Category: Issue 11.8

With a focus on keeping as much of the legal work in-house, Net-Connect Group Head of Regulatory Affairs Radu Culic discusses best practices for managing in-house legal budgets.

CEELM: Overall, has your in-house legal team’s budget increased, decreased, or has it remained relatively stable?

Culic: Over the past couple of years, the budgets have been pretty stable by doing as much work in-house as possible. By cutting back on how much we rely on external lawyers, we’ve managed to stay on budget. A key part of the general counsels’ role is negotiating that budget internally and knowing where the limits are. One area we can’t compromise on is litigation – whether it’s a small customer complaint or a major dispute involving millions of euros, it’s crucial to handle these cases properly because GCs don’t have the time to be tied up in court.

When working with external lawyers, it’s important to be mindful of their tendency to prefer hourly fees, which can be unpredictable. I push for flat fees instead, as I believe lawyers are experienced enough to assess a project once I provide them with all the necessary details. This approach ensures better financial predictability for my internal finance team. This helps our finance team manage budgets better. I’ve even applied this to litigation, which is trickier because you never know how many court hearings might be needed.

Another challenge is dealing with big fines from different authorities. Court hearings can drag on, and every year the finance team asks: “Do we still need this provision?” My usual answer is: “I don’t know because the case is still ongoing.” It’s just a number in the Excel sheet until the proceedings wrap up and we know if we have to pay it or not.

CEELM: “Do more with less” is a commonly reported pressure on in-house counsel. Do you feel that is reflected in your organization?

Culic: I don’t feel that pressure, even though I’ve heard my peers talk about it. We really need to take a balanced approach here – it largely depends on the complexity of the situation. For instance, when dealing with litigation involving different authorities, I’m okay with proceeding, but who is ultimately making that decision? It’s up to the general counsels to negotiate with the internal stakeholders.

CEELM: If and when there are budget cuts – what are traditionally the first costs you look to trim?

Culic: For us, the key is to focus on what you can handle internally. Since I already prioritize keeping most work in-house, I’m largely spared from having to make tough budget cuts. When 99% of your budget is tied up in litigation – with legislative software and subscriptions being relatively minor expenses – there’s not much left for consultancy. With such a small buffer for external advice, there isn’t much room to cut costs, and any savings for the finance team would be minimal. On the other hand, I normally ensure there’s always some budget for professional development – maybe attending a conference now and then. I’ll try to limit it, but I’d rather not cut it out entirely.

Other than that, it’s normally tough to predict in September or October (when the budget is being drafted) what might happen by July of the subsequent year. The most practical approach is to try to maintain a buffer and reassess at the mid-year point to see if it needs to be adjusted.

If one needs to cut external spending, building in-house capacity is an option. This is especially the case since, for us, salaries fall under a different budget under HR, which makes it easier to focus on the budget itself and address any financial issues.

CEELM: What strategies have you developed over time to argue for new or expanded budget lines internally?

Culic: First, I start with a friendly approach. If that doesn’t work, I present the risks clearly: “If we don’t do this, we could lose X amount.” For example, if competition law fines are 10% of revenue, you can easily calculate the potential loss, and that gets attention quickly. Show the necessity of the investment by emphasizing how it supports business growth. At the end of the day, we’re a support function, and if we want the business to grow, we need the right resources.

Internally, when giving advice, the decision isn’t always up to the General Counsel. For instance, if a Marketing Director wants to pursue a risky idea, I’ll assess the potential risk (fine) and then ask how much they expect to earn from the initiative. If the potential profit outweighs the fine, and it contributes to business growth, then it might be worth taking the risk, however, if the risk is 10% of turnover, the conversation changes.

I believe that a good General Counsel isn’t someone who says “no, because,” but rather “yes, if.” That’s a well-known mantra among GCs.

CEELM: Finally, as you touched upon it, beyond capped fees, what are the best practices when it comes to working with external counsel?

Culic: Be clear about what we need from them. Consultants often try to upsell, but it’s important to just say no and to set clear parameters from the start.

I also don’t find lengthy memos that dive into every detail of the issue useful – I’m already aware of the background, which is why I brought it to the external counsel in the first place. I prefer concise bullet points that get straight to the point, rather than a memo that takes two hours to read. This approach also helps prevent them from billing large amounts for a simple half-page email. This way, they can’t justify billing thousands of euros for a half-page email. But you have to be clear about your expectations from the very beginning.

Photon Energy Group’s Deputy Group Legal Counsel Florina Mariana Homeghiu discusses her approach to managing legal budgets, including trends in costs and effective cost-cutting strategies.

CEELM: Overall, has your in-house legal team’s budget generally increased, decreased, or remained relatively stable over the past few years?

Homeghiu: From my experience, the budget trends for in-house legal teams vary and depend on several factors, including business cycles, company projects, etc. While businesses often aim to minimize costs, there are situations where external legal expertise is essential, such as when you need a tax legal opinion or due diligence for specific authorizations, or when the company plans new initiatives or acquisitions. However, for internal matters, we typically handle them in-house. The budget allocation for legal services is closely tied to the company’s activities, and it’s crucial to consider the legal implications before making cuts.

Additionally, when business activity significantly increases or when the company is expanding into new business lines, it becomes clear that the existing in-house team can’t handle the workload alone. In these situations, internal resources may not be sufficient and it is necessary to work with external lawyers or you might need to create a new position to manage the increased workload, as the rising number of office hours and the growing volume of requests indicate that the current team can’t meet the demands within a reasonable timeframe.

