The use of external counsel, once an investigation or prosecution has been made official, received across-the-board support from participants in this survey. 77% of respondents considered it at least moderately important for external counsel to be involved at that point, with almost half of those considering it highly important. 14% reported feeling that external counsel would not be involved.
‘Especially in smaller departments I have been a part of, having a good lawyer outside your business who knows your business is critical,’ explains one senior legal director in the European aviation industry.
‘Departments are strapped for resources as it is; the overhead of responding to a regulator – or worse, a formal prosecution – is beyond the capabilities of most departments.’
Those counsel who were a part of smaller departments were more likely to expect external counsel to be involved. Respondents in teams of 50 or larger were less likely than any other group to involve external counsel, with 31% reporting no involvement of external counsel at that stage.
When it comes to involving external counsel in anticipation of an investigation (as opposed to when one has formally been announced), approaches differ. Just 8% or respondents reported always involving external counsel at this stage; 33% reported occasionally involved external counsel and 38% reported involving counsel ‘often’. Almost 20% rarely involve external counsel at any point before the formal launching of an investigation or prosecution.
‘We are in almost constant contact with at least one outside lawyer to consult with on any real or potential investigations,’ says one veteran in-house counsel in the North American energy sector.
‘We can’t afford not to. If the first time you are meeting with a lawyer is when the regulator is at your door, a lot of (avoidable) damage has been done.’
While the in-house community has been vocal in pushing for diversity in their partner law firms, a company instructing external counsel on an investigatory or other white collar matter is typically more likely to involve a single practitioner for representation than other types of legal work. Therefore, survey participants were asked how important of a factor diversity and inclusion is when selecting counsel in these situations. The overwhelming majority felt it important, with 40% considering it a ‘highly important’ factor and another 40% considering it ‘moderately important’. Just 5% felt it unimportant.
In choosing external counsel, respondents reported choosing from a variety of sources. On average, in-house counsel were most likely to have found their chosen counsel by direct outreach to single firms – 20% of counsel reported choosing their representation this way. The next most popular source was the use of a company-curated preferred provider panel at 15%.
On the 30th of November 2017, The Australian Government announced a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission). Appointed to preside over the public inquiry was High Court Justice, Kenneth Hayne. He was tasked with identifying the underlying causes of financial sector misconduct, and to uncover evidence of systemic issues within corporate practices.
The Commission was precipitated by a series of high profile exposés implicating Australia’s biggest banks in scandals covering fraud, predatory sales practices, FOREX trading impropriety, interest rate rigging and more. The Commission conducted seven rounds of public hearings over 68 days, called more than 130 witnesses, and reviewed over 10,000 public submissions. The findings made front page headlines across the country. Concluding the public inquiry, Commissioner Hayne put forward 76 recommendations directed at government institutions, regulators and industry leaders.
The Commission’s findings heralded sweeping changes within current operational frameworks in the financial advice, life insurance and superannuation sectors. Leading general counsel working across these industries in Australia candidly share their experiences in rebuilding consumer trust, as they work towards transforming regulatory practices across the country.
Cashing in
To understand the damning findings of the Royal Commission it is crucial to reflect back upon the historical development of banks in Australia. Jeff Morris was a financial adviser for Australia’s Commonwealth Bank and more importantly, was a key whistleblower spurring the public enquiry.
‘What I noticed was the mentality of banks; they lost their way, and they lost sight of their history,’ explains Morris.
‘The history of Australian banks is a good and honourable one, and an important contributor to national economic growth. It was in the 90s when things began to change. American sales cultures came in and banks got infected with the remuneration US banks had always paid.’
This shift away from customer-focused services towards bonus schemes led to deceptive conduct. Claims that arose included: charges for services that were not provided; continuing conflicts of interest affecting financial advisors; and an insufficient focus on risk management. In more severe cases, some financial institutions had inadvertently facilitated money laundering, turned a blind eye to terrorism financing, and promoted a culture of greed.
Refusing to stay silent, Morris filed several complaints to ASIC (The Australian Securities Investment Commission) Australia’s financial regulator, outlining acts of misconduct he had witnessed. For years ASIC did little to investigate the claims and in 2013 Morris decided go public. Several media outlets began to report upon allegations of fraud, forgery and management coverups. This ultimately resulted in a parliamentary inquiry and Royal Commission.
Since the Royal Commission was televised, Australians saw the direct impact financial misconduct had on individual’s livelihoods, prosperity, and dignity. The erosion of consumer confidence and trust in the sector was – and to some extent still is – extensive.
‘The thing that was so distinguishing about the Banking Royal Commission, was how it captured the public’s attention because of how it connected through case studies into such deep feelings and experiences within Australian consumers,’ says Grant Jones, General Counsel & Executive Lead, Regulatory Affairs at MLC Life Insurance.
‘It showed how customers felt so vulnerable to large institutions, and it gave voice to this feeling and experience.’
This sentiment was shared by David Cullen, general counsel of AMP, one of Australia’s leading wealth management companies.
‘I think it certainly is a pretty challenged environment after the Royal Commission. There is lots of activity and focus on remediating and rectifying legacy issues, making compliance improvements, and leaning into a much greater regulatory change environment than we have seen in recent years.’
The findings of the Royal Commission and the suggested reform package put forward by Commissionaire Hayne represents the largest and most comprehensive corporate and financial law reform process since the 1900s. The reform package addressed issues of weak regulation, corrupt reward structures and an overall disregard for client interests. From the 76 recommendations made, 54 were directed to Government, 12 to regulators and 10 to industry leaders.
‘Together, these reforms have and will continue to ensure that Australia’s financial systems deliver fairer outcomes for consumers and remains resilient to enormous stresses caused by events like the global financial crisis and now the coronavirus,’ said a spokesman from the Australian Treasury.
Leaning into legal
Since the Royal Commission, the role of in-house counsel has been cast into the spotlight. Professor Michael Adams, head of law at Australia’s University of New England explains the delicate position of corporate counsel.
‘The Royal Commission has really highlighted the role of lawyers within financial services, and in particular the role of various in-house counsel within these entities. I think there has been a lot of soul searching and discussions about whether more could have been done, or if they should have been more vocal in management discussions.’
‘First and foremost, if you are a practicing lawyer, solicitor or barrister – you are an officer of the court and you have duties which are predominately to the court, above and beyond that to your client, even as in-house counsel. So, in theory the delineation is very clear,’ says Professor Adams.
Blowing the whistle
During a time when it would have been easier to turn a blind eye, Jeff Morris chose to do the right thing and blow the whistle. By doing so he would embark on a ten year crusade which would culminate in a Royal Commission.
‘It’s a lot more difficult, to be your own man, chart your own course if you have to stand alone, against everyone else who wants you to do nothing,’ explains Morris.
It all started in 2008 when Morris was working as a financial advisor at Commonwealth Bank – one of Australia’s biggest. He became deeply concerned about the severe losses and emotional distress being experienced by many elderly and vulnerable clients as a result of poor financial advice.
‘What I saw and the thing that actually got to me, was when some elderly people came into my office and physically broke down in distress because they had half a million dollars vaporised from their investments. They couldn’t get a straight answer out of their financial planner or any of the managers in the organisation.
‘There were some other blokes who were having similar experiences to me; we got together and decided this was not going to happen on our watch. This is when I wrote to our corporate regulator ASIC (The Australian Securities Investment Commission). The regulators were absolutely useless.
‘That is why in June 2013, nearly five years later, I went public. I needed to expose not only what the banks were doing, but what the regulator was letting them do while they were sitting there asleep at the wheel.’
Morris’s plight to expose corrupt banking practices resulted in one of the biggest regulatory overhauls for the industry.
‘It is I guess quite fortuitous banks had a tune up and a realignment of attitude. The economic carnage at the moment would be just absolutely appalling. Getting banks back on the path of righteousness probably came in just the nick of time. The way the finance industry and banks respond to coronavirus will be extremely important.’
