The mix of cultural and business styles in Asia is a real challenge for the delivery of internal legal advice and services, writes Leigh Dance
When senior corporate counsel of 20 international corporations gathered in Tokyo recently for the first Martindale-Hubbell Counsel to Counsel forum in Asia, their focus was on three issues:
managing the legal department to provide better services across many jurisdictions and businesses;
- improving how the legal department demonstrates value to its internal clients; and
- coping with limited legal resources, due to a shortage of both Japanese-qualified lawyers (bengoshi) and Anglo-Saxon lawyers, and with constant pressure to reduce costs.
Most participants at the Counsel to Counsel roundtable were general counsel for the Japan or Asia regions of multinational companies.
Forum co-chair Alan Greenwood, of Dow Corning Asia, an English-qualified lawyer who has worked in Tokyo for eight years, defined his challenge as adapting the legal department's services to a corporate structure of business divisions aligned globally.
Greenwood's team handles a wide range of issues internationally, although particular attention is paid to 17 countries in Asia.
"The narrowing margins in the chemicals industry have put enormous pressure on costs, including in the legal department," he said. "We are continuously looking for ways to provide more value as we respond to our internal clients' needs."
Greenwood said the mix of cultural and business styles in the region provided a real challenge for the delivery of internal advice and services.
The in-house counsel participants agreed that their jobs are rendered more difficult by the lack of homogeneity of laws and regulations in Asia, as compared with the relative convergence in Europe and North America. In addition, participants commented that the speed and pace of change in many industries, combined with a constant pressure on costs, often stretched the legal teams in both time and capacity.
In discussing how they prove their value to the business, the group agreed that their impact is greater when they have open channels to executive management and play a role in corporate policy making. Gary Sumihiro is Amway's Japan general counsel with responsibility for external affairs, public relations, investor relations and human resources, and for legal affairs throughout Asia. He said: "I can best demonstrate value by proactively identifying legal issues, as well as the implications to the business deal, as early as possible in the process."
Sumihiro said his position as a director and company secretary gave him "a unique insight into and understanding of the business drivers".
He added: "I then can appropriately frame the legal strategies and allocate resources a lot faster than if I were on the outside or not part of senior management."
Focus is on results in serving the businesses, and several of the legal departments represented at the forum said they asked for performance evaluations from business management.
One general counsel said that to provide value to the businesses, the department developed centres of knowledge among in-house lawyers, in areas such as licensing contract negotiations, IP/IT technical know how, and M&A projects. Linda Filardi, iReality Group Japan's general counsel, who practised at Skadden Arps Slate Meagher & Flom before moving 'in-house', said: "We all take very seriously our responsibility to comply with the laws in the markets we serve. Our business executives accept and assume that.
"When they think of the value I really add, however, they focus on the support I provide to create, structure and implement transactions quickly and cost-effectively."
She said that internal clients were impressed when she occasionally calculated what her services would have cost if she had billed them according to her rates when she was in private practice.
In-house counsel in Japan must be particularly creative in dealing with outside lawyers' fees, as shortages of experienced resources often make it difficult to complete transactions.
Some have obtained discounts by offering retainers to selected outside law firms.
The retainer approach aims to increase the chances that the law firm will make lawyers available when the company needs them. The goal of a retainer is also to stabilise budgets and to invest in a loyal relationship whereby the outside lawyers get to know the business better.
Several participants found themselves in the catch-22 situation of trying to cut costs in a legal services 'sellers' market'. If the business units do not see the value from outside advice, in-house counsel can find it hard to get approval to pay their bills. Some request cost approval in advance, but this can raise an additional risk - if the cost is then capped, the outside lawyers may limit their advice and effort so that the business may
not get the information needed to make a wise decision.
In order to keep up with the widely diverse and constantly changing laws and regulations in Asia, many corporate counsel use informational databases and knowledge management systems. The development and maintenance of these systems is viewed as a necessary cost of doing business, as the financial and public image penalties of non-compliance can be great. Sometimes this information resides on the corporate intranet, other times in a system that can be accessed by the legal department
Participants agreed that outsourcing the maintenance of this sort of information bank is rarely successful. They felt that the legal department needs to have 'ownership', not only of the information it uses day-to-day, but also of the system that houses the data.