ACC Europe Panel 114 Legal Services in the 21 st Century.

ACC Europe Panel 114

Legal Services in the 21st Century

Introduction

Bertrand Alexis

Senior Director

Qtel International

Managing Outside Counsel Spend

Leanne Geale

Legal Services Coordinator

Royal Dutch Shell

Shell

• We are active in more than 90 countries• Worldwide, we have 93,000 full-time employees• We produce 3.3 million barrels of oil equivalent per day• Our fuel retail network has around 43,000 Shell service stations• We annually sell 145 billion litres of fuel to customers

In 2010…• We generated an income of $20.5 billion;• Invested $30.6 billion in capital; and• Spent over $1.0 billion on R&D

Royal Dutch Shell plc is listed on the stock exchanges of Amsterdam, London and New York

Source: 2010 Annual Report and Form 20-F

Shell Legal

• Over 600 lawyers

• Approx. 65 intellectual property professionals

• Approx. 30 compliance officers and lawyers

• Over 250 paralegals and support staff

• In over 50 countries

Managing outside counsel spend

• Competitive law firm billing for projects

• Project budgeting

• Assessing performance

• Key tips for reviewing outside counsel bills

Questions to consider

• When should one use competitive bids for project?

• Should one engage the company’s contracting and procurement department in the bidding process?

• How can one really estimate the cost of all of the twists and turns of a matter, especially in litigation matters?

• As long as the matters come in on or under budget, why spend any more time on assessing performance?

• How can I reduce the time I spend reviewing invoices and still ensure they are appropriate in time and amount?

Resources

• Invoice exercise

• Microsoft Office Project

• Performance assessment form Microsoft Office

Excel 97-2003 Worksheet

Microsoft Office Word 97 - 2003 Document

Microsoft Office Word 97 - 2003 Document

Alternative Legal Service Providers

Bertrand Alexis

Senior Director

Qtel International

• Qtel is a leading fixed and mobile telecommunications operator principally operating in Qatar, Indonesia, Kuwait and Iraq

• Customer base of >75m as of March 31, 2011

• Presence in 17 countries with operations in 16 countries

• Focused on 3 regions: • Middle East & North Africa• Asian Subcontinent • Asia Pacific

• Incorporated in 1987 and listed on the Qatar Exchange (Doha Securities Market) in 1998:

• Market capitalization of QAR 23.88 bn(1)

• Strong sovereign ownership:• 55% owned by the Qatari government

(directly and indirectly)• 13% by other Qatari government

related entities

Qtel at a glance

Notes: (1) As of 31 March 2011

10

QAR Millions3M

2010 3M 2011

Consolidated revenue 6,417 7,478

Consolidated EBITDA 11,231 12,465

Consolidated EBITDA margin 47% 48%

Credit ratings (Moody’s/S&P/Fitch) A2 / A / A+ (all stable)

Qtel Summary Financial Results

Qtel Revenue Breakdown Q1 2011

Business Area Geography

Alternative Legal Services Providers

• Virtual law Firms – Former in-house counsel

• Contract (Locum) placement models

• Outsourcing legal or paralegal services (to India)

• Other knowledge process outsourcers

Questions to consider

• Why change law firms?

• What types of legal work could you envisage outsourcing to a

specialised firm?

• How would you measure the savings?

• How do you manage the relationship with the outsourcing firm?

(reporting, access to internal clients, renewal of contracts and

pricing)

Alternative Billing Models offered by Law Firms

Andrew Fleming

Partner

Norton Rose Group

Alternative Billing Methods offered by Law FirmsGood Overview: ACC Value-Based Fee Primer www.acc.com

Alternative Fee Arrangements and Value Billing series by Jerome Kowalski http://kowalskiandassociatesblog.com

Objectives• Manage legal spend• Improve efficiencies/productivity• Improve client/law firm relationship• Align interests

Implementation• Managing expectations• Importance of data

Key Issues• Candid dialogue• Transparency• Trust

Alternative Billing Methods offered by Law Firms

Questions

• Who goes first – law firm or client?

• How do alternative billing models affect quality of service

• Can we identify some of the challenges in alternative billing

models?

• Can we identify some of the advantages of alternative billing

methods?

One Stop Shop Model – one Company’s Experience

Andrea Goodrich

Associate General Counsel

Tyco International Ltd

TYCO INTERNATIONAL

• Global, diversified company with businesses in

- Security products and services

- Fire protection and detection products and services

- valves and controls and other industrial products

• Industry: Conglomerate

• Revenue FY10 $17.0Bn

• Employees: 100,000 in October 2010

• Legal Team includes about 100 attorneys and about 60 legal professionals

Tyco’s Single Regional Provider Approach: Path to Selection of an External Partner

• Problem/Opportunity– 250 different law firms in EMEA and $9 million annual spend

• Assessment of Key Value Drivers for Legal Services– What is it that the client wants out of the engagement? – How is success defined? (Goals)– What are the measures of success? (Result, Cost, Time)– What are the factors influencing success? (Integration)

• Approach: Solicit partnership proposals– How does a firm compare value drivers and add value?– Do they have “skin in the game” and share risk/reward?– Will your partner develop and share metrics for success?– Is the firm willing the dump the hourly fee for service model?

