With impeccable timing, the European chapter of the Association of Corporate Counsel (ACC) convened in Switzerland for its annual conference on 8 June. A few weeks earlier, the Swiss government had released draft legislation that could give corporate in-house counsel in Switzerland a right to professional privilege that does not exist under EU law (see [2009] Gazette, 11 June, 2). The Swiss delegates among more than 200 senior corporate counsel made it clear that they would be tapping their political connections to ensure the smooth transition of this new right into Swiss law.

Delegates were also clear that their role as in-house lawyers needed to change, as did their relationships with panel law firms. Dirk Tirez, general counsel at The Belgian Post, fired a warning to external counsel. ‘Let’s be real,’ he said. ‘Law firms only want to get money out of our pockets. So think carefully about the job you want them to do and create a lengthy plan with clear time constraints. Ask for a quote, which you can put into a budget. Otherwise, they will get 20 junior lawyers to look at the law in every EU jurisdiction before delivering your bill.’ Tirez suggested that the downturn presented a ‘golden opportunity’ to reduce hourly rates.

Michael Burd, partner at City firm Lewis Silkin, interjected: ‘I accept that the hourly rate is going to die, but if all you can say is "cut 50% from your rates", that’s not the way to do business.’ Another lawyer said: ‘Trust is important. If we milk you for millions of pounds one year, then don’t get any income in years two, three or four, then we’re not doing our job.’ Tirez replied: ‘Trust is important, but control is better.’

One senior counsel said the debate was more about quality than fees, but procurement departments didn’t grasp this. ‘Decisions on panel firms must be left to corporate counsel, who hold the expertise,’ they said. Burd responded: ‘With this, we are united. We hate procurement too.’

Another senior counsel suggested law firms’ promotion structures needed to change: ‘Most law firms have a pyramid structure, and one of the ways juniors compete to become a partner is with the billable hour. It just mushrooms the hours worked by associates.’

One European counsel cited the UK housing market as an exemplary case study of legal competitiveness. ‘If you go to buy a house, then every high street law firm will quote you a fixed fee. Big law firms don’t operate in such a competitive market. Now we have the opportunity to really change the competition model for big firms.’

Hammering down external legal spend is one aspect of the in-house lawyer’s job, but corporate counsel must also prove their worth within their company. One component of this is having an innovative business mind. ‘You’re going to be the most valuable to your company when you migrate from being a lawyer into a business leader,’ one senior counsel said. ‘Leadership must be part of our DNA.’ Another highlighted the enviable position of an in-house lawyer within a business: ‘An in-house lawyer working in a company for three to five years has experience that cuts across more parts of the business than any other manager. Human resources and finance managers concentrate solely on their own departments.’

One chief executive of a major global corporation said that corporate counsel must use their expertise not just to protect revenues but also to grow them. He suggested that counsel should be proactively looking to sue competitors.

Terry Miller, general counsel for the London Organising Committee of the Olympic and Paralympic Games (LOCOG), suggested that counsel should ensure their company has a credit rating, so that suppliers could get cheaper financing.

Another increasingly important contribution of the in-house lawyer – especially ­during the downturn – is their compliance function. ‘The more preventative work we do internally, the more we diminish the need for outside supervisors to increase regulation,’ said one senior counsel. Greater expectations on the supervision of management had led to greater expectations on the legal department ‘to act as a robust check and balance’.

Another senior counsel said: ‘Desperate business decisions challenge legal regulation. Facing all of this, you need to keep in mind your ethical integrity as a lawyer.’

Jim Jackson, associate general counsel at Philip Morris International, said: ‘There is increased pressure on people to meet targets and cut corners. More people are concerned about job security, and thinking about what they can get from the company. These are dangerous things, especially in these troubled times.’ He drew on data from the US Corporate Executive Board, which revealed that incidences of reported misconduct had shot up 20% in recent months. The CEB data also revealed a 5% decline in employees’ perception of the integrity of senior management when it came to compliance. ‘Management focus can be tempted away from compliance, which gives rise to more anxiety for us,’ he said.

Anthony Wales, general counsel at AOL Europe, said that prescriptive rules-based compliance programmes would fail. ‘If you’ve been taught how not to break the rules, then it’s a short step to the side to stretch the rules to get what you want,’ he said. ‘Enron supposedly had the best compliance rules at the time.’ Wales suggested that rules had to ‘permeate the whole workforce,’ including management.