CEELM: If you need to cut budgets, what are the first costs you typically look to trim, and on the opposite side, which costs would you never consider cutting?

Homeghiu: In terms of what costs to cut, we first look at smaller tasks like reviewing different types of contracts (construction, services, EPCs) to see if we can handle those internally. We also do legal translations internally (we created bilingual versions of different documents), corporate documents, powers of attorney, etc., avoiding the need to pay external providers.

On the flip side, there are certain areas where I would never consider cutting the budget. As I mentioned earlier, for big projects and significant legal opinions, external expertise is crucial. For example, when Photon acquired different companies or several renewable projects in Romania, the legal-related activities were too complex to handle entirely in-house. In cases like these, where specific expertise is required, external lawyers are indispensable.

CEELM: What have been your team’s most effective cost-cutting initiatives in recent years?

Homeghiu: In the past, I reviewed the entire cost structure from the previous year and compared it with this year’s spending on items like training, conferences, translations, and so on. Based on this review, we identified areas for improvement. For instance, when evaluating conference participation, we assessed whether it added significant value or if it was just attendance. Additionally, for activities that can be standardized, such as contracts, powers of attorney, etc., using templates can reduce the need for external lawyers and can be applied across different projects or collaborators.

CEELM: Which costs have seen the most significant increase for your legal team in recent years?

Homeghiu: For specific projects, we negotiate capped fees, while for others, we use hourly rates. We noticed that hourly rates have increased across all law firms. We prefer to avoid hourly rates because costs can rise uncontrollably. This increase in hourly rates has been observed both before and after the pandemic.

CEELM: What best practices have you developed for instances where planned budgets are exceeded?

Homeghiu: At the beginning of the year, the companies start with a fixed budget, but by mid-year or later, you might find that you’re close to exhausting it. In such cases, I approach the CFO, CEO or group management to request additional funds. The lesson here is that while you might negotiate a capped fee, there are times when lawyers, due to the nature of the project, might not agree to work within that cap. This requires negotiating an extension of the budget, especially if the project evolves beyond what was initially planned.

Sometimes, unexpected activities, such as attending conferences or training, arise. For example, a General Counsel might discover an important conference in June that someone from the team wants to attend. As a legal manager, it is important to be flexible, discuss any additional expenses transparently and review timesheets and legal invoices.

When requesting an extra budget, from my point of view, best practices include anticipating potential additional costs that weren’t considered ten months ago and having arguments for the extension. It’s important to inform upper management early on about specific projects that might incur extra costs. Keep them updated in advance to ensure they are aware of the potential for additional expenses and to facilitate the issuance of invoices. Transparency and communication are key.

CEELM: What is your plan for handling a budget crisis or financial downturn?

Homeghiu: You usually can’t predict when a crisis will hit (it may appear different types of crisis), so I’ve never had a specific Plan B for each potential situation – I adjusted the budget accordingly along the way. I typically create a budget based on the spending patterns of the past 1-2 years, estimating future expenses as accurately as possible. If an unexpected event, like a pandemic, occurs, the first adjustments are usually to cut travel costs and expenses for training abroad, since travel is often halted for everyone, including executives and other departments.

Additionally, when projects are put on hold/suspended or delayed it affects the budget. Therefore, you can adjust the budget accordingly by reallocating or cutting funds that were initially set aside for that project. If the project is canceled or indefinitely postponed, you can remove those allocated funds from your budget.

Heureka Group CEE Head of Legal Gergely Szekely provides insights on his in-house legal team’s budget trends and management, considering the challenges inherent in the dynamic e-commerce sector.

CEELM: Overall, has your in-house legal team’s budget tended to increase, decrease, or remain relatively stable over the past few years?

Szekely: First of all, I serve as the Head of Legal at Heureka Group CEE, overseeing legal matters for Compari, Arukereso, and Pazaruvaj – our businesses in Romania, Hungary, and Bulgaria, respectively. Heureka Group is a regional market-leader e-commerce business service provider, with our main operations based in the Czech Republic and Slovakia and having business operations in Slovenia and other countries in the Adriatic region – Croatia, Bosnia and Herzegovina, and Serbia – as well as in the CEE region – Hungary, Romania, and Bulgaria.

The budget has been stable – we manage it very conservatively and avoid increasing costs. However, the e-commerce sector presents many challenges, which means timely budget considerations are essential. As a member of the unified legal team, in charge of Heureka Group business activity in Romania, Bulgaria, and Hungary, I work closely with the Group’s General Counsel to select and discuss projects within our overall budget. It’s quite challenging to justify the budget and plan for upcoming legal projects throughout the year.

Many projects are controlled in the Czech Republic by the group, while locally we rather handle ongoing operational legal issues and coordinate with external partners. Our annual budget is generally fixed, with only occasional increases, and there hasn’t been much change in recent years.

CEELM: If budget cuts become necessary, what are typically the first areas of expense you consider reducing?

Szekely: Actually, we aim to maintain our budget rather than trim it. We strive to handle everything in-house to control fixed legal costs effectively. External services are only used for very specialized or local needs. When we do use external help, we negotiate hourly rates and often ask for fixed fees or caps. Setting these caps can be tricky and sometimes involves tough negotiations.

We also sometimes shift certain operational legal costs to HR, especially for labor law matters or issues generated by HR. Our corporate structure supports internal budget adjustments throughout the year, and HR costs are generally more flexible in our organization.

