term but the players who are in the game will have ample money to fund cases.
A microscope on NDAs
The day concluded with a debate over the role of non-disclosure agreements (NDAs), chaired by Eversheds partner Paul Fontes. The panel discussion centred around non-disclosure agreements and the role of the lawyer in drafting these.
SRA principals reminded lawyers of their ethical standards, in light the Harvey Weinstein scandal and since NDAs have become a point of contention.
One panellist said that the agreements are tools to protect the interest of a client but another stipulated that they can often lead to cover-ups of misconduct, stating the “interest of clients does not override wider duties to act independently and maintain public trust.”
It emerged that in the last 28 NDAs the SRA has investigated, seven were linked to sexual harassment and 21 were not. The panel emphasised that NDAs aren’t all about sexual harassment.
One panellist said: “The number one focus for the business is the protection of reputation, they give our company a huge amount of comfort from a community of people who provide a threat to our reputation.” With another panellist emphasising that no matter what the NDA says, if someone has concerns that are public interest they should be raised and “responsible whistleblowing is there to stop harm.”
In the closing stages of the conference, one panellist said that “there is a knee jerk ‘we must have an NDA in every settlement agreement’ reaction. They need to be proportionate, time relative and used with the consent of both sides.”