The European Legal Summit 2003 at the Hotel Arts, Barcelona was an unqualified success. More than 100 in-house delegates from a huge variety of business sectors were full of praise for a sophisticated programme covering topics as diverse as expansion into the new EU countries, corporate governance and protecting IP portfolios.
The keynote address, given by David Walton of Goldman Sachs (right), set the tone. Walton, a managing director and chief European economist at the investment bank, delivered an upbeat briefing on the economic and business prospects for Europe in 2004.
Over the two days delegates flocked to the 15 sessions, where lively dialogue between speakers and the floor was the order of the day and full advantage was taken of the chance to quiz private practice lawyers. The pre-arranged one-to-one meetings between in-house lawyers and private practice were particularly successful, with more than one in-house lawyer remarking how much better private practice firms had become at pitching. The roundtable discussion groups, themed by industry sector, were the crowning event of the conference, where in-house lawyers grappled with business issues common to their peers.
All in all, it was a networking triumph – and there’s another major in-house event coming up next year. As part of The Lawyer’s unparalleled commitment to covering the in-house sector, we are joining with the Commerce & Industry Group in organising the Annual C&I dinner. See you there…
|Up, up and away – economic and business prospects for Europe in 2004|
| The keynote speech by David Walton, chief European economist, Goldman Sachs David Walton surprised a number of delegates in the audience by painting a relatively upbeat picture of the European economy over the next year. He added that the business climate for major M&A was improving, but questioned whether the regulatory hurdles were becoming too high.
Setting the scene, Walton explained that Goldman Sachs’ gross domestic product (GDP) forecasts for the US, Japan and Euroland for 2004 were all above trend (US trend 3 per cent, prediction 3.7 per cent; Japan 1 per cent and 1.7 per cent; Euroland 2 per cent and 2.6 per cent). In the US, that position was balanced, he said, by the “very aggressive” fiscal stimulus over the last three years, where substantial tax cuts had raised doubts about the sustainability of the US recovery. The Euroland position was, as he called it, “a healthier mix”.
Private practice lawyers, not to mention investment bankers, will be heartened by Walton’s prediction that the improvement in economic performance will have a correlation to the levels of corporate activity. “If the forecasts are right,” he said, “we should see a steady increase in the volumes of M&A activity over the next year.” Walton added that the increase could be in the region of 20 per cent, but warned that the experience of the 2001 GE-Honeywell merger, which was passed by the US authorities only to fail at the European Commission, could restrict any economic-related growth in merger activity.
|Risk management – the practical reality|
| Nigel Titley, senior counsel at Invensys
Jonathan Guest, Eversheds
The rising cost of insurance underlined the key message in this presentation. Eversheds partner Jonathan Guest began by outlining the talk’s two key messages: any business has its own inherent level of risk, and that risk is essential – without it there can be no rewards.
Those messages were set against the context of the hardening insurance market, in which 79 per cent of businesses face significant premium hikes. Consequently, said Guest, it was imperative that companies had a commitment to managing the different kinds of risks in their businesses. As he pointed out, this process cannot be simply imposed. “You have to get people to engage,” he said.
Guest added that in-house counsel were exactly the right people to implement a risk management process. The combination of their understanding of their business with legal expertise made them “ideally positioned to help make a project that some still see as fairly ephemeral become seen as a major project”.
Nigel Titley put Guest’s comments into the context of Invensys’ recent major risk management project. The challenge, he said, was making it happen in a company with more than 300 business units, operations in 30 countries and a wide range of product risk exposures. Invensys opted for a self-assessment process which, explained Titley, contributed significantly to raising awareness within the business. Invensys also used an online questionnaire in a tick-box format featuring hyperlinks to best practice guidance notes. This format, said Titley, “forced people to think in-depth about risk”.
