82,891
edits
Legal operations: Difference between revisions
no edit summary
Amwelladmin (talk | contribs) No edit summary |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 19: | Line 19: | ||
The bankers did start to wonder whether they couldn’t rationalise that legal spend: “the less we spend on legals,” they reasoned, “the nicer our German cars will be.” One obvious touchpoint was the hand-off between the bank and the law-firm. “Why don’t we hire some lawyers to manage that legal relationship? If they filter out all the stupid questions, and head off the wild goose chases, we won’t burn so much in legal fees. We will encourage them to work for us by paying them an investment banking bonus, and letting them go home at 6pm.” | The bankers did start to wonder whether they couldn’t rationalise that legal spend: “the less we spend on legals,” they reasoned, “the nicer our German cars will be.” One obvious touchpoint was the hand-off between the bank and the law-firm. “Why don’t we hire some lawyers to manage that legal relationship? If they filter out all the stupid questions, and head off the wild goose chases, we won’t burn so much in legal fees. We will encourage them to work for us by paying them an investment banking bonus, and letting them go home at 6pm.” | ||
So began the modern in-house legal team. This worked very well for everyone: deals were executed more efficiently, the embarrassing sensation of seeing your firm’s name mis-spelled in the final prospectus disappeared from the commonplace and the banks started to structure ever more elaborate deals, as the cost and capability of practical legal structuring inside their organisations mushroomed. The [[legal eagle]]<nowiki/>s started to do more than just steer instructions to law firms, translate banking gibberish and check the [[football team]]. They started to ''add value''. | So began the modern in-house legal team. This worked very well for everyone: deals were executed more efficiently, the embarrassing sensation of seeing your firm’s name mis-spelled in the final prospectus disappeared from the commonplace and the banks started to structure ever more elaborate deals, as the cost and capability of practical legal structuring inside their organisations mushroomed. The [[legal eagle]]<nowiki/>s started to do more than just steer instructions to law firms, translate banking gibberish and check the [[football team]]. They started to ''add value''. | ||
But at the same time, the [[Legal|legal department]] started to get really ''big''. Teams that had numbered a handful in 1995 were running into the hundreds ten years later. | But at the same time, the [[Legal|legal department]] started to get really ''big''. Teams that had numbered a handful in 1995 were running into the hundreds ten years later. | ||
| Line 29: | Line 29: | ||
So began the great retrenchment of inhouse legal. But it didn’t happen, as you might expect, by asking the difficult questions the credit crisis plainly posed. Instead, management consultants got in on the act. | So began the great retrenchment of inhouse legal. But it didn’t happen, as you might expect, by asking the difficult questions the credit crisis plainly posed. Instead, management consultants got in on the act. | ||
{{Sa}} | ====== What’s ''really'' wrong with in-house legal ====== | ||
Now acres of ink have been spilled, books written, monographs published, thought-pieces floated, on the problem ''how to fix inhouse legal''. All are in awe of technology’s current gallop; all burn with the thought-leader’s desire to clothe one’s mundane vocabulary in voguish finery; to ride the vanguard leading edge. But the problem is not technological, it isn’t new, and it doesn’t require much vision. It is rather dreary and age-old. It is this: | |||
{{Quote|''Legal is too expensive and too slow.''}} | |||
This in turn hinges on two things: | |||
* '''Over-reliance on external counsel''': [[In-house lawyer|in-house lawyers]] are still far too ready to send easy, English-law work out. This was the original plan, to be sure, and it made sense when the bank only had three lawyers covering the whole investment bank, but times have moved on. Inhouse teams at investment banks are the size of middling international law firms. They have, generally, more senior and have far more institutional experience than their equivalents in private practice. There is generally little substantive need to refer complex English law material to outside counsel, yet they routinely do it.<ref>It is said that Banks’ reluctance to buy [[Professional indemnity insurance|professional indemnity]] insurance for their legal teams may propel this, but this strikes me as a fatuous argument. Banks are classic self-insurers. If ever the amount of a legal call is sufficiently grave to warrant claim on a professional indemnity policy there are better questions to ask, such as ''why is a bank adopting such a risky strategy in the first place''? If that is too naive an outlook — ok, guilty as charged — then maybe ''that'' is the triage point for engaging external counsel.</ref> | |||
* '''We over-engineer legal docs''': Partly because external counsel feel short an ugly option should they screw anything up, and partly thanks to the professional [[rent-seeker]]’s general will to [[Iatrogenic|iatrogenesis]], all legal documents are absurdly over-engineered for what they actually do. They are far too incomprehensible, inscrutable, and even for those who do understand them, they are shot through with protections that the parties do not need and will never use, but which are nonetheless argued about and nickel-and-dimed over for weeks of months. Even those contracts that aren’t particularly high risk suffer from “[[Finance contract|banking envy]]”. | |||
Now it is far easier said than done, but were those tasked with realigning legal to address these ''cultural'' phenomena — neither are easily solved problems to be sure, but aligning systems and incentives could help — then the need for much of the modern millenarianism we are seeing would melt away. You don’t need [[artificial intelligence]] to review your confidentiality agreements if the market agrees a [[OneNDA|short, plain, standard form]]. You don’t need document assembly if you standardise and simplify your ISDA schedules. | |||
But these problems require imagination, an understanding of [[Behavioural economics|human psychology]] and a [[Subject matter expert|deep grasp of the legal and market conventions]] — qualities with which your average [[Master of Business Administration|MBA]] is not liberally endowed. | |||
==== What the MBAs bring to the party ==== | |||
Now MBAs are not known for their imagination, but they have a long suit in reductionist analytical rigour and they do like an over-arching metaphorical schema. They see the “inhouse legal problem” may be impervious to front-on attack, but they can ''analyse'' it into submission. This they do by breaking down that intractable whole into [[Legibility|legible]], familiar parts that already exist in the MBA toolkit. Each of these components becomes its own little sub-component, with its own workstream, and workstream lead, going out and gathering evidence and, bascially, getting in the way of the lawyers who are busily trying to execute on their time-worn business model.{{Sa}} | |||
* [[Magic circle law firm]] | * [[Magic circle law firm]] | ||
| Line 36: | Line 49: | ||
* [[Ultimate client]] | * [[Ultimate client]] | ||
* [[Look, I tried]] | * [[Look, I tried]] | ||
* [[OneNDA]] | |||
{{Ref}} | {{Ref}} | ||