As in-house legal teams grow increasingly sophisticated, they are beginning to demand more from their law firms. And while many law firms meet their standards, there are some that cause frustration due to issues with billing, lack of expertise and attentiveness, and occasional outright incompetence. ALB looks into what in-house counsel based in Asia value in their law firm partners, and what will break their trust once and for all.

 

In-house counsel keep a checklist when choosing external law firms to work with. With competition heating up amongst private practices, technical expertise is expected as a bare minimum. What really differentiates between the plethora of outside counsel, therefore, has become much more nuanced, especially when in-house legal departments are grappling with the dominant doc-trine of “do more with less”.

In a recent survey conducted by ALB among in-house counsel across major Asian jurisdictions, an overwhelming 99 percent of respondents prize lawyers who are not only stellar specialists in their field but also industry experts, able to provide additional value to the long-term viability of their businesses. In addition, nearly all respondents

(95 percent) want transparent and predictable pricing systems provided by law firms. In-house counsel lament that issues such as duplication of items billed, discrepancies between the amount billed and the perceived legal value of the actual work done, and delayed out-of-pocket expenses are among issues that cause hassles. Law firms responsible for these difficulties are likely to be bearers of a black mark.

At the end of the day, it is a sense of trust that solidifies a working relationship that is operating on good faith and mutual understanding between in-house counsel and their external legal advisers. The trust of in-house counsel, while hard to earn, can be easily lost.

WORTH THEIR SALT

Maria Concepcion Simundac-Delos Santos, lead legal counsel at ING Bank Philippines, underscores the significance of legal advice, be it coming from law firms or the in-house team. The quality of the advice can make or break the business, and hence there is great demand for unique insights but little room for error. For that reason, what she is not looking for from law firms are basic textbook answers. “If I were to engage an external counsel, it’ll really be to ask them to add value. I already know what the law says. I’ve already done my research. What other solutions can you give me? Or sometimes I ask them to confirm my position, especially if I’m dealing with a complex transaction or a regulation that has a lot of grey areas.” But on some occasions, in-house teams found the firms their institution engaged with lacking expertise in the field, which has caused frustration.

A general counsel in the financial service sector, who asked not to be named, notes that navigating banking regulations in the Philippines can be quite complex. “There are many issuances by our central bank, which must be cross-checked with previous issuances from other government agencies. In one instance I sought advice from one of our retainer law firms on a particular issue. While they provided an answer, for me, it was not enough. It appeared to me that I actually knew more than the external counsel because I have direct access to the regulators,” they tell ALB.

On top of that, the Manila-based GC says that domestic law firms in the Philippines may not have kept pace with the advancements in financial technology and data protection. “It appears to me that those in the corporate sector, especially multinationals like us, have more information about the latest technologies and trends. This enables us to anticipate potential issues. However, when we inquire about the impact of potential new technology, the law firms seem to be still trying to catch up.”

A Singapore-based general counsel in the healthcare industry, who asked not to be named, agrees that it’d be a plus if their law firm partner has a good grasp of the nature and operations of their company. But they think it’s unreasonable to expect outside counsel to know the business inside out. “That’s the true value of the in-house counsel because you are inside the organisation. You cannot expect other people to do your job,” the unnamed GC tells ALB.

But they did encounter firms who talked a huge game but fell short on delivery. “A lot of people said, ‘We know the industry well’. But once you have them onboard for a certain thing and you’d find, ‘No, actually you don’t know it that well’. The stress comes when things are urgent.”

Dinasti Brian Harahap, group general counsel and chief legal officer at NWP Property based in Indonesia, had similar experiences working with local firms. “For example, I typically get various counsel sending me their marketing materials and saying that ‘We are experts in real estate’. But upon reviewing their deal experiences, I find that their list of deals relates representing corporations in doing their lease agreements (as tenants) or something like that. And obviously I’d think ‘this is not really the sort of expertise that I’m looking for.”

But sometimes law firms scored extra points simply by going the extra mile to keep the in-house teams updated on the shifting regulatory landscape. The Manila-based GC heaps praise on firms which have been sending out newsletters to keep them informed.

“There are a lot of regulations coming out on banking and data protection. As in-house counsel, we don’t have the luxury of time to go over all the websites of the government agencies to check. If law firms can do that, that’s going to be very helpful. It can lead to potential work for them,” they say.

And combined with top-notch technical skills and in-depth industry knowledge, a pragmatic mindset is the secret sauce to making a law firm truly stand out against a crowded field of competitors in front of in-house teams. “Understanding the commercial goals of the transactions is very important. The law firm should be able to come up with a practical and workable solution to a particular issue and have strategic insight to meet our commercial goal,” says Simundac-Delos Santos of ING Bank Philippines.