‘In practice in-house counsel roles are subjected to a range of pressures. The more senior of a lawyer you are, the more likely you are part of the management decision-making process. If you are a general counsel at a financial entity, you are part of the c-suite.
‘You are there to facilitate your organisation to develop new products and get around legal barriers and regulatory hurdles. That is part of your job. However, you do have an obligation to speak out against ethical violations to explain when something is misleading or unreasonable.’
Getting ethical
Navigating commercial obligations, whilst acting as a trusted advisor may sometimes present ethical grey areas for corporate counsel.
‘The Royal Commission constituted a profound point of inflection in the industry where firms were forced to publicly look into a dark mirror and make a decision to fundamentally change,’ says Jones.
‘What the Commission particularly highlighted through its case studies, is how easily unfair decisions which have real adverse impacts on people can become normalised within a large commercial operations.’
‘This was a very confronting realisation for industry because the vast majority of people across financial services get up each morning and go to work, wanting to do help and do some good and to make a contribution to their customers and community. They are horrified at any prospect of hurting customers.’
‘If you are a general counsel at a financial entity, you are part of the c-suite.’
‘So when industry people saw the impact of particular conduct through the lens of impacted customers – it was a very confronting moment – people felt deep shame and were challenged at a level of personal values. It was a real moment.’
Similarly, Elizabeth Weston, former head of investment legal and governance at Cbus Super Fund reflects on the on the Royal Commission and its importance on ethical conduct.
‘For me, it was about primacy of community expectations vs the black letter of the law. As a lawyer, obviously people can sail close to the wind, but just because you can do something does not mean you should do something. So, this was a stark reminder of the importance of community expectations and the obligations to always act in the best interests of members.’
Since the Royal Commission, there has been a renewed focus on ethical conduct within the financial sector.
‘I really think those in the sector occupy a unique position of trust, because they are looking after the financial wellbeing of Australians, which is a responsibility and a pretty heavy one. But it is also a privilege,’ explains Cullen.
Culture corrupted
One of the major criticisms coming out of the Royal Commission was the toxic culture prevalent within financial service industries. In fact, Commissionaire Hayne in his final report outlined harmful cultural practices directly linked with risky, immoral and even illegal activities from financial providers. He wrote:
‘Rewarding misconduct is wrong. Yet incentive bonus and commission schemes through the financial services industry have measured sales and profit, but not compliance with the law and proper standards.’
Therefore, cultural practices play a pivotal role in driving or discouraging misconduct.
‘Quite often, an in-house counsel’s job is going to be telling people unpleasant truths, things they do not want to hear. In a culture where everything is being covered up, in a toxic culture, in-house counsel will frequently be pressured to suppress news and not present senior executives with bad news that they know they do not want to hear,’ says Morris.
Weston agrees: ‘As in-house counsel – especially in financial services – there is always a risk that you will fall captive to business and rubber stamp initiatives. One of the key challenges is the fact that you are sometimes delivering deeply unpopular messages.’
‘As you become more senior, you become resigned to the reality of your function as not merely a trusted counsel but also as an officer of the court. I think at times nobody really wants to hear the squeaky wheel, but it is better they do so, before all the wheels fall off the wagon.’
‘I think for me it is about how to deliver that message in a way that stakeholders are able to identify an alignment of interests. How do we counter that risk and deter it in such a way that they will see where you are coming from and act accordingly?’
Looking to the future post-Royal Commission, the role of in-house counsel is fundamental in influencing healthy cultural practices within the workplace.
‘The role of in-house counsel is more important than ever; certainly in this sector they are busier than ever,’ says Cullen.
‘I am a bit wary of the view that in-house lawyers are the conscience of an organisation because really I think everyone should shoulder that conscience. But we do have a key role in setting and being part of the moral compass of an organisation.
‘I think the other key thing in the Royal Commission was about misconduct. It was asked to look into conduct that may fall below community expectations – even where not strictly contrary to law. Now, that is quite a challenging environment for lawyers to operate in because generally lawyers are most comfortable when dealing with black letter legal obligations. The concept of what is and is not contrary to community expectations will be something lawyers have to consider as part of their advice. It raises the issue of ‘where is the line drawn?’ but increasingly this is another challenge that in-house lawyers will have to grapple with.’
Fairness is another concept that does not necessarily follow the black letter of the law, yet according to Grant Jones, general counsel at MLC Life insurance, it has become a key topic for consideration post-Royal Commission.
‘There are two clear learnings that I took from the Royal Commission that influence how I perform my new role today.
‘Number one is fairness. I believe fairness will be the defining regulatory principle of our time. The second learning is that fairness needs the most protection in every 100 small decisions that are made across a company every day, relative to the fewer and bigger decisions a board will make that have the benefit of lots of perspective and debate.
‘Why is the first important? It is important because it prompts the question, how do you embed fairness in your business processes? Fairness is an idea, it does not have a fixed perimeter and is entirely subjective. With that being the case, how can it be a principle of law that you can design processes and products off the back of? This is the challenge for industry participants and regulators, but it’s a critical issue to solve.’
Governance glow up
As a result of the increased regulatory environment following the royal commission, companies across the financial sector are reassessing their internal corporate governance processes. In particular, one of the most obvious shifts for in-house counsel post-Royal Commission has been the push towards strengthening internal corporate governance framework.
‘In Australia, we have come out of a Royal Commission into Financial Services which has really emphasised the need for robust corporate governance and seen an increased focus by our regulators to take action against white-collar crime. That trend is unlikely to change,’ explains Seshani Bala, group general counsel & corporate assurance at Chartered Accountants ANZ.
‘The approach to interacting with regulators is of fundamental importance.’
‘One of the things I noticed following the Royal Commission was the broadened remit of the General Counsel. I previously led the legal function and my remit was extended to risk and governance. There is definitely a trend towards integrating those functions so you can really drive process synchronisation. Risk can be identified and managed and governance around that risk solidified.’
This shift has also been observed by Cullen: ‘Supporting boards and their increased governance needs has undoubtedly heightened post the Royal Commission. I also think the approach to interacting with regulators is of fundamental importance.’
In-house legal teams across the finance industry are tasked with improving corporate governance frameworks in order to avoid public scrutiny or corporate watchdog fines. Raising the accountability and governance standards across the financial sector is crucial.
‘I was hoping that the Royal Commission would lead to a renaissance for legal function within financial services. Perhaps it did within the retail banking sector, but I am not sure if it did so much in the industry funds sector,’ says Weston.
Focusing on the future
Overall, the Royal Commission and its findings sent shock waves through the financial sector of Australia. Revelations of systemic misconduct and corporate coverups brought to light shameful practices and toxic work cultures.
‘Sometimes it takes a disaster or a near disaster for people to recognise – really truly appreciate – cognitive diversity. As a legal professional you bring a different perspective to bear because of your discipline and because of your training as an officer of the court,’ outlines Weston.
‘I think as lawyers I have always felt that we know about worst case scenarios, we seem to be the people who envision it, we seem to be the people who consider what it would look like on the front page of the paper, rather than waiting until it is on the front page of the paper.’
Although the financial sector in Australia has gone through significant regulatory transformation, acknowledging past mistakes and implementing new frameworks aimed at improving industry practices are the first steps towards rebuilding consumer trust.
Plans to mitigate sources of investigatory risk and respond when an investigation does occur must change according to the risk profile of the business. Between novel technologies, evolving sensibilities and seismic shifts within industry, regulators and investigatory bodies are changing focus regularly. So too are business attitudes toward risk changing.
Generally speaking, when asked how the risk profile of their business has changed over the past five years, 53% of in-house counsel said it had at least somewhat increased. When asked to look ahead at the next five years, 26% felt that the risk profile of their business would significantly increase over the next five years, with 61% feeling that there would be at least a slight increase in their business’ risk profile.
