Alex Florescu of Nepi RockCastle, Andrzej Klimek of Idea Getin Leasing, Bora Kaya of Gama Power Systems, Clementina Canel of Fepra, Dora Szebeni of Vanguards Fashion Group, Eirini Florou of Holcim, Eleni Stathaki of Upstream Systems, Gamze Bedirkurum of Ericsson, Gunel Rzayeva of VavaCars, Ioana Regenbogen of ING, Iwona Gajek of BNP Paribas, Judit Miskolci of Teva, Mary Chaidou of AIG, Milan Lomic of L’Oreal, Radu Culic of Roche, Ramona Ene of ADM, Sylvia Nanovska of Telelink, Viktor Fonth of HB Reavis, Wioletta Kaloska of Symfonia, Zita Toth of Primaenergia, Zuzanna Kopaczynska-Grabiec of Wonga.pl, and others share their approach to working with and managing external legal counsel.
Do you Outsource More?
Business as Usual
The volume of work sent to external counsel by Andrzej Klimek of Idea Getin Leasing has “stayed on a comparable level” over the last couple of years – and the same is true for 24% of General Counsel.
For Ingo Steinwender of CA Immobilien, this is a result of “a constant internal team size and quite a stable workload with no unforeseen issues.” For Milan Lomic of L’Oreal, this has been the case as they dodged a bullet and “haven’t seen any impact of COVID-19.” And, since many general counsel report they tend to outsource litigation, the level of externalized work remained constant with the number of disputes, as Ioana Regenbogen of ING explains: “Mostly we are externalizing litigation. We have not registered an increase in our litigation and/or insolvency portfolio, so far so the workload remained stable – a reflection of our solid and prudent credit-risk approach.”
But, while the volume of work might have stayed the same, that does not mean there are no changes in terms of outsourced work. “The involvement of external law firms remained at the same level, however, the scope of the enquires has changed,” explains Zuzanna Kopaczynska-Grabiec of Wonga.pl. “The COVID-19 pandemic has shown that companies are now under even greater pressure to deal with growing legal risks whil,e at the same time, increasing their efficiency. The constantly increasing cost pressure within companies requires effective cost management when contracting external law firms. This means that legal departments must deliver higher performance with reduced budgets.”
“The volume of work has decreased because the decision was to internalize part of the legal activity,” says Clementina Canel of Fepra. 31% of General Counsel report outsourcing less, with most pointing to bringing work in-house and enhancing their legal teams’ capabilities.
Radu Culic of Roche reports that outsourced work “has decreased as the great majority of the consultancy work has been done internally.” Mary Chaidou of AIG points to “the recruitment of additional in-house lawyers” as the reason to scale back on externalized work, echoed by Dora Szebeni of Vanguards Fashion Group: “It decreased a lot since we have a bigger in-house team.” And the push towards it seems to be ongoing, with Sylvia Nanovska of Telelink explaining: “We have the capacity to deal with most of the legal matters internally and are increasing our competencies constantly.”
“Another factor is that we are facing more and more disappointment with the quality of outside advice,” says Nanovska. “As an example, we were closing a deal that took us months to draft, and just days before signing, the law firm advising all parties comes to the conclusion that we need to seek governmental approval for the deal.”
The drive to keep work in-house is “due to cost constraints,” according to Judit Miskolci of Teva. Bora Kaya of Gama Power Systems explains: “The volume of the work that we sent to external counsel has reduced considerably, mainly because of economic concerns – there is ambiguity in market conditions and the political situation in almost all of the countries in which our company does business.”
But it’s not just about costs, according to Adam Brzezinski of MoneyGram, who stresses the need to assimilate input from external counsel once received and replicate it in case of future needs. “We try to do as much as possible in-house to limit the cost connected with outside counsel but also to learn and address most frequent topics in-house. In my opinion, this is just a part of our job. In-house lawyers should not become professionals that are simply forwarding emails to outside counsel.”
Business Asks for More
45% of General Counsel report outsourcing more over the last couple of years. For many, this is a simple result of increased workload with their businesses growing. Eirini Florou of Holcim says it is simply the result of a “pure workload increase.” This is echoed by Gunel Rzayeva of VavaCars: “The volume of work that I send to external counsel increased because of the workload. Since VavaCars is a fast-growing start-up, the workload of the teams, including the legal team, is increased in line with the company.” And growth can lead to increased workload outside of the company’s operations. As Wioletta Kaloska of Symfonia says, the amount she externalized has grown “due to out-of-business-as-usual activities of the company related to M&A.”
Alex Florescu of Nepi RockCastle reports the volume of work externalized has “increased because of business-specific issues.” Zita Toth of Primaenergia exemplifies this by explaining they “need to get back gas tanks placed with different customers and sometimes it is difficult to claim back our gas tanks if the owner of the property changed in between.” Iwona Gajek of BNP Paribas notes that “in the core business, the scope of cooperation with external lawyers is at a similar level, but in addition, a large new part of such cooperation is driven by CHF lawsuits.”