WAIT, HOW MUCH?

Almost all GCs are overcome with frustration when the topic of fees comes up. The hourly billing model seemed to be a major source of exasperation fuelled by the prevalence of duplicating billing.

Harahap says that he has come across cases of what he calls “triple billing” among the largest Indonesian firms. ‘We encountered situations where we collaborated with excellent firms, often affiliated with international counterparts. The engagement was comprehensive, involving all three tiers of the firm – partners, senior associates, and associates – who were intricately involved in the details. This level of commitment reflects their dedication to providing high-quality service, resulting in exceptional outcomes. However, upon reviewing the timesheets, we found instances, where there were double or even triple billings on simple and straightforward matters, senior associates devoted two hours to reviewing it, and two partners allocating another hour for re-evaluation.

Puzzled by this approach, I discussed it with the relationship partner, questioning the rationale behind such extensive billing.”

Harahap adds, “In certain cases, local counsel occasionally requests additional time to conduct necessary on-site research or matters that they are not familiar with. However, these instances often result in charging substantial billable hours for what could easily be addressed by mixing a cap of reason-able billable hours and have the residual hours spent be inputted as investment time. Alternatively, I could arrange for members of my in-house legal team do the exact same research.”

The unnamed Singapore GC con-curs. “The associates do an X number of hours, and then you have a Y number of hours where the partner reviews the work. To me, I always cannot understand. I don’t care if your team A, B or C review it. This is a very old-school way of working.” Simundac-Delos Santos says that what has been helpful for her is to lay down ground rules with the law firm. For example, requesting that only the decision maker attend the call with them or with the client, unless necessary. If the team’s presence is preferred, then they will just be paying for one. Moreover, the Manila-based GC says, “Several law firms that I worked with do not bill the out-of-pocket expenses at the same time as when they bill the time charges. They bill only the hourly time charges and you pay it thinking you are done. Then after a few months, they will send you another bill for the out-of-pocket expenses that they incurred for that work.”

With dissatisfaction brewing with the hourly billing model, there’ve been growing debates about reforming the fee structures at law firms. But Stanley Park, a Singapore-based independent consultant who used to helm the legal departments in several financial institutions, thinks finding a viable alternative is even harder.

 

“Some of the most negative experiences I had with law firms is when they mismanage their resources and the time that is going into the matter. This resulted in them either blowing up their budget or ending up billing us for far more than we expected, which led to resentment and unpleasantness, even anger, within the financial institution; or they were upset, because they were getting paid not as much they should be paid. We may not go back to the firm again because we can’t trust their estimate, their word, or their judgement.”
— Stanley Park, former senior in-house counsel

 

For corporate transactions, Park believes one of the biggest challenges many law firms have is the competitive need to provide an essentially fixed pricing.

“Some of the most negative experiences I had with law firms is when they mismanage their resources and the time that’s going into the matter. This resulted in them either blowing up their budget or ending up billing us for far more than we expected, which led to resentment and unpleasantness, even anger, within the financial institution; or they were upset, because they were getting paid not as much as they should be paid,” says Park.

What made matters worse is when firms slapped the bloated legal bill on the in-house teams on the exact day of billing. “You can’t show up on our doorstep on the day billing with an amount that’s twice as much as we expected. We may not go back to the firm again because we can’t trust their estimate, their word, or their judgement,” notes Park.

Park faults competition between law firms as the cause of the mismatch between the estimates that are given, and the actual amount billed. “When clients are requesting two or more bids or bids from two or more law firms, each law firm has an incentive to lowball the amount that they expect to bill in order to win the deal.”

Harahap, on the other hand, leans towards the “fee cap” approach. He elaborates, “In instances where the required work might amount to around 10 hours, I generally grant the firm the autonomy to determine their approach and set a cap accordingly. This is typically our modus operandi. If the engagement extends beyond initial estimates, we engage in further discussions to mutually agree on a reasonable arrangement. In my view, this represents the optimal approach to structuring fees. However, whenever I see that firms go above and beyond on complex issues, I would definitely stand by any of their uplifts.”

And there are steps that law firms can immediately take to improve the perceived deplorable state of billing arrangements. “Technology is a good tool. One of the things I always ask firms – especially those I know are expensive – is to give me weekly fee updates. They have the tools to pull in the time that’s been spent in readable charts and graphs. Every single firm that we work with should invest in that sort of technology. That’s something that would be really helpful to be able to monitor the WIPs,” says Harahap.

ALL HANDS ON DECK

Practice makes perfect, and years of experience normally translate to a solid track record. Therefore, in-house legal departments generally want the A-team led by marquee partners from their external law firms to stay on top of their case and make sure everything is on track. But sometimes that’s not the case, with partners taking leave and the transactions pawned off to junior lawyers.

