Digital transformation is a hot topic right now and DXC Technology is an industry leader in this field. We leverage technological innovations to deliver better business outcomes by driving new levels of performance, competitiveness and lower prices. Put simply, we work hard to make sure other businesses stay ahead of the curve when it comes to technology.
The legal team has embraced this approach. As [DXC general counsel] Bill Deckelman said, the digital innovation tools that our department has had access to since 2017, [when DXC was formed through a merger of the recently spun-off Hewlett Packard Enterprise’s Enterprise Service segment and Computer Sciences Corporation (CSC)], represent a unique opportunity to position our legal team as global thought leaders in legal digital transformation.
From the very start of our journey we aimed to do something different, partnering with UnitedLex to help restructure the global legal team. At the time, this was the largest-ever managed services transaction in the legal space. By bringing in new technologies we have developed a far more agile way of working that enables us to cover more ground than ever before. We have created a digital platform housing legal research, templates and advice. This allows us to provide a lawyers on demand service for a range of matters, from documentation to compliance, from litigations to procurement. Supplementing this, AI-based legal tools and machine learning allow us to better predict risks, understand customers’ problems and improve performance.
This technology has undoubtedly improved our efficiency. It can streamline templates and playbooks, assist with negotiations, help with training and rationalise workflows. It also allows each team member to properly track their work in real time so the management team is constantly aware of the progress being made on a matter. This means management can identify gaps in our coverage and move to respond to potential issues faster than ever before.
Ivy Wu
It has also helped us show management the value our team brings to the company. We can track the value of each matter we are supporting, whether that is by managing litigation risk or contributing to new business. The feedback from business has been very positive. They are able to see that the cost saved or value added by the legal department far exceeds our budget.
Technology reduces the barriers to collaboration across functions. It can be a useful way of working with various business units to identify pain points, opportunities and solutions. In fact, the new ways of working we have developed have been so successful that we plan to make remote working, at least to some degree, a permanent feature of the way we operate. Technology will not replace lawyers, but it will require a re-imagining of resources, both technical and personal. Legal work will place much more emphasis on the ability to collect, analyse and process relevant data.
The push to introduce new legal technologies is to be welcomed, but there is still a long way to go. Many of the new tools that have come to market are very complex, do not allow for optimisation, and requires a big time commitment on the part of GCs to fully learn its functionalities. Of course, the more time you have to spend learning a new system, the less effective it is as a cost-saving tool. Team members may also need to repeatedly log in, complete registration forms, or provide other information.
International legal service providers should also consider customising their products to work in Mandarin, or tailoring them to fit local cultural usage. China is a very large market, and enhanced support for our lawyers would be beneficial to both domestic businesses and multinational companies.
There is no doubt that legal technology has helped everyone in the market improve their performance. Most interesting has been the impact it has had on the judicial system. The ability to file lawsuits electronically or attend virtual hearings has proved very successful in China. This is a very important development, especially for employees of multinational companies who are not able to be physically present during the course of a matter. Other developments are even more surprising. While previously it was very time consuming to notarise electronic evidence, we are now able to apply blockchain technologies to preserve electronic evidence.
There are a lot of changes taking place. Our mission in the DXC legal department is to understand these changes, learn as much as possible about the technologies powering them and, most importantly, to be at the forefront of any future change.
Arcadis may not compete (yet!) with Apple in the brand recognition stakes, but in the world of environmental engineering its right up there with the iPhone as the premier player in its space. For over 130 years, from its roots in the Netherlands, where it was an early pioneer in redevelopment of land, water and sea defence systems, the company has grown to become a leading global player in built asset and sustainability solutions, with a workforce of nearly 30,000 people spread over 72 countries.
In the Asia Pacific region, our consultants and engineers are regularly called upon to work on the types of projects that can make or break a country’s future, from protecting against coastal erosion to designing flooding protection systems to advising governments and stakeholders on master plans for smart city developments.
But, as with most global companies that have grown inorganically, there can be regional differences, and one has to be respectful of different ways of doing things. When I moved from my private practice in project finance to build an in-house legal team, I was very conscious that I might be seen as an outsider, someone who should be kept at arm’s length. Crucially, I needed to earn the trust of my new business management very quickly, and the easiest way to do that is to present yourself as someone who’s coming in to try to take their problems away. Going for the low-hanging fruit got me quick wins and showed I was someone who would make their lives easier.
To complicate matters, the Asian side of the business had little in the way of localised legal resource and so my first job was working out what talent we had within the organisation that I could leverage. There were nearly 4,000 people based across the Asian offices, and it seemed obvious that a fairly large number of them could be legal graduates who could find their way around a contract, even if they were not in my legal team.
Carl Watson
As a substitute for drafting new personnel into the team, I managed to borrow time from others around the business to help me build a new commercial contract review system – exactly the sort of quick win I was looking for. In the longer term, it was clear that technology was going to have to do a lot of the heavy lifting in the legal function.