And, as a general counsel of a global fashion retailer explains, “certain compliance-related legal areas virtually did not exist five years ago,” which leads to Eleni Stathaki of Upstream Systems saying her externalized workload has increased “mostly because of the need for expert advice on various local regulations.”
When Do you Outsource?
Deciding between what matters to externalize and what to keep in-house is “subject to the issue and its weight to the company,” according to Andrzej Klimek of Idea Getin Leasing. Ramona Ene of ADM explains: “For me, there is always an intentional effort to keep a relatively delicate balance between available resources, existing capabilities, risk, timeline, and desired outcome. If I were to choose the main rule, I suppose it would be having the right hands for the right work.”
For Bora Kaya of Gama Power Systems, it is a matter of askin if the issue “requires strategic involvement due to confidential business information surrounding that issue more than straightforward legal practice. If so, we keep it in-house. We tend to externalize anything that we can handle with pure legal knowledge and profound legal practice if it is beyond our team’s capability in terms of the then-current workload.”
Knowing the Right Things…
“Legal as a function is an enabler and a guardian of the business of a company,” Gamze Bedirkurum of Ericsson says. “At the same time and as part of its role as a trusted advisor, legal is one of the key players within the company and is, therefore, well connected with the business and challenges. Having this broad overview of the business enables me to weigh in on the specific matter at hand and determine the legal problem in essence. Finally, I evaluate whether the specific legal problem definitely requires an expert approach from a legal point of view and decide on whether or not to externalize the specific matter.” And this question of whether the required expertise is available within the team is the first consideration raised by 61% of General Counsel.
For Iwona Gajek of BNP Paribas, it is “firstly a question of knowledge and a need for detailed expertise on particularly complicated issues,” when she decides whether to outsource work. Milan Lomic of L’Oreal also stresses that they “externalize matters that require certain specific expertise that we sometimes do not possess in-house or have little experience with,” and Andras Levai of Market Epito says it “can be that we need support from a well-experienced legal professional in a certain legal area (e.g., competition law, public procurement law, etc.) or the legal matter itself (e.g., a litigation) is so complex that it makes sense to outsource it to an external law firm because it can manage the case more effectively.”
“Recurring matters and matters that we have an experience with will be handled mainly in-house,” says Adam Brzezinski of MoneyGram, while “Big picture projects involving laws that we are not familiar with will be typically handled by outside counsel.”
In terms of specific fields, litigation is the main one that is passed over to external counsel. “Litigation is always externalized, while the consultancy work is kept in-house,” says Radu Culic of Roche. Gunel Rzayeva of VavaCars echoes this and says they are “externalizing litigation matters and the matters related to IP law and protection of the personal data,” while Aybars Yagiz of Gama Energy points to “litigation (and mainly enforcement cases) as usually outsourced as these topics require a large legal team and we are not a litigious company.”
…In the Right Place
Sylvia Nanovska of Telelink says they also tend to “externalize corporate matters for the subsidiaries abroad.” And 10% of General Counsel mention the need to look to external support in other jurisdictions.
Dora Szebeni of Vanguards Fashion Group says they “only externalize those tasks which require such special knowledge which we do not have within the team (e.g., it involves a foreign jurisdiction),” with Lomic explaining that “given the fact that we operate on a regional level, we usually externalize matters/projects requiring legal support for all the markets/jurisdictions at once, within a short time span.”
Sometimes It’s Just Too Much
“We use outside counsel for financing and corporate transactions, both because of the expertise in these areas and because of the need for greater capacity,” says Eleni Stathaki of Upstream Systems. “Those kinds of transactions tend to be more complex and each one requires a whole group of lawyers. Even then, we do keep the coordination and project management in-house.” The expected workload of a project is highlighted by 10% of General Counsel as a reason to look for external counsel.
Viktor Fonth of HB Reavis says he looks at “the size of the transaction and the resulting expected workload,” as well as their “workload related to other ongoing projects,” with Asli Sahinkaya of Setur also saying they “choose to externalize matters that are bigger in volume (like litigation).”
“Sometimes we think it would be better to share the responsibility for the potential negative outcome of that matter,” says Kaya. While usually mentioned only in passing, 19% of General Counsel spoke of turning to external counsel as a means of outsourcing risk.
For Clementina Canel of Fepra, one of the three metrics is whether they “want to have the responsibility in-house or external,” and for Ingo Steinwender of CA Immobilien, one of the three considerations is whether there is a “need for a third-party liability or opinion.”
