In his recent Guest Editorial EY’s Georgy Kovalenko spoke of a rising trend of large companies building up their in-house legal functions to the point where they will not only compete with law firms in terms of catering to their internal clients but will also slowly branch out into offering their services to other companies. CEE Legal Matters spoke with Eugenia Volkoskaya, General Manager of Gazpromneft Expert Solutions – an enterprise that, while not there just yet, seems poised to do exactly what Kovalenko was foreseeing.
“When the economy is not doing great and budgets for external advisors shrink, it is natural for legal directors to create strong in-house legal departments, able to cover the majority of their enterprises’ needs. Especially when there are good candidates on the market. Large businesses are thus increasingly creating self-sufficient in-house legal departments, which engage law firms only when a need arises for either international work or assistance with very complex projects. If you talk to partners at law firms, you will hear that their major competitors are now in-house legal departments.
After creating large in-house teams, chief legal officers face the challenge of making those teams efficient and retaining key people who hate routine tasks, while at the same time dealing with increased regulatory requirements and more complex assignments. Indeed, we at EY Law regularly consult clients on legal function optimization. We analyze and improve internal processes (including by way of outsourcing or insourcing), change individual and department KPIs, and propose automation solutions.
A complex review of the legal function sometimes reveals the capability to work not only for internal but also for external clients. Legal departments can be converted from cost centers to profit-generating units. This is possible because the legal profession is not as regulated in Russia as it is in other Western countries. There is no requirement for a law firm to be owned by bar-admitted lawyers or be licensed in any other manner. Thus, Sberbank, Russia’s leading bank, has created Sber Legal, a law firm that works with retail clients. MTS (a leading mobile operator) has launched Norma, a solution that helps small and medium businesses create legal documents and resolve other legal tasks. Another client of ours, a major oil company, is creating a unit that uses its sector knowledge to advise small companies on regulatory matters and other legal aspects of exploring and producing oil and gas. Corporate law firms still do not view these non-conventional players as direct competitors, but small high street firms and in-house lawyers should be concerned about their future.”
Excerpt from “Trends in the Russian Legal Market” (CEELM Issue 7.11) by Georgy Kovalenko, Partner, Head of EY Law in Russia and CIS
CEELM: What is Gazpromneft Expert Solutions and how does it work?
Volkoskaya: In brief, Gazpromneft Expert Solutions is a business entity within the Gazprom Neft Group that provides advice in various fields. As of now, only lawyers are represented in the team of experts, but we plan to soon bring in specialists from other departments as well.
Legal support is based on the one-stop-shop principle: a client may easily access any sort of expertise represented within the expert staff pool. The company currently has five centers of legal expertise: IP; Procurement and Real Estate; Commerce; Corporate monitoring and compliance; Public Regulation and Litigation.
CEELM: What was the thinking behind setting it up, how is it different from a typical group in-house function?
Volkoskaya: The Gazprom Neft Group is quite a large structure consisting of a number of various businesses, all of which had their own legal department. We decided to take a step further in corporate legal support by organizing a separate company with a general idea of uniting professionals by their areas of expertise. As opposed to a classic in-house model, our concept allows us to focus better on requests generated by the businesses, while the vast geography of our offices ensures prompt response and secures better availability of legal professionals when and where necessary. It also allows us to collaborate, share experiences, and develop our experts.
CEELM: Do you still have GC/Heads of Legal departments within the companies of the group? If so, to whom do they report?
Volkoskaya: We still have legal business partners within the companies of the group. They ensure collaboration and networking between their companies and Gazpromneft Expert Solutions and are eventually responsible for the quality of legal service provided to their companies and for risk management as well. They possess all the information on the strategy, specifics of the business, key projects of a certain company and make decisions regarding the need for legal support in relevant practice areas. They manage project teams for legal support projects. In addition, business partners are responsible for the identification and assessment of risks that may affect their companies’ activity, and it is their job to participate in all important business decision-making processes.
CEELM: How large is the team and how is it structured?
Volkoskaya: The whole team includes approximately 340 legal professionals. It took us half a year to bring them all together.
As mentioned above, we have five centers of expertise. Each center is divided into practice areas. For example, the Center of Public Regulation and Litigation includes four practice areas: (1) General litigation, for high-value disputes and/or cases of precedential value; (2) Financial Law and Antitrust Law; (3) Environmental Law and Law on Subsoil Use; and (4) Industrial Safety and Occupational Health & Safety.
Other centers are organized in a similar way so that there are teams focused on certain practice areas. In addition, in order to ensure prompt service, we have four major hubs located in Saint Petersburg, Moscow, Omsk, and Tyumen, and a few smaller offices in a number of regions. The geographical location is not directly connected to the practice area or center to which a certain lawyer is assigned, as our experts are represented in almost every region where the group operates, or at least are close enough to the production and other key assets.
CEELM: What are the main KPIs you are looking at to decide if the Gazpromneft Expert Solutions (for lack of a better word for now) “initiative” is a success?
Volkoskaya: Legal support and legal risk management within the company have always been among our top priorities. But now our expertise is even easier to access, and we are closer to the business. We will assume that we are successful when the business approves our efforts and is pleased with our legal service. However, success would also be defined by our business clients recommending us to their partners. We are not only focused on KPIs but also on our NPS (net promoter score). That’s why we have developed certain quality standards for us to follow. Our clients will, taking into consideration the view of business partners, evaluate the results not only annually, but quarterly as well.
CEELM: Our understanding is that, at this point, Gazpromneft Expert Solutions caters to “internal” clients only within the group. Is that accurate? Is there a likelihood that it may change? If taking on “external” clients is a reality now or will be in the future, how will elements like conflicts of interest be handled?
Volkoskaya: It is certainly safe to say that Gazpromneft Expert Solutions started as an “internal initiative” for “internal” clients. However, we definitely don’t rule out “external” clients and are ready to cooperate. We have brought together legal experts with unique competencies that are rare on the market. We don’t think that conflicts of interest could be an issue for us – a conflict check is a standard procedure for any consulting company – so we are ready to follow best applicable practices, especially given that we have a number of lawyers with extensive experience in Russian and international law firms.
CEELM: What’s on the horizon? How do you see Gazpromneft Expert Solutions evolving over the next five years?
Volkoskaya: There are a number of vectors for our development, and we see potential to develop in all of them. To name a few, we can talk about the development of our legal teams focused on IP, real estate, commerce, procurement, and other “traditional” practice areas. All of them have strong professionals and a few rising stars. In addition, our Public Regulation and Litigation center has a number of practice areas (e.g. Industrial Safety and OHS) that are either rare or unique on the legal market and could be of great interest not only to the oil & gas sector but to other industries as well.
We can eventually either become a trend-setting leader in terms of “internal consulting” for oil & gas and other industries or evolve into a more classic consulting services company. We are ready to offer our expertise not only to our internal clients but to other companies as well.
This Article was originally published in Issue 8.8 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