CEELM: What have been your team’s most successful cost-cutting initiatives in past years?

Szekely: Not only have we been successful in managing our legal operations, but we also achieve this consistently every year. Currently, we have a well-established legal pool, which includes several attorneys based in Romania. We are also aiming to establish a similar legal pool in Bulgaria. This strategic distribution of projects allows us to manage and reduce legal costs efficiently.

Within this pool, we foster a competitive environment by including two or three law firms and consistently requesting project fees and competitive quotations from all members. This approach isn’t about merely cutting legal expenses. Rather, our primary goal is to maintain control over expenses while ensuring high-quality legal services. By encouraging competition within our pool, I believe we can achieve better cost management and optimized legal solutions.

CEELM: What have been the costs that increased the most for your legal team in recent years?

Szekely: Certainly, one of our main expenses is people, and unfortunately, due to cost-cutting measures, we’re unable to expand our team. We need to justify the necessity of new hires strictly, so instead, we focus on managing and controlling external resources while handling as much internally as possible. The primary budget cuts have affected our ability to hire additional staff, which we need.

In reality, in the e-commerce sector, where legal challenges and considerations are constantly evolving, it’s difficult to reduce legal costs. External consultants are necessary, and there are also administrative and notary fees that we can’t cut. Certain expenses are unavoidable because they are essential to our operations.

CEELM: You touched upon budget considerations while working with the external counsel. How do you avoid the loss of trust scenarios when the initial budget is exceeded?

Szekely: Working with external consultants can be quite interesting. Initially, there can be a misalignment over budget expectations, especially when negotiating capped fees, which they sometimes resist. However, the key point is that in e-commerce, success often relies on passion and enthusiasm. When you and your external partners share this passion, it helps in managing the budget more effectively. Even though external lawyers may not always share the same level of enthusiasm, finding common ground in your passion for the work can make budget management smoother.

There are times when we realize that a capped fee with an external consultant hasn’t fully covered the scope of work. In such cases, our corporate approach often points to external factors as the cause. We strive to build trust and acknowledge when a consultant has exceeded expectations. In a particular case, our external legal consultant reached their cap and delivered excellent service, so we offered an additional budget or a small bonus as a token of appreciation. Although it was a modest amount, it reflected our commitment to treating our external partners well.

Managing budgets in big companies could be seen at the same time as art and as a challenge. And art should never be under pressure.

Managing legal budgets in big companies is even more challenging, relating to the fact that, as is well known, the legal department is still perceived by the management of companies as a “cost department.”

The bigger a company is, the stricter the forecasted and approved budgets are. On the other side, the bigger the company is, the more unforeseen events appear with a positive influence on legal budgets.

Last years’ events (the COVID-19 pandemic, the war in Ukraine) affected budget trends and the pressure over costs, including costs for legal departments is higher and higher. The number of assigned projects increased, and the legal challenges and legal environment are even less predictable.

How does an in-house lawyer deal with the assigned budget for a specific year? How does one correctly forecast a proper budget answering all KPIs requested by the company? How does one deal with so many uncertainties, offer the best quality legal services, and successfully manage the budget constraints? Can this be done without some pixie dust?

The costs that legal departments have are pretty much the same anywhere: personnel expenses, law firm fees, administrative costs, and costs registered within the legal budget in accordance with their destination but having other departments as consumers of this line of budget (notary costs, taxes to trade registry, stamp duty, etc.).

Here are some takeaways for success:

1) Accurate forecast of the budget before its approval for the next year: preliminary discussions with all departments registered as consumers of the legal budget and obtain a precise forecast for the costs that will incur next year. For example, a discussion with the marketing department to verify its intention to prolong the trademarks expiring in that year will help with a precise forecast toward budgeting IP costs.

2) Engage the legal team in forecasting the budget: with their involvement, legal officers will feel responsible and liable for the budget, working as a united team for this common project that they all agreed upon from the very beginning.

3) Ensuring, with support from the HR department, the retention of the legal team: retention is essential not for the budget itself only but will also support the budgetary constraints in two ways – legal professionals trained in law and business will be encouraged to strategically think, and to cooperate, ensuring good quality of their legal opinions toward their internal clients, stabilizing the costs with external law firms. To this end, the professional development of the legal team should be ensured by trainings, courses, or other educational forms of study and this should be a part of the company’s HR strategy.

4) Solid and adjusted cooperation with external law firms: effective work with external consultants is a key element for a healthy legal budget. A solid and long-term cooperation with the respective external lawyers as well as the ability of the in-house lawyer to communicate properly the scope of work are crucial for an honest and win-win cooperation within the budget parameters.

5) Strong argumentation for the legal budget in front of a board of directors: it is already known that in the last years, the role of a GC in a company increased in the sense that they received empowerment to ensure internally more difficult and complex projects, being confronted to deliver “more with less.” Therefore, a coherent and strong argumentation of the budget when, inevitably, the proposal is for the budget to increase will ensure the sustainability of the legal budget.

How does one deal with the unexpected? For all unforeseen projects with a high dimension that require significant unforeseen legal budget deviations, it is important to correctly designate the internal division or department of that company. The legal department plays the key support role in such a case, not only ensuring that the project is executed internally as much as possible (with all the diligence required to the highest standards) but also minimizing the costs with those projects without compromising the quality of the services.

Managing the legal budget is a task in itself, which for GCs could be a real burden considering that their role is primarily focused on defend the interests of the company in a legitimate climate and the “figures” pressure is not a learned skill in law school.