Tyco’s Single Regional Provider Approach: Path to Selection of an External Partner

EMEA Regional Representation by Eversheds

Convergence of 250 firms to 1 firm• Coverage: 27 jurisdictions • Cost:

• Blended rate with target annual hours for basic counseling and litigation (with Cap and collar)

• Preference on additional work at discounted hourly rates• Budget of $3M in FY11 for in scope work

• Consistency: • Eversheds integrated into team meetings and operations• Management data including reporting/accruals• First Rule- Legal pre-approval of all cost estimates

Tyco’s Single Regional Provider Approach: Benefits & Challenges

• Key Value Drivers– Flexibility in resourcing – Transparency and Certainty for P&L leaders– Demonstrated firm investment – Consistency in provision of legal services in most matters

• Challenges– Initial Business Buy-in– Data management, incompatible systems, accruals– Some Affiliates/Best Friends provide inconsistent service

• Constant open and transparent dialogue critical to maintaining benefits for long term success

Stop Beating up on Outside Counsel

Andrew Fleming

Partner

Norton Rose Group

Stop Beating up on Outside Counsel

Establishing the relationship on a spectrum

Partner/best friend Defined process/metric centric

Important Factors:

• Using the procurement function

• Number of legal providers

• Size of legal function

• Direct access to business units

• Type of work – commodity vs. bespoke

Stop Beating up on Outside Counsel

Questions• Where does outside counsel provide exceptional value?• When is it appropriate to “premium bill”?• How can both client and law firm achieve each other’s

objectives- Efficiencies- Value/cost- Certainty- Quality

• How does risk/reward assessment play into the relationship?

Managing the In-house Legal Budget

Michael C. Wu

General Counsel and Corporate Secretary

Rosetta Stone Inc.

Company Rosetta Stone Inc.

Founded 1992

Industry Software

Mission Changing the way the way theworld learns languages

Corporate headquarters

Arlington, VA

Other offices US - Harrisonburg, VA and Boulder, CO Overseas – Beijing, London, Munich, Sao Paulo, Seoul, Tokyo

Stock symbol RST (NYSE); IPO April 2009

Number of Employees Approximately 2000

U.S. Brand Awareness Best known language learning brand – 75% awareness (Berlitz second with 23% awareness)

Legal Department 7 attorney and 12 other professionals (contract admins, legal assistants, anti-piracy enforcement) 26

Rosetta Stone - The Most Recognized Language Learning Brand

27

Managing In-house Legal Budget Optimal mix of outside counsel/in-house staff budget

Benchmarking against peers (ACC , CLEX, etc.) Studies show that bringing in more in-house results in lower total

costs Retain core practice areas in-house – commercial/contracts, financial,

IP, administrative and regulatory; outsource large or complex litigation and other matters requiring specialized skills

Key metrics for in-house department Legal dept. spend as a percentage of revenue Performance against budget Recoveries gained Liabilities averted Number of initiatives successfully launched/charting wins and losses Preventive efforts: training seminars/modules created and delivered

Managing In-house Legal Budget Justifying the value of the in-house team

Increased legal department spending reduced legal liability Legal liability rising in recent years and risk of exposure growing Tenured lawyers’ company specific knowledge appears to reduce legal liability

(CLEX data on damages, settlements and fines) Higher compliance budgets correlated with reduced legal liability, business

interruption and reputational harm

Managing outside counsel relationships and reducing outside counsel spend

Board support – enhance board support: (i) improve board development, (ii) assist in corporate strategy, (iii) manage company-wide risk

Aligning Legal Services with Client Needs – (i) client surveys to assess priorities and identify gaps in perception, (ii) educate clients on appropriate work to send to Legal, (iii) Enhance client self-sufficiency

Managing In-house Legal Budget Considering outsourcing the legal department

Develop criteria to identify low-value work to outsource to the appropriate alternative service providerRun-of-the-mill contracts, legal research, document

review, etc.Pushing work down to paralegals and contracts

administrators Build an alumni attorney network – opportunities for

moving work to contract attorneysLeverage value of alumni attorneys who understand

companyLeverage value of former in-house counsel colleagues

ACC Resources

• ACC Top Ten (2011):

Top Ten Considerations When Evaluating a System for Managin

g Outside Counsel Work

• ACC Presentation (2010):

Legal Service Management 3.0 Core Curriculum

• ACC Leading Practices Profile (2010):

Leading Practices in Providing In-house Legal Support for Corp

orate Governance Initiatives and Compliance and Ethics Progra

ms

• ACC Value Challenge: www.acc.com/valuechallenge

Bibliography of Other Resources

• American Bar Association

http://www.americanbar.org/publications/law_practice_home/lawpractice_archive/lpm_magazine_articles_v34_is5_pg47.html-

• Legal Process Outsourcing

http://www.outsourcing.org/Directory/Legal/1

http://www.lawgazette.co.uk/in-business/a-first-hand-look-a-legal-process-outsourcer-provider-india