What do in-house counsel really want from law firms?

AC: Where does the responsibility lie when it comes to assessing the issues and situations you mentioned – with the external or in-house counsel?
PR: It is definitely a two-way thing. The in-house can help him or herself by keeping lines of communication open and assisting the external, understand their working environment, and what are the areas that need the focus in any given matter. For example, properly scoped instructions stating commercial objectives are important followed up with regular review meetings where changes in focus can be addressed. Obviously the better the working relationship between the in-house and external the better the communication – maybe that’s the ‘x’ factor.
RH: Good communications is the key in building the relationship. In terms of allocating responsibilities between the in-house legal function and external counsel it does very much depend on the circumstances at the time and the particular matter involved. Generally, both sides will have their capabilities and limitations. In addition to confidence, a successful long-term relationship will be more likely if there is a mutual understanding about capabilities and limitations as it will shape expectations in a realistic way. Inhouse counsel should know what their external counsel are able to deliver, and external counsel should try to take time to understand how they can help the in-house legal function to in turn, deliver.

AC: Do you have any examples of where externals have worked to the benefit or the detriment of your organisation?
AL: You will hope that the relationships held with your external lawyers work for the benefit of your organisation as otherwise there will be a problem. I do not recall having faced experiences where the work carried out by the external was detrimental to the interests of the company, but I have to say, it is not unusual for commercial colleagues to feel that something else could have been obtained. It is in such cases, where you need to ask yourself whether such expectations are reasonable or not. At the same time, one area in the relationship between the company and law firm that may, from time to time, cause concern is billing, as discussed earlier. I have found myself on certain occasions arguing in relation to a bill, which is definitely something that an in-house counsel does not feel comfortable with. This goes to the root of the trust or confidence to which we referred earlier. When you suggest your external colleague that something may have been improperly billed, and end up getting a reduction of 25 percent of the bill originally raised, you really wonder what is going on. Had I not conducted an in-depth review of the bill, the company I work for could have ended up paying an unjustifiable amount. No matter how efficient and knowledgeable the external lawyer may be, having on-going differences on the billing aspect may contribute to a (perhaps unfair) perception that the work carried out was somehow detrimental to the company.
PW: I would agree with Adrian that you hope every situation and relationship works out. Unfortunately, not every one does. We have been in situations where we have changed our direction with external counsel because of poor service or lack of critical competence. Billing, as Adrian mentioned, is definitely another area of constant concern. When we go through a bill and notice clear errors on more than one occasion, it really makes you wonder if the partner on the matter really took the time to carefully review the bill before sending it out and, like Adrian said, you wonder what is going on.

AC: So, what then are your suggestions to firms when it comes to affairs of billing and cost?
PR: Flexibility before and after. Flexibility after in the way I have already mentioned but flexibility before as well, for example, to be willing to try different charging methodologies. On one particularly complex IT matter we realised there would be a lot of time consuming negotiations with a supplier, so what we did to keep costs down was to come up with a fixed charge per draft of the contract. The inhouse lawyers fronted the time consuming negotiations and the externals did the backroom drafting to update the document and also provide their expertise on positions being taken. Once we agreed on what amounted to a new draft it worked really well and we could more easily give management an idea on the kind of legal bill that would result from the project.
AL: The practice of a proper ‘case management system’ would be a suggestion to make. Whenever feasible, the exercise of an early estimation of costs for the different stages of the case would also be advisable. I definitely expect the law firm to stick to the initial budget (some reasonable leeway permitted), as it is quite uncomfortable when your appointed firm deviates from the initial budget arguing ‘peculiar’ or ‘unexpected’ circumstances of the case. In order to avoid surprises or disagreements, I would suggest that a proper evaluation of the case is made at the outset so that the budget received by the in-house, on which the selection of that particular firm may have partly relied, is respected in the end.
RH: I would just add that good and regular communication is important. When it comes to bills, unless we are talking about coming in under budget, surprises are never welcomed. If there hasn’t been any forewarning of a significant deviation in budget then the law firm was not doing its job. On the other hand I can sometimes tell when things are getting out of control and then it’s my responsibility to understand what is happening. At that point a frank discussion with the law firm would be called for.