At the same time, the GC’s role is much more than ensuring the legitimate environment for the company’s business development. The GC, being part of the management of the company, has to be a good administrator of the money received to ensure the mission of the legal department. And with this aim, I consider it important to focus on the increasing costs requiring external professional support (e.g., GDPR involves a huge volume of work and external costs) and to try and compensate with great internal legal services. Ultimately, people make the difference in any kind of project, including in managing the budget.

By Mihaela Scarlatescu, Head of Legal and Compliance Director, Farmexim

In recent years, in-house legal teams have faced growing pressure to manage budgets more effectively while maintaining high standards of service. In this article, I will share best practices for managing legal budgets, and address trends, challenges, and strategies that have shaped the budgeting landscape for in-house legal teams.

Trends in In-House Legal Budgets

Over the past few years, there has been a notable trend of decreasing or stagnating budgets for in-house legal teams. Organizations are increasingly scrutinizing all departments, including legal, to ensure cost efficiency. This has led to a greater emphasis on finding ways to deliver legal services more cost-effectively, without compromising on quality or increasing risk exposure.

Despite these budgetary constraints, the demands on us (legal teams) have not diminished. If anything, they have grown more complex, with legal teams facing new challenges such as heightened regulatory scrutiny, data privacy concerns, and the need to manage global compliance issues. As a result, we as legal directors are tasked with finding ways to stretch our budgets while still meeting these increasing demands.

The Impact of “Do More with Less”

The mandate to “do more with less” is not just a catchphrase – it is a reality for many in-house legal teams. This pressure is indeed reflected in the operational and budgetary decisions within organizations. Legal departments are expected to manage an expanding scope of work with limited resources, leading to a need for greater efficiency and more strategic budget management.

Rising Costs for In-House Legal Teams

Several cost areas have seen significant increases in recent years, adding to the budgetary pressures on in-house legal teams:

Regulatory Compliance and Data Privacy: With the introduction of stringent regulations such as the GDPR in Europe or KVKK and CCPA in California, the costs associated with ensuring compliance have risen sharply. Legal teams must invest in new technologies, training, and external expertise to navigate these complex regulatory environments.

Technology and Cybersecurity: As legal teams increasingly rely on technology for everything from document management to e-discovery, the costs associated with maintaining and upgrading these systems have grown. Additionally, the rise in cybersecurity threats has led to increased spending on protecting sensitive legal data.

Litigation and Dispute Resolution: The cost of litigation continues to rise, driven by the complexity of cases and the need for specialized expertise. This includes not only legal fees but also the costs of managing and storing large volumes of electronic data.

Talent Acquisition and Retention: Attracting and retaining top legal talent has become more expensive, particularly as the demand for specialized legal skills, such as data privacy and intellectual property, has increased. Competitive salaries and benefits are necessary to retain skilled legal professionals in a tight labor market.

Best Practices for Managing and Expanding Legal Budgets

Given the rising costs and the pressure to do more with less, we as legal directors must adopt best practices for budget management. These practices not only help manage existing budgets but also provide a framework for arguing for new or expanded budget lines.

Developing a Strong Business Case for Budget Increases: When advocating for increased or new budget lines, legal directors must build a compelling business case that aligns with the organization’s broader strategic goals. This includes clearly articulating the risks of underfunding the legal department, such as potential regulatory fines, litigation losses, or cybersecurity breaches, and demonstrating how additional resources will mitigate these risks.

Leveraging Data and Analytics: Data-driven decision-making is key to managing legal budgets effectively. We as Legal directors should track and analyze key metrics, such as legal spend as a percentage of revenue, cost per matter, and return on investment for legal technology. This data can be used to identify areas where the department is delivering value and where additional investment could lead to further efficiencies or cost savings.

Implementing Cost-Control Measures: We should explore cost-control measures, such as renegotiating contracts with outside counsel, exploring alternative fee arrangements, and leveraging alternative legal service providers for routine legal tasks. These measures can help manage costs without sacrificing the quality of legal services.

Investing in Legal Technology: While technology costs have increased, strategic investments in legal technology can lead to long-term cost savings. Automation tools, artificial intelligence, and legal analytics platforms can streamline processes, reduce the need for additional headcount, and provide more accurate budgeting and forecasting capabilities.

Continuous Improvement and Adaptation: Legal directors should regularly review and adjust their budget management strategies based on evolving organizational needs and external factors. This includes staying informed about industry trends, regulatory changes, and best practices in legal operations. By continuously improving and adapting their approach, legal directors can ensure that their teams remain agile and capable of responding to new challenges.

As a result of managing legal budgets in today’s environment requires a strategic and proactive approach. The trend of budget reductions, coupled with the rising costs of regulatory compliance, technology, litigation, and talent, has created significant challenges for in-house legal teams. However, by adopting best practices such as building strong business cases, leveraging data, implementing cost-control measures, and investing in technology, we as legal directors can effectively manage our budgets while advocating for the resources we need to protect and advance our organizations’ interests.

By Cilem Baykaler, Legal Director, OzTreyler

M&A transactions involve numerous legal, financial, and operational challenges. As in-house counsel, we are responsible for businesses’ right risk allocation and risk mitigation, while we bear significant responsibility in ensuring the deal progresses smoothly and can be closed successfully. Given this high responsibility, effective collaboration with external counsel is crucial to navigating these high-stakes deals and ensuring a smooth and successful transaction. Drawing from my experience, I will share best practices for selecting, collaborating with, and managing external counsel during M&A projects to achieve optimal outcomes and make your life easier in the post-closing and integration stages.

