Reeba Zachariah, TNN | Oct 27, 2013, 02.17AM IST
MUMBAI: With India Inc feeling the heat from a spate of litigations and investigations, many companies are on a mission to add muscle and brainpower to their legal teams.
This, in turn, has made the prospect of going in-house — shorthand for corporate law departments - more attractive for lawyers.
Besides earmarking significantly larger budgets for their legal departments, companies are poaching some of the best brains from rivals and law firms. In-house lawyers are also closing the gap with the C-suite. A top industrialist told TOI, "You'll find that in more and more companies, the chief law officer or legal director now reports directly to the CEO, instead of being minus two or three" (which is corporate code for how many levels down the hierarchy an executive is).
This change in dynamics is in response to fear of litigations — one of the most significant business risks in Asia's third largest economy in decades — which has singed almost every leading business conglomerate.
In the old days, in-house legal departments dealt with relatively low-value disputes and transactions -- and as liaison between top management and big lawyers and law firms on critical cases. Now, CEOs want accomplished lawyers by their side at all times and not just to hire as-and-when or on retainer.
Sujjain Talwar, partner at Economic Laws Practice, said that legal issues were becoming far more important than earlier. "With penalties imposed by regulators and stakes involved in transactions high, companies can't sign documents without having lawyers on their side. Moreover any information that goes out from the company can be used against the company. This calls for greater responsibility and companies can't completely rely on external lawyers. Corporates are realizing this and increasingly prefer in-house counsel as their first contact point for advice," added Talwar.
Legal spend can also make a big difference to bottomlines. In 2012, corporate India had to shell out an estimated $1 billion (Rs 5,500-odd crore) in legal fees to fight scam-related cases, patent wars and disputes, upsetting chieftains who were counting on cutting expenses to make up for sluggish revenue growth. So, now they are hiring specialists -- from cyber law to environment law -- to ensure compliance.
The Tata Group today has an army of around 400 lawyers. At the $27-billion Essar Group, each of its eight businesses now have separate legal teams, unlike the earlier structure of a common legal team at the group level.
The general counsel, and not the senior partner of a law firm, has become the "first go-to" counselor for the CEO and every crucial written communication -- from bid documents to responses to a media query -- is being vetted by the in-house legal team.
The Tata Group general counsel, Bharat Vasani, advises the top management on issues as varied as mergers & acquisitions, intellectual property, international trade, regulatory and tax. Steel-to-shipping conglomerate Essar brought on board legal veteran Hemant Kumar as group general counsel. Drugmaker Cipla, with presence in over 170 countries, recently appointed its first global general counsel in Murali Neelankantan, a former senior partner at law firm Khaitan & Co.
Other companies that made key appointments in the recent past include Citibank, which had IndusLaw's partner Pramod Rao join the group as general counsel; and Vedanta Resources got Fox Mandal Little Ajit Yadav as president and global general counsel.
"In-house lawyers are in a strong position to understand the gravity of an issue and prioritize a matter better compared to external lawyers who handle multiple cases," said Ramesh Vaidyanathan, former general counsel of Mumbai International Airport and founder of Advaya Legal.
For multinationals operating out of India, a sharp legal team which can formulate sound anti-bribery policies and tackle tricky patent issues is even more important. India has been considered a high risk country on corruption after the US and UK uncovered bribery scandals by several multinationals in emerging markets. The US imposed over $1.7 billion as penalties on corporations in 2010 and most of the corruption cases involved non-US companies, according to a Deloitte report.
The role and scope of general counsel in India Inc has undergone a sea change in the past decade, with many occupying board seats. In MNCs, general counsel reports directly to the corporation's chief counsel at headquarters and not to the country head.
Globally, lawyers have gone on to lead well-known organizations (with mixed results) -- Charles 'Chuck' Prince at Citigroup, Lloyd Blankfein at Goldman Sachs, Brian Moynihan at Bank of America, Jeff Smisek at Continental Airlines and David Dillon at grocery chain Kroger are some examples.
In India, such examples are hard to come by; the exception being Aditya Ghosh at Indigo airlines.
Sujjain Talwar, partner at Economic Laws Practice, said that legal issues were becoming far more important than earlier. "With penalties imposed by regulators and stakes involved in transactions high, companies can't sign documents without having lawyers on their side. Moreover any information that goes out from the company can be used against the company. This calls for greater responsibility and companies can't completely rely on external lawyers. Corporates are realizing this and increasingly prefer in-house counsel as their first contact point for advice," added Talwar.
Legal spend can also make a big difference to bottomlines. In 2012, corporate India had to shell out an estimated $1 billion (Rs 5,500-odd crore) in legal fees to fight scam-related cases, patent wars and disputes, upsetting chieftains who were counting on cutting expenses to make up for sluggish revenue growth. So, now they are hiring specialists -- from cyber law to environment law -- to ensure compliance.
The Tata Group today has an army of around 400 lawyers. At the $27-billion Essar Group, each of its eight businesses now have separate legal teams, unlike the earlier structure of a common legal team at the group level.
The general counsel, and not the senior partner of a law firm, has become the "first go-to" counselor for the CEO and every crucial written communication -- from bid documents to responses to a media query -- is being vetted by the in-house legal team.
The Tata Group general counsel, Bharat Vasani, advises the top management on issues as varied as mergers & acquisitions, intellectual property, international trade, regulatory and tax. Steel-to-shipping conglomerate Essar brought on board legal veteran Hemant Kumar as group general counsel. Drugmaker Cipla, with presence in over 170 countries, recently appointed its first global general counsel in Murali Neelankantan, a former senior partner at law firm Khaitan & Co.
Other companies that made key appointments in the recent past include Citibank, which had IndusLaw's partner Pramod Rao join the group as general counsel; and Vedanta Resources got Fox Mandal Little Ajit Yadav as president and global general counsel.
"In-house lawyers are in a strong position to understand the gravity of an issue and prioritize a matter better compared to external lawyers who handle multiple cases," said Ramesh Vaidyanathan, former general counsel of Mumbai International Airport and founder of Advaya Legal.
For multinationals operating out of India, a sharp legal team which can formulate sound anti-bribery policies and tackle tricky patent issues is even more important. India has been considered a high risk country on corruption after the US and UK uncovered bribery scandals by several multinationals in emerging markets. The US imposed over $1.7 billion as penalties on corporations in 2010 and most of the corruption cases involved non-US companies, according to a Deloitte report.
The role and scope of general counsel in India Inc has undergone a sea change in the past decade, with many occupying board seats. In MNCs, general counsel reports directly to the corporation's chief counsel at headquarters and not to the country head.
Globally, lawyers have gone on to lead well-known organizations (with mixed results) -- Charles 'Chuck' Prince at Citigroup, Lloyd Blankfein at Goldman Sachs, Brian Moynihan at Bank of America, Jeff Smisek at Continental Airlines and David Dillon at grocery chain Kroger are some examples.
In India, such examples are hard to come by; the exception being Aditya Ghosh at Indigo airlines.
However, with the way the bar is being raised, we may see more lawyers in the corner office.
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