Australian Corporate Lawyer - Spring 2018 by Association of Corporate Counsel (ACC) Australia

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acla.acc.com SPRING 2018, Volume 28 – Issue 3

The official publication of

CROSS BORDERS E-COMMERCE IN CHINA AND AUSTRALIA - CHALLENGES FOR IN-HOUSE COUNSEL THE EVOLUTION OF INTERNATIONAL ARBITRATION MOVING BEYOND RELATIONSHIPS FOR SMARTER, MORE STRATEGIC ENGAGEMENT DECISIONS1 VOLUME 28, ISSUE 3 – SPRING 2018 |

CONTACT

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Alistair McDonald

Australia’s Leading Workplace Relations Specialists

Head of Business Development Professional Services asm@fcbgroup.com.au

02 9922 5188 fcbgroup.com.au

FCB is not a conventional law firm. We are specialists in employment law, workplace relations, immigration law, HR technology and WHS. It is all we do. As the only law firm in Australia with five Accredited Specialists (Employment & Industrial Law / Workplace Relations) you know you are in the safest of hands. With a Net Promoter Score of 68 it appears our 11,000+ clients think so too!

VOLUME 28, ISSUE 3 – SPRING 2018

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Volume Number 28 Issue Number 3

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ACC Australia ACN 003 186 767

REGULARS

Editorial Editor: Andrew McCallum T: (61) 3 9248 5548 E: a.mccallum@acc.com

PRESIDENT’S REPORT

PERSPECTIVES For a Diverse and Inclusive in-house sector

A DAY IN THE LIFE Kit Wilson

ACC GLOBAL UPDATE

If you are interested in other sponsorship opportunities with ACC Australia, please contact: Ingrid Segota T: (61) 3 9248 5511 E: i.segota@accglobal.com

F E AT U R E S 8

E-COMMERCE IN CHINA AND AUSTRALIA — CHALLENGES FOR IN-HOUSE COUNSEL

2018 INTERNATIONAL ARBITRATION SURVEY: THE EVOLUTION OF INTERNATIONAL ARBITRATION

COPYRIGHT HERE AND ACROSS BORDERS THE ISSUES OF WORKING ON – TIPS FOR AUSTRALIAN CROSS-BORDER TRANSACTIONS IN-HOUSE LAWYERS AND DISPUTES

CONDUCTING LITIGATION EFFICIENTLY AND COST-EFFECTIVELY – TIPS FROM SEASONED LITIGATORS

Journal Sponsorship and Advertising Are you interested in reaching 4,000 ACC members Australia-wide? Please contact: Andrew McCallum T: (61) 3 9248 5548 E: a.mccallum@acc.com

MANAGING A REGIONAL AND DISPERSED LEGAL WORKFORCE IN ASIA

Letters to the Editor You are invited to submit letters to the editor by email: a.mccallum@acc.com Articles for Publication If you have an article you would like to submit for publication, please contact: Andrew McCallum T: (61) 3 9248 5548 E: a.mccallum@acc.com Contributions are included at ACC Australia’s discretion and may be edited. General Enquiries T: (61) 3 9248 5500 E: ausmembership@acc.com W: acla.acc.com Publisher The Australian Corporate Lawyer is published by the Association of Corporate Counsel (ACC) Asia Pacific.

TAILOR YOUR INTERNATIONAL ARBITRATION MOVING BEYOND RELATIONSHIPS AGREEMENTS TO REDUCE TIME, CONTROL FOR SMARTER, MORE STRATEGIC COSTS, AND REACH DESIRABLE OUTCOMES ENGAGEMENT DECISIONS

LEADING HIGH-PERFORMING PROJECT TEAMS IN CROSS-BORDER ENVIRONMENTS

IS THE GENERAL COUNSEL THE MORAL GUARDIAN OF THE COMPANY?