Selecting the Right External Counsel

A strong track record is essential. Look for attorneys with extensive experience in your industry who have successfully handled deals of similar complexity and scale in the related jurisdiction. Research the reputation of potential external counsel. Seek references from other in-house counsels or industry peers. Evaluate the resources and team composition of the external counsel. Ensure they have a robust team with diverse expertise to address all aspects of the transaction.

Establishing Clear Objectives and Scope

Clearly articulate the goals and objectives of the M&A transaction to the external counsel. This includes strategic rationale, desired outcomes, and key milestones. Aligning these goals ensures that everyone is working toward the same objectives. Define the scope of work in detail. Outline the specific tasks, responsibilities, and deliverables expected from the external counsel. This clarity helps prevent misunderstandings and ensures accountability. Discuss the budget and fee structure upfront. Agree on billing rates, payment terms, and any potential additional costs. Consider fixed fees or capped arrangements to maintain cost predictability.

Effective Communication and Collaboration

Establish a routine for regular updates and meetings. Schedule weekly calls to discuss progress, address concerns, and review upcoming tasks. This consistent communication keeps everyone aligned and informed. Encourage open and transparent communication between your in-house team and external counsel. Share relevant information, documents, and updates promptly. Transparency fosters trust and enables external counsel to provide more informed advice. Leverage technology to facilitate communication and collaboration. Utilize secure platforms for document sharing, project management tools to track progress, and video conferencing for virtual meetings. Technology streamlines workflows and enhances efficiency.

Ensuring a Deep Understanding of the Business

Ensure that the external counsel has a deep understanding of your business, industry, and competitive landscape. Provide them with comprehensive background information, including your company’s strategic goals, operational challenges, and market position. Make them understand what you are fighting for and trying to achieve with this M&A transaction.

Managing Expectations and Timelines

Set realistic timelines for each phase of the M&A project. Break down the transaction into manageable stages, such as due diligence, negotiation, drafting, and closing. Agree on deadlines and milestones for each stage to ensure a structured approach. Agree on expected response times for communications and deliverables. Timely responses are crucial, especially in fast-paced M&A deals. Do not give your external counsel artificial deadlines and claim urgency when it is not. This jeopardizes your credibility and harms the trust relationship between colleagues who need to work closely together.

Documentation and Record-Keeping

Maintain detailed records of all communications, agreements, and documents related to the M&A project. This includes emails, meeting minutes, draft agreements, and final contracts. Proper documentation is essential for legal compliance and future reference.

Conflict Resolution and Feedback

Establish a clear process for escalating and resolving issues that may arise during the transaction. Identify key contacts and decision-makers. Implement a feedback mechanism to gather insights from your in-house team and external counsel throughout the project. Regular feedback helps identify areas for improvement and ensures continuous enhancement of collaboration practices.

Cost Management

Develop a detailed budget for the M&A project and closely monitor costs against it. Discuss ways to optimize cost efficiency without compromising the quality of legal services.

As an in-house counsel, I see myself as the owner of my corporation’s M&A transactions, and I recommend you adopt the same approach to manage a successful transaction. This means you should thoroughly study your work, perhaps even more than your external counsel. Your external counsel will be your business partner and trusted advisor, but please always keep in mind that to manage a successful project, you need to know the project better than anyone else to direct them in the right way. By following these best practices, we can maximize the value of our in-house legal team by collaborating with external counsel and achieving successful M&A transactions that drive business growth and success.

By Gizem Zeynep Bolukbasi Komuryakan, Vice President of Legal and Compliance, Turkiye Wealth Fund

Mondelez International Senior Counsel Competition Law Compliance Kameliya Naydenova emphasizes the importance of communication, trust, and practical expertise when working with external legal counsel.

CEELM: What types of legal work does your team tend to externalize?

Naydenova: I would not say that the “one size fits all” approach works in every situation. We externalize legal work to our external legal partners depending on various factors – timing, focus on other priorities that we have at the current moment, need for multi-disciplinary or specific narrow expertise where our preference would be to have an external team working on the topic.

Naturally, every company needs to keep an eye on its budget. We have our internal processes in place helping us to decide whether to handle certain topics in-house or outsource them, and whether to go with billable hours or fixed-price projects.

CEELM: What are the most important criteria you look at when picking which firm/lawyer you’ll be working with on a project?

Naydenova: For us, it is crucial to work with lawyers who are not only knowledgeable legal experts but also have practical knowledge of how legislation is implemented in real-life business scenarios. It’s not just about having theoretical knowledge, but rather, it’s about providing advice based on strong expertise that is practical and can be implemented from our business perspective. The requested legal advice often involves input from different markets and an understanding of legislation across multiple jurisdictions.

Our preferred approach is to have a one-stop-shop option where possible. This is highly beneficial if we have advisors present in as many jurisdictions as needed. The one-stop-shop solution saves us time and avoids having different conversations with different people and law firms while allowing them to provide all the required local law perspectives.

In terms of the selection process itself, we seek reputable law firms, whether through recommendations or by looking at the rankings. We have a selection and approval process in place where we give equal and objective opportunities to all candidates. In smaller markets with local law firms, we review publicly available information and rankings, particularly in specific areas of law that are most important to us.

CEELM: What best practices have you developed over time in instructing a law firm for a new mandate?