A crucial point the presentation raised was that risk management is an ongoing responsibility and that it was fundamental to have board-level buy-in to ensure this. “At some point,” said Guest, “something will happen in the business – a merger or disposal, for example – and that is exactly the point when you need someone continuing the focus on risk management, when the company’s attention is elsewhere.”
|Harvesting and protecting your IP portfolio|
| Lynton Boardman, general counsel and company secretary, QinetiQ
Andrew Hornigold, partner, Pinsents
QinetiQ general counsel Lynton Boardman teamed up with Pinsents’ head of technology Andrew Hornigold and the firm’s soon-to-be (when he finishes his gardening leave from Irwin Mitchell) head of intellectual property (IP) James Love for a bite-sized guide to maximising your company’s IP rights. Boardman flicked through his slides at a rate that may have skipped some details but meant that boredom was not a problem. He introduced QinetiQ, pointing out that as the first national defence science and technology agency to reach the private sector, IP is one of its most important assets.
“So many companies don’t have a bloody clue what [IP assets] they’ve got,” exclaimed Boardman. He went on to explain the sources of IP and how to develop a company’s strategic management of its portfolio, despite acknowledging the number of McKinsey studies stating that companies should not have strategies and that they should be agile.
Boardman had stated that if you do not have any use for a particular IP asset, then you should get rid of it. One example, provided by Hornigold, was when British Telecom spun out its corporate incubator Brightstar. By way of a contrast, Thomson Multimedia asserted its IP rights by using patent litigation as a tool to police its IP portfolio.
Boardman closed the session by announcing that patent attorneys “need to be dragged kicking and screaming into the 21st century”. The response of the in-house crowd was enthusiastic agreement.
A lesson for patent attorneys?
|A modern tale of commercial fraud|
| Peter Wylde, London managing partner, Irwin Mitchell, with partners Pauline Devine, Amina Somers and Bronwen Jenkins
Irwin Mitchell presented one of the conference’s most colourful sessions to produce a “modern tale of commercial fraud”.
After introducing key characters Mr Red, Ms Blue, Ms Orange and Miss Purple, the firm’s London managing partner Peter Wylde acknowledged a debt to Quentin Tarantino’s Reservoir Dogs. But the scenario’s complex intrigue probably owed more to board game Cluedo than to the trendsetting movie.
Wylde invited us to suspend disbelief and imagine that we had been summoned to a crisis board meeting of imaginary telecoms company Quick Call.
Quick Call is losing market share to two competitors with similar but inferior products. The managing director Mr Red (Wylde) has been sent a whistleblowing letter by W Blower suggesting that all is not good with a business partner and that “friends of the board are not what they seem. Systems not safe.”
The contract with the suspect business partner is costing twice as much as expected and the integrity of the salesman who sold the contract is under suspicion.
Unfortunately, Quick Call’s director of procurement (Pauline Devine) is unsure that the contract is in place and notes that the business partner is based offshore.
Now, the managing director wants the blood of the salesman. HR manager (Bronwen Jenkins) points out that the company’s email and internet policy allows them to check for email evidence, but is unsure that the salesman signed the policy.
So finally, managing director Wylde turns to his in-house lawyer (Amina Somers), who wants time to consider whether the company should be making an emergency application to the court and whether they can freeze the assets of the business partner.
The session delegates then took time out and split into groups to discuss the relevant issues with Jenkins, Devine, Wylde and Somers. While some delegates were able to contribute more than others, the Irwin Mitchell partners used the information gathered (although one suspects that they had already considered all the options) to present a coherent strategy, which covered all the litigation, HR and contractual issues.
The presentation overall was a lively insight into a serious situation that could affect any in-house lawyer. While some of the Irwin Mitchell partners were more enthusiastic than others when it came to the amateur dramatics, they imaginatively managed to put the delegates on the inside track.
|Becoming a more trusted adviser within your business|
| Susan Sneider, partner, Vistas Consulting
Isabel Linares, deputy managing director, Sanitas Group
There was an unusually large degree of audience participation in the first session after lunch on Friday. Former Hildebrandt consultant Susan Sneider’s determination to make the presentation as interactive as possible was designed to reflect the underlying concept that the best way to become more trusted in your organisation was to be as visible and communicative as possible.