As you can imagine, as a built asset consultancy we didn’t have much in the way of pure play legal tech, but like most organisations we have software licences for legally useful technologies. Even a ubiquitous office technology like the Microsoft O365 suite of products contains a large volume of very helpful stuff that can help GCs drive meaningful improvements and build momentum quickly. It may not be at the cutting edge, but it’s an incredibly effective way to build trust. Data visualisation platforms like Power BI can be linked into Excel and the other products in the Microsoft suite to produce clear dashboards. Even something as simple as that can add a lot of clarity and transparency and around what the function is doing to leadership. For example, we now generate automated utilisation reports that show the different client types we have served, the value of the contracts that we’re reviewing and the type of work we’re doing on those contracts. That means I am not only able to keep track of what the team is working on, but can show the business our return on investment or the savings we are making in terms of claims avoided. When you add those numbers together legal no longer looks like a cost.
GCs can fixate on having new systems without first understanding the tools they already have at their disposal. Knowing what you’ve already got is super important for any business leader, and that applies to both our talent management and technology. Ultimately, if you are going to ask the business for money to buy some legal tech it is your responsibility to check whether the same result can be obtained with a bit of research into the products you already own. This also demonstrates that you can use technology effectively to capture value.
When it comes to building trust, nothing is more important for a legal team than showing business colleagues it has their backs. Using technology to develop new and more robust ways of managing corporate governance is one of the best ways to do this. We have automated the approvals and governance processes for new work entirely by putting it all on a digitally-enabled system we coded ourselves in-house. Likewise, all of our governance and reporting records are now maintained through a digital platform that eliminates duplication of records and work streams, or the need to fill in multiple forms to do the same thing. Rather than using a number of operating systems globally that don’t talk to each other, we now have a much more joined up system.
It also helps generate real value to the business. For example, a project sold say in 2016 on the basis of a certain financial performance or risk profile may no longer be adhering to those assumptions five years later. If there’s a delta between the financial and risk performance then and now we can track that digitally through an automated project review process and take action. The upshot is that we’re not just reporting dry data. We’re looking at trends, we’re looking at root cause analysis through the types of claims that come into our business. That data is helping you learn lessons rather than perpetuate risks. That builds trust and confidence within the business and helps make them realise you are a reliable partner.
Everything in its right place
In its simplest form, Arcadis advises clients on their built assets, covering everything from services to manage their space to master planning and business case design. It also operates an architectural business, a landscaping business, a project and programme management business, a ‘pure play’ design engineering business, and a general business advisory and consulting practice that offers analysis, feasibility, delivery and implementation services to a range of built assets. With such a broad portfolio, developing and implementing a digitalisation strategy becomes hugely important.
The enlightened contractors we work with are shifting quickly into the use of technologies. We’re conscious of the pressure that places on us to evolve. We don’t just want to keep up with them, we want to be ahead of the game, selling digitally-enabled consultancy services that allow our clients to do more and better things with the information and analytics we can provide. Whether that involves using drone technology and advanced camera technology to provide remote access for site-owners or decision-makers sitting thousands of miles away, or offering our insight on asset performance through our Arcadis GEN brand, or through platform-led, subscription-based models where our clients can customise the expertise and experience they get from us, technology is going to be at the heart of our future and we have invested in the in-house capabilities and product development skills to deliver.
In short, repetitive tasks are being replaced by focused automated processes and platform solutions across the business, and the legal function should be no different. To maintain relevance in our digital future, we have to stay close to the business and keep our eyes open. But we need to have the bandwidth to keep our eyes open.
For example, it is just not efficient to have a senior in-house lawyer doing mundane contract work. I want my senior lawyers helping the business win big mandates, avoid big claims, navigate new legislative headwinds or develop digitally-enabled, client-facing services. Having them spend time on basic contract reviews is a problem, the solution to which can be using technology to do the same job, or it can be drawing on back-office support centres in markets that have a lower operating cost.
The real danger is using tech for tech’s sake. Digital tools are a big part of driving efficiency, but I’m a believer in a razor sharp focus on legal operations, you also need to look at the general optimisation of your cost and operating model via standardisation, automation and cost efficiency. If you can use technology to get where you need to be then that’s great, but it is a mistake to focus too narrowly on that. Your goal as GC is not having technology, it is ensuring the business gets quality, accessible advice that delivers value for money.
Most of our software is built in-house and customised for the legal team’s own use. 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. Working with customised software is much more intuitive and user-friendly. When you take on technology from external sources there is always going to be a process of learning and testing.
Working with external providers also means the legal team loses some degree of control over the software. For example, a significant provider of due diligence software once decided to shut down its operations in Singapore. We lost access to the whole system and had to suddenly find an alternative provider. This was a major exercise, and it meant we had to get used to the intricacies of a new system at short notice. That is the disadvantage of external providers. You simply cannot pre-empt or control what they are going to do, and even things like maintenance or updates are out of your control.