“I want the handling partner to be heavily involved,” says Simundac-Delos Santos. “If there’s going to be an important meeting, it should be with the handling partner. The reason you’re engaging this external counsel is because of their expertise. So I want to talk to the senior lawyer who’s supposed to be the expert and not the junior lawyer who’s still in training.”

For Harahap, partnership-level engagement is not necessary if there’s a stellar army of mid- to senior-level associates to work on his transactions. But more often than not, it’s the partners who can spot the pitfalls and bring the deal over the line.

“When these partners reviewed the work, there was some output that we never really thought about. For example, they gave us a really good advice and said, look, this might hunt you down in your representation and warranties. And I’m like, you know what, that’s correct. And we wouldn’t have known that if it wasn’t an experienced partner who gave the advice. Those sorts of things are valuable,” says Harahap.

In addition, “When dealing with local government, sometimes the partners have a relationship with the higher-ups. They know how to navigate it more efficiently and where the red flags are.

So before due diligence they already flag it up front and say, look, this is what you have to look out for. Two months down the deal it’s the same sort of issues they’ve already flagged before and that’s when we know we’re getting really good representation,” he adds.

However, an unresponsive partner or a team leader who fails at delegation could not only cause friction between working teams, but also derail a transaction and have a severe impact on the business.

Park cites one incident where such mishaps left a bitter taste in the in-house team’s month. “The partner said that they had done these transactions many times. We had used them previously and we kind of liked them. And the partner said he was going on vacation but he’s going to make sure that someone would handle our secured lending transaction. But then we ended up with a gross error that should never even have occurred. It had big, material consequences for the client as well.”

Adds the anonymous GC in Singapore, “We currently have a project. We engaged a firm that we’ve engaged before. We believed in what they presented. But when the project started it’s very difficult to get hold of the partner. As a business, we entrusted you and if you are not there, you have to send someone that responds to us what’s going on here. It’s not every time you ask and they’re always like ‘I’ll check and get back to you.’”

And when duplicity is thrown into the mix, it can be the last straw.

“One partner tried to overcharge us. The discrepancy between what we expected for the type of work that was being done, which honestly, we thought could have been done by a paralegal, and then the seniority of the lawyer who actually did the work, the amount of work that was done, and the amount that was billed to us for what we thought was a relative trivial matter, was astounding. Needless to say, we never went back to them,” Park tells ALB.

The Manila-based GC concludes, “Even if you are the best lawyer, the best law firm, if your bedside manners are deficient, it’s not good to work with you.”

TRUST IS GOLD

It’s not likely for Simundac-Delos Santos to go back to firms which gave her team wrong legal advice or did not deliver as promised. Harahap also cites inadequate output as one of the dealbreakers of the partnership between his team and the external law firm.

“We had a firm that had represented us long before my time. They were previously a firm of choice for local deals, and they were the kind of firm that when we said jump and they asked how high. Then it came to my attention that their service or output (which we were paying for) was subpar. It’s like I’m working with junior members of my team whom I had to develop,” recalls Harahap.

 

“Relationship is undeniably one of the pivotal factors. Reputable firms invest time in nurturing these relationships and check up on you from time to time to try to understand your business more. However, some firms neglect this altogether. Personally, I strive for objectivity and would like a chance to work with everyone. Even in cases where relationship-building is lacking, if a firm possesses exceptional expertise in a required area, I maintain a constructive approach. Yet, due to the increased competition between (local) firms, without this relational element, some firms would not be on my radar.”
— Dinasti Brian Harahap, NWP Property

 

Park calls out firms that intention-ally misled his team. “If the firm misrepresented some facts because of negligence, no problem; But if they knew that it was wrong, or that they intentionally misrepresented what I thought was a material fact in a situation, that generally will cover most breaches of trust,” says Park.

“Relationship is undeniably one of the pivotal factors,” notes Harahap. “Reputable firms invest time in nurturing these relationships and check up on you from time to time to try to understand your business more. However, some firms neglect this altogether. Personally, I strive for objectivity and would like a chance to work with everyone. Even in cases where relationship-building is lacking, if a firm possesses exceptional expertise in a required area, I maintain a constructive approach. Yet, due to the increased competition between (local) firms, without this relational element, some of these firms would not be on my radar.” Adds Park, “There are all sorts of issues that come up from time to time where you simply just trust the lawyer to give you the honest, unvarnished truth. It could be how much it’s going to cost; the extent of the problem at hand; the reasons for a mistake that has been made; weakness on their team, my team, or the opposing team; whether the sun is rising from the East.”

“If I lose trust in my lawyer, that’s it. It’s a human relationship, just like any other relationship,” Park says.