EXPANDING CROSS-BORDER ROLES OF LEGAL TEAMS IN EMERGING SOUTHEAST ASIAN MARKETS

Disclaimer The opinions, advice and information contained in this publication may not be shared by ACC Australia. They are solely offered in pursuance of the object of ACC Australia to provide an information service to corporate lawyers.

The Association issues no invitation to any member or other person to act or rely upon such opinions, advice or information and it accepts no responsibility for any of them. It intends by this statement to exclude liability for any such opinions, advice or information. Readers should rely on their own enquiries in making any decisions which relate to the content here.

VOLUME 28, ISSUE 3 – SPRING 2018 |

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PRESIDENT ’S R E P O R T

Karen Grumley National President

hen working and living in Australia, the term ‘cross borders’ does give the impression of a journey across an expanse of ocean to a foreign land. Despite being on an island, international influence and the integration of people, politics and companies worldwide has had, and will continue to have, a profound effect on the way in which we perform our professional roles here in Australia. The emphasis of this issue of Australian Corporate Lawyer magazine is on all topics cross borders. But what does ‘cross borders’ mean? For me, it calls to mind that famous line from John Donne: No man is an island, entire of itself. Even if you work for an Australian-based organisation— headquartered here and conducting all its business on the Australian continent—events across the ocean do have an impact on how you operate. I work for an iconic Australian company providing services in Australia, and I encounter cross-border issues most days. Our ownership base comprises blue-chip institutional investors from around the globe, each with their own experiences here and abroad. Our suppliers often have manufacturing bases off-shore, resulting in us acquiring equipment from various places such as China and North America. Many of our customers are either multinational corporations, headquartered and listed overseas, or engaged in integrated supply chains across the world. And we benchmark our performance, operationally and financially, against Class 1 railways worldwide. These factors, and many more, propel cross-border considerations before our legal team regularly. So how do we stay abreast of the best across the globe? Whether through horizon scanning, understanding business etiquette when dealing with international counterparts, understanding transaction frameworks and dispute processes in other jurisdictions, and knowing what is happening and why around the world; the legal division is capable of being a strategic ally to our organisation.

There is no doubt that recent global endeavours have shaped Australian law and government policy, requiring in-house teams to assess the impact of those changes on the operation of their businesses. These include matters such as the introduction of new modern slavery reporting obligations for Australian entities, and the Australian Human Rights Commission launching a national inquiry into sexual harassment in Australia in response to the #MeToo movement. These and many other topical issues are regularly deliberated on at ACC Australia CLE events and conferences. I expect that several of the articles in this edition of the magazine will also go some way to enlightening you on the complexity of cross-border issues faced by in-house teams. In the global world in which we now operate, not only is integration of our businesses vital but also of our people. To this end, ACC Australia has published its Diversity and Inclusion Charter. This charter is provided to enable in-house legal leaders to declare their support and commitment for creating an inclusive legal profession as well as supporting diversity and inclusion initiatives within their legal departments. ACC Australia is a useful source of cross-border information and resources—we are part of the world’s largest community of in-house counsel, with 43,000 members in over 90 countries. How better to service your local needs than to connect with your colleagues in our global ACC network? I don’t know about you but having access to resources and people across the globe does make me feel like I am part of a larger whole—I am not an island, entire of myself— and those cross-border considerations flying across my desk are understood, leveraged and learnt from. Finally, you may have noticed a new profile photo at the start of this President's report. This is my nod to ACC's exciting new More than a Lawyer campaign. More Than A Lawyer aims to highlight the diversity of functions and wideranging contributions of in-house lawyers in organisations across the world. ACC is asking our global membership to share an image of themselves in the workplace, an image that represents how you're #morethanalawyer. So, whether you're in the factory, in the laboratory, in the training room, inspecting a construction site, or something entirely beyond the norm; snap an image, post it with the hashtag and share why your #morethanalawyer, on your favourite social media platform and help us celebrate the global in-house sector. Visit acc.com/morethanalawyer for more information. a

