Smoking buddies

British American Tobacco’s Stephen Walzer is an expert in smoothing the way with the authorities, hardly surprising given his involvement in so many. Naomi Rovnick reports

“Large corporations ignore Brussels at their peril,” booms Stephen Walzer when asked why British American Tobacco (BAT) has a separate legal division, headed by him, to concentrate solely on international regulatory issues. And he is right, as any company that has fallen foul of the competition laws will testify. As the second largest tobacco company in the world, BAT has to be careful.

Walzer’s job title is slightly misleading. He leads the way in any negotiations with the European Commission, but is not the only deputy to the worldwide general counsel. He is known as ‘assistant general counsel’ as he is one of a handful of lawyers with that title who all report to the worldwide general counsel and head legal divisions.

At BAT, Walzer covers the laws of the European Union, United Nations, the Organisation for Economic Cooperation and Development and the World Trade Organisation. He has been at BAT for 10 years, and was previously in-house at British Petroleum.

Perhaps it is down to Walzer that BAT has never been blasted by the European Commission. While the company, which recently took over tobacco producer Rothmans, comes up with the big ideas, it is Walzer who has the crucial role of keeping the regulator onside.

“You don’t go to the commission saying, ‘We want to rule the world and no one else matters’,” he says.

Walzer also believes that any company needs a lawyer to negotiate with the European Commission. “In-house lawyers advise their clients and seek to ensure business propositions will be achieved. I lead negotiations with the commission that can often be hugely complex,” he says.

And Walzer is one lawyer who really knows how negotiations with the regulatory bodies work. Last autumn, he was invited to join the UK Competition Commission’s reporting panel. He joined with two other lawyers, Theodore Goddard’s highly regarded partner and consultant Diana Guy and former Nabarro Nathanson partner Laurence Elks. However, he is the first to admit that negotiating with the European Commission is not always an easy task. When asked about the discussions surrounding the Rothmans acquisition in particular, he says: “There is debate, as there always is, about the mechanics of a corporate acquisition. Things may not be understood, or they may be analysed in an inappropriate way. This needs to be resolved through sensible discussion.”

Walzer spends around two days a week at the Competition Commission, where the reporting panel has been expanded as part of the Government’s plans to give it more powers. Walzer is one of 21 new panel members who got in following around 800 applications in response to advertisements in the national press.

When he was appointed, Walzer said he had personal reasons for wanting to be on the panel, which does not pay high salaries, and wanted to give something back as he is approaching retirement.

He has just been chosen to work on the Competition Commission’s inquiry into Coloplast A/S, a company which runs a nursing service, over its acquisition of the continence care business of SSL International.

Walzer believes that his role as an in-house lawyer means he has skills that span law and industry, which are of great use to the regulator.

Walzer is also a member of other competition panels. But he is keen to point out that these roles are separate to his job at BAT. He is a member of the UK competition panel for the International Chamber of Commerce (ICC), of which BAT is a member. He is also in the Confederation of British Industry (CBI) competition group. And he is on competition working parties for the Law Society and the Bar Council.

Obviously, BAT has nothing much to do with the Law Society and the Bar Council, but the company is a member of the CBI. Walzer says that, although BAT is also involved in some of these organisations, he is not there as its representative.

Some would assume that Walzer’s job with the UK Competition Commission, a role that he describes as part time, could throw up some conflict issues. But he says that it has not happened yet.

In 2000, Secretary of State for Trade and Industry Stephen Byers commissioned an inquiry into BAT, looking at whether the company was involved in tobacco smuggling. BAT has reportedly agreed to a deal with the Government to participate in the inquiry, and the spotlight has shifted to Imperial Tobacco. Walzer will not be drawn into any discussions about how such Government inquiries could intersect with his role at the Competition Commission, which is a Government body.

As Walzer is responsible for one distinct, albeit very important, division of the tobacco megalith, he instructs his own law firms. These instructions, he is keen to point out, are always separate to instructions that may be made by BAT. He uses Herbert Smith and Linklaters because he believes they are good at competition law. Herbert Smith is also BAT’s main corporate adviser.

Walzer wishes that as an in-house lawyer he could do more. He is very keen for UK in-house lawyers to have legal professional privilege, as they do in the US. He would like to be able to keep his legal knowledge to himself in some circumstances, and thinks other in-house lawyers should be able to do the same. In his view, external law firms are often used by companies only because they are allowed to keep secrets in the way in-house lawyers cannot.

“In-house lawyers are unable to carry out their proper role,” he says. “We have to advise with one hand tied behind our backs. But law firms do have that privilege. In-house lawyers are no better or no worse than law firms: we are both subject to the same rules. It is the latter’s professional privilege which can often secure work for them,” he says.
Stephen Walzer
Assistant general counsel
British American Tobacco

Organisation British American Tobacco
Sector Tobacco
Market capitalisation £11.4 bn
Employees 81,425
Legal capability 200
Assistant general counsel Stephen Walzer
Reporting to Neil Wallington, worldwide general counsel
Law Firms Herbert Smith, Linklaters