Naydenova: We think mutual trust and good and clear communication are key to getting the full picture and building a strong working collaboration. After selecting a law firm, it’s important that they speak our language. Legal language can get pretty theoretical, and we need lawyers who can communicate in a business-friendly way. We try to support our external partners by sharing relevant business details and insights, while we rely on them not only on pure legal advice but also on consulting regarding trends and policies in the respective jurisdictions.

It’s crucial to have good communication and an understanding of business in today’s complex world. In certain cases, there are many legal areas involved and robust multi-layered advice is needed where on top we need to consider different legal environments in multiple jurisdictions. That’s why having lawyers with a multidisciplinary approach is important, though there are times when we need specific narrow expertise. We rely on teams that have both broad and specialized knowledge, so we don’t lose sight of the bigger picture.

We make sure there are no conflicts of interest, checking this in advance to protect our business secrets and confidential information, and to maintain respect as business partners. This process ensures transparency and trust on both sides.

CEELM: What is your preferred billing structure when it comes to external counsel? And what steps do you take throughout the mandate to limit budgets going over?

Naydenova: For newly enrolled firms, we have a procurement process in place, not just for fee assessment, but also for the level of expertise and type of services, so we can compare apples to apples. When we have standard agreements and an initial enrollment process, we ensure we work with reputable law firms. We go through a fair and transparent selection process.

CEELM: Do you internalize input from external counsel in some form of a knowledge bank? If so, how?

Naydenova: Our internal legal colleagues are based in various markets and for us staying connected and having good knowledge sharing is crucial. Luckily, in nowadays digital reality this is not hard to achieve. We have regular knowledge-sharing connects, group discussions, and brainstorming sessions. It’s important for us to not just give advice and share legal information but also to build team spirit to share broader knowledge and exchange ideas by promoting the team culture and rewarding successful solutions.

Working with external counsel can be a crucial aspect of managing legal issues, especially for companies that need specialized expertise or extra support for their in-house legal team. To make the most of these collaborations, it’s important to follow some best practices that ensure efficiency, alignment with business goals, and cost-effectiveness. Here’s my straightforward guide to help work effectively with external legal experts.

1. Choose the Right Counsel for the Job

The first and perhaps most important step is selecting the right external counsel. Think of this process as matching the right tool to the job. It’s essential to find a specialist whose expertise aligns perfectly with the task at hand. This targeted approach ensures that the counsel you hire will be able to handle the matter with the highest level of effectiveness.

2. Onboard Your External Counsel Thoroughly

Once you’ve selected the right external counsel, proper onboarding is key. Don’t just hand over a task and expect results. Take the time to integrate the external expert into your company’s operations. Help them understand how your business works, what your strategic goals are, and why certain decisions are made. Provide them with insights into your internal processes, corporate jargon, and specific terminologies. This way, they won’t just see the small piece of the puzzle they’re working on – they’ll understand the big picture. When external counsel grasps the full context, they can deliver more strategic and aligned advice.

3. Provide a Clear and Strict Briefing

When assigning tasks to your external counsel, clarity is crucial. Clearly define what you need, why you need it, when you need it by, and how much you’re willing to spend. This briefing should be detailed and leave no room for ambiguity. By setting clear expectations, you not only ensure that the work aligns with your objectives but also prevent misunderstandings that could lead to unnecessary revisions or delays.

4. Pre-Approve Any Changes

One of the risks of working with external counsel is the potential for scope creep – where the scope of work expands beyond the original agreement, leading to unnecessary work and increased costs. To avoid this, make it a rule that any changes to the original plan must be pre-approved by you or your in-house legal team. This ensures that all work remains relevant to your needs and prevents the delivery of work products that aren’t essential.

5. Monitor Hourly Rates and Expenses

Cost management is a significant concern when working with external counsel. It’s vital to ensure that the hourly rates and expenses are reasonable and remain so throughout the project. Request detailed legal bills that specifically describe the services performed. This practice not only keeps costs in check but also gives you insight into what the external counsel is doing. By maintaining detailed records, you can challenge any questionable hours and ensure that the billing remains fair.

6. Conduct Quarterly Relationship Management Calls

Regular communication is essential for maintaining a strong working relationship with external counsel. Schedule quarterly relationship management calls to review past performance, discuss upcoming needs, and provide feedback. These calls serve as an opportunity to align on future projects, address any concerns, and ensure that both parties are on the same page. This ongoing dialogue helps to build a more productive and transparent partnership.

7. Track Results and Learn Lessons

Once a project is completed, take the time to track the results and identify any lessons learned. This could include analyzing the duration of the project, total fees and expenses, the outcomes achieved, and how accurately the external counsel predicted the results. By comparing these metrics across different projects or law firms, you can identify patterns and make more informed decisions in the future. Sharing these insights with your business clients can also help reduce future legal exposure and spending.

8. Treat External Counsel as Part of the Team

Finally, remember that external legal experts are an extension of your team. They should be viewed not as outsiders but as integral members of your broader legal department. If they make a mistake, it’s as if your own team made it; if they achieve success, it’s a success for everyone. Foster a collaborative spirit and ensure that external counsel feels invested in your company’s goals. By working together closely, you can achieve better outcomes and build a stronger, more cohesive legal team.

By following these best practices, you can ensure that your collaboration with external counsel is efficient, cost-effective, and aligned with your company’s strategic goals. This not only helps in achieving better legal outcomes but also contributes to the overall success of your business.