Sneider, prowling around the stage with the mike, began by asking how many of the delegates believed they had trusted relationships in their lives, unrelated to work. She then asked what were the qualities that made those relationships trusted. The initially reticent audience soon began shouting out words like openness, comfortable, humour (“isn’t it terribly boring to be with people who are terribly boring”, quipped Sneider), integrity, reliability and generosity.
“When we talk about trust,” said Sneider, “it’s not some kind of theoretical discussion and it’s not something you get because you’re a general counsel. You have to earn it.”
Using the above concepts as a platform, Sneider outlined how general counsels should behave with the in-house legal teams to generate trust. A key concept was to share quality work and not hang on to the most important projects or litigation and “to allow all the members of the team to shine”. Walk the halls, added Sneider, pointing out that general counsels also needed to be a partner with their outside counsel.
By the presentation’s conclusion, Sneider had generated enough trust to win a seemingly honest answer to one of her final questions: how many among the delegates could read a balance sheet. The answer? Just 25 per cent.
|Building and retaining your in-house team|
| Denise Jagger, company secretary and general counsel, Asda
Alfred Farha, senior corporate counsel, Cisco Systems
Asda’s Denise Jagger and Alfred Farha of Cisco Systems led this lively presentation, which attracted significant input from delegates.
Jagger highlighted the importance of setting aside time to manage the legal function. “Management is a worthwhile part of my service, but it’s easy not to assign time to management,” she said.
She also said that the key to retaining an in-house legal team is to “focus on people” and to “celebrate success”. She added that career progression and helping people to broaden their skills, as well as flexible working, can reduce attrition rates. “If people are increasing their skill sets they’ll want to stay,” said Jagger.
Other measures taken by Jagger include requiring lawyers to spend time in an Asda store for three days during the Christmas period to raise the team’s profile internally and get closer to the business.
Farha outlined the pressures faced by international legal teams: headcount limitations; outside counsel budget reviews; organisational realignment; specialised legal functions; and a culture of frugality in testing economic conditions.
He added that when he joined Cisco the company was a hiring machine, but has since had to squeeze headcount.
Farha favoured secondments from law firms and said they benefited the company and the law firm as well as the lawyer.
|Pan-European employment law update|
| Fraser Younson, head of employment, McDermott Will & Emery
McDermott Will & Emery partner Fraser Younson called the EU Charter of Fundamental Rights, which could well become legally binding in the UK, a “loopy” piece of legislation in this presentation.
Speaking at the session entitled ‘Update on European Labour Law’, Younson said some of the principles of the charter represent a huge step backwards for employers.
“This takes us back to the pre-Thatcher years,” he said of some of the charter’s principles, arguing that they were in many places unspecific and largely open to interpretation.
There is also debate as to what the legal effect of the charter is. “Here [in the UK] the feeling is that it’s not legally binding; but when you speak to the French, they say it has to be legally binding,” Younson noted. “The reality is that there will be immense pressure to make this legally enforceable.”
However, while the charter is obviously of concern, in the more immediate future it is the Information & Consultation Directive (ICD) on which employers should be taking action.
“It will have immense impact on how we deal with our employers,” said Younson. He is currently working with the Department of Trade and Industry (DTI) to iron out aspects of the legislation that “don’t really work”.
Implementation of the draft begins in March 2005. It will have the most impact on businesses in which no existing works council structure exists – which is around 70 per cent of UK businesses. If these businesses do not get their own councils running by around the March 2005 date, just 10 per cent of employees could then force them to revert to the directive’s ‘default’ model.
One of the provisions within the default model is that management must consult “with a view to reaching agreement” on any decisions “likely to lead to substantial changes in work organisations or contractual relations”.
“That’s the bit that employers should be worried about,” said Younson. He said this definition of consultation with a view to reaching agreement is akin to negotiation, and thereby gives significant power to works councils.