In a previous role I worked at a public body in Singapore that concerned itself with science and technology, including in AI and other blue-sky technologies. Protecting intellectual property was a huge aspect of that work, and it has taught me that IP is critically important when it comes to developing legal tech. I believe that, especially for bigger companies, it is always good to own the IP on anything you use internally.
However, there are areas of technology where we cannot build our own systems. As you would expect, McDonald’s has a long list of compliance processes to go through. This process involves many people across a number of different teams. It must also synchronise with the compliance checks across the company, so for this type of exercise we are following the policies and systems of the global business.
For pretty much anything else we use our own technology. We have built a document tracking system that checks all our contracts for things like date of expiry and gives us a prompt so we understand where in the contract cycle a document sits. It is also useful in that it tells us which counterparties have we given any limitation or liabilities to.
For the most part, our forms tend to be pretty standard, so while the back end will be specific to each vendor that we are dealing with, the main boilerplates are very consistent. That means we can use software that focuses on tracking documents and sending us reminders. Some of my peers at other organisations are starting to use AI for more cookie cutter stuff such as NDAs, but for us it is still all done by the internal legal team, including paralegals.
Our process for implementing new technology starts with recognising the need for a particular piece of software. Whether that software is going to track contracts, bring in GDPR compliance or handle more complicated work, you need to identify the need within the organisation first of all. We then look at how this can be introduced in a useful and user-friendly manner, drawing up a customisation and implementation plan to help us understand what the software should look like. This latter stage will almost always involve conversations with the IT department.
This has served us well so far, but inevitably we will reach a point where our tech needs outstrip our capacity to produce solutions internally. For example, it will become increasingly important to have software that can supervise and track user data and user rights. These days, everyone wants to know what their data is being used for and to have the right to choose what parts of their data is logged. Having software to keep track of this helps to share that obligation or responsibility with the consumer.
Asia is a very impressive part of the world where people are generally more technologically driven. It is this drive that motivates companies to continuously innovate. Asians are generally early adopters of tech, and customers are very advanced when it comes to embracing new technology.
When I compare Asia to Europe everything is on a much larger scale. The pace of innovation is unprecedented. Technology is being embraced across Asia, but it is China that is leading the way in technological innovation and development. The pace of development in China is particularly interesting.
For example, when it comes to moneyless payments, China is the most advanced market in the world. I rarely need to carry a wallet anymore as everything can be paid for via a mobile phone. Beijing is one of the biggest startup hubs for tech companies and a leading place for AI technology, research and development. Generally, the consumer and enterprise markets are massive, and therefore the potential for developing and implementing tech is apparent.
Ericsson has an established presence in China, where it occupies nearly half the market for mobile systems. In recent times, Ericsson has strengthened its market share by winning 5G contracts with three major operators in China.
The importance of technological innovation has been cast into the spotlight in recent months. Legal teams across Asia have embraced standardised technology to remain connected. We are using Microsoft Teams and SharePoint products. These platforms provide a collaborative area, where teams across the region can work together, for example to review documents. We are considering introducing a new e-billing system when working with our external law firms. From a contract management perspective, we have various repositories for sales and sourcing agreements.
Today, there are contract databases where you can search for templates and find various clauses. The next step will be AI based search engines, where the platform is itself intelligent and an evolving algorithm informs the search results. It is quite amazing to think about the opportunities associated with AI when applied to legal work. We will eventually be able to predict problems before they arise; we will know if something may cause an issue in a contract before finalising a deal.
Despite all the advantages brought by legal tech, going completely digital this year has not always been an easy task. Technology cannot replace the atmosphere of a meeting room or the human connections shared between individuals. Working remotely also makes it more difficult to introduce new employees into an office. You learn a lot from seeing how members of a team behave and react to others.
Nevertheless, technology can also be used to bring legal teams together. Managing legal operations across five countries means video conferences and meetings are crucialPreviously, we spent a lot of time travelling to meet internal stakeholders, customers and suppliers. Travelling would take up a significant amount of time. But since the pandemic, people have adjusted. One positive is that meetings are typically condensed and well prepared. In this sense technology has driven efficiency, or at any rate it has led to people using their time more effectively.
As we look to the future, technology is expected to play a key role in improving legal services, and within the next five years artificial intelligence will play a significant role in transforming the legal profession. As thing stand, it is rarely used by legal teams, but the potential this technology has is revolutionary.
Legal innovation is not only about technology, but the way lawyers operate. Most lawyers used to see an in-house role as a way of having better work life balance – this has changed and so have the expectations around them. To be a legal innovator you need to be a solution provider. Technical expertise is a given, being a solution provider is the next step, and the final and more significant part of legal innovation is being a thought leader.