When looking at changing risk profiles, data breaches are a good example: it wasn’t so long ago that the range of companies that rely on the collection and use of data was limited. Now, data has pervaded nearly every aspect of commerce. Retail stores that may historically have collected very little personal data now capture all manner of information at the point of sale for loyalty programmes, not to mention the continued recission of relatively anonymous brick-and-mortar buying in favour of online shopping.
To go back further, increasingly globalised markets and supply chains have largely informed recent interest in modern slavery. Modern slavery regimes set an expectation that companies must not hide behind the strongest link in the compliance chain, instead being held accountable for the weakest link: a company in the United Kingdom may be perfectly above-board in a foreign jurisdiction, but regulators now hold those companies to the standard of UK law for their actions in jurisdictions further up the supply chain, where protections against abuse and exploitation are not as strong.
Reading the room
GC surveyed top in-house counsel from across the world, asking participants to rate their organisation’s current risk levels on a scale of 1 to 5, 1 being the lowest risk, and 5 the highest. The responses were broken up into the following categories:
Accounting fraud
Antitrust/price-fixing
Bribery and corruption
Compliance/due diligence
Cybersecurity and data privacy
Environmental regulatory
Money laundering
Sanctions evasion
Securities/commodities fraud
Tax evasion
Trade/foreign investment violations
Cybersecurity and data privacy risks were rated as the highest concern by survey respondents, both in terms of the risk they currently pose to businesses and how that risk was expected to change in the next five years. Cybersecurity and data privacy risks were rated at an average of 4.48/5 currently, which ballooned to 4.75 when respondents were asked to look ahead at the next five years.
Compliance and due diligence are also top of GCs’ minds – both when speaking about their organisation’s current level of risk and when looking ahead to how this might change over the next five years – coming in at an average rating of 4.27 with an expected increase of 0.22 to 4.49 in the next five years.
On average, nearly every category is expected to become more risky over the next five years. Bribery and corruption risks polled the biggest jump, increasing by 0.32 points on the survey’s five-point scale.
Risking it online
With cybersecurity and data privacy almost unanimously rated as the most pressing risks for GCs both currently and in the coming years, many of the in-house counsel surveyed and interviewed for this report had much to say on the subject.
‘Cyber threats form one of the biggest security risks of the 21st century,’ said Ritankar Sahu, general counsel and head of compliance for the Maxpower Group, operating throughout Southeast Asia and the Middle East.
‘Most Fortune 500 companies have been victims to some form of cyberattack leading to economic damage ranging from a few thousand to a few billion dollars. Cyber-attacks have increased dramatically in the last few months amidst the pandemic.’
Until relatively recently, it might have made sense to talk about cybersecurity and data privacy in terms of specific sectors, but the adoption of mobile platforms and cloud services – be they for internal operations, customer interactions, or both – has made cybersecurity everybody’s problem. In fact, the sector in which a given survey respondent is working had virtually no impact on their perception of cybersecurity and data privacy as a risk: GCs working for manufacturing companies were just as worried as those working for healthcare providers.
This is something that Seshani Bala, general counsel at Chartered Accountants of Australia and New Zealand, has seen personally.
‘Another big challenge is that we are trying to give customers and members a personalised experience, and to make data-driven decisions as a business,’ says Bala.
‘So, we are collecting more data to focus on that personalised, segmented experience. That increases the potential privacy risks in the event of a data breach. The penalties are very high under GDPR and Australian law. We are now seeing other countries move to a mandatory notification system that is in line with GDPR standards, and this poses greater pressure on organisations to make sure they have robust policies and procedures to quickly comply with those notification requirements.’
‘With the rapid development of online services, the risks associated with data storage and cybersecurity will develop,’ agrees Roman Kuznetsov, legal manager at WILO RUS.
Bala has worked closely with stakeholders in the wider business to make sure data protection policies are both clearly understood and rigorously enforced.
‘Once we have made sense of that, we can then drive processes and controls to reduce risk in that space. We partner very closely with our IT team. I think that has probably been the biggest change I have seen the last 12 to 24 months. I think Legal and IT need to be best of friends in-house, and you really need an integrated approach to effectively manage risk in that space.’
‘Before moving to a digital solution, I think it is really key to understand how each platform stores, secures and moves data. Mapping out that data flow process and understanding the data risks and data journey, as well as how it integrates with other platforms or plug-ins in other locations is important. It’s a given that digital solutions need to comply with applicable privacy laws but legal technology solutions also need to appropriately protect legal privilege, corporate record holding, and in-house destruction and recovery policies.’
Modern working
While the large difference between current risk and expected risk over the next five years is undoubtedly a reflection of an increasingly data-driven world, the effects of the COVID-19 pandemic will certainly also be playing a role. With home working becoming near-ubiquitous over the past few months, the volume of data being transmitted – either from workstation to workstation, colleague to colleague or business to customer (and vice versa) – is at an all-time high. This, too, means that the scope for bad actors to gain access to confidential data is also higher than ever.
‘The effects of the pandemic, and the current situation the world is in, pose several challenges for us in terms of rearranging our fraud agenda,’ says Gustavo Sáchica, chief legal and compliance officer at Allianz in Colombia.
‘In-house legal counsel need to anticipate the possibilities of fraud under pandemic circumstances. At Allianz, we have measured and stressed our risk tests in order to consider as many possibilities as possible.’
‘Due to Covid-19, increased working from home has resulted in a rise of remotely-accessed work platforms and digital ecosystems,’ says Sahu.
‘Enterprises still have lots to do before they can claim that they are breach-proof.’
‘This has made us highly dependent on technology which in turn has exposed us to more sophisticated cyber threats. For MAXpower, this has not been much different. Our fleet of gas engines are spread across remote sites in South Asia, and given applicable travel restrictions, we have had to rely extensively on our cloud based technology platform which lets us track ‘live’ operating performance, profitability and emissions from a centralised asset dashboard. The technology also lets us engage in predictive analytics and gives us valuable fleet-level insights.’
‘From a risk management perspective, I think the industry view is that enterprises still have lots to do before they can claim that they are breach-proof. MAXpower’s exposure is no less than other similarly placed power producers in the market.’
‘We constantly strive to make our systems less vulnerable to digital threats. As general counsel, I recognise that we are not breach-proof and regularly engage in conversations with our operations folks trying to gauge whether we are doing enough.’
For some in-house counsel worried about what the future might hold for their cybersecurity efforts, the risk is already eventuating.
‘We have also seen our mail servers being the victim of ransomware attacks and we have had to strengthen our firewalls,’ explains Sahu. ‘In the months to come, I am certain that companies will allocate more budget and resources to address cybersecurity risks, and I do see a rise in procurement of cybersecurity insurance coverage.’
Regulators
The interaction between the regulators’ attitudes to risk and the reality on the ground for in-house counsel is complicated. In some instances, regulators are leading the charge by focusing on an area of concern and proactively shoring up the relevant protections, or cracking down on non-compliant entities. On the other hand, regulators may have fallen behind the in-house community in how they approach these areas of concern. In this way, regulators can make a company’s compliance journey both easier and more difficult.
‘Increased oversight by regulators is reshaping the way we approach risk.’
Khaled Shivji, chief legal officer at the UAE’s Moro Hub, highlights this point. ‘In order to reduce the regulatory cost of compliance, we would be grateful to see more proactive guidance from regulators and prosecutors about the kinds of risks they believe are rated by the national and state governments as risks that, if not tackled, will diminish the country’s overall international rankings concerning white-collar crime.’
‘Increased oversight by regulators is reshaping the way we approach risk,’ agrees Armando Cruz, director at KPMG in Mexico.
And as with everything, this dynamic between regulators and the market is being redefined by COVID-19, according to Maria Alvear, general counsel at Chile’s GASVALPO.
