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The Inside Track: Parting Ways

The Inside Track: Parting Ways

Issue 10.10
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In The Inside Track, General Counsels across CEE share the nuances of their roles, challenges, and strategies for success. Given the importance of relationships between in-house legal departments and law firms, this time we asked GCs: What is the most common reason for which you cease working with a specific law firm and what would you suggest firms definitely do to ensure they do not make the same mistake?

Andrius Digrys, General Counsel, BLRT Grupp: The most important – and probably the one reason for which we cease working with a specific law firm is loss of trust. Usually, it is due to general professional ethics issues, incomprehensive or even incorrect advice. However, I would specifically emphasize general professional ethics issues – it can sound rather strange, but we still face problems with this.

Eleni Stathaki, Head of Legal, Upstream: We rely very much on outside counsel for advice on local law in the countries where we are active and other matters where we need specific expertise. Thankfully, we have been very fortunate with our legal partners, with most of whom we have worked for several years. However, there have been cases where we have stopped working with a firm, with the most common reason being excessive billing and in general costs not being accompanied by value. There was one firm that had billed hours spent on an introductory lunch before they were engaged. I remember finding that extremely inappropriate, as this cost should be included in their business development efforts and did not correspond to the services rendered.

A good way to address that would be billing transparency and upfront communication. We have developed our outside counsel policy which we share upon engagement. Amongst other items, we clarify that we will not pay for duplication of time caused by the transfer of a project to a new attorney for internal reasons, education, or excessive intra-firm conferencing. Legal departments typically struggle with tight budgets so knowing upfront what constitutes billable matters and what does not help in controlling costs.

Barbara Chocholowska, Country Head of Legal, HB Reavis: As a rule, it is the legal department providing full legal support to our group companies. We usually seek support from external law firms in case of very large projects or complex legal issues. Thus, when cooperating with law firms, we mainly look for expertise and experience in the required area. This is the main requirement when we make a decision on the choice of a law firm, although, of course, financial conditions are also important nowadays.

When cooperating with the law firm on a project, what is important to us is the commitment of the project team and their understanding of our business needs. Equally important to us is the availability of the team and the adherence to arrangements made, including deadlines. Consequently, we build cooperation on trust, and if the trust is lacking, it is not a law firm with which we can establish a long-term relationship.

Joanna Przybyl, General Counsel, Revetas Capital: Poor quality of services provided is probably the most serious reason to decide to stop cooperation with a law firm, but lack of proactive communication and transparency when it comes to billing may also impact the relationship with a law firm. In-house legal teams are very often responsible for reporting on the fees incurred versus the internally approved budgets. When clear instructions are given for a law firm to notify significant out-of-scope works before they are undertaken, these should be followed. There is nothing more problematic than to realize after completion of the project that fees doubled as it may be just too late to address such fee increases.

Martin Lisa, General Counsel, Eviden Czech Republic: Fortunately, such a case has happened to me only once so far. The reason for terminating our cooperation was the passing of an important legal deadline in court proceedings, which led to the loss of the case due to such formal misconduct. The lesson I’ve learned is to be active, to ask about the status of the proceedings and the next steps, to suggest the next course of action, and to not rely only on the actions of the external lawyer. An external lawyer usually has no personal connection to the case and takes it as one of the many others. Another recommendation is to maintain long-term relations with the external law office with which we cooperate, to build more than just a professional relationship, i.e., a more personal approach, which of course results in a greater mutual trust and a more responsible approach.

Daniel Urban, Head of Legal & Operations, Mercedes-Benz Financial Services Hungary: When it comes to external legal reviews, we aim for materials that are more straight to the point and less theoretical. For the business, the paramount factor is to get compact, practical, and easy-to-process responses to legal issues. I’d especially highlight the importance of this when it comes to personal meetings and presentations of legal solutions. It happened on numerous occasions that we decided to stop cooperation with a law firm due to this, independently from the quality of the original material: Getting lost in the legal depth and details when presenting to the business.

Bora Kaya, Head of Legal, Gama Holding: I think our profession relies upon mutual trust more than anything else. Once that trust erodes, it is not possible to continue working together. This deterioration primarily stems from receiving either false (or materially deficient) information about the applicable law or misleading budget proposals representing only 10% of the total invoice amount at the end of the day. These situations put in-house counsel who decided to work with those external counsel in a tough place in front of their internal clients (i.e., Boards or CEOs). Law firms should not quote for works in which they are not equipped enough to provide the service that is expected even when an in-house counsel insists on receiving one. If a law firm submits an estimated budget as a proposal, then a) this proposal should not be based on a long list of assumptions and b) the firm should not exceed this budget by more than 10% when the job is done. Even when the firm has to pass that limit, it should consider compensating that excess internally in the first place, absent an event that can be regarded as almost force majeure (i.e., beyond its control), and bring this issue to discussion with the in-house counsel of their client at a later stage (maybe at their next assignment) rather than sending an invoice directly and threatening their client to cease carrying on with or completing the job if the invoice is not paid.

Nada Matusikova, Co-Head of Legal, RWS Group: I definitely discourage law firms from not answering clients’ requests and emails in time and not following their instructions. I always give the lawyers more chances to improve but if they are repeatedly delayed with their responses or they don’t follow my instructions, sooner or later I terminate the cooperation.

I suggest sending a regular overview of open matters. I hate sending status update reminders (another reason to stop the cooperation). Last but not least, I cease working with the law firm if the people I’m happy working with, move somewhere else. Sorry to say that, but my loyalty relates rather to people than to the firm.

Anonymous: I expect prompt and business-tailored replies. To do so external law firms should be familiar both a) with our industry and b) corporate business model. To support this goal from our side we tend to have long-lasting business relationships.

Usual mistakes are: a) general replies not reflecting our specifics, b) “apprentice level replies” without any actual advice, c) not respecting our tight deadlines (we prefer larger law firms to make sure that at least some lawyers are available), and d) insisting on further inputs from our side despite none being available, i.e., not being able to provide advise based upon limited facts.

Additionally, we require advice in different legal areas, hence some specific expertise is expected – which is another reason to cooperate with larger law firms with departments dedicated to certain legal areas.

In short, external advisors should help, make our job easier and not more complicated. I always try to discuss it with senior partners to make sure that there is no misunderstanding about what is expected from them.

This article was originally published in Issue 10.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.