Even though Nanyang Technological University, Singapore (NTU) is a public funded university and a charity, we have leveraged our digital tools very significantly.
When I joined NTU two years ago we were getting contract approvals through email or manually by paper, with several signatories required at the executive committee level. We retooled Adobe Sign, our e-signing platform, to use it, in parallel to e-signing, as an approval workflow system. We were able to do this by using existing licenses, and the new process has been extremely successful and well received.
The lesson is that legal innovation doesn’t always mean spending a lot of money.
The second tool we implemented is Convene, a piece of board management software. We transformed our governance architecture by migrating, as of late 2019, our resolutions, meeting minutes, and corporate instrument documents to this platform. Previously, these documents were circulated by emails. This is still fairly novel for a lot of organisations, and possibly for universities which tend to be slower to adopt certain technologies. We wanted to demonstrate that we could move ahead despite this.
Greg Chew
In most organisations, if you need IT support you log a ticket, and someone will get back to you to say “got your ticket”. We realised we could leverage this system as a workflow tool, not only to track case assignment to, or workload of, our legal officers, but to better understand data analytics – the quantity and quality of the work we’re doing. For this we used a platform called ServiceNow, an enterprise workflow tool.
This system was not ordinarily meant for that purpose, the employees that use it are IT, housing and facilities, the construction team etc. but we leveraged on the platform and licences that were already there. We have now gone digital for legal support requests.
We also embarked on legal process outsourcing (LPO) to handle growing contract demands, which you might think would be based in Asia but is in fact based in Europe. Legal innovation is not confined to home locations, especially with our current global situation.
In future we will look to implement a chatbot for legal help, so questions like “How do I get my contract approved?” and “Where do I get a template for this NDA?” can be processed. NTU has about 10,000 staff at the University and is the number 47 ranked institution in the world according to recent rankings. We want robust systems and processes that match our research and academic standards and ambitions.
Legal tech challenges lawyers to add value beyond what they ordinarily do. The things we were spending a lot of administrative time on are now being absorbed by legal tech, so we really need to show the value that we add. In the context of new legal tech coming in, we would rather preserve headcount and leverage technology than grow headcount, but at the same time, we want to upskill team members so we don’t have to deal with rightsizing when the time comes. We can say we will invest more in technology instead of hiring more people and add skills we don’t have today.
As lawyers we can still be very traditional in our mindset; we see ourselves as subject matter experts and are typically conservative going into fields we don’t know. Some of the Singapore law firms are now realising there’s a gap in the market and have now started to set up companies as spin offs from their own law firms. They’re limiting those companies to legal tech, with set up of legal tech tools which they can offer to their clients.
But what we need to do as a profession is explore how we work in adjacent fields that are not necessarily related to our subject matter expertise. Over time automation and AI tools will get better, so the question is, what is the gap the lawyer has to fill? Those who are very specialised (like tax lawyers) will continue as before. But what does the other type of lawyer do? What’s different about them? I think they’re the ones who will define the future of lawyering.
I’m certainly not someone others would describe as tech-savvy, but I do believe in the value of digital transformation at every level and am constantly reviewing and re-reviewing tech solutions in the market. For example, some years back, contract automation solutions were generally cost prohibitive, but I have noted that in recent years they have become more cost efficient.
A lot of the legal tech we use is developed in-house. The first project we embarked on is a contract management system we call iCON, which allows internal clients to self-manage ownership and archiving of their contracts while allowing the legal team ease of search and oversight. Auto-alerts can also be customised to remind contract owners on impending contract expiry.
We moved on to develop iASK, a legal services request system. This works like a ticketing system and helps us monitor and track requests from other divisions in a more efficient manner. The status and response times of requests can be tracked, along with history of contract negotiations with specific external parties for reference in new transactions. More importantly, iASK also acts as an internal knowledge database to understand better how certain requests were handled for consistency and facilitate knowledge transfer for new joinees.
Over time, we’ve expanded this to be able to assign requests to different teams within the function such as intellectual property and product regulatory. We are also able to loop in matters from other Canon companies under our supervision in this region. As Canon Singapore is the regional headquarters for Canon sales and marketing business in South Asia and Southeast Asia, this helps us to capture matters carried out not just in Singapore but at the regional level as well.
The latest tech we’ve been working on is called iREG, which is a derivative of iCON. Instead of contracts, iREG will be used to record all licences and certifications that are related to our business and products. The system allows stakeholders to track the status of things like licenses or certifications and trigger actions to be taken. The interface allows stakeholders to easily obtain a snapshot of the business and product regulatory compliance in our region. Users are also able to tag products to specific requirements so that in the absence of a requisite license or certification for any product, red flag alerts are triggered.
We hope to integrate this with our order and shipping system to minimise the risk of shipment of products which may not have fulfilled the requisite regulatory requirements for going to market.