By Mate Lapis, Head of Legal, Cherrisk

Revetas Capital General Counsel Joanna Przybyl reveals her strategies for mastering relationships with external counsel, from choosing the right firms to keeping budgets on track.

CEELM: What types of legal work does your team tend to externalize?

Przybyl: I can say that our legal team heavily relies on outsourcing legal work and intends to outsource even more in the future. Our in-house team is rather small but very hands-on. There is a significant number of topics that we typically delegate to external counsels and that includes acquisition, disposals, and financing transactions which are core activities for our business. This work is highly demanding and covers everything from early-stage due diligence to closing deals.

There are areas which, as a team with primary real estate and transactional background, we have never managed, such as IP, IT, and data protection, or that require very specific expertise and therefore, we prefer to rely on experts. Litigation matters are also always outsourced to external counsels.

In the past, we were involved in transaction management which was very time-consuming, and with the shrinking in-house team, we soon realized that continuing this approach leaves us extremely busy and with limited capacity for the tasks and matters that cannot be so simply outsourced. Now, in addition to hiring legal counsel on M&A or financing transactions where local law expertise is a must, we also require such counsel to be more involved in the transaction management field – this comes at a higher cost but allows the team to address a wider range of topics effectively. It also doesn’t mean that we have left that field completely – it is rather taking the backseat, staying engaged in supervision, and providing directions for the external teams.

We are now focusing on building long-term relationships with firms that offer the best value for money, rather than just the cheapest option. These firms learn to understand our teams, requirements, and standards, making the process more efficient. We believe that with each and every project they will just become more like an extension of our in-house team, being capable of directly responding to the business needs of our organization.

CEELM: What are the most important criteria you look at when picking which firm/lawyer you’ll be working with on a project?

Przybyl: First, if I’m not familiar with the jurisdiction and the contacts, I evaluate their offer to see if they understand the transaction we are trying to execute. Even at this stage, they need to be hands-on, not just follow the description of the transaction provided in the pitch invitation but also consider and present any other items that may be relevant.

Secondly, pricing is a key factor. It’s often difficult to evaluate because everyone uses different calculation methods. We examine how complete the overall proposal is and how reasonable the pricing appears. We understand that often there will be additional costs that deviate from the plan. We also like to see deal discounts for transactions that do not close.

Next, we typically speak with the team as part of the selection process. It’s important to be direct and find a counterparty you can work with transparently. We value personal connections and collaborative team efforts. We also seek experts who can translate legal language into business terms.

CEELM: On the flip side, what are the main things you don’t care about when you receive a proposal from a firm?

Przybyl: Typically, firms provide lengthy credential lists, sometimes up to 10 pages of past projects, but I rarely look at these. If I’m familiar with the firm, I don’t need to see their credentials. If I’m not, then I prefer they select the three most relevant examples, something that they really believe will make them stand out from the competitors. By doing so, they demonstrate an understanding of the mandate.

CEELM: You mentioned fee changes. How do you manage fee budget adjustments after the project has already begun?

Przybyl: On the practical side, communication about fees is crucial. We prefer to work with capped fees and understand that assumptions might be breached, but we need to be informed about these changes as they occur. We operate within a strict budget that I personally monitor, and delays in communication can lead to situations where fee increases can no longer be accepted or negotiated. Interestingly, we ask that firms notify us in advance if assumptions are breached, but this rarely happens. Firms often proceed with the work, even if it is clearly out of scope, and only inform us after the fact. I need to be alerted as soon as such additional work is undertaken, not after the transaction closes, as I might not have the ability or authority to adjust the budget at that point. We are becoming more and more strict on that point but I also make sure that it is properly communicated to the law firm in advance.

Last year, while working on a transaction, I was in regular contact with the lead lawyer from the firm and was informed early on that we would exceed the budget and the reasons were also clearly explained. We ended up paying significantly more than the originally approved budget, but we were able to manage the situation because we discussed it continuously.

CEELM: What best practices have you developed over time in instructing a law firm for a new mandate?

Przybyl: We’ve already introduced several standardized documents over the years. For example, we have a document outlining our preferred transaction procedures, negotiation coverage, and internal requirements. This approach significantly reduces the amount of work needed as the law firm is able to provide the first draft that already matches our expectations or requirements, instead of producing just a template adjusted to a transaction that will need to be redrafted heavily. We also advise firms to check our requirements before drafting any documents – there’s no need to produce lengthy documents that we don’t require.

In practice, I do review transactional documents as the transaction progresses, but by setting clear expectations from the start, the firm knows whether such review is necessary and they also know what points to highlight. Spending a bit more time upfront to establish these expectations can help minimize the amount of work later on.

CEELM: Do you provide feedback to external counsels after each transaction?

Przybyl: I usually don’t provide formal feedback after transactions as it’s more often on-the-go and immediate. However, I agree that formal feedback would be beneficial and I’m always open to any client listening sessions that law firms organize. I wish we conducted formal feedback more regularly but for the in-house teams the real work begins when the transaction closes, so unfortunately it’s challenging to find this time.

CEELM: What is your preferred billing structure when it comes to external counsel? And what steps do you take throughout the mandate to limit budgets going over?

Przybyl: The fee structure depends on the type of work, but we generally prefer capped or fixed fees. While this is something that is quite common in the CEE region, it seems to be less feasible in Western Europe. There, fee communication is more intensive, and we need to request regular updates on the budget status. Blended rates are also becoming more common. What we have recently started seeing is instead of one blended rate for all lawyers, irrespective of their seniority, there is a separate blended rate for partners, senior associates, and junior lawyers. We recognize the need to differentiate between transactional and non-transactional work. Transactional work tends to be more complex, so we opt for a more flexible fee structure. For day-to-day advisory work, we generally push for a single blended rate. There are also projects where law firms deliver rather standardized products and that’s where fixed fees are the best fit.