VOLUME 28, ISSUE 3 – SPRING 2018

theAustralian

corporatelawyer

acla.acc.com SPRING 2018, Volume 28 – Issue 3

The official publication of

ACC AUSTRALIA BOARD President Karen Grumley Pacific National Vice President Justin Coss AUB Group Limited Immediate Past President Gillian Wong St Barbara Limited Company Secretary Rachel Portelli Intensive Group Pty Ltd Directors Mary Adam Department of Local Government, Sport and Cultural Industries (WA) Sandie Angus Queensland Treasury Anna Bagley Programmed Group Limited Susan Dalliston Ignite Energy Resources Jon Downes Willis Tower Watson Jon Fenwick CSIRO Sayuri Grady Department of the Prime Minister and Cabinet Valerie Hodgins Metropolitan Redevelopment Authority Theo Kapodistrias University of Tasmania Andrew Lee Beyond Bank Australia Lori Middlehurst VMware Mei Ramsay Medibank Private Limited Edwina Starck Pernod Ricard Winemakers

Membership 1300 558 550 PO Box 422 Collins Street West Melbourne, VIC 3007 acla.acc.com

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PERSPEC TIVE S F O R A D I V E R S E A N D I N C LU S I V E I N - H O U S E S E C TO R

CC Australia introduced the ACC Australia Diversity and Inclusion Charter earlier this year. The charter was developed by dedicated ACC Australia members and approved by the ACC Australia Board of Directors with the support of the ACC Australia GC100 and the ACC Australia Advocacy Committee. The charter enables in-house legal teams to declare their support for and their commitment to an inclusive legal profession, as well as supporting diversity and inclusion initiatives within their legal departments.

In this context, our ability to express our views freely and speak up is closely related to our ability to perform our job — that is our way to contribute meaningfully to our organisation and add value. To express our views freely, we need to feel secure within ourselves and within our organisation and it is essential that we feel respected, valued and that we belong regardless of our gender, age, disability, ethnicity, cultural background, sexual orientation, religious belief, education, work experience, occupation, socioeconomic background, marital status, or whether we have family and carer responsibilities.

The members who devoted their time and effort to this initiative did so because statements such as this are critical in normalising and internalising diversity and inclusion in our departments and our organisations. The in-house sector leads the legal profession in gender equality and so it makes sense that we should lead the way with this charter. By promoting the charter, we visibly and actively support diversity, inclusion and belonging.

Against this backdrop, inclusion, diversity and belonging are values that are central to our success as in-house lawyers.

The charter provides examples of best practice from major legal departments to support you in your diversity and inclusion implementation efforts. We recognise that departments and organisations are at different points in their diversity and inclusion journey — so these real-life examples and best practices will help your company accelerate its programs. The charter is intended to complement and not supersede any existing diversity and inclusion policies or procedures within signatory organisations.

I have realised that not standing for diversity, inclusion and belonging amounts to standing against it. Silence can be interpreted as lack of interest in these important issues, which are closely correlated with bottom lines, leadership, innovation, and above all meeting our clients’needs.

Diversity, inclusion and belonging practices are essential in promoting fairness and equality in our society. Whilst there has been a lot of progress over the past few years, we must keep these issues alive so that, together, we can bring about lasting change in our society. An important aspect of our role as trusted advisers to our organisation is to ask the tough questions. Sometimes this means that we need to stress test decisions, challenge the status quo and deliver difficult messages our clients may not want to hear. Often it also means that we need to be the voice of conscience and reason. Our position as officers of the court means that, apart from our overriding duty to the court and the standards of our profession, we also have a duty to the public. These duties sometimes conflict with our clients’wants and interests. The duties that are imprinted into our job description require us to be courageous, and to provide perspectives and ideas others may not have considered, to reach a legal and ethical outcome. What this boils down to is that our value is not only in providing the correct legal answer but also in our ability to influence our clients and bring them on our journey. We constantly have to stand in our clients’ shoes and visualise what we would do if we had to make the call.

