BEING PART of a global legal network may become essential if Australian firms want to attract the work of major international companies.
At least this is what DLA Phillips Fox has found, after being on the receiving end of an exclusive arrangement with gas and engineering heavyweight The Linde Group thanks to its association with DLA Piper.
Linde chose DLA to be the sole legal provider of advice arising from daily business from a group of more than 20 firms involved in the tender process.
“The more innovative part is around the appointment of just one firm, DLA Piper, to cover the day-to-day requirements,” Nick Deeming, chief legal officer at Linde, said.
“I met some outstanding law firms and those finally appointed stood out as having the best combination of skills to suit our needs, together with a commercial package of fees and value-added activity that would allow us to deliver essential savings to the organisation.”
The decision to go with DLA came after a four-month review of the in-house legal team and its external legal providers.
“I initiated this review with an open mind as to what the end structure might look like, though I had one clear aim: to identify one or two leading law firms in each continent that would work in partnership with our internal legal services team and deliver high-quality services across all the areas we are likely to outsource,” Deeming said.
David Morris was the lead partner from DLA Phillips Fox involved with the global pitch to Linde in Singapore. He described the group’s relationship with DLA as a “very unique and innovative arrangement that they have put in place”.
It is also just the sort of arrangement the firm was hoping to get access to when it entered into an exclusive alliance with DLA in November last year.
Morris said that although he isn’t aware of other global companies striking similar relationships with global law firms, it is sure to be the way of the future. The very pace of globalisation, as well as the tendency of firms to adopt a single accounting firm worldwide, is a strong indication of this, according to Morris.
“From our perspective, we see the need for both Australian clients, and also international clients, to have one firm that they can rely on throughout the world,” Morris said.
“And if you look at why they did this — they said this was all about making sure they had the best risk management they could, putting in significant cost efficiencies through the Group, by having one firm.
“You don’t get all the down-time by using another firm in different regions,” he said. “And we also gave them a really comprehensive package of value-add services, which can be utilised and deployed all around the world.”
However, John Fast, chief legal officer of BHP Billiton, which has operating assets and exploration activities in around 50 countries, said hiring a single law firm for the day-to-day management of legal advice may suit some companies, but for him this approach has more minuses than pluses.
“BHP has 100 operating assets, we’re in maybe 30 countries around the world and we’ve probably got exploration activities in another 20. Imagine trying to work through one centralised law firm. I think from our point of view, it would make it difficult,” he said.
Where the law firm appointed didn’t have offices or expertise in a jurisdiction, he felt there would be an “inevitable delay” because they would have to then take advice from affiliated firms.
“So instead of going to whoever the supplier of legal services would be in that jurisdiction, you have to go to some sort of central focal point, who then steps in, and double handles it.”
This possibility could also lead to a rise in legal costs to pay for not only the local advice, but the interpretation and repackaging of that advice by the global coordinator.
Then there is always the perennial issue of conflicts of interest. “Conflicts of interest is certainly one issue which requires you to have more than one service provider, particularly when you have got so many different transactions with so many different parties,” Fast said.
However, he said one legal provider would allow them to become more intimate with the client’s business. “You have someone becoming much more aware of the totality of your operations — how you think, how you walk, how you act,” he said.
“To that extent they become not purely legal advisers, but almost corporate advisers. Because in the process of briefing and/or instructing a local firm to provide advice in an area, they have to be your proxy for the sorts of instructions you as a corporation would provide.”