THE PANEL
Roy Huang is Senior Vice-President and General Counsel for CITIC Ka Wah Bank Limited as well as Head of Group Compliance. Prior to joining CITIC Ka Wah Bank Limited, he was partner in charge of legal affairs Asia-Pacific at Andersen Worldwide.
Adrian Larrondo heads up the Legal Department for the international shipping company, CSAV Group. He graduated in 1994, with a Master’s degree in Shipping Law and Marine Insurance in Southampton (UK). He has experience as a marine insurance broker and lawyer (both external and internal) in England, Argentina, and Chile. He has been based in Hong Kong since 2004
Philip Reid is a Senior Group Legal Adviser in PCCW’s group legal office, responsible for the team that supports the company’s commercial and international business divisions, regulatory affairs and treasury departments. Previously, he was in private practice from 1992 in Sydney, then from 1995 as an IT/Telecoms lawyer with Sidley & Austin and Rakisons in London and Clifford Chance in Hong Kong.
Paul Wong is the Head of Legal, Asia-Pacific for the Fimat Group, the securities and futures brokerage division of Societe Generale, and is based in Hong Kong. He is a licensed attorney in the State of California.
Asian-Counsel: How important is it to have confidence in a firm you use?
Philip Reid: I think it’s a given that external lawyers have a level of technical legal expertise that is up to scratch. It’s actually the extra value-add that they bring to the table which sets them apart and which helps develop the confidence and ensure that their advice will be client focused. By the way, I’ve got some statistics from a survey done in 2003 by BTI Consulting on in-house counsel of Fortune 1000 companies – apparently 35 percent of them said that they didn’t believe they received client focused advice. In the same year Ronald Pol surveyed partners at a large Australian law firm and 90 percent said they did believe they delivered client focused advice. So there seems to be a bit of a gap between what in-house and externals think the externals deliver – or maybe what client focused advice really is.
Roy Huang: Confidence in the external law firms we retain is important. It’s partly about competencies but winning the confidence of the client involves other factors as well. Ultimately it’s having the knowledge that I can trust their judgment without worrying that something important, legal or otherwise, might have been overlooked. Also when I work with external counsel I don’t hide them away from my client and in fact encourage interaction between external counsel and the business people. Accordingly there is a bit of pressure, not necessarily by design, to not only win my confidence but the confidence of the business people. Having my confidence and the confidence of the business people will make everything down the line much easier including that point when we need to discuss fees.
Adrian Larrondo: Without hesitation, confidence in your external lawyer is essential in such a business relationship. Confidence will comprise of many factors ranging from the trust you place in the level of expertise of the professional you are dealing with, a proper understanding of your needs from such lawyer and a reasonable level of costs being charged for the professional service rendered to your company. It is in the latter aspect that, sometimes, misunderstandings may be experienced with the effect of confidence possibly getting affected.
Paul Wong: You must have confidence in your external counsel. The way external counsel gains your confidence is to give, among other things, competent, responsive, and timely advice. And to get to that level they need to get to know us, understand our business and industry and the legal issues we face. They need to be able to add value to our business and be able to be a partner with us.