Many people believe that equality in the workplace is a process that evolves naturally over time and that no bias exists. Others think that diversity, inclusion and belonging are issues best left to human resources (mostly women) in afternoon-tea activities.

Vered Keisar As the Vice President and General Counsel – Asia Pacific at ResMed, Vered is responsible for the provision of legal services across Asia Pacific and the Middle East, while holding global legal responsibilities for healthcare informatics and data privacy. Vered is admitted to practice law in Australia, England and Israel and is an ambassador and a regular speaker for the National Breast Cancer Foundation. Vered is the chair of the ACC Australia, Inclusion and Diversity Sub-Committee and is a committee member of the NSW Division of ACC Australia.

I have also come to realise that while much of the visible bias has been dealt with by way of policies and changes in work practices, these changes do not address social norms, stereotypes, systems and beliefs associated with the underlying factors that lead to inequality. Therefore, bringing issues of inequality to our consciousness and paying attention to our practices and bias are key to creating a society to which we can all contribute to our maximum potential. If you are reading this, you are privileged. Even if you were not born privileged, your choices and life path have led you to privilege now. From the privileged positions we now occupy we have the power to influence society through our organisations. My threeyear-old son tells me that“with great power comes great responsibility”(Uncle Ben to Spider-Man). To benefit our clients, our organisations, our community and our society as a whole, we ought to use our powers to lead in shaping our society and promoting equality and fairness. Implementing the ACC Diversity and Inclusion Charter is a great step in that direction. Take action now and ensure you declare your organisation’s commitment to the charter. As in the words of Nelson Mandela on his 91st birthday:“It is in your hands to create a better world for all who live in it”. The ACC Australia Diversity and Inclusion charter can be downloaded from the ACC Australia website. a

Lori Middlehurst As the Senior Director and Lead - Employment and Immigration Law at VMware, a multinational software company, Lori’s responsibilities include leading and supporting the organisations CSR initiatives globally. Earlier this year, Lori was the Asia Pacific Employment Law winner at the 2018 Global Counsel awards. Lori is the Vice President of the NSW Division of ACC Australia, is active on the CLE and Diversity and Inclusion subcommittees and Co-Chair of ACC's International Employment and Labor Law Committee. VOLUME 28, ISSUE 3 – SPRING 2018 |

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A DAY IN THE LIFE KIT WILSON Deputy General Counsel, The Hongkong and Shanghai Banking Corporation

Kit Wilson

5:45 am

As Deputy General Counsel at HSBC in Hong Kong, Kit is responsible for the legal coverage of HSBC’s Global Banking & Markets businesses for the Asia-Pacific region. In addition to managing the legal team, Kit sits on a number of risk management and governance committees. Prior to joining HSBC, Kit held in-house and private practice roles in New York City, Boston and Singapore.

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I wake up most mornings at 5:45, grab a quick cup of strong coffee and prepare to head out to the pool or gym. I wake my wife (not a morning person) at the last minute and we drive to the train station, where I drop myself off and she (sufficiently caffeinated by this point) drives home to take our four kids to school. I do some quick email triage on the train to see whether anything critical has happened overnight that I need to deal with before exercising.

8:30 am

I arrive at the office in Central, Hong Kong, and eat breakfast at my desk while starting to work through overnight emails. I prepare a quick agenda for my 9:30 meeting.

