One of the key responsibilities of an in-house lawyer is the selection and management of external advisers. Most in-house legal teams work on a tight operational budget and external fees are usually the largest component of their annual spend. Unless an in-house legal team is quite large, there will be little opportunity to specialise in niche areas of law. As such, most in-house counsel tend to be generalists, with a wide, working knowledge of most areas of law. On occasions when more specialist advice is needed, industry lawyers will turn to external counsel for advice.
Law is a fairly incestuous business. It is not uncommon for an external advisers to be instructed on the basis that they are an ex-university or law school friend, an ex-colleague, or were the last firm the in-house lawyer worked at before moving into industry. Many heads of legal will “inherit” a firm from the previous incumbent. However, there are a number of factors to consider if looking for a more objective and balanced set of criteria.
The visibility and standing of a firm generally, and in the industry specifically, will give a good indication of their quality. There are a number of traditional on-line and off-line directories which rank firms and individual lawyers in a wide range of business sectors, but these may be less objective than they look. A better indication is a word-of-mouth recommendation from existing clients. Linked-In is also a good source, as there are a number of forums for industry lawyers that would be ideal for such a query.
Most external advisers work on an hourly rate, so understanding what they charge is obviously important. However, the market for legal advice is highly competitive, and firms are always looking at alternative fee arrangements to attract clients. These include blended rates (a single hourly rate for all fee earners regardless of qualification level), fixed fees for work that warrants it, or discounted rates for high volume work. Some innovative practices operate a discretionary bonus scheme, where the initial fees charged are discounted, but if the client is happy with the work, then the client can add “repay” part or all of the discount.
There is an argument that in the top echelon of UK and US law firms, there is little differentiation in terms of the overall quality of work provided. As such, firms have been forced to find other ways of adding value to their client offering. These include general and bespoke training seminars, regular briefings and updates, access to a client extranet, the provision of secondees to work at the client premises. Good firms will be keen to take the time to develop a good understanding of the client’s business as ultimately, it will enable to provide better and more focussed advice.
Depending on the nature of the client business, it may be important that an external firm has branch offices, or at the very least, affiliated firms in strategic jurisdictions around the country and the world. Instructing one firm, rather than a panel, brings economies of scale to medium size and smaller enterprises. Also, consider whether billing will be seamless – in one currency through the head office of the firm, or whether you will be receiving separate bills in different currencies from each affiliated firm.
An in-house lawyer may spend several days stuck in a room during complex negotiations with his external lawyer at his side. As such, it is crucial that their working practices are complementary and that you can get on with them on a personal level. Before a firm is chosen, ask them to assemble a bespoke pitch, tailored to your company which includes bios of the team that is likely to support you, their services and their rates. Attend some of their seminars and social functions and go out for dinner or lunch if invited so you can get a feel for whether they will be easy to work with.
A bit of research and due diligence, some bargaining on fees, and a good understanding of a firm’s capabilities, reach and service offering should put an in-house lawyer in a good position to make an objective assessment when selecting external counsel.