This year, I started overseeing the Quality Environmental Health and Safety function (QEHS) and inherited another in-house developed system called iDOC, a policy management system that allows users to upload new division or company level policies and escalate them for approval prior to the eventual publication and notification to the whole company through an auto-link to our internal company webpage.
At our team level, I advocated some years back the use of what we call the Activity Log System, which is similar to the system law firms use to record their lawyers’ time costs. While there wasn’t then an immediate need for such data, I foresaw the necessity to address matters ranging from internal or cross company charging, tracking productivity at both individual and team level and understanding better the nature of work conducted.
I was fortunate to be able to leverage our IT team’s existing system with minor customisations to suit my objectives. It took a while for my team members in the region to get used to the concept of keying in time costs. However, I believe in recent years, they have learnt to appreciate the value of this brings. It has also been a useful tool for me in explaining and justifying head count replacements when necessary.
In terms of external resources, we use DocuSign as an e-contracting solution. Our contract volume may be relatively lower compared to other industries and electronic contracting is still curtailed in certain jurisdictions within the region under our care. However, we recognise the value of a tracked electronic contracting process and I wanted to embark on it early.
Collaboration between legal and IT is clearly key in the development of bespoke tools. A critical factor for a successful collaboration is ensuring that we do not take our IT resources for granted (which tends to be the case where internal costs are not so visual). As such, I fully support our IT’s team recent efforts in helping their internal clients visualise the IT resources and cost expended for each project better. They are after all a service provider to us as we are a service provider to our internal clients.
I suppose legal tech invariably leads to a discussion on the use of AI. I have spoken with other GCs who have used artificial intelligence to understand better its practical value. At the basic level, for example in terms of automated contract generation, there is certainly value. However, extending its use to a larger scope such as contract reviews may have differing levels of output value depending on the organisation’s needs and the source data it can provide. There are also concerns of output reliability and risks and responsibility.
JERA is one of the largest energy companies in Japan but it is also a relatively new company established as a joint venture between Tokyo Electric Power and Chubu Electric Power.
Having a short history has in fact helped us to onboard legal technology. If our company had a history of a hundred years, it would be almost impossible to fundamentally change the way the legal group works because there would be so much tradition built up that the organisation would be very resistant to change. With a new business one finds that nothing is set in stone. We are also fortunate to receive strong support from our ICT group, which is leading the digital transformation of our company.
But even with a young company, doing something new and bringing in a big change is not easy. One must secure budget and buy-in from management. One must also acknowledge the fact that Japan is a very traditional culture when it comes to doing business. Historically, Japanese companies have relied on paper, ink and physical signatures or seals to confirm documents.
However, COVID-19 has forced companies to examine technological solutions and embrace non-traditional working practices. This may have opened their eyes to the possibilities that technology provides, which will lead to a corresponding increase in demand. We are now able to get corporate approval at all levels via electronic confirmations, and paperless working is moving ahead throughout the company.
We are currently introducing and deploying contractual review legal technology. 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.
The next area we would like to incorporate legal tech into will be that of workflow management. At the moment, all of this work is undertaken manually; we pick up the phone or receive emails and the consultation starts. In the future we would like to introduce management software to assist this process.
While not all our legal staff are equally eager for legal tech, particularly if they feel learning a new way of doing things will be time consuming, the technology we have introduced so far has proved to be very successful.
We would like to be even more ambitious with the technology we introduce, but we have not got there yet. Take something like document management systems. Transitioning to this type of software is so complicated that we are not sure which supplier is the right fit for us, or whether any company is able to do what we need. We are watching and waiting for the market to evolve.
Naturally, given the company’s size, the legal group’s work is on a global scale, and we need to work with both Japanese and English language documents. The uniqueness of language is one factor as to why Japan does not have as advanced a legal tech sector as other mature economies such as the US or UK. Japan is to some extent isolated from the global market because of this. It is making some headway in catching up, especially due to the COVID situation, and will hopefully progress further.
I firmly believe that the trend of increased legal tech adoption in Japan will continue and we will see an increasing number of companies introducing some sort of legal tech, whether that is document management, contract review or higher-end AI solutions.
We are looking for improvements to our legal technology in most areas. Although I believe we are a bit ahead of the curve in terms of openness to technology adoption, our use of legal tech is limited to contractual review and the contractual review itself – we are talking about relatively standard documents.
If technology advances and other areas can be also processed by legal tech, then the accuracy and efficiency of our work will be significantly higher, which is why we are looking out for new products and evaluating them on an individual basis. Adopting advanced technology to assist the company is one of our top priorities over the foreseeable future.
I have been a lawyer for 24 years, originally specialising in tax law. I became an in-house lawyer by chance. I began my corporate career as legal manager for Central America and the Caribbean at British American Tobacco. It was an incredible experience, but one day I received an offer I could not turn down. So, I went to work for Colgate-Palmolive. This is a really interesting company that deals with consumer goods and products that focus on oral health, personal care and home care. We also have a division that manufactures and sells pet food. It is a very diverse and interesting company.
