The role of legal services in the growth of service sector economy or knowledge economy of India is quite significant. This can be emphasised by the various types of legal services provided by lawyers, whether external or in-house, observe Dr. Rajeev Uberoi and Santosh B Parab
Capitalism has undergone a phenomenal transformation from a mass production system, where the principle source of value creation was human labour to a new world of innovation led economy, where knowledge plays a critical role for the value creation and growth. The recent surge in the global trade and commerce, less restricted flow of capital, technology and labour has played a significant role in economic development and growth across the globe. Legal services have played a catalytic role in facilitating this. They have been instrumental in the huge shift, which has happened from the service economy led growth to the knowledge economy led development.
It is a well established fact that the service sector has played a significant role in growth and development of the Indian economy. The legal services have contributed amply to make this happen. This is more evident from the number of legal firms, which have come in the market place and the volume of work they have been assigned. Most of the large corporates, both in the financial sector and also in the service sector, have built robust inhouse legal teams to support them in their growth and development in the sunrise economy.
The service sector is fast changing to a knowledge economy, as the knowledge industries operate in the service industries. Knowledge is one of the key determinants of growth of any economy. The focus on knowledge capital and its productivity is of perfectly understandable and of paramount importance in the emerging knowledge-intensive economy of India.
Right from their contribution in the liberalisation process, which started sometime after 1990’s, by way of assisting government agencies in preparing the Public-Private Partnership (PPP) policy, drafting of bidding documents, concession agreements, and licence agreements till the present era of merger and acquisitions, mega infrastructure projects, the legal services sector is playing a significant role.
The practice of law is changing rapidly with changes in trade, commerce and business. The main focus areas being mega project financing, Joint Ventures ( JVs) and collaborations, Mergers and Acquisitions (M&A), privatisations, intellectual property rights, copyrights and patents, apart from others. The increasing engagement of legal services has made it imperative that corporates have both in-house legal teams for their day to day requirements and have support of external counsels to meet their specific and specialised needs. Engaging the right external law firms is very important and is more than recruiting the right person for the right position.
The role that an in-house legal team plays in today’s competitive business context is quite complex, as they are required to give proper legal advice, based of the prevailing laws and regulations and a thorough understanding of the company’s business. In today’s context, an in-house legal team’s role is that of an adviser, who is seen to be offering solutions – creativity and problem solving in the strategic sense.
In growing organisations, in-house legal team will need to assess the legal position and risk very quickly and takes a broad view in order to move the business forward. It is important for inhouse team to anticipate all the legal risks in advance and mitigate them at the source, before they become problems. Even where disputes may be inevitable, in-house team shall create an alternative dispute resolution options in agreements and providing realistic litigation risk assessment to encourage early resolution on reasonable terms.
Therefore, it is important to consider the following while building internal legal department:
The in-house legal team based on its expertise will have to strike a proper balance by allocation of work between itself and external lawyers. Typically the external lawyers are engaged for:
Further, engaging external lawyers will depend on the following:
assistance will be required in the areas of manufacturing, equipment supply, raw material supply, financing, insurance, permits, collaboration or JVs, sales, which are one time requirements. Depending upon the same, it should build its internal legal department. For matters, which are repetitive, it is better to have a dedicated legal team, but for onetime need, it is prudent to engage external legal counsels or firm. However, it may not be true for some other industries. For instance, a financing company requires legal assistance on daily basis and therefore to provide good services to its clients a strong internal legal department with proper skill sets is a must.
Selection of outside lawyers shall entirely be based on merit with cost and prior experience being factors in merit. The goal shall be to build a long-term relationship so that the expectations are met. Biases towards bigger law firm must be avoided because even the smaller firm can handle big deals efficiently. Competition between law firms to better serve the company shall be encouraged; however, such competition shall be healthy and not just to get a discount.
For reducing the cost of the legal services, steps should be taken on standardisation of documents, which are frequently used for the business. Steps should also be taken to enhance the skill sets of internal legal department. One should work on alternate billing mechanisms to reduce fees. Out of pocket expenses passed shall be limited to actual cost, with larger expenses controlled by a series of techniques, prior approval requirements, and examination of underlying receipts.
Every litigation or legal case is important. The result of each litigation case can have different implications on the organisation. No litigation shall be taken lightly. Best of the external lawyers shall be approached and appointed for protecting the interest of the organisation. Dedicated resource shall be allocated to coordinate with external lawyers for litigation. Proper processes and systems shall be developed for updating of the status and providing information of the dates. Regular meeting and briefings about the case to the external lawyers shall be done. Providing of all the information pertaining to the case to the external lawyers is of paramount importance. And last but not the least, updating the senior management on a regular basis of the status of litigation.
To conclude, presently, the general counsel has an important role to play not only getting the best talent for their in-house legal teams but also know and understand the need for engaging the right external law firms for their corporate requirements. They have to understand that the external lawyers will become the face of the company to the external stakeholders and will carry the burden of giving the right advice and comfort to the corporate as well as the client.
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