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The Nightmare of In-house Counsel: Cost Cutting

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Regulating an effective budget for a legal department is a major strategic decision that must be considered by companies and their legal counsel.

External legal support is one of the most essential elements for a company, but it can also be a major cost.  Before embarking on a cost-cutting exercise, one should consider what type of internal legal counsel would most effectively serve the needs of the company. For example, does the company hire a significantly experienced person, able to oversee almost every legal issue that may arise, or should the company consider a more junior lawyer that can lighten the daily workload and handle critical issues with the participation of external support? After the company elects the appropriate in-house counsel, the department should consider the following:

1. Use In-House Advantages: 

When legal service is provided by an internal counsel the advice will be in line with business objectives and corporate strategy, where an external counsel would not be aware of such considerations. Therefore, in-house legal counsel can be a valuable partner in advancing the strategic mission of the company. 

2. Determine Legal Needs and Hire External Lawyers Accordingly: 

The external law firm you hire does not need to be the “number one” firm in your jurisdiction. Depending on business needs, it could be a well-known international law firm or, alternately, a very basic local firm with relevant experience in the relevant field. The question comes down, simply, to the particular needs of your company. In other words, only hire a law firm after determining your company’s needs. 

To ensure you select the right law firm, be prepared to meet with several prospective firms. Bring all relevant documents, emails, and other materials to the initial session to avoid the need for further calls or meetings. Don’t hesitate to hire the most expensive lawyer if it is necessary, especially if the work involves contracts, corporate matters, or important cases. The outcome of selecting unqualified counsel can be disastrous. Don’t forget that sometimes a very experienced lawyer will be more efficient and cost-effective; furthermore, you won’t have to educate him on your specific needs.

3. Distribute Standard Functions to Low Level Team Members or Different Departments in Your Company: 

Allowing trainee or junior lawyers to complete standard corporate registrations, trademark renewals, filings, and other similar processes will have a huge impact on your budget. You should not pay outside counsel to complete very basic transactions, as these tasks are time-consuming and costly. If you need to use external counsel for these duties, try to hire a cost-effective option.

4. Be Open to Hiring Different Lawyers: 

Remember, once you select a law firm, you are not married to that firm. If you think the external counsel you are working with is not a good fit for the job, or if that firm provides incorrect information, or delivers its product late, don’t hesitate to find an alternative. The legal market is continuously evolving; legal fees change frequently, and a lawyer that knows your company won’t hesitate to move to another firm. 

5. Pay Only for the Work Done and for the Time it Took to Do It: 

To control costs, it is important to make sure you give the law firm you’re working with clear and specific directions regarding due dates and follow the status of their work closely by requiring regular status reports. You should also try to reach your external counsel during normal business hours and avoid making the lawyers work overtime. Without guidance and instructions, your external counsel cannot be efficient, which will result in higher fees. If possible, make fee arrangements on a case by case basis. For example, in a litigation case payment might be based on a mixture of fixed and success fees, where for a contract review a capped or flat fee may be more appropriate. Review your legal bills closely and do not hesitate to question a statement or expense report if you think it is incorrect. Establishing a budget and ensuring compliance with that budget are key components in controlling costs as an in-house counsel.

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.

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