I manage six countries: Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama. I oversee all the legal issues including tax, environmental law, government relations and advertising law. One of the most important things that has set Central America apart from the rest of the world when it comes to COVID-19 is the implementation of curfews. We have been under lockdown and had strict controls placed on our movements over the last five months.
Despite this, Colgate-Palmolive has not had to shut downits operations. We sell our products throughout Central America, Dominican Republic, some parts of Europe, Mexico and the United States. We have not stopped even for one day. The goods we sell have been considered essential by every government in the region. Ensuring our people are able to do their job in a safe manner has been key. While this work has involved many departments, the legal team has made sure everything is done in a fully legal and compliant way.
The truth is, in-house legal work is usually done behind the scenes. I am fine with that, [because it] means when we do our work in the best way, everything goes smoothly. For example, in order for our employees to travel during curfew times we had to apply for special legal permits. In the end, nobody raised any issues. This means we did our job well.
This is a consumer goods company, it is a company whose main area of focus is to manufacture, sell and market products. We as legal are a support function, and our main goal is to operate in such a way that people do not know what we are doing behind the scenes. [Our lack of visibility] is a measure that the legal function, not only in Central America but worldwide is working effectively. Colgate-Palmolive has done a terrific job as we continue to manufacture and sell products safely.
Another, major change in my role is I am working from home all day. Apart from a quick visit into the office, I have not seen my leadership and management team for the past five months. This means we have had to change how we deal with everyday issues.Previously, I would spend some time of the year in each country, making at least two visits per country a year. If something was urgent I would just hop on to a plane. These days I have to handle everything over the telephone or over a computer screen.
One of the biggest challenges during this pandemic has been brand protection, and I believe we have been doing a great job. We pursue and take action against imitation of products, counterfeiting and smuggling of products that do not conform to our requirements. During this pandemic, right from the beginning, we have had to deal with people trying to sell products and mislead consumers into believing products are from our company, when they are not. In the past, we would send our brand protection team, comprised of lawyers and private investigations to looking into to these kinds of issues. We would run an investigation, submit a case for breach of intellectual property and prosecute the case. As many of the countries in our regional cluster are now closed we have had to come up with creative ideas to deal with such issues. For example, gel alcohol (sanitizer) which is advertised using one of our brands on Facebook marketplace, is not a product we manufactured. We let Facebook know the product is not ours, and they need to shut the account down. We also sent a cease and desist letter [to the manufacturer of this product].
We have had to find a lot of creative ways to protect the company’s trademark, as well as protecting consumer rights. In the past, we would go into a street and look for the product, collect samples and just gather as much information as possible to prosecute those cases. Now, we have had to be more creative, and find other ways to have the product removed from the market without us involving private investigators.
My personal opinion is that we have managed our resources very efficiently. We can respond to matters effectively, whether we are sitting in an office or at our homes, and provide the same results. I believe the legal profession will become more flexible as we look for smart and creative solutions, whilst respecting the processes of the law. The reason people are hesitant to approach lawyers is that we can sometimes take too long to address issues.
Overall, we as lawyers want the legal profession to advance. When I was at school, there was a philosophical discussion regarding the law and whether the legal profession was a science or just a body of dead knowledgethat continued to follow the same statutes and cases over and over again. This pandemic has made us stop for a moment to take a look at our profession from a scientific standpoint. As in-house lawyers we have to reinvent ourselves, and find alternative answers to make things easier. The law can evolve, and the legal profession can evolve just as other sciences do.
Regardless of the fact that Ecuador’s economy is the eighth largest in Latin America and the Caribbean (among 33 countries), Ecuador has amazing potential of business activities in the mining, energy, tourism and agriculture industries. With large natural mineral reserves (in gold, cooper and iron), amazing conditions for the development of energy projects, especially photovoltaic and hydroelectric energy, incredible tourism locations such as the Galapagos Islands, beautiful highlands, and considered to be one of the most bio-diverse countries in the world, Ecuador is also one of the top exporters worldwide of bananas, shrimp, flowers and cacao.
Due to all these interesting factors and many others like a dollarized economy, the government’s current policy has been focused in promoting attractive conditions for foreign investors and working on improving the benefits that were already granted in the Organic Code of Production, Commerce and Investment (COPCI) published in December 2010, but had little or none effect during the previous government (aligned to Hugo Chavez ideology).
The Law of Productive Development, Attraction of Investment, Employment Generation and Fiscal Stability (Investment Law) enacted in august 2018, offers to investors the possibility of obtaining interesting benefits such as: tax exemptions (income tax and currency remittance tax), reduction of custom tariffs, legal stability and entering into arbitration agreements while entering into Investment Agreements with the State, which has given law firms a new scope of work that involves project finance, tax, regulatory matters and contracts.