And this choice has potential other ramifications as well, as Stefan Orosi of Prima Bank Slovensko explains: “I always consider the presence of internal expertise in a given area, the cost of outsourcing compared to the cost of in-house resources, and also reputational issues. All of us who have been working in the legal field for a long time know that the outputs of external legal advisors are often, regardless of their professional quality, more respected in the external and internal environment. ‘Extra impact’ will often play a role in the decision to outsource. To be specific, if you win a lawsuit represented by an external attorney, the opposing party will reimburse you, based on the court’s decision, a significant part of the costs you paid to the attorney. If you do not have an external attorney, you will not receive any compensation from the opposing party for the in-house lawyer who dealt with the matter for many hours of their working time.”
Do you Pick the Firm or the Lawyer?
A Firm Choice
Do you tend to select your external counsel based on the firm or a specific lawyer? While the answer is many times a mix of the two, 40% of General Counsel lean towards looking at the firm.
“I tend to pick based on the law firm,” says Asli Sahinkaya of Setur. “I think the culture of the law firm is very important, and the best law firms are those who keep the culture, even if the lawyers change.”
A formal or informal panel of firms that GCs are familiar with is pointed to most often as an explanation. Judit Miskolci of Teva says that for them, “there are selected law firms with whom we work at group and local levels on specific areas of expertise.”
For others, like Andrzej Klimek of Idea Getin Leasing, it comes down to knowing there is manpower behind a matter: “We rather prefer a law firm because of potential replacement and number of lawyers who may be involved.” As Joanna Przybyl of Revetas Capital explains, “it is important to have a trusted relationship with a specific lawyer, but equally important to know that there are other teams behind this person that can either support (if from the same practice area) or supplement the services with support provided from other areas that may become relevant in a given matter.”
Lastly, for some, “a brand name law firm offers a level of credibility and comfort,” as Alex Florescu of Nepi RockCastle puts it. Bora Kaya of Gama Power Systems explains that “the brand becomes more important if the impact of the potential negative result on the business will require an explanation to the shareholders or the board.”
But even for those that lean towards picking based on the firm, having the right point person is critical. “We have contracted law firms, however, we work always with the same lawyers therefrom, if possible,” says Viktor Fonth of HB Reavis. “This simplifies the cooperation (we have already gone through our mutual learning process, they know our standards, we know the quality of work and the attitude we can expect).” This is echoed by Przybyl: “On bigger projects, we do appreciate having one contact person that coordinates all relevant workstreams and understands the overall project – this simply brings additional efficiencies if we do not need to collect and combine various elements relevant for a given matter.”
Letterheads Are Not All
“I prefer choosing a specific lawyer over a law firm,” says Stefan Orosi of Prima Bank Slovensko. “I am always looking for a lawyer with professional experience and good references. The expected result takes precedence over a lot of supplied letterhead paper with nicely aligned edges, if you know what I mean.” And the majority agrees with him, with 60% of General Counsel leaning towards choosing based on the individual lawyer.
“Even though all lawyers within a big law firm should be of high level, it is not always the case,” says Eirini Florou of Holcim. And a perceived failed promise of quality is a recurring theme, with Ingo Steinwender of CA Immobilien saying they “pick individuals as the law firm and their rankings only indicates the quality of the partners, but - more often than I expected – is not a seal of quality.”
“I have learned that brands are irrelevant,” adds Adam Brzezinski of MoneyGram. “I know this sounds provocative but that is the truth. It always comes down to the human being talking to you and his/her perspective and thoughts that can either tackle the topic at hand straight on or be generic enough that is not even remotely linked to the issue discussed.” Going for a specific lawyer seems like a safer bet in the minds of most general counsel, like Sylvia Nanovska of Telelink: “We used to pick based on the law firm, but now we prefer to work with a prominent professional for a matter we need advice on. We are then more confident that we will get professional and expert advice.”
Keeping Positive Vibes
Radu Culic of Roche says he tends to “pick based on a specific lawyer, considering the previous experience with that person.” Mark Erdelyi of Yettel Hungary also says he looks at “lawyers, usually,” because he “trusts the individuals who have proven themselves.”
Clementina Canel of Fepra too highlights the importance of having “previously worked together and having good results,” with Zita Toth of Primaenergia stressing she looks at individual lawyers with whom she “had good/positive experiences before.”
“I personally pick the external counsel based on the specific lawyer, so whenever he/she moves to another law firm, I prefer to go with him/her too,” says Gunel Rzayeva of VavaCars. “We always go with the individual names as we value the relationship,” explains Aybars Yagiz of Gama Energy. “Almost all mid- to large-sized law firms can provide indemnity insurance, and amongst them, we seek to pick favorable names.”
And that happens even when the initial choice was based on the firm, according to Eleni Stathaki of Upstream Systems: “Unless someone refers to me a specific lawyer, I tend to pick based on the law firm. However, when a lawyer that we work closely with changes firms, I typically follow the lawyer. Familiarity with the organization can save lots of time and make for better results.”
This article was originally published in Issue 9.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.