However, the charter and the ICD are just two of many changes coming out of Europe that Younson discussed. Others include the European Commissions’ review of the 1994 Works Council Directive; its paper on “socially responsible” restructuring; revisions to the Takeovers Directive; and the framework Discrimination Directive, to name but a few.
|Regulatory risk – a survivor’s guide|
| Neil Gerrard, head of the regulatory group, DLA
Lucy Woods, chief executive officer, Viatel
The session on regulatory risk addressed key issues in the new regulatory environment post-Enron and WorldCom. DLA partner Neil Gerrard – a former policeman and now head of the firm’s regulatory group – reminded in-house counsel that the regulators’ powers now extend to criminal sanctions. Given this, he argued, an accountant or a corporate lawyer would have no idea of how to run an interview with the regulator and that the wrong choice of adviser could eventually create more harm than good for the company.
While Gerrard detailed the regulatory framework, the second speaker provided practical advice on beefing up a company’s legal defences. Lucy Woods, a forthright and engaging speaker and now chief executive officer of Viatel, had been at WorldCom when the storm broke. Although Woods did not talk about her time at WorldCom, her well-received presentation was clearly informed by her experience. Much of her advice to the in-house counsel present was based on the dictum that prevention is better than cure.
Woods asked the delegates: “Do you know who’s accountable and who is responsible?” Arguing that creating a clearly defined structure of accountability was a key task of any in-house lawyer, Woods recommended weekly meetings in which compliance at all levels was addressed – and for in-house counsel to raise this with board members wherever possible.
“Even if they’re rude to you and tell you that you’re excessively detailed, just keep going back to them,” she said. “If there’s one thing you have to know, it’s that these risks are not theoretical.”
The issue of privilege elicited an interesting exchange during the questions. DAC partner David McIntosh asked how in-house counsel could make sure that compliance reports would be legally privileged. “There’s no such thing as a foolproof way – you’ll only know when it’s tested and a judge decides,” replied Gerrard. He continued: “The regulator is challenging privilege more and more and will insist on seizing documents and asking independent counsel to review whether they’re privileged or not.”
The last question they dealt with revolved around the issue of board minutes. Both Gerrard and Woods strongly recommended that minutes should be written by a lawyer. “The language used can be wrong,” said Gerrard. “They need to be carefully drafted.”
Woods added in a final salvo: “It’s so important to get someone with a nose for this stuff to review the minutes. You can shoot yourself in the foot by loose or colloquial language.”
|Ten things you never knew you could do with your external lawyers|
| Michael Luckman and Kevin Lowe, partners, Wragge & Co
Geoffrey Timms, head of legal, Legal & General
There is a worrying divide between in-house and private practice lawyers. This session drove the point home that when it comes to the two working together, the gulf between what the in-house lawyer wants and what the private practice lawyer delivers often stretches to Grand Canyon proportions.
Beginning with a hilarious yet revealing role play (written by Wragge & Co partner Michael Luckman), the three speakers staged a nightmare debriefing meeting, playing out a series of worst-case scenarios.
Everything was covered, from forgetting the in-house lawyer’s name, to over-lawyering, to complete miscommunication on deal strategy.
As the participants broke out into discussion groups, it became clear that some of these situations were, sadly, all too familiar to the in-housers.
Communication, consistency and trust became the watchwords, and fees, unsurprisingly, came near the top of the list of concerns. Many said they had asked for a breakdown of what they had been charged after a piece of work had been completed. If there had been duplication of work by different lawyers on a deal, for example, internal lawyers would question paying for this.
One point on which many agreed was that they felt they were effectively paying for the training of younger fee-earners. There was a clear demand for more qualified lawyers to undertake a task to save time and therefore money. At the same time, in-house lawyers recognised that they, too, had a responsibility to manage the process with their external advisers and it was up to them to set a benchmark on fees and to constantly monitor spend.
Knowing the client was a point that many of the attendees felt their chosen law firms should brush up on. Secondees were seen as an effective way of understanding how an organisation worked.