Furthermore, Ecuador offers investors a dollarized economy and a much more transparent State which has promoted transparency and the implementation of ISO 37001 anti-bribery among its government institutions and companies. These benefits have caused almost a 130% increase in foreign direct investment in comparison to the former government as per studies of the Central Bank of Ecuador.
However, despite the new foreign investors that came in different industries due the favorable conditions of the Investment Law and the effort of the current government to solve the extremely high debt left by the former government (which in addition to other matters caused a division among the elected political party, some in favor of the previous government and some in favor of the actual government), the economy of Ecuador was affected again by a combination of different factors.These are the social unrest events that occurred not only in the country but also in the Latin American region around October 2019, followed by the oil crisis (price-drop), the damages in the local oil pipelines due to massive landslides and COVID-19.
COVID-19 impact not only revealed the deficit in the country’s health system but also caused the lockdown of the country and the suspension of most economic activities for a couple of weeks. As a consequence, certain small businesses have faced bankruptcy or many other, have had to reduce their production capacity and employment force, generating many opportunities for law firms in debt restructuring, ADR and labor advice, that had to innovate their services to provide legal assistance while working from home.
In addition, Ecuador has upcoming presidential elections on February 2021, and the political scenario is uncertain due to the fact that most of the high public official (President, Vice President and some ministries) of the former government have been prosecuted in relation to corruption allegations, and there is low probability that they can run for a public position. As such, after 14 years of having the same political party in government, there is a high probability of having a different political party achieving the presidency.
Some of the key aspects take into account while deciding to invest in Ecuador are the following:
Key Indicators for 2020 and forecast
Current Business Environment
Sources: INEC and Central Bank of Ecuador.
Tax Regulation
Bellow a brief description of the main taxes applicable to commercial activities in Ecuador:
a) Income Tax
Income tax taxes the rent obtained by persons and local and foreign companies. Under the Ecuadorian law, income refers to:
Income from Ecuadorian source obtained free of charge of from work or capital.
Income obtained from abroad by persons domiciled in Ecuador or by Ecuadorian companies.
The tax basis is the total taxable income, less returns, discounts, costs and expenses deductible and attributable to such income. In general terms, the rate for companies is of 25%.
b) Value Added Tax
Tax on the value of transfer of ownership or import of goods, services, copyrights, industrial property and related rights. A 12% rate is applied over the price of goods and services. Some exceptions may apply to certain goods and services that will be taxed with a 0% rate.
c) Currency Remittance Tax (ISD)
The Currency Remittance Tax (ISD) taxes transfers in cash, through money orders, bank transfers, shipment, withdrawals or any payment of any kind, of currencies sent abroad, with the exception of an account clearing made with or without the intermediation of financial institutions.
The tax rate of 5% is applied over the value of the currency transfer. This tax is declared and paid by the financial institution by which the financial operation is carried out.
d) Capital Gains Tax or Property Transfer Tax
The tax rate for Capital Gains Tax and Property Transfer Tax ranges from 2% to 10%.
Labor – Profit sharing
15% of the net earnings of a company are distributed to all employees in the payroll. It can also apply to employees of companies that provide the company complementary services such as catering, security, cleaning and courier services. From the 15%, 10% is divided and distributed to all employees. The remaining 5% is distributed in accordance with the employee’s household.
Profit Sharing in mining, oil, and hydroelectric companies: as an exception to the general profit sharing rule, that the 15% of the annual profit must be distributed to all employees, in the case of mining, oil and hydroelectric companies it is only distributed 3% to all employees in the payroll, and 12% is distributed to the state.
Public Private Partnerships
The government has promoted Public Private Partnerships (PPP) which can be established for the provision of goods, building infrastructure, or services. All terms and conditions of PPPs are set out in a contract that must be signed with the public entity.
The PPPs have, among others that might be agreed upon the contractual parties, the following incentives:
a) Legal stability.
b) Income tax Exemption: Income tax exemption for ten years in projects in the prioritized sectors determined by an inter-institutional committee, period which starts from the first fiscal year in which the company generates operating income.
c) Currency Tax Remittance Exemption:All companies that participate in an PPP will be exonerated from ISD in the following scenarios:
In the importation of goods for the execution of the public project, whatever the import regime used.
In the acquisition of services for the execution of the public project.
The payments made by the company to the financiers of the public project, including capital, interest and commissions, provided that the agreed interest rate does not exceed the reference rate at the date of registration of the credit. The benefit extends to subordinate loans, provided that the borrowing company is not in a situation of undercapitalization in accordance with the general regime.
The payments made by the company for distribution of dividends or profits to its beneficiaries, notwithstanding where they have their fiscal domicile.
