The economic downturn has increased the pressure on in-house counsel to show added value, and to do it on a lean budget

Jonathan Armstrong is a Partner at Eversheds LLP

A sign of how tough things are for global in-house counsel came in September 2008, with the publication of the New York State Bar Association’s first Global Change Survey.  Almost 40% of the global in-house counsel surveyed voted the economic downturn as the single biggest factor affecting their legal department.

Later that month, a panel of in-house lawyers from the NYSBA International Section met me in Stockholm, Sweden, to discuss the survey’s results.  Allison Tomlinson, a member of the NYSBA’s Internal Section executive committee and Senior Associate Counsel at US engineering and infrastructure company Parsons Brinckerhoff, said: “There is always pressure on in-house counsel to be efficient and prove their worth… but the economic downturn has increased the pressure on them to show added value, which can be hard to quantify, and to do it on a lean budget.”

Survey findings

Besides showing the immediate focus of in-house lawyers on the current climate, there were a number of other interesting findings:

•  90.9% of in-house lawyers think compliance is more of an issue for them than five years ago
• the countries which cause the most compliance concerns amongst those surveyed were North America (46.8%); China (26%) and South America (14.3%).  Western Europe, Africa and Russia scored equal for compliance risk, with not one person concerned about the Baltics - despite the location of the conference! 
•  the majority of in-house counsel feel there has been a rise in litigation affecting them in the last two years, with 15.8% regarding this rise as "big"  
• despite the rumoured rise of procurement in purchasing legal services, only 2.6% thought this issue was the most important concern for their in-house team
   

The second largest pressure for in-house counsel was a recent regulatory issue (18.2%), followed by rising cost (14.3%) and the pace of global growth (10.4%).  Here the survey contrasts with a similar survey conducted by Eversheds and the Association of Corporate Counsel's Greater New York Chapter at their conference in New York in June 2008.  The June 2008 survey found that the pace and scope of global growth was of a higher concern for in-house counsel than either the rising costs of external law firms or the economic downturn.  A total of 38% of in-house lawyers attending the June event ranked the pace of global growth as having the biggest impact on them. Next was the rising costs of outside counsel (20%), followed by the economic downturn (14%).  The statistically small samples of both surveys are enough to explain the differences in emphasis between them. Equally, however, the contrast between the surveys might demonstrate just how acutely the economic downturn has been felt over the summer.  What seems clear is that economic pressures on in-house counsel to reduce costs is now more apparent than ever.

What the NYSBA survey failed to show was any consensus about which was the single most important compliance issue facing in-house lawyers.  Responses ranged from the general (such as "regulatory issues" or "EU") to the specific (such as "New York City Building Code regulations").  Whilst there was no real commonality between respondents, issues such as data security and data protection, the cultural aspects of compliance, and the challenges of differing employment laws were all recurrent themes.  Other issues which featured more than once were customs issues, the US Foreign and Corrupt Practices Act, and anti-money laundering legislation.

Contracting resources

While the spread of compliance topics and the geography covered by in-house lawyers is now ever greater than ever, anecdotal evidence suggests the resources to address these issues are often contracting rather than increasing.  Another of the speakers at the Stockholm conference, Ulf Linden, Senior Legal Counsel of GE Healthcare Life Sciences, spoke on this point:  "The vast number of different compliance issues reflected in the survey just shows how fragmented and complex this field is.  I would say that this is the top challenge for in-house departments - and especially if you work for a global business. More regulation is a trend not only in the industrialized part of the world, but also in the emerging markets."

Working smarter

As the global economic crisis continues, so the pressure on in-house teams grows.  In-house lawyers are used to 'working smarter'. As a result, in many cases - there will be little they can do to improve on what they are already doing.  Some in-house teams are, however, looking at measures they can take to reduce costs - and even generate their own revenue.  For example, my own firm has been working with a number of in-house teams to audit their company's brand registrations.  A policy of "release, reduce and resell" for brand owners can not only cut costs but, for those fortunate enough to be sitting on a large trademark portfolio, bring in much-needed cash.

What is common across in-house teams is that they will require the co-operation of external law firms to reduce pressures on costs. These external law firms must understand the new dynamics, and be willing to offer flexibility and cost-effective support in these troubled times.  The legal profession looks set for leaner, meaner times - and we all have to work together to get through them.