![]() “External counsel that I work with respect the fact that I want to be part of all communications … I would not expect external counsel to launch into some major area of discussion without first raising the matter with me” Roy Huang, CITIC Ka Wah Bank Limited |
AC: How can a firm gain your confidence? PW: All of the things I mentioned before are important. On top of them, I would add that they go out and really try to get intimate with the client. By investing the time to know us and our operations, objectives and challenges, they really set themselves apart from the others. In turn, we get to know them, what their core competencies are, and what value can they bring to our business. Just like when you ask your friends for a restaurant recommendation, in-house counsel do the same with their in-house counsel friends across the street when they are looking for external counsel. If you went out and really got to know your client, I am confident that your client will contact you first almost every time whenever an issue arises. When that happens, that is when you have gained the confidence of your client. PR: I think the key to building confidence is the externals knowing and understanding the individual circumstances faced by the in-house. Every in-house lawyer is different and will be faced with different types of work demands and constraints. Every matter will bring its own set of commercial objectives and peculiarities which the external needs to tap into and understand so that advice is focused. For example, as in Roy’s case some in-house lawyers will encourage direct communications between the external lawyers and the business people and often that is a necessity to deal with matters in a timely manner. When possible our approach is more hands on. We operate almost as a gateway to ensure that the communication remains focused on the legal issues to control costs. The external lawyer needs to be in tune with that and not go off on a tangent at the whim of a well meaning commercial person. Even the physical environment plays a role. Some in-house lawyers work in an open plan environment where business people are shooting questions at them and they may simply need the comfort of being able to pick up the phone and talk to an external lawyer about issues knowing they are not going to be charged for everything. Other in-house counsel may have more time and might want more detailed advice – it’s important for the externals to assess the environment, and assess the particular matter and the commercial objectives and then tailor their advice to fit in with how the in-house operates – that is the real challenge. AL: With regard to the advantages of favouring direct relationships between external lawyers and business people within an organisation referred to by Roy, I have witnessed (avoidable) misunderstandings on some occasions; for instance, external lawyers may not find it easy to communicate with accountants; sometimes you feel that two different languages are being spoken with the result that precious time, and money, ends up being spent, whereas a timely intermediation from the in-house would have saved either or both such resources. Having said this, there will admittedly be times where a direct communication or interaction is to be welcome and favoured by the in-house. RH: I am sensitive to the potential problems raised by Adrian and Philip but no one knows the business better than the business people and I am happy to have them involved as much as possible in the process. External counsel that I work with respect the fact that I want to be part of all communications, whether that’s a meeting or an email or a phone call, and know to keep me looped in. Also I would not expect external counsel to launch into some major area of discussion without first raising the matter with me. I do believe there is significant efficiency achieved when working with the business people as a team in this way. AC: Where does the responsibility lie when it comes to assessing the issues and situations you mentioned – with the external or in-house counsel? AC: Do you have any examples of where externals have worked to the benefit or the detriment of your organisation? |
![]() “One pet hate that I have is finding my self supervising a junior lawyer at an external firm. Obviously, they have an important role to play particularly in keeping costs down but at the end of the day when you’re busy and the pressure is on you want to be dealing with a lawyer that is adding value and has the experience and street sense to help the in-house through rather than the other way round” Philip Reid, PCCW |
AC: How much of an issue is cost when it comes to retaining a firm? PW: It is very important. Ask any in-house counsel and they will tell you that costs and budget are very important issues. With that in mind, we will ask external counsel for estimates and get them to stick to it or let us know if they think that estimate will be exceeded. Also, we will carefully scrutinise each bill to make sure the work we are being charged for is meaningful work and the time is correct. The bills have to be itemised, setting forth who did what work, a complete description of the work done and the time spent on it. If we get a bill that we cannot properly verify, we will send it back and ask them to do it again. PR: Every in-house lawyer faces cost issues – it’s a common problem. When it comes to ‘partnership’ and having a good working relationship and so on, that’s where the externals really put their money where their mouth is. If they can be flexible with costs and work with us in that regard then that is a huge benefit to the in-house lawyer and can lead to more work. For example, a matter may be important at first but then for whatever reason it no longer has such commercial significance. It’s actually in everyone’s interests to be flexible on costs in those circumstances because management aren’t going to like a hefty legal bill and next time round it may be more difficult to instruct. Obviously the externals are not going to be flexible when it comes to costs unless they know they are going to get repeat instructions, which is why once again, it’s a two-way street. In that way it’s often good to be using a smaller group of law firms as they know they are going to receive repeat instructions. RH: One interesting thing about the billing and costs setting exercise that we all go through at the beginning of a new matter is that it can reflect the kind of value that the law firm will bring. Often but not always if they get the costing right including correctly pointing out where and why costs may be highly variable and producing a realistic range for such situations, it reveals experience. I have