‘In my view, the whole landscape will change after COVID-19 crisis lowers its impact. It will probably remain within us for a while and that encourages us to change our old ways of working and doing business, including regulatory risk management.
‘Regulatory risk management has been very challenging during these months, with several regulations being issued due to COVID, so it’s hard to keep up-to-date and perform accordingly. I guess this uncertainty that we are facing will remain; sticking to regulatory compliance will become more important than it is today to avoid a situation where lack of control and uncertainty give space for corruption to enter the business.’
For companies and their general counsel – as with the rest of the world, generally – 2020 presented unique challenges. As we move through 2021, organisations of all sizes and across all industries face unprecedented forms of scrutiny, liability, and potential “bet-the-company” penalties for misconduct by US and other international regulators.
In response to the COVID-19 pandemic, governments worldwide have distributed significant amounts of emergency relief funds to help manage the pandemic and mitigate its impact on individuals and businesses. Over the course of the last year, the United States, for example, has passed the largest spending measures ever enacted, providing more than five trillion dollars in aid through multiple stimulus bills and more is being proposed. Those relief funds include oversight mechanisms based upon TARP that seek to combat potential fraud, waste, and abuse on behalf of fund recipients, paving new avenues for regulatory scrutiny.
In June 2020, the US Department of Justice (DOJ) issued updates to its Evaluation of Corporate Compliance Programs as part of its overall framework that prosecutors should consider in conducting corporate investigations. That framework will apply to COVID-related investigations. It also provides insight for GCs of corporations seeking to develop and implement a best-in-class compliance program. Among its recommendations, the guidance encourages companies to leverage technology and engage with compliance data real-time – a clear signal to businesses of the importance of data management and security in building a robust compliance program.
Additionally, although robust white collar enforcement has continued in a number of areas over the past four years, the 2020 US Presidential election will usher in a new administration that will likely adjust its regulatory and enforcement priorities on several fronts. With new leadership, financial regulators – including the DOJ and US Securities and Exchange Commission – are poised to take more aggressive stances to combat alleged corporate wrongdoing.
It is no surprise, therefore, that global general counsel are expressing heightened concern over these new and emerging challenges. To gain more direct insight into these issues, Latham & Watkins is delighted to partner with GC Magazine and The Legal 500 in their inaugural “Under Investigation: A GC Guide to White Collar and Sanctions Trends in 2021” to ask GCs about their top regulatory challenges. The following responses offer a snapshot into the concerns and risks GCs around the world have identified as top-of-mind in this evolving regulatory climate.
Douglas Greenburg Benjamin Naftalis Nathan Seltzer
Global Chairs, White Collar Defense & Investigations, Latham & Watkins LLP
Virtually all respondents to our survey had an opinion on whether ethics and compliance were treated as two different topics within their organisation. There was no overwhelming consensus, however 61% of survey participants said that they are not treated as distinct concepts within their organisations; 35% said that they were.
‘Many companies think that these should be separated, where one should focus on the law and the other on the company culture as a whole,’ explains Armando Cruz, director at KPMG in Mexico.
Regardless of the relationship between the two, some consensus has emerged from the results suggesting that the question of ethics does and should touch all areas of the business – not least of all in avoiding the ire of regulators and investigatory bodies.
90% of in-house counsel consider corporate ethics highly important in avoiding white-collar investigations. Similarly, 87% considered the legal team as ‘highly important’ to the promotion of an ethical business culture within an organisation – 12% consider it ‘moderately important’ – and just 1% of respondents thought that the legal team was less important than that.
The results show a near-universal appreciation for ethics within a business by in-house counsel. This is unsurprising. However, what is surprising is the extent to which that feeling from general counsel does – or doesn’t – manifest within the wider business.
Despite near-universal agreement among in-house counsel that their teams are important to an organisation’s ethical makeup, just 63% felt that they and their teams are appropriately placed to promote an ethical business culture within their organisation.
‘Even though they are managed by same team, they are materially different,’ says Miguel Oyonarte, VP legal and corporate affairs at VTR Comunicaciones SA.
‘Ethics is much bigger in terms of scope and impact on culture. For its successful management, it requires the lead of the CEO and all their direct reports. It is also much more difficult to change – it requires full cultural change.’
Indeed, those who didn’t feel that their team is appropriately placed overwhelmingly pointed to factors external to the legal team as being the biggest reason. 61% cited institutional structure as making legal’s involvement impractical. The next most cited reason was that culture and conduct were the domain of another department (17%).
For quite some time now the legal profession has acknowledged that more needs to be done to develop female talent, and there has been much discussion about women in the law. Having those conversations is a great start, but the practical piece is often missing. We wanted to develop a programme that would have a real impact on the lives and careers of female attorneys. What we have started with Finnegan FORWARD, and what we will continue to develop over the coming months, is a set of tools and resources that will help women advance their careers.
As science and engineering professionals, we are aware that women in STEM-related areas of law face a number of obstacles to career progression. Therefore, we were interested in finding ways to move the needle when it comes to our diversity and inclusion initiatives.
When we sat down to plan the Finnegan FORWARD initiatives, we wanted to make sure our female attorneys were given a clear path to partnership. The first step was to identify the practical barriers women face in the legal profession. One consistent challenge female attorneys face, both within their firms and when developing relationships with clients, is how to best market themselves. As a generalisation, women tend to downplay their experience. If a female attorney is not, for example, comfortable listing her relevant experiences or is not certain that her experiences are relevant to a particular matter, it can result in her being missed in a pool of candidates. It takes conscious effort to routinely think about everything you’ve done and been exposed to, but that is a helpful practice if you want to be more visible within a firm.
No one in this firm is ever going to overlook a qualified female attorney, but they may not see that there is a suitably qualified attorney available. We are encouraging women to put their hands up for a role on the team so that they are best positioned to get more opportunities within the firm.
Junior lawyers may sometimes assume that because they haven’t worked on a particular type of matter for 20 years they don’t have the necessary experience for a particular matter; and not every lawyer knows how to best present their experience and expertise in a particular area and how it may be beneficial to a team. Often, clients want lawyers who have approached problems from a variety of angles and who bring new and creative solutions to the table. At Finnegan FORWARD, we run programmes that help lawyers better understand how to interpret the experience they have and what qualifies as experience for a particular matter.
The other big issue we wanted to address is how female lawyers can improve their visibility with clients. Successful lawyers have inevitably developed a book of business – they have clients who have worked with them before and who trust them. These relationships of trust are foundational to a partner’s practice, and helping lawyers form those reputations is an important to their career development. We are working hard to make sure our more junior female attorneys have opportunities to network, or to spend time with mentors who can help them along that path. We are also helping female attorneys carve out a niche practice, whether by helping them publish and gain a reputation as subject matter experts, or by nominating them for awards that highlight their strengths and offer them the same exposure and recognition as our male attorneys receive.
The reason we are committed to this is to help women, but as with all D&I initiatives, the positive outcomes go far beyond that. Clients want to see diverse teams because they know those teams deliver better results. We have a large talent pool to draw on, which is great for our partners, and we are putting together more diverse, stronger teams.
As a firm, Finnegan tends to be very collaborative when it comes to business development. We also like to keep an open dialogue with our clients or potential clients about how we can do things better together. This is particularly true when it comes to D&I; GCs and legal teams have been on this journey far longer than law firms so we welcome their ideas and perspectives.
The eight minute and forty-six second murder of George Floyd that we all witnessed in 2020 opened America’s eyes to acknowledge systemic racism. The aftermath reignited conversations around racism, discrimination, and implicit bias in the workplace. The legal profession has used this time as an opportunity to train staff and attorneys, reaffirm policies against workplace discrimination, and increase diversity initiatives. These acts are indeed necessary. But behind the cloak of formal policies remains the deep-rooted implicit bias and microaggressions directed toward black attorneys every day, especially when it comes to staffing cases and providing opportunities to take on lead roles in important matters.