But in-house lawyers also said that sometimes people in the business side of their organisations felt that law firms were capable of achieving John Grisham-style miracles. Here the in-house department provided a bridge between what the external advisers could do and managing the expectations of their executives. Many in-house lawyers hail from private practice, and so do understand the challenges that many private practice fee-earners face.
However, the main conclusion drawn from the session was that clients want to feel like they are being taken care of, no matter what size the company is. After all, small businesses can grow into huge FTSE 100 clients.
Examples of senior partners being present at beauty parades only never to appear again were cited as particularly irksome. Too many lawyers or constantly changing teams also annoyed, while even things such as returning phone calls came high on the list of bugbears.
It was generally felt that communication needed to be a two-way thing, with the in-housers spelling out their expectations and saying that their external advisers should make every effort to reciprocate. After all, everyone just wants to feel loved.
|FSA… the new corporate watchdog|
| James Bagge, partner, Norton Rose
Sunita Babbar, associate, FSA
All corporations, not just financial institutions, need to be aware of the powers of the Financial Services Authority (FSA), said FSA associate Sunita Babbar and Norton Rose partner James Bagge.
“In-house lawyers need to realise just how much the FSA will now be a part of the life of any corporate with a listing on the official list,” said Bagge.
He pointed out that the FSA has now been appointed as guardian and enforcer of the new market conduct regime.
Babbar said: “The new provisions overlap, but go beyond the previous provisions for market manipulation or insider dealing.”
Babbar later pointed out rather sadly that the income from fines for breach of the financial services regime no longer goes to the FSA and instead goes directly to the Treasury.
“So, what will make for a more demanding regulatory environment?” asked Bagge. “Two things: first, a change in culture at the FSA; and second, the possibility of a change in approach.” He added: “There’s been a rather more intrusive approach since the FSA took over as watchdog.”
He identified two cases as demonstrative of the new approach; supermarket chain Iceland was publicly censured for a breach of the listing rules last year and Marconi faced similar criticism from the FSA this year.
Babbar and Bagge discussed Consultation Paper CP 203 on the listing regime. The paper proposes that public companies should be regulated by a principles-based regime rather than the current black letter one.
This regime already applies to financial institutions and gives the FSA the power to apply for the disqualification of directors.
|Using technology effectively through the life of a litigation|
| Kelvin McGregor-Alcorn, director, Oyez Legal Technologies
Martyn Gilbey, senior litigation counsel, British American Tobacco
This presentation highlighted the significant cost and time savings in-house counsel can achieve by the utilisation of technology during a litigation.
The focus inevitably was on large-scale litigation involving potentially millions of documents, but as Kelvin McGregor-Alcorn of litigation support company Oyez Legal Technologies pointed out, the use of technology was not restricted to the largest cases. “The vast majority of cases we work on are under 50,000 pages, or around 100 lever-arch files,” he said.
McGregor-Alcorn used the example of Lord Saville’s Bloody Sunday Inquiry to illustrate the most creative use of technology. Using software that took nine months to build, which allowed for the compilation of a bank of 360Ëš digital photographs, the inquiry was able to view what McGregor-Alcorn called “a geographical environment that no longer exists [ie Londonderry in 1972]”. The public gallery’s reaction at the inquiry on seeing the technology, he said, was to stand and applaud for three minutes.
Less dramatically perhaps, but equally effective, were the developments in electronic data discovery. McGregor-Alcorn outlined a technological process that captures information (or meta data, such as author, date and recipient) from electronic files, avoiding the need to print out on paper. He also explained the benefits of document imaging, which allowed thousands of documents to be scanned and coded for instant access. Highlighting the potential loss of profits to external legal providers that traditionally use paralegals to perform this task in a litigation, McGregor-Alcorn said it was crucial to have a discussion with the law firm and the external service provider on this issue. “With respect,” he added, “I don’t think lawyers should be doing this kind of work. I don’t think this is what lawyers are best at. Lawyers should lawyer and experts should assist them.”