9:30 am

Most of my team has settled in by now and done their own triage, and I have my weekly meeting with my five direct reports. In total, there around 65 lawyers in my Global Banking & Markets legal team. I move it along fairly quickly and try to assign actions for each of the agenda items. They range from the substantive (a company has defaulted on a loan we have outstanding, but our securities services business is also the agent so we need to be careful with managing internal conflicts) to the administrative (when should we do summer drinks?). In addition to the group meeting, I also do a weekly or bi-weekly one-on-one meeting

with each of my direct reports. In those meetings we discuss issues more specific to their particular line of business. 10:00 am I attend the Legal Risk Executive Committee meeting with the General Counsel; the heads of other legal teams (such as our retail bank business); and the heads of specialist legal functions (such as litigation, data privacy and competition law). In the meeting, we go through the legal risks we face as a department, look at what’s moved in the last few weeks and discuss whether the controls we have in place to manage these risks are effective. We then hear a special report from our litigation lawyers on a recent case that may trigger a need to reassess whether we are appropriately grading our data privacy risks. 12:30 pm Lunch at my desk (bad habit). I return a few phone calls, send off some emails to colleagues in London so they’ll have them when they wake up and spend some time reading the news online. 2:00 pm One-on-one meeting with one of my direct reports who covers our cash management business. She has prepared an agenda in advance. As noted above, I do these each week or two. There are a few standing agenda items around particular risk areas, but most other

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agenda items change each meeting. If we don’t have anything to cover, we cancel it, but this rarely happens. I have very few meetings anymore where an agenda has not been prepared. 2:30 pm

Conference call with one of our panel law firms to ask nicely for a free secondee for 6 months. We have around 4-6 legal secondees at any one time. Sometimes they are covering a lawyer’s maternity leave, sometimes covering the gap between a lawyer’s departure and a replacement hire, sometimes covering a spike in business. Out of necessity, we’re flexible on the experience level of secondees, but generally prefer a mid-level associate. Unfortunately, the call is unsuccessful. Fortunately, it is short. Therefore, I use the time to chase HR about the onboarding delay for a new person we’re hiring. We’ve had rolling secondees cover some of our businesses as well, but I’m replacing most of them with full time hires. It’s too much work to keep sourcing the next secondee, and it creates

operational risk when we need to train a new secondee every six months. 3 pm

5 pm

Read briefing materials ahead of a reputation risk committee meeting that I’m a member of. This committee meets weekly and we usually have a full agenda. We discuss whether to take on new clients, do new business with existing clients or exit a client where there is a reputational issue that has been identified (such as concerns around financial crime, aggressive taxstructuring, etc. I don’t understand the structure of one of the deals that will be presented, so I stop by the desk of one of my derivatives lawyers to get the background. I am repeatedly interrupted by “urgent” emails and phone calls. My bosses in London are on the way to the office, so, as is the case most days, I have a few quick discussions with them. Reputation risk committee meeting. We discuss four matters. We approve transactions with three of these clients, but for the fourth

one, we are not comfortable. We’re inclined to reject the deal and formally “exit” the client but agree to give the deal team a week to do some more work and report to us. 6.30 pm Back at my desk. I reply to a few more emails and speak to one of my lawyers about the client that we are considering exiting. 7 pm

I try to leave around 7 most days. I’ll get home a little before eight, grab some dinner with any family members who haven’t eaten, try to ask my fifteen-year old boys a question about school that will elicit any response other than “fine” and maybe make a final phone call to London. I average about two evening calls per week with London; colleagues in London are quite good about arranging calls with Hong Kong first thing in their morning, which is why this isn’t a daily event. It’s sometimes unavoidable, such as, when we have global calls that include lawyers from New York. a

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E-COMMERCE IN CHINA AND AUSTRALIA — CHALLENGES FOR IN-HOUSE COUNSEL The continuing rise of the middle-class in China and the growing prevalence of e-commerce sites presents a range of opportunities for companies in Australia and overseas. Importantly, it also presents a range of legal considerations and complex challenges.

