Legal fees are a necessary business expense in every company. The eternal feud between the legal and the financial departments in regard to the “unnecessary” external legal expenses seems to be the daily bread of every general counsel. The fragile beauty of all legal issues is that they parade as “unimportant and deferable” at first sight and to the untrained eye; but the reality of all parties and state authorities involved may be completely different.
Based on my experience, a properly working in-house legal team can cut down on legal expenses quite significantly. On the other hand, having an in-house legal department is never a cheap option, but every wise shareholder/manager should see it as an invaluable investment, and one which will prevent further costs.
Only a properly working legal team can determine and evaluate the risks involved in any issue and estimate which measures need to be taken to reasonably mitigate them based on the operational needs of the company. We are not living in a fairy tale world with an unlimited legal budget, where you can outsource everything and let the external lawyers be responsible. Also, most of us General Counsels have experience in private practice, and therefore we know that, from a firm’s perspective, the best client is someone without any legal experience and without an accurate assessment of things which have to be done (and billed).
Our approach at Invia is to consider if we have enough time and in some cases even experience to solve a given matter internally, and if not, how to approach an external law firm. In an ideal constellation, if there is time, we always aim for a mini tender where we inform our partners of the desired outcome /business need and our expectation of expenses. We are quite lucky with contracting legal services since our main market, which is at the moment the Czech Republic, has a new generation of small law firms or even solo practitioners who are willing to offer fee caps for a complete project. With some projects – mostly small-claims litigation – there is even an option for a contingency fee.
Of course, there are transactions where you do not have time to look for the best price/value ratio or which are simply too big to be handled by someone without proper expertise. I have been lucky to have met some exceptional lawyers from prominent law firms who are willing to take that extra step and, despite the time constraints, provide exceptional services for reasonable prices. Unfortunately, these cases never involved capped fees, but an educated estimate.
We have our inner circle of trusted law firms and solo practitioners and in my opinion the best cost saving strategy is to choose a proper one for a specific matter to be solved. It is always easier and time saving – therefore cost saving – when you don’t have to explain the details of your business and internal standards.
Long story short, I believe there is no magical “cost cutting” strategy, it is a simply choosing a proper lawyer, either in-house or external, for each issue. There is no sense in squeezing your business partner for too much as you can win once, but this is not feasible on a long-term basis. In the end, we need each other and this relationship is very private and based on trust.
Anyway, who can you trust if not your lawyer?
This Article was originally published in Issue 4.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.