Testing the mettle

Steel producer Ispat International had to rely heavily on its in-house legal team due to the technical nature of the business. But that is not to say it won’t look at outside firms- in fact, it probably knows them all. Vanessa Pawsey investigates.

In a world increasingly dominated by high-tech developments, the manufacturing industry may be unfashionable, but steel producer Ispat International is as dynamic as any dotcom start-up you care to mention.

Ispat produces more than 14 million tons of steel a year and has operations in six countries. Shearman & Sterling advised the company when it floated on the New York and Amsterdam stock exchanges for $776m (£540.9m) in 1997 in what was the largest initial public offering (IPO) outside privatisation.

Since then it has been pioneering new legal ground in various jurisdictions as it pulls off a number of unusual projects.

Head of legal Nipun Gupta set up the in-house legal department in 1997. She joined the company from Nabarro Nathanson, where Ispat was one of her clients. At Nabarros she worked as part of a team developing regulatory departments and was involved in setting up a practice in India. “Nabarros encouraged me to get involved in as much as possible. I did a lot of joint venture work, which gave me a huge amount of versatility,” she says.

At Ispat she was thrown in at the deep end. With operations in numerous jurisdictions, she was faced with the challenge of making policies applicable in all areas.

“From a legal perspective, the work we do is often different. It’s often something no one else has done before,” says Gupta. One example is a deal she pulled off in Kazakhstan for Ispat Karmet, a subsidiary of Ispat International, which introduced the notion of having two types of securities over the same assets.

There are seven in-house lawyers at Ispat International – three in Chicago, one in Canada, one in Kazakhstan, and including Gupta, two in London. Except for the two London lawyers, all are based on-site. One lawyer is an environmental law expert, another is a securities and international trade expert and the rest are generalists.

But all of them have an important role to play in the bread-and-butter operational issues. Ispat’s philosophy is not to farm out work to law firms, but to bring in experts to work alongside its own team.

When Ispat listed in 1997 it put together an insider trading policy for the company and its subsidiaries. It is currently putting together a compliance manual for the whole group. Gupta says that both projects have been run in-house.

One of the biggest challenges for Ispat, when it does outsource, is to find law firms with multijurisdictional expertise. But with operations in countries as geographically distant as Mexico, Germany, Trinidad and Ireland, the call is a tall order. Gupta says: “We want firms that have multijurisdictional expertise, but no single law firm has the capabilities for all the jurisdictions that we cover.”

Ispat’s in-house lawyers know everything there is to know about steel. According to Gupta, the challenge is bringing both them and the company’s external lawyers up to date with Ispat culture.

But the fundamental issue with external lawyers is always cost. “All my conversations begin by talking about cost,” says Gupta. “We have a very clear brief, which is to obtain premium advice at cheap rates. It’s very hard for external lawyers to match the level of expertise that we have in-house, which makes it very important to select the right personality of lawyer.”

“Think global, act local” is the resounding message from Gupta. It is often assumed by firms that global companies want, and indeed need, a one-stop shop for purchasing legal services. But this is not always the case.

“Our starting premise is that you want the best lawyer for the job,” says Gupta. “But as a lawyer, I know that being in the largest law firm does not automatically make you the best, and there are plenty of small practices with brilliant lawyers.”

Gupta’s conviction is reflected in the size of Ispat’s panel of law firms. Along with the extensive list of well-know names are a number of little-known local firms that also swipe a substantial amount of business. “Our panel is by no means carved in stone,” says Gupta. “If we hear of a lawyer who is good then we will use them, regardless of whether we’ve used their firm in the past.”

Gupta chooses people who are well known in the market. She has a network of existing advisers who she says are prepared to be honest, providing she continues to use them. Lawrence Leporte at Cripps Harries Hall, formerly of CMS Cameron McKenna, is one such example. He led a team that acted for Ispat Karmet on a $450m (£313.6m) financing project with the European Bank of Reconstruction and Development (EBRD) and the International Finance Corporation (IFC).

“We used Cameron’s Kazakhstan office. I asked them to recommend some local lawyers in that jurisdiction and the names of the people they gave me included some of their competitors,” says Gupta. At the time of writing that office has just passed to Denton Wilde Sapte. She says she is looking for excellent commercial lawyers, not ones who sit on the fence. “I want people who are extremely responsive. I need the advice to be applied. I don’t just want to know the regulations, I also want to know what I should do.”

Gupta identifies a trend of using US law firms instead of UK firms. She says they are far more service driven. For example, Ispat uses Dutch firm De Brauw Blackstone Westbroek, a member firm of Linklaters & Alliance. But although De Brauws is proactive in sustaining the relationship and wants Ispat to be covered by associated firms in all jurisdictions, Gupta says Linklaters has never followed up the relationship.

She says that although UK law firms have equally good transactional lawyers, often they do not have the cross-jurisdictional experience that Ispat requires. Generally, she finds that US lawyers are broader in their mindset and are less fazed by different cultures, unknown lawyers and time differences.

In the US there is also a greater emphasis on lawyers doing in-house stints and international secondments. Gupta would like to see UK lawyers doing the same thing. “I think everyone should do in-house stints,” she says. “You see a different perspective because you’re a consumer as well as a provider.”

In the last two years, Ispat has conformed to popular practice to the extent that it has developed a panel of preferred law firms. The panel, however, is constantly under review and Gupta continues to meet at least one new firm every time she embarks upon a new project.

Ispat’s motto, then, remains unchanged. And Gupta will continue to strive to find the best lawyer for the best price.
Nipun Gupta
Head of legal
Ispat International

Organisation Ispat International
Sector Steel
Listed on New York and Amsterdam stock exchanges
Employees 18,000
Legal capability Seven in-house lawyers
Head of legal Nipun Gupta
Reporting to Chairman Lakshmi Mittal, head of finance Bhikam Agarwal and managing director Johannes Sittard
Main location for lawyers London, Chicago, Canada and Kazakhstan
Main law firms CMS Cameron McKenna, Cravath Swaine & Moore, Herbert Smith, Macfarlanes, Morrison & Foerster, Nabarro Nathanson, Norton Rose, Shearman & Sterling, Sidley & Austin, Skadden Arps Slate Meagher& Flom and White & Case