What to Expect from a Foreign Outside Counsel?

01 March 2007

This introduction deals with an issue that is becoming more prevalent in the world of corporate America. As US companies engage in foreign affairs, harmonising legal matters between two very distinct partners becomes a major hurdle for the business.

Daniela Canale Brito, Esq, MPIA, Dunkin’ Brands Inc - Director and International Counsel

The immediate subjects of legal systems, laws, regulations, jurisdiction and enforceability, are augmented with political, economic and social matters, all of which are discussed in the fabric of the partners’ two (or more) different cultures. As the in-house corporate counsel responsible for business in 46 countries, I am required to overcome this challenge by facilitating and mediating negotiations with the assistance of US and foreign colleagues, who may become key allies or compound the problem depending on their expertise above and beyond legal matters. I hope this brief introduction provides guidance for those who, like me, need assistance from outside counsel in international matters. Perhaps it may also offer some ideas to many of the fine lawyers and firms in this book regarding the necessary skills to engage in such practice.

TheContext

Consider Dunkin’Brands, one of the world’s largest quick-service restaurant companies, with over 12,000 units including over 4,400 points of sale in 46 countries. As the single international in-house attorney responsible for all the international legal matters (and some domestic as well, after all, there are 7,600 domestic stores that also need attention), my duties include the expected set of transactions for this role, such as: drafting, revising and negotiating contracts in the areas of franchise, real estate, joint-ventures, M&A, employment, and financial arrangements. Add to these tasks due diligence, compliance, auditing, training, process improvement, board meetings, administrative tasks, changes in business strategy, and it becomes clear that my wonderful team and I need some outside assistance to keep up with the pace of business.

Fortunately enough, my experience and education greatly help me in coping with the situation. Yet, I still face challenges engaging outside counsel and the following sections illustrate the key areas that I consider in performing my duties.

The basics

An outside counsel has to meet some basic criteria: he or she must be reputable, knowledgeable, experienced and ethical. Reputation, like trust, is continuously earned (and can be easily lost). Over the years, all of us build our networks of trusted advisers, who can refer or comment on many of those companies and lawyers listed in this book. This is the screening step that separates many prospects. Knowledge is normally not an issue – after all, we have all passed bar exams like New York’s. However, experience is not a universal attribute. Knowing the actual past dealings of the particular lawyers to whom you are entrusting your case proves a critical step in the selection process. Depending on the volatility of the region or country of the world, long-term and more recent experience may be required. As for ethics, many take it for granted, forgetting that ethics is a cultural expression of values of right or wrong, which varies depending on where in the world you are (just picture yourself in Russia, the Middle East, Latin America or China, and you will probably realise it). Operating from a US-based corporation means – most of the time – that your partners have to share (or at least abide by) US ethical principles.

The business

Those preliminary conditions are musthaves. I expect that all in this book meet the above standards. Hence, there are still many candidates. Engaging an outside counsel is no different for a business than making any other outsourcing decisions. Companies today outsource even primary valuechain activities, such as, offshore software development, factory sourcing, or customer support. As a cost-centre, support chain unit, the legal department is a prime candidate for outsourcing; companies are not in the business of drafting contracts, negotiating or litigating. Yet, serious businesses acknowledge the difference that an appropriate legal support can make. The decision is ultimately made on the basis of the net value added, regardless of who does it. At Dunkin’ Brands, the legal department motto is “enable, protect and facilitate,” which well expresses the business criteria that we seek: greater experience in the particular subject area and country; business acumen; agility and flexibility; partnering skills; enabling mindset; and, of course, affordability!

We gauge our outside advisers on their experience in the subject area and geography of the particular transaction (eg, a jointventure in Macedonia). Ideally, our outside counsel is in for a long-term partnership and will pass this filter most of the time. Business acumen is a characteristic that some firms possess, as their target clients and practices are geared more to commercial affairs than court battles. Agility and flexibility reflect a trait that businesses know well: you only exist because of your clients – therefore, being responsive and adapting to the client’s needs increase your chances of getting the business. This is a core competency and must be executed well. It is not a matter of agreeing to anything and everything that a client demands, but rather being reasonable and prudent (in business, not legal terms) to enable the relationship to start and continue, and to allow that very mindset to enable the client’s business. When all these traits exist, the outside firm adds value to the client and shares the savings, clearly demonstrating its commitment, especially by not charging US fees for the services rendered abroad many times for a fractional amount. Making a huge profit based on the spread of currencies can be an insult to any business, which knows well enough the value of goods and services anywhere in the world.

Beyond The Average

Now that we have many less candidates, based on our basic and business criteria, we can select our winners based on what really matters: the in-depth knowledge of the cultural environment where the action is required and the similar knowledge and ability to handle the US environment. Having degrees from both civil and common law countries, a master degree in public and international affairs, international working experience, and speaking some languages, gives me some basis to evaluate and appreciate the relevance of this aspect.

Most contenders cover one of the two environments, but very few manage to cover both. Most of the time, a local counsel provides an accurate local understanding by not only considering the applicable laws and due processes, but also considering the time, enforceability and stability of the legal instruments in light and in anticipation of the practical political, economic, social and legal forces in the country or region. However, that same local expert rarely possesses the ability to translate these elements into their equivalent terms in the US (sometimes due to the different legal system, sometimes due to language barriers, and other times simply due to an inaccuarate perception of the relevance of this translation). A typical example is the notion of time. ‘Time is money’ is a very true adage in the US, engrained in the everyday aspects of American life. Elsewhere, time is everything but money, especially in countries where a judicial dispute may take longer than the life of the people involved.

Most of the international transactions are conducted in spoken or written English, but seldom between entities that share the same cultural set as the US. This means that an outside counsel in the target country may know very well his or her environment, but also operates under his or her own cultural basis, which includes all values, ethical, social, political, economic behaviours. While the external procedures, reports, and interactions may follow US standards, the actual results, understanding and actions may not. Valuable outside counsel is aware of this issue and ensures that their lawyers immerse in different cultures and live in different places, enabling them to operate in a global world, if not by themselves, through good cooperation with their colleagues and counterparts.

I have been fortunate enough to have this type of training, both from educational and working perspectives. Many times, I have to overcome challenges in dealing with my counsel abroad because while they were performing as exponents in their countries, they were unaware of the needs of my business, not from a legal or even business perspective, but from a cultural standpoint. Conversely, I have also had the opportunity to work with those who became major deal-enablers for possessing this very skill, which is not taught in a law school or intercultural class.

Moving Forward

At this point, it is clear that the legal profession becomes more complex as the world becomes smaller. Recently, the first partnering between a US and Chinese law firm took place. It is a reflection of what is still to come in terms of broader international relationships and the need to consider different legal, business and cultural standards in the composition of a legal team. Some call it diversity, but true diversity requires the acknowledgement and embracing of a world where differences are understood, respected and dealt with in a professional and natural manner, not because of some corporate mandate. Like many in this book, those who meet this challenge will stand above the crowd and be better positioned to operate in the coming years.