There is no doubt that systemic racism and implicit bias exist in the legal profession. Several years ago, for example, a study conducted by the consulting firm, Nextions, provided empirical evidence of implicit bias against black attorneys. Two versions of a legal memo containing the same number of errors were circulated to law firm partners participating in the study. The only difference between the memos was that the participants were told that one was drafted by a white associate and the other a black associate. The exact same memo averaged a 4.1/5.0 rating for the white associate’s memo accompanied with encouraging comments such as “generally good writer but needs to work on …,” “has potential,” and “good analytical skills.” The black associate’s score? He averaged only a 3.2/5.0 rating accompanied by more negative feedback: “needs lots of work,” “can’t believe he went to NYU,” and “average at best.”
Aaron Gleaton Clay | Associate | Finnegan
Is this same implicit bias diminishing black attorneys’ role on cases? Opportunities to lead and try cases or argue motions before courts are critical for any attorney’s professional development and advancement. And while these opportunities are hard to come by for younger associates, in large part because senior and more experienced partners are slated, or because such decisions are largely driven by client demands, these opportunities seem even rarer for black attorneys, especially young, black associates. As a law clerk at both the federal district and appellate court levels, I witnessed how black attorneys were rarely given a speaking role in motions hearings, trials, or oral arguments. Some of this I attributed to the alarmingly low numbers of black attorneys in major U.S. law firms. Indeed, in 2020, the National Association for Law Placement (“NALP”) reported that only 5.1% of associates and only 2.1% of partners in U.S. law firms are black. These numbers were worse for black women who made up only 3.04% of associates and 0.8% of partners! But even with these low numbers, I wondered if there was more to the story. Why is it that black counsel has a “seat at the table” but not a lead, speaking role? Is it not important to provide these opportunities to black attorneys who not only need the experience but can add value to the case? Does the court or the jury take notice of this disparity? If so, what can we do to fix it?
To answer some of these questions, I interviewed the Honorable Gerald Bruce Lee, retired U.S. District Judge of the United States District Court for the Eastern District of Virginia, for his view from the court’s perspective. Over the course of his more than 25 years on the federal and state benches, as well as his prior experience as a trial lawyer, Judge Lee has encountered more than his fair share of attorneys and firms and has seen first-hand how younger, and arguably more knowledgeable, attorneys are “benched,” particularly black attorneys. In his view, “systemic racism is the answer; it remains a problem.”
We must “be very conscious of systemic racism that exists,” Judge Lee said, and “we have to end the ‘mirrortocracy.’” In other words, we must stop choosing to only work with someone who looks like us. Judge Lee suggests that firms and partners “pick a black associate that you want to work with and put that person to work. Give them the same coaching and mentorship that you would give someone that looks like you,” he said. Not just on one case either, he said, “work with them on 10 cases and see what happens.”
And “it’s not just for social justice reasons,” Judge Lee added. “We are creators, we are innovators, and we can think outside the box, and you need to give us a chance to do that and improve the quality of work that is being done and to create the results that are being attained.” Judge Lee said that judges “think young, black associates have ideas” because “young, black associates have had to improvise and have had to learn how to think creatively on their feet.” To him, “it seems that to have someone as gifted and talented as some of these young, black associates are, who have overcome many obstacles and have many good insights, and not to use them is like wasting resources that you’ve acquired.” He asked, “Why would you waste resources? Put your resources to work.”
Judge Lee “enjoys seeing young, black lawyers come into court who are doing more than carrying a briefcase” because he knows that “if the black attorney’s name is on the brief, then there has been some opportunity for the lawyer to communicate to the partner about the brief.” But many black lawyers are not being given a chance to argue cases, which contributes to a lack of preparedness and the professional development they need to become partners. Judge Lee is not alone in his eagerness, noting that “black and white judges want to see young, black associates at the podium, questioning witnesses, and arguing motions.” “It is time to get your black attorneys off the bench and in the field. What better time than now to acknowledge that you are going to fully use your black associates and partners?,” he asked.
Giving black attorneys more leading roles in the courtroom can also have a positive impact on the case. Judge Lee emphasized that “the days of all white judges and juries are over.” When asked what effect black attorneys have on the jury or the court, Judge Lee said, “the first thing it adds is talent and resources,” but he added that “it could also make a difference in how the jury reacts to the trial.” For example, he said, “if a jury sees a black lawyer sitting there and there are minorities in the jury and they only see that person pass paper, then they know that person is ‘window dressing.’” And from the court’s perspective, he said, having black attorneys in lead roles can also “make a difference in how I view the case from the standpoint of how it was managed and the case was being presented.”
I asked Judge Lee for any final advice for black attorneys looking for opportunities to improve and expand their skill set. He suggested that we continually seek out the work we want and “be persistent.” As a young lawyer, Judge Lee always told himself that the answer “no” was just “the beginning of the conversation, not the end of the conversation.” If partners or clients turn you down the first time, he said, use that as an opportunity to follow up again until they say “yes.” Eventually, he said, “they’ll get tired of you and give you the work.” Use that opportunity to thrive.
What have we learned since March 2020? For Amar Sundram, head of legal at RBS in India, it is that talk of lawyers being an uncreative species was greatly exaggerated.
‘We are now seven months into the pandemic and the main myths about lawyers have been broken. The myths that we are not adaptive, that we do not take risks, that we are averse to technology – they have all disappeared. Lawyers have found that, when faced with necessity, they can take to new tasks as well as any other professional group.’
Our survey of over 100 of the leading counsel across the Asia Pacific region showed that less than a fifth of legal teams (18%) felt their output was significantly affected by the pandemic, though the bulk of respondents (73%) had experienced some level of disruption.
For many legal teams, the pandemic was an unexpected experiment in working remotely. While over half of legal teams (59%) had a prescribed remote-working policy in place before the pandemic hit, and almost all (95%) felt such a policy was necessary, this was scant preparation for having the entire team work remotely for weeks at a time.
Marcus Clayton, general counsel and company secretary at leading Australian integrated construction materials producer Adelaide Brighton Cement (Adbri), reflects on the early days of lockdown:
‘With a very lean team to start with, working from home through COVID-19 and splitting the legal team into Team A and Team B made it much harder to produce the expected outcomes, [particularly as] demands increased. We were all to work longer and harder in difficult circumstances to achieve a lesser product than before.’
Many survey respondents pointed to a similar problem, noting that in the early days of lockdown they had been expected to meet more challenges with fewer resources. As one respondent, a legal director working at a large industrials company in Singapore, commented:
‘While demand for regular commercial advice has tailed off somewhat, we have had to contend with an increased number of requests for regulatory advice. At the same time, there has been a huge increase in the number of online meetings, with some of these taking up the entire day. Managing this challenge of growing demand under such unusual circumstances has been particularly difficult.’
Others pointed to the lack of connectivity in the legal team, and the difficulty of ‘discussion, deliberation and evaluation of the finer points of a matter’ while working remotely. Some felt that the organisational support for remote working was still lacking, with one Hong Kong-based general counsel at a consumer electronics company commenting:
‘A documented remote working policy has worked well for us. However, it will only work if home infrastructure allows employees to work remotely. It is more than simply providing a laptop. This has not been a problem with the lawyers in the legal team but has been a problem with support staff.’
The A and B Team
While talk among GCs has turned from “business resilience” to “business resurgence”, few expect their return to normal to be synonymous with a return to the office. Staff may be returning on a team by team rotation, but a growing number of companies have started to think about how they can operate a remote working policy as their default setting.
To do this successfully they will have to deal with the issue of cyber security. As Pulin Kumar, senior legal and compliance director at adidas India, notes:
‘In today’s environment a lot of things are system driven, and once you have a system driven environment then everything has to be connected. It is almost a given that for remote working to succeed information must be highly accessible. The data will flow to far more places and people, so the security checks in place need to be robust. This is a matter for IT teams, but it is also a matter for legal and compliance teams. Employees’ understanding of compliance has to be updated to account for the mass shift we are seeing toward working from home.’