AC: Are your current procedures 100 percent foolproof when it comes to conducting the relationship between yourselves and externals?
PW: Never 100 percent. We understand it is a two-way street to make the relationship work. With that in mind, when we do send something out, we will try to make our instructions as clear as possible. We always keep an ‘open door’ policy and expect them 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. At the end of the day, we don’t want a work product that is not what we asked for. They need to understand what we want and ask if they are unsure.
PR: We are all human and fallible – ultimately it is a give and take situation with hopefully a bit more give from the externals. Though, as I mentioned, the in-house has a crucial role in assisting the external lawyers to know what he or she wants so that the trust and confidence can develop.
RH: Whether it’s more or less hands-on management or supervision in part depends on how well our external counsel are doing their job. If there’s a sense that they are letting matters drift or they are not paying full attention to the issue then one will jump in.

AC: How hard do you think it is for external counsel to understand your business?
AL: In the shipping legal world, externals will normally be quite well positioned to understand your needs and issues at stake without really needing you to start from scratch. I do not recall facing situations where I needed to explain the business, but just facts, of the particular case at hand.
RH: In my area I think there are three levels requiring understanding, one is the business of the bank I work for the second is understanding the regulatory environment in which the bank operates, and the third is understanding the competitive forces and challenges in the industry which the bank is in. I would expect external counsel working with us to have some understanding of these things, not just the business. They ought to know what is happening in the banking sector in Hong Kong and the Mainland, what the regulators are saying if not thinking, as well as knowing our business. Acquiring this knowledge takes time but having it can only improve the quality of the advice given.
PW: Like Roy, our business – brokerage – requires them to know us, our industry and the regulatory environment in which we operate in. Our external counsel really needs to understand our business, know the industry, its jargon and industry climate, and have the necessary industry competence. They also need to understand exactly what we need. When we need a quick answer on something, we don’t want a long legal analysis when a two-page executive summary will do. This really boils down to them knowing the client. I look at every one of my business managers as a client, and I do take the time to sit down and understand their business, what their expectations are, what I can do for them and what they can do for me to help them. I expect external counsels to do the same. It is all part of building the client relationship and understanding each other.
PR: There is plenty of information about the Hong Kong telecoms sector on the public record through OFTA (Office of Telecommunications Authority) and elsewhere – we are publicly listed company and in the press learning about our business should be relatively easy. As to what are the commercial objectives of any given matter, that is clearly where the in-house role is very important as the objectives may be more subtle or not as obvious as they would first seem. They may change too, which is why regular review meetings are so helpful – this is a key area where the in-house can help him or herself.

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?
PW: This is not novel, and it has been something we have touched on one way or another today. You need to know your client. You need to know our business, our industry, our competitors, and the environment in which we operate in. You need to ask how you can better serve us, anticipate our needs, and nurture the relationship you have with us. A relationship not well developed can quickly end with just one bad experience. A carefully developed and nurtured relationship can survive the bad experience. So the message would be for external counsel to really think about why they have really good, close relationships with some in-house counsel and companies and how they can replicate that for clients where the relationship is not as strong. Often, it is just simply showing the client that you want to get to know them better and then doing it.
PR: Many external lawyers will appreciate a lot of the issues we have been discussing and do put them into practice. However, they are normally the very experienced ones who have been ‘around the block’ a few times. My message to law firms would be, for those who are not already doing it, to build into their practice development, appropriate training on client care to assist their lawyers at all levels within the firm, including secondments where possible. The theme of that training should always focus on identifying the particular circumstances of any given in-house client and any given matter and how to tailor advice to be really client focused.
RH: Excellent value. A close relationship. At times they don’t follow through in terms of keeping the relationship warm. I sense at times they don’t appreciate the value in building the relationship. Every client wants to feel that they are a special client to the firm.
AL: My final message would be to pay attention to the requests and needs from the in-house lawyer, and always remember that his or her success (and ultimately, that of the company appointing you) depends very much on your correct and timely understanding of their needs. Finally, be professional in both rendering legal advice and how you charge for such services.