LOCOG’s Miller emphasised the importance of keeping tabs on suppliers. ‘We have a number of mission-critical sponsors,’ she said, giving the example of timekeeper Omega, which ­supplies timing systems for the games. ‘If anything happened to them, there would be major problems – and people are very shy if they have a problem.’ Miller said she sends team members to meet regularly with stakeholders. ‘Legal isn’t always as embedded within an organisation as it should be.’

The emergence and ongoing debate around collective actions in Europe is one area of concern – but also opportunity – for corporate counsel, the conference also heard. ‘Europe is entering a new era,’ said Daniel Buehr, European general counsel for Schindler Management. ‘Our continental way of looking at civil law damages is changing quickly. Consumers, customers and competitors have access to more legal instruments with which to defend their interests.’

Although collective actions – the European version of the US class action – can be brought in many EU member states, the European Commission is considering whether it needs to harmonise the law. A new directive, which would allow collective actions to be brought in all EU states, continues to be debated by politicians, businesses, lawyers and consumer groups.

At present, member states have differing mechanisms for collective actions, and in many, state-run and privately run consumer organisations are the only groups that can bring such actions. However, under the commission’s white paper, any group that shows it has a collective interest in pursuing legal action will be able to do so, with litigants required to opt in to the class. Decisions on collective actions made by the European Court of Justice will bind national judges, who will then only have to rule on damages. Also, the loser will pay, although leniency will be given to companies that declare an infringement.

‘These instruments can work for and against big corporates,’ said Jacques-Antoine Robert, a partner at City firm Simmons & Simmons. ‘In-house counsel must defend the interests of their companies, but may be interested in joining an action,’ he added, suggesting that collective actions pitching big corporates against cartels would become more prevalent in Europe. Robert also predicted increased involvement by private equity firms in collective actions, for example in setting up a special purpose vehicle to join a class in an antitrust case.

JB Simko, assistant general counsel at Philip Morris International, said that the mechanisms for collective actions in some EU member states were in urgent need of change. He revealed that a collective action in Bulgaria, where claimants were seeking damages and special injunctive relief, could ‘effectively shut the business down’ if it succeeded. ‘You have to recognise that the plaintiffs have the advantage in these cases, which has a significant impact on your ability to defend,’ he added, proposing that EU legislation should require preliminary hearings before full trial in all collective actions.

Anne Rose Stouthuysen, assistant general counsel at Sun Microsystems Belgium, said a number of important issues still needed to be resolved in the commission’s consultation, such as how to group claimants and how the system would be funded. ‘The role of money is the most important thing,’ she said. ‘As soon as there are intermediaries able to make money out of collective actions, then abuses will appear in Europe as they have done in the US.’ Stouthuysen said that any litigation funding system in Europe should not follow the English example, especially in the use of conditional fee agreements and claim farming by intermediaries in product liability cases.

Although unlikely to be top of any company’s agenda in the current economic climate, corporate counsel nevertheless offered some guidance on mergers and acquisitions for those less experienced at doing deals. Marian Block, vice-president and associate general counsel at Lockheed Martin, suggested that a number of legal tools could be used to overcome risks in a transaction, such as the provision of indemnification for the buyer if they take on a known risk, or specialist insurance against unknown or unidentified risks. ‘If the liabilities are that bad or incapable of being valued, then walk away,’ she said. ‘You can’t value the harm to the reputation of your company if, for example, you take over a company that has neglected its environmental duties across the world. These things will make the headlines.’ She suggested that corporate counsel inexperienced in M&A should call on a combination of resources – law firms, accountancy firms and other M&A specialists – to carry out due diligence work.

However, panel firms would be advised to limit their word count when assisting in-house counsel. ‘External law firms seem to spend a lot of your time and money on summarising the law,’ said Marco Boschetti, principal and co-head of global M&A at Towers Perrin. ‘It’s interesting, but not particularly useful. Tell them to summarise the issues, rather than the law, in 40 pages instead of 700 pages.’ Brian Craig, legal counsel at Lockheed Martin, said that outside law firms were often asked to do non-legal work because of bad project management. He recommended that corporate counsel could instead shift administrative work onto the target company and their lawyers. ‘If they’re the interested party, they should be pushed,’ he said.