Respondents to our survey echoed this, pointing out that remote working had exposed their companies to enhanced cyber security risks. Over a third (36%) felt the biggest risk came from loss or theft of confidential business information. As one GC commented, ‘Sensitive data and applications are now being accessed through non-secure networks. Businesses need to give this some more thought, and will likely have to invest more time, effort and money to strengthen their IT infrastructure.’
Of course, when it comes to new ways of working, not all legal work is created equal. Work involving insurance claims relating to physical infrastructure, anti-bribery and fraud investigations, or due diligence in the context of an M&A where virtual data rooms are required are all exponentially more difficult to do remotely. As Nancy Wei, associate legal director of Skechers China comments: ‘Remote working is really helpful non-litigation scenarios. For litigation issues, I tend to choose face to face meeting to discuss the facts of the case and collection of evidence.’
A pandemic in numbers
But perhaps we should not dwell on the negatives. One of the most surprising things about the lockdown has been the ability of many businesses to function as normal. Likewise, legal teams have managed to weather the storm successfully. Nearly a third (27%) of respondents to our survey felt their efficiency had improved, while a similar number (24%) said their output had in fact increased. Being on call 24 hours a day does have some advantages….
Another positive has been the invigorating effect remote working has had on legal teams. As Amba Prasad, vice president and head of legal services at Indian construction and engineering conglomerate Larsen & Toubro comments:
‘COVID-19 has shown that the remote working can be efficient despite the challenges of management and the interplay of work related to teams based in different locations. Scaling up our technological infrastructure in a timely manner aided this transition.’
Aside from helping the legal team find new ways to operate efficiently, he continues, the pandemic has had other benefits. ‘It has brought the team together in a manner that was never before seen. Caring and sharing between team members has really become an embedded practice.’
This much is clear from our survey. Fully 31% of those we spoke to said employees within the legal team were happier with their current out of office setup.
While most GCs felt remote work had been a positive thing for the legal team, there are questions of whether the same established structures can endure over the longer term. Bernard Tan, Asia Pacific managing counsel at Agilent Technologies, comments:
‘I don’t think there is an immediate negative impact to productivity as we have the necessary working culture, processes and technical infrastructure that enable work to continue on a remote basis. The concern is more about long term engagement issues and whether, as a legal team, we are able to continue to exert the necessary influence and engagement with internal clients if we work on a 100% remote basis perpetually.’
The solution to this ongoing question will likely involve increased spending on technological infrastructure and enhanced cyber security protocols, but it will equally depend on the approach taken by lawyers. As Nancy Wei concludes:
‘It is going to be a case of legal teams learning new and more flexible ways of doing things. We need to communicate more efficiently and effectively, especially when facing up to balancing business opportunity and risks. Trust among team members is going to be very important in facing up to this uncertain situation.’
With nearly three quarters (73%) of respondents saying the expect remote working to increase over the coming months, pressure on GCs to find ways of dealing with uncertainty is going to be with us looks set to become the new normal.
‘If I’d lived in Roman times, I’d have lived in Rome.’
John Lennon’s famous words when asked by a journalist why he was living in New York, then the cultural and economic centre of the world. In 2020, a growing number of tech investors that have relocated to Beijing are giving a similar answer.
President Xi Jinping has outlined a plan to make China a world leader in advanced technologies, investing more than a trillion dollars into key industries. Even without this state support, the country’s tech sector is on an upward swing. Investment in its artificial intelligence (AI) sector for the first half of 2020 has already surpassed US$9bn, making China one of the leading global players in the field.
Following China’s lead, tech companies across Asia have seen a boom in investment. Many of the region’s fastest growing businesses – Hong Kong’s WeLab, Singapore’s Synagie, India’s GoBolt – are led by charismatic, tech-savvy entrepreneurs.
The region’s legal industry, often seen as a bastion of conservative values, is now waking up to the challenge of technology. Singapore now houses one of the largest legal tech accelerator programs in the world, Chinese courts have become world leaders in the use of technology, and even less mature markets have turned to technology as a way of bypassing their stretched legal systems.
To find out why the region is proving to be such a fertile ground for legal innovation, and how this is impacting in-house counsel, we spoke to general counsel who are making the most of legal tech.
State aid
States across Asia Pacific are jostling for position, with substantial sums being spent by governments aiming to achieve legal technological pre-eminence. Already, legal tech initiatives region-wide have ridden on the crest of this wave. For example, Indonesia has made amendments to laws affecting legal tech, for instance by introducing a list of certified Indonesian e-signature providers. India has huge domestic demand for legal tech as it looks to boost efficiency in what is still mostly a pen and paper legal system.
Increasingly, the more established corridors of business are looking to capitalise on this success. Stung by the rising number of high-profile tech companies looking to list outside the region, the Singapore Exchange (SGX) has started offering grants to help fast growth businesses cover the legal and regulatory costs of their listings. In a similar move, Hong Kong’s financial secretary Paul Chan Mo-po has set aside HK$50bn (US$6.5bn) in funding to support greater innovation and technology development in Hong Kong.
In April 2020, the Government of Hong Kong announced a HK$35m LAWTECH Fund to assist law firms and chambers upgrade their IT systems. As Jerrold Soh, assistant professor of computational law at Singapore Management University (SMU), explains:
Jerrold Soh, assistant professor of computational law at Singapore Management University (SMU)
‘Hong Kong’s approach is similar to Singapore’s in that it is driven by external demand, but their focus is more on the mainland China market, especially technology related to the Belt and Road Initiative (BRI). For instance, a comprehensive electronic dispute resolution, arbitration and mediation platform was constructed out of Hong Kong to assist the
BRI’.
Taken together, these initiatives suggest a regional trend, but the Asia Pafic tech market is anything but a unified field. It is, says Jerrold Soh, a market preoccupied with solving domestic rather than regional problems, and nowhere is this truer than in China.
‘Domestic demand is the key driving force for Chinese tech companies, many of which are not so much interested in attracting outside investment. They really are just building their own topologies, and the same rule applies in the
legal tech space.’ ‘There are so many new tech startups, firms and applications that are being built there. Not only are these companies becoming significant players, but they are changing the way we think about the law. You can have an entire dispute resolved on an app, powered by WeChat. That is something incredibly exciting in the legal field that is being driven by Chinese tech and innovation’.
While many of even the largest tech companies remain unknown outside the PRC, they boast user bases that would be the envy of a Silicon Valley unicorn. They are also becoming increasingly sophisticated, adds Ivy Wu, head of legal for Greater China at American business-to-business IT service provider DXC Technology.
‘In the time I have observed the development of legal tech in China, I have found that in both litigation and non-litigation products the technology has developed amazingly quickly. For non-litigation software – for example, for document management and review tools – Chinese technology is now more advanced than anything available internationally. There are suppliers focusing on contract management processes and internal process approval on legal documents which have proved to be very effective, as has software aimed at the record keeping of signed agreements.’
Nancy Wei, head of legal for Skechers China, says the rapidly maturing domestic tech scene offers legal counsel greater flexibility when it comes to resourcing legal matters.
Nancy Wei, head of legal, Skechers ChinaKenji Tagaya, general counsel executive officer and head of the legal group, JERA
‘We use a mix of both international and domestic Chinese technology in our team. For our database systems we use internationally known suppliers that have been active in the market for several years. However, for contract management we select local suppliers who may or may not have international experience, but who, in this area, tend to provide systems that are more user-friendly for the Chinese market’.
Kenji Tagaya, general counsel executive officer and head of the legal group at JERA, Japan’s largest power generation company, says it is common for large organisations to look to both domestic and international providers.