Payments made by any person or company due to the acquisition of shares, rights or participations of the structured company for the execution of a public project in the PPPs modality or for transactions that fall on securities representing obligations issued for the financing of the public project.
d) Reduction of tariffs: Customs tariffs that are related to the PPP projects will also be exonerated
e) International or domestic arbitration agreements
The incentives mentioned above may be enjoyed for the term agreed upon in the contract, with the exception of the income tax exemption, which can only be 10 years.
Investment Contracts
The Investment Law and COPCI benefits are directed to those new investments (either made by foreign or local investors) that meet the criteria of new productive investments in prioritized sectors of the economy that increases production and generates new employment.
The benefits granted by the government will depend on the investment project, its location, its industry, whether is a new company or an existing one, amongst other criteria, as shown bellow:
a) Total or partial income tax reduction from 8 to 15 years.
b) Currency Remittance Tax (“ISD”) exemption for the payment of imported machinery and raw materials, and for the payment of profits to foreign shareholders.
c) Tax stability for up to 15 years of the current applicable income tax rate. This provision does not provide stability for municipal, customs nor VAT Taxes.
d) Temporary exemption of custom tariff.
e) International or domestic arbitration is available for investors.
Initially, the aforementioned benefits apply for those investments made up to August 2020, but the President has recently extended the benefit for 2 years more, until 2022.
I am from Venezuela and for most of my career I was based there. I moved to Panama five years ago when 3M relocated me to takeover legal responsibilities for countries across Central America and the Caribbean. After two and a half years I relocated to Mexico to become general counsel there. In 2020, I moved back to Panama as general counsel for Latin America, overseeing legal operations in the health care, transportation and electronics sectors.
I started this new role during the pandemic and have overseen the company’s involvement in a range of initiatives during this period. 3M has been very focused on increasing production of respirators. As a company are working together to get things where they need to be, utilising our own distribution channels. It is important to note the company has not increased the price of respirators. In fact, 3M has been fighting against price gouging and many other types of fraud in both the United States and Latin America. There have been fewer cases in Latin American than in the US.
Legally, we have taken a global approach, rather than a local one. Legal departments across the company have aligned their goals for Latin America, USAC (United States and Canada) and Europe.
One of the biggest challenges that I have experienced in recent months has been dealing with the speed of change. Governments have generally relaxed their rules to allow healthcare products to come into countries easier,while some jurisdictions have made it harder to export products deemed necessary during the pandemic. Dealing with different jurisdictions and trying to standardise the way in which we work has been our biggest goal. It is a challenge when deciding how to balance multiple jurisdictions – you cannot work with 15 countries in 15 different ways. We need to find a midpoint that works across varying countries.
For example, if I am drafting an agreement that I would like to be used as a template for both Mexico and Argentina, I cannot put into that agreement the initial part of the document, as the format will be different for each country. If I insist on having that part of the document done in one single way for Latin America it would simply fail. If I focused on the little things, I would lose sight of the bigger picture.
No matter what jurisdiction we are dealing with, general counsel need to be more business mindedthan external counsel. Being part of a company is very different to being part of a law firm. Your state of mind needs to be focused on what the company needs, and on how the company’s goalscan be achieved through different tools. That is where the IT team here at 3M steps in and integrates those tools, sometimes even delivering new tools on demand. When I was in Venezuela I asked the IT team to develop a tool for my internal client agreements. I was tired of people coming to my office to request an agreement with a range of stipulations, without giving me the details that I would need in order to draft the agreement.The IT team developed technology that would make it easier to extract the relevant information I would need to draft that agreement. However, as things evolved, that particular technology is not efficient enough anymore.
At the moment, there are a number of tools on the market that companies can purchase. They can then adapt those tools to the company’s needs. That is exactly the case for 3M. We have been working with management tools for agreements as well as repository tools to be more efficient. We as a legal department are very much like a sponges. We need to be aware of and absorb a lot, whilst always adapting to the needs of the business. Our goal is to serve the business – there is no question ever about that. We then have to be innovative, and we need to be fast. We aim to help business teams do what they need to do – which in the end is to sell our products.
To that extent, it is really important to adapt to the needs of the business and to take advantage of all the tools we have to make work easier. But I have to admit that the legal department does complain in order to get the technologies that help us become more streamlined. That is the nature of being human, if we did not complain we would not be able to improve things.
I miss being able to go into to work and see people in our Panama office. Looking to the future, I think this moment of time has accelerated things within the industry. We definitely need to move towards becoming more efficient, and to find a balance between being compliant with the law and doing the right thing. I know doing the right thing is a subjective concept, but it is important to try and do what is right at a particular moment when you are faced with a particular situation. As a lawyer, the personal values you have and believe in, are a big part of it.
Of course, you also need support from the business. In a company like 3M, when a lawyer says something is not right, the issue will be heard and observed. Legal departments do not only report to their businesses, but also to a wider legal code. Everybody knows the opinions of lawyers matter – and although lawyers can sometimes get it wrong – companies trust their legal departments.