often found a firm that brings value to something will pretty much get the costs right at the expectation setting stage. That kind of firm tends to give me confidence, because it is a demonstration that they have been there and know what they are doing. PR: There is a technique called ‘value billing’. Generally law firms will charge by the hour, but ‘value billing’ is where the in-house and the external will agree on certain value criteria for a matter, for example the timeliness of advice, how complicated it is or whether the advice has met commercial objectives. The idea is at the end of the matter to agree whether the criteria has been met and then come up with a number for how much to charge. At PCCW we do that to an extent and in an informal way, but by using the hourly billing as a benchmark. The firms still calculate costs by the hour but then at the end of the matter if, for example, something has gone wrong or if a issue no longer has the same commercial importance we ask them to reduce. We don’t increase the bill of course. It’s that idea of adjusting the bill depending on how valuable the advice is to the in-house which can really focus minds on what in-house want. AL: You definitely need to pay attention to likely legal costs before recommending your company to embark in any legal exercise. Nowadays, there is pressure on all areas of a company to keep costs to a reasonable level; the inhouse legal department being no exception. Going beyond the initial expected legal costs does create internal ‘friction’, especially when you need to explain to the relevant officers the reasons for such a situation. PR: The external simply must keep the inhouse fully informed about the way costs are going. You may have set costs expectations internally or even have them pre-approved and therefore you need the external to keep you informed if they foresee a particular matter going a particular way which will incur additional costs outside the budget. They need to let you know, and in advance, so that you can reset expectations with management or seek additional approval. RH: Good external counsel will be aware of these issues; a lot of what we are saying will not, or rather should not, be new to external counsel. AC: So, what then are your suggestions to firms when it comes to affairs of billing and cost? |
![]() “We always keep an ‘open door’ policy and expect [external counsel] to come to back if they are not clear or don’t understand the instructions, to ask questions, and keep us informed of the status … They need to understand what we want and ask if they are unsure” Paul Wong, Fimat Group |
AC: How much delegation and supervision of externals is required? AL: No more delegation than necessary. In the industry I am involved in (shipping) there is an expectation of a substantial knowledge on the part of the in-house, what means that in practice, you will generally delegate matters that will unavoidably go to court or arbitration. Any issues related to negotiation of contracts, agreements, etc. will normally be handled internally. PR: One pet hate that I have is finding my self supervising a junior lawyer at an external firm. Obviously, they have an important role to play particularly in keeping costs down but at the end of the day when you’re busy and the pressure is on you want to be dealing with a lawyer that is adding value and has the experience and street sense to help the in-house through rather than the other way round. PW: I would agree with the comment, ‘No more than necessary.’ We would not turn to external counsel if it required us to supervise them on our work. We do want them to keep us abreast of the status of the project and to come back to us right away if they have questions. All of this goes back to having confidence in your external counsel. When we send something out, we expect the work to be handled by someone who is competent. We don’t dictate who can and cannot work on our project, but we generally only work with partners. I know this is becoming the policy at many in-house departments, particularly in the US. As for us, we have had a couple of experiences with work that was passed down to associates who were not able to handle the task and it required us to hold their hands throughout the whole project. Suffice to say, these experiences did not reflect well on the external counsel. RH: We’ve had a similar experience where our initial talks were with a partner from the external law firm and then we saw and heard fairly little from that person again. Generally we will outsource depending on the complexity of the matter and our capabilities and resources in-house. When we do outsource I see supervision, to some degree, as an important part of our job in-house. AC: Are your current procedures 100 percent foolproof when it comes to conducting the relationship between yourselves and externals? AC: How hard do you think it is for external counsel to understand your business? |
![]() “My message to [external counsel] would be to pay attention to the requests and needs from the in-house lawyer, and always remember that his or her success depends very much on your correct and timely understanding of their needs” Adrian Larrondo, CSAV Group |
AC: How easy is it for you to understand the barriers that exist within law firms? PR: It certainly helps if the in-house has worked in private practice before. One barrier is the law firms need to cover their backsides, which can often result in written advice being too long and not focused. A solution is to adopt creative ways in presenting the advice, for example, by using executive summaries, tables, even diagrams to make the product more user friendly. PW: Like many in-house counsel, our former lives were spent in private practice. I fully understand the constraints they have and I do keep that in mind when I talk to external counsel. However, at the end of the day, the critical issue is addressing the needs of the client. RH: It goes without saying that we do appreciate the pressures law firms are under in terms of their own business and those the individual lawyers are under. I think we owe it to them as well. It isn’t a one way street, we do have to understand their issues and constraints as much as they have to understand ours, we are talking about a relationship which by definition is two-way. AL: I think it’s also worth mentioning the way legal advice is presented to us, similar to what Philip said. If they could summarise or highlight the issue and then leave it for the second stage for explanations, this would make our lives much easier. AC: What’s the message you’d like to get out to law firms in terms of, and it goes back to the question – what do in-house counsel really want from law firms? |