‘We introduced two [tech providers] for contractual review purposes, one English and one Japanese. I find this necessary as a Japanese solution is needed for Japanese-language documents and an international provider is needed for English-language documents.’
‘Some international companies also claim that they have Japanese language adaptability, but the quality is limited because of the nature of AI. Unless they process a huge amount of data, the AI will not grow to a level of capability that satisfies us.’
A home-grown revolution
It is not just the rise of domestic tech firms that is changing the way GCs operate. Increasingly, legal teams across the Asia Pacific region are looking to develop their own IT platforms before turning to external suppliers.
Carl Watson, general counsel for Asia at design and engineering consultancy Arcadis, underlines the value this brings to the legal team.
‘What I would say is that you don’t know what you don’t have until you look… There’s a whole volume of very helpful apps that you’re paying for anyway, but you probably don’t even know it; I’ve always been quite interested in what’s available and then optimising these sorts of technologies.’
‘Demonstrating value through use of simple technology tools to provide dashboard insight into what we’re doing [is] how I got the ball rolling in the very early days. I think it’s about building trust and identifying tools that were available without needing any great investment’.
Faz Hussen, general counsel and director of government relations at McDonald’s Singapore, has found similar benefits in harnessing existing technology within the legal team.
‘Using home-grown software has two main advantages. It is obviously much cheaper, and developing our own in-house software means that we can hedge on business costs as opposed to getting them signed off for external technology.’
‘Perhaps a bigger advantage is that internally developed technology can be customised to match systems we are already familiar with. That will ensure other business units can seamlessly work with the platform.’
Turning to the results of our survey of over 100 legal teams across Asia Pacific, it seems that this message has yet to find a mass audience. Only 9% of legal teams are currently looking internally to develop tech solutions, while 83% of teams are looking to tech vendors for readymade or bespoke solutions.
Needs-driven Innovation
Technology and the legal profession in Asia-Pacific have long had a delicate relationship; while the potential impact of technology has long been understood – albeit oftentimes fodder for debate – its implementation and execution has, until recently, remained largely an academic exercise for most.
‘The practice of law is very much dependent on everyday life,’ explains Janet Toh Yoong Sang, partner at Shearn Delamore & Co.
‘With the growing use of technology all around the world, private practice law firms have been encouraged to use legal technology to keep up with the quickly changing nature of business and industry.’
But much like their in-house counterparts featured throughout the report, private practice lawyers have had to learn and adapt quickly to these new working habits brought about by the pandemic – including the toolsets which facilitate remote legal work. For many, this marks a sharp departure from established norms – with much of the profession in Asia-Pacific notoriously reticent on technology-driven shifts to legal practice. But for most in private practice, the global pandemic has meant that integrating technology has fast become a business imperative.
‘In-house clients are expecting that we have sufficient knowledge of the various technology tools available and how best to make use of them so that the successful delivery of legal services during the pandemic can be ensured,’ explains Zhuowei (Joyce) Li, partner at Han Kun Law Offices.
‘Many expect that social distancing measures will be central to commercial thinking for years to come, making the effective use of technology a vital component for maintaining business relationships and offering the best service to our clients.’
That experience echoes the results of the empirical research which underpins this report, with technology becoming an increasingly important factor for in-house counsel when assessing their law firms, with 59% of respondents reporting that a firm’s use of technology comprised a direct part of panel reviews and 68% saying that it was either very important or crucial that law firms remained abreast of new technologies. While some of that shift may be attributable to the short-term needs-driven innovation, few anticipate the uptake in technology to be a fast-passing trend.
‘As service providers, we are naturally driven by client demand, and that demand will push law firms like ours to use more and better technologies in the coming years,’ says Vinay Ahuja, Partner – Indonesia, Lao PDR & Thailand and Head of Indonesia Practice at DFDL Tax & Legal.
‘Since March we have seen just how much technology can facilitate legal work, and I do not think I will be the only person to predict this will become an established habit among all lawyers.’
Nonetheless, homegrown legal solutions are finding champions at the largest companies. Sheldon Renkema, general legal manager at top-10 ASX listed diversified conglomerate Wesfarmers, has worked to introduce a number of self-service tools into the legal department, including a non-disclosure agreement tool that allows commercial teams to generate and execute a compliant confidentiality agreement.
Sheldon Renkema, general legal manager, Wesfarmers
‘Our objective is to identify processes that our lawyers would otherwise do that are not particularly complex and not particularly strategically significant. And where we can, making use of a tool so that can be done within the business in a user-friendly way that manages the risk’.
Creating tech solutions internally can also act as a catalyst for the creation of a culture of open-mindedness and creativity within teams, which can pay dividends in other areas. As Bernard Tan, Asia Pacific managing counsel for US-headquartered analytical instrumentation manufacturer Agilent Technologies comments, ‘It is important that we don’t just follow corporate-wide technology projects. We need to create a culture of innovation and digitalisation within the legal function itself, and that means we need a sort of skunkworks for the legal team itself to develop and pioneer new tech.’
Chek-Tsang Foo, group deputy general counsel of NTT Limited, has followed this ethos, working with legal colleagues to create a suite of proprietary legal tech solutions, including a contract risk scoring tool for contracts. The next few years, he says, will be transformational for legal teams.
‘Legal tech will not just change how fast we work, but what we work on. As technology matures, routine and repetitive work can effectively be automated. This frees up bandwidth for internal lawyers to do more complex work that requires more creativity.’
‘It will allow us to spend much more time on things like negotiations, resolving complex matters and proactive legal risk management. The in-house team may also start to provide new areas of value to the enterprise, leveraging the legal team’s skillsets and attributes. The future is also what we create, with the help of legal tech. Perhaps technology will help solve the modern in-house counsel’s struggle for sufficient bandwidth.’
Inflection point
For GCs across the world, 2020 has been a year of learning to work remotely. As DXC Technology’s Ivy Wu puts it:
‘COVID-19 has totally changed people’s lives and changed the way workplaces operate, and people have spent a long time adapting to a work from home lifestyle. This will have big implications for the uptake of legal technology.’
‘In recent years, legal innovation has mostly benefited law firms and companies, but we are now seeing a trend toward traditional legal venues embracing technology. Courts are encouraging lawsuits to be filed online, and there is a push towards virtual hearings. Legal technology has made things more efficient for all players in the legal system, and those effects will continue to grow.’
JERA’s Tagaya adds: ‘Until now, Japan has had a tendency to believe in paper, ink and physical signature or seal. But now that COVID-19 has forced companies to examine technological solutions and embrace non-traditional working practices, it may have opened up their eyes to the possibilities that technology provides, which will lead to a corresponding increase in demand and thus growth of this sector’.
Julien Bergerat, head of legal and chief compliance officer for Nghi Son Refinery and Petrochemical (NSRP), a joint venture to build and operate the largest petrochemicals refinery in Vietnam, is an old hand when it comes to working remotely.
Before moving to NSRP in 2019, he held senior positions in Kuwait, Qatar, Switzerland and France. The ability to access legal information on demand has now become an expectation, he says:
‘We are living in a world where technology cannot be avoided, and the legal profession is no exception. Contract management, document automation and storage, legal research and, more recently, client relationship management and data and contract analytics tools are used by legal professionals as a matter of course’.
Benjamin Teong, associate counsel for legal operations, Lazada
‘Over the last decade, legal technologies have given the profession opportunities to improve its overall efficiency and the tools to adapt to agile and challenging working environments. The lower cost of hardware, improved ease of use of software and increased mobility have allowed for easier means of communication but, most importantly, they have enabled lawyers to work from almost any location extremely efficiently’.
But it is not just the demands of remote working that are changing the way legal teams operate. The pressure to do more with less, never far from the minds of GCs, has suddenly become one of the main priorities of businesses fighting to cut costs in a time of crisis.