CEELM: What would be one lesson learned from working with external counsel?

Przybyl: What sets some firms apart is their hands-on approach. When lawyers take on a transaction, they often feel fully responsible for it, which isn’t always the case with other service providers. Although this can be challenging because it may come at a higher cost, it’s incredibly valuable. I wish more service providers operated at this level of commitment – it would make things much easier. I believe lawyers are often underestimated and the effort they put into transactions is not always fully recognized.

From staying loyal to specific lawyers irrespective of the brand they work under to focusing on fixed fees, Selvita General Counsel and Executive Management Board Member Dawid Radziszewski shares his best practices in terms of working with external counsel.

CEELM: What types of legal work does your team tend to externalize?

Radziszewski: For context, Selvita is a contract research organization – we provide assistance in the research projects of pharmaceutical and biotech companies when they are developing their drugs. As a result, we operate in both a highly regulated and innovative space meaning that, most of the time, when we externalize work, it’s usually due to a lack of niche expertise. It’s most often a result of us aiming to expand our offerings and often requires external knowledge to fill in internal knowledge gaps.

We also externalize M&A work, particularly when it involves cross-border matters. Additionally, we tend to outsource complex litigation. We believe it makes more sense to outsource rather than handle it internally, not just because of our team’s bandwidth but also because we prefer to focus on value-generating activities rather than litigation. In our demanding environment, where we support the work of scientists toward value-added offerings, it’s more productive for us to focus on those elements rather than allow ourselves to be distracted by litigations.

Lastly, being a listed company, we also externalize certain regulatory requirements that come with that status.

CEELM: What are the most important criteria you look at when selecting a firm or lawyer for a project?

Radziszewski: The most critical are expertise and experience. We prioritize firms that can demonstrate their capabilities in the specific areas we need, especially since, as mentioned, we’re typically looking for niche expertise. Industry knowledge is also crucial, as is the firm’s reputation. We often ask colleagues for recommendations and consult industry rankings to gauge the level of expertise.

Cost is another consideration, although it is secondary to expertise. The most important factor is having the specific knowledge and experience we require, but we do consider the cost implications.

One last note on this, having read the past Corporate Counsel Handbook, I was surprised to see there’s a split in opinion about whether GCs prefer picking firms or individual lawyers. We’ve followed several lawyers through their career moves, and for us, it’s clear: we value the relationship we’ve built with the individual, regardless of the firm they are with. This loyalty can lead to more engagement and dedication from the lawyer on our projects in return as well.

CEELM: Since it’s at the top of your list, how do you assess expertise?

Radziszewski: We start by creating an information package detailing our project’s objectives and requirements. We then assess the firm’s past track record in similar matters against that package. We use industry rankings and word-of-mouth recommendations to further inform our decision.

CEELM: And, when needed, who do you turn to for word-of-mouth recommendations?

Radziszewski: I typically consult with a network of about 4-5 experienced colleagues, especially when it comes to law firms in other jurisdictions, to get reliable recommendations. I know they are very well-connected and active in various networks and I can reliably rely on great suggestions from them.

CEELM: Do you have a preferred fee structure?

Radziszewski: Our preference is to work on a fixed fee basis. When we clearly communicate our expectations from the outset, we expect the experienced party to provide a precise cost estimate. While projects can take different directions, we prefer to have an estimated cost upfront. In some cases, an hourly rate is necessary, but we try to cap it to manage the budget effectively and understand the costs in advance.

CEELM: What aspects do you not prioritize when receiving a proposal from a firm?

Radziszewski: When we receive proposals, law firms often include a lot of brochures and marketing materials. I rarely flip through these beyond the sections describing the firm’s expertise that is directly relevant to the mandate at hand.

I am interested in the expertise and background of the specific team members who will be assisting Selvita on the project and care less about the firm’s senior team’s remote experience. We always ask for the specific team members who will be advising us, as I want to avoid situations where senior partners present during the pitch but never dial in in subsequent conference calls. Knowing the team upfront is crucial.

We also don’t particularly care about the size of the firm – what matters is its specific expertise. We are perfectly fine working with smaller firms if they have the required experience and knowledge.

CEELM: What best practices have you developed over time in instructing a law firm for a new mandate?

Radziszewski: Typically, we begin with a brief presentation about Selvita to ensure the law firm fully understands our mandate. This is important, especially given the complex environment in which we operate. Setting clear, written objectives helps the law firm prepare its offer initially and aligns expectations in the long run.

Beyond that, communication is key. We maintain regular, open communication, not only for updates and monitoring progress but also to involve our internal lawyers. We take a hands-on approach in all our projects, with at least one internal lawyer constantly involved. We ask our law firms to treat these internal lawyers as part of their team, ensuring more regular communication and helping us build our in-house knowledge base.

CEELM: And since you touched on this, do you internalize input from external counsel in some form of a knowledge bank? If so, how?

Radziszewski: Yes, we do. Through direct collaboration, we assimilate relevant information on a daily basis. We look for best practices identified during, for example, a due diligence that we can implement in our daily operations. Additionally, we use external lawyers for training and development sessions for our team, which has been very beneficial.