Benjamin Teong, associate counsel for legal operations at Lazada, one of South East Asia’s largest e-commerce companies, sees adapting to this change as an increasingly unavoidable part of managing a legal function.
‘For in-house counsel, the scope of the work and its complexity is increasing, but we are being forced more and more to work with leaner teams and really maximise the manpower that we do have. There is pressure to achieve more creative and innovative outcomes for the company’.
‘We have tools that are specifically geared toward ensuring that we work efficiently and avoid low-value work as much as possible. We have a workflow management tool, which tracks any work requests to the legal team, allowing us to manage it from the time that we receive the request until the request is fulfilled, and to prioritise issues that are more pressing’.
Off-the-shelf solutions
Across Asia Pacific, GCs are finding that the simplest technologies carry the most impact when it comes to changing the way their teams operate. For Dimas Nandaraditya, general counsel of Indonesia-based Traveloka Group, this relatively simple software has proved to be a quiet revolution.
‘Adopting a new technology requires time and managing multiple vendors and software for our business processes can be cumbersome, therefore we prefer out-of-the-box solutions.’
‘We adopted software that sends regular reminders on when a contract or license is due to expire, which means lawyers no longer need to go through all documents one by one to assess the relevant expiry date or manually send reminders to the relevant stakeholders. The technology itself is rather simple but its impact is very significant: it makes our lives easier’.
There is, adds Nandaraditya, a degree of skepticism toward more advanced forms of legal tech, such as machine learning. ‘Basic AI functions such as e-discovery or automated diligence are starting to get traction, but I doubt that they will be widely available in the next one to two years.’
Jeremy Ryan Chua, general counsel of JAC Liner Group, one of the largest bus companies in the Philippines, has a similar take: ‘Artificial intelligence can assist in gathering data and narrow down possible decision-making choices, it cannot replace the intuition, on the ground experience, and foresight of a seasoned lawyer’.
Made in China
As US sanctions start to bite, businesses in the PRC are becoming ever more reliant on domestic technology. GC asks what it means for the country’s lawyers.If you want to build a nuclear powerplant, a maglev train, or a quantum computer it is increasingly likely you will rely on Chinese expertise. In the space of little more than two decades China has emerged as a global economic powerhouse, transforming itself from the home of low-cost manufacturing to a leader in cutting edge technologies.
Bin Zhao, senior vice president, legal and government affairs at tech multinational Qualcomm has seen China’s technological prowess grow over two decades.
‘Since late 1900s, China has started to highly promote the tech industry. The government made a lot of direct/indirect investments and extended a significant amount of polices in all business areas to advance Chinese technological development. That is when big multi-national tech companies came into China and made business successes.’
‘At that time, there was a honeymoon period between China and multi-national companies, and American companies such as Microsoft, Intel and many others grew significantly during this period, taking advantage of both the open-door policy, and the Chinese leadership’s good intentions to merge into the international market. The situation however has changed dramatically recently, and the tensions between the US and Chinese governments are making things much less clear.’
Dealing with this uncertainty is likely to be a key theme for the coming months. DXC Technology (DXC) is just one of a plethora of American companies operating in China that has felt the repercussions of ongoing trade wars.
‘It is not something we can really prepare for,’ says Ivy Wu, head of Greater China legal at DXC. ‘Draft copies of regulations are coming out all the time, so we review to determine whether they will impact our business.’
‘As in-house counsel we have to be fast acting, agile and knowledgeable in all aspects of laws in China. When a crisis happens, you need to keep in mind what kind of risk is associated, then you need to take some action, and manage all situations in a proper way.’
Indeed, escalating tensions between the United States and China have dominated news headlines in recent years. Chengyang Xie, vice president & chief legal officer at Foxconn Industrial Internet Co Ltd (FII), believes the potential decoupling between the United States and China is one of the chief concerns for in-house counsel in the region.
‘When the trade war between the United States and China began to bite, we really saw things change. This year, the sanctions on Huawei and other entities have continued to be challenging, and there are now over 200 entities on that sanctions list. This will be a great challenge for the years to come. The one certainty is that everything is uncertain for multinational companies in China.’
Getting technical
Trade tensions aside, China’s corporate counsel are finding themselves facing the same pressure to do more for less as US counterparts. While using technology to streamline processes has been on the radar of legal teams for some time, the recent COVID-19 pandemic has accelerated the need for new ways of delivering legal advice.
Gordon Liu, vice president, legal for Dell Greater China, says he has been fortunate in his ability to draw on a comprehensive suite of workplace technologies.
‘Dell was a forerunner in workplace tech, so we have the infrastructure to work from a distance. Even before the pandemic, we were used to working in this way. However, systems that were somewhat experimental are now becoming our default way of working. For example, we use a contract management tool, which generates a lot of standard contracts, as well as handling negotiations, revisions and other changes. The pandemic has accelerated our use of these technologies, and our strong position in this field has allows us to navigate the lockdown without interruption.’
Adds Xie: ‘The lockdown has taught us that remote teams can communicate just as effectively. In my regional cluster we handle business across 12 countries, so managing a legal team without face-to-face contact is something we are accustomed to. However, the enforced reliance on tech to conduct our daily business has been an interesting lesson to us all. We have seen that many matters are more efficiently processed with software.’
‘Legal technology has become more important in the daily practice of in-house counsel. We now use tech-enabled platforms for legal drafts, intellectual property work and legal databases.’
Despite the advantages of legal tech, in-house have also experienced drawbacks, says Zhao: ‘On one hand, internet-based, cloud-based and 5G smart phone-enabled tools have significantly improved lawyers’ efficiency. At the same time, when everybody is connected, and information and data is always flowing around, you have to be aware of the most current information and recent trends, and that is not easy.’
The innovation race
As China continues to support digital innovation and investment, corporate counsel find themselves under more pressure to evolve. Despite the challenges, in-house counsel across China have embraced tech to boost efficiency, connect legal teams and manage the ever-growing pressure to do more with less.
‘The tech sector is a rapidly growing industry in China. There has emerged quite a few online, e-commerce and technology companies. With fast growth, there is a lot of energy volatility in the market,’ says Liu.
However, as the domestic tech companies continue to develop in China, the future of international tech giants remains ambiguous.
‘When talking about the future, the first word that jumps into my head is uncertainty,’ says Zhao. ‘I think that is the biggest challenge facing all multinational companies doing business in China.’
As Zhao puts it, the next few months will be decisive for multinationals in China: ‘This is a very important point in history. We will have to wait and see what is going to happen after the US presidential elections. It will determine a new era of history for high-tech companies, and their future development in China.’
Perhaps unsurprisingly then, while the potential of advanced legal tech continues to excite the region’s GCs, it has so far failed to gain any real traction in legal teams. Josh Lee Kok Thong, chair of Asia Pacific wide legal tech forum ALITA, remains optimistic.
‘The technology is really improving. One example is ROSS Intelligence, which recently rolled out a free Google Chrome extension. Users can plug in the case that they want to review, and the system will instantly pull it out. Tools like this will change how in-house counsel behave.’
‘The next generation of AI technologies will help lawyers start to write and craft opinions. This will be a game changer because it helps spark the inspiration process, it eliminates writer’s block and enhances the cognitive abilities of lawyers. Building on this, the technology is a game changer. It will allow lawyers to gain new ways of thinking and new insights they may not have seen before.’
This should come as no surprise. As Per Hoffman, vice president and head of legal affairs and sourcing for North East Asia at Ericsson, comments:
‘China is huge, so when it does something the volume it does it with and the impact that has on markets are all huge. AI will be the thing that will come into legal areas. Today you have contract databases where you can search and find various contract clauses. But the next step after that will be AI. China has one of the most advanced AI research and development environments in the world, so for lawyers that is the place we will look to for change.’
Carl Watson, general counsel for Asia at design and engineering consultancy Arcadis, underlines the value this brings to the legal team.