he rise of China’s middle-class, from encompassing 4% of all urban households in 2002 to more than 68% of all urban households in 20121, has had a dramatic impact on the world economy. Multinational companies have sought to meet the demand created by this new middle-class population with varying degrees of success. Inhouse lawyers have had to learn the typical tactics and strategies required to successfully operate in China’s market including issues relating to intellectual property protection; the difficulties of concluding and enforcing litigation; the complexities of national versus local regulations; the system of product registrations and business licences; and the delicate balancing of local customs with local and extra-territorial laws against bribery and corruption. The rise of e-commerce websites such as JD.com (now listed on the NYSE with a market capitalisation exceeding US$60 billion) and Ali Baba (also listed on the NYSE with a staggering US$440 billion market capitalisation) has dramatically changed the retail landscape of China as well as the manner in which business is transacted. On 11 November 2017, sales over JD.com and Ali Baba’s T-Mall accounted for over US$25 billion in retail transactions in a twenty-four-hour period.2 In the meantime, the US has experienced an explosive growth in online e-commerce.3 The move away from a traditional storefront as the single point of contact with a consumer to, e-commerce websites and the associated infrastructure, such as fulfilment centres, has also contributed to significant changes in these countries. Now that Amazon has launched its fully-fledged offering in Australia (in December 2017)4, we can expect more changes to the Australian retail landscape in the near future. What does all this mean for in-house lawyers?

1. China E-Commerce There are two key factors that have accelerated cross-border China e-commerce for multinational companies. The first factor is the effect of the release of the “List of Imported Commodities for Retail in Cross-Border E-Commerce”, issued by 11 Ministries in March 20165, which effectively suspended the rules for cross-border sales in relation to certain categories of goods. The first category to be given favourable treatment under the suspended rules includes clothing, footwear, children’s toys, home appliances, food and beverages and certain medical devices. These categories of products are known as the “Positive List” and can either be imported in bulk to bonded warehouses or sent to consumers directly with different duty and VAT levies on each.6 The second category comprises those goods that are not on the Positive List but are not restricted. Similar rules apply, although there are generally higher levels of duty and VAT. Finally, there are restricted goods (including pesticides, veterinary preparations etc.), which cannot be imported under cross-border rules regardless of the categorisation of the goods. Although the rules are currently being reviewed, with new rules expected in December 2018, at present, the ability of multinational companies to directly import their goods to 8

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China’s consumers via e-commerce channels has been dramatically expanded. Accurate identification of whether goods are on the “Positive List”, or at least not on the “Negative List”, will immediately open opportunities for offshore companies to sell goods cross-border through e-commerce channels. Additionally, the sale of goods is effectively recognised as having occurred offshore, meaning that the usual regulatory requirements for goods (such as CCC certification), as well as requirements around packaging, are also suspended. Being on the Positive List is not a way of avoiding Chinese laws on packaging, but there is a tacitly understood element of “‘buyer beware”, given that consumers are buying offshore goods. The second factor that has significantly improved the outlook for multinational companies is the adoption by JD.com and T-Mall (belonging to the rival Ali Baba) of policies that restrict the sale of goods other than by the product manufacturer or the registered owner of the relevant trademark.7 Given the prevalence of counterfeit products, parallel imports and the uncertain providence of products sold in China, JD.com and T-Mall have carved out a valuable space for multinational companies to directly sell their authentic products to China’s consumers. On the surface, this sounds quite straightforward. However, in any typical multinational company, there are a number of challenges. Firstly, identifying the holder of the intellectual property amongst the corporate group is critical in order to provide a licence to the entity engaging in e-commerce. When it comes to cross-border e-commerce, the selling entity is less critical (so long as it is not a domestic PRC entity), but for domestic China e-commerce, the selling entity must be a domestic PRC entity. Secondly, as corporate groups change their name or merge, usually to manage the tax affairs or to change the identity of the parent corporation over time, the domestic China IP registration may not have been updated. A decision needs to be made to either update the registration to match the current IP owner or to prove the chain of ownership between the current holder and the registration. Finally, some companies may not even have a China trademark registration to support the sale of their product. This might be because, historically, a registration could not be secured; was secured by a third-party; or the China market was not seen as critical to sales, leading to a decision not to register. Either way, the focus on selling through these channels underscores the importance of controlling the relevant brands in China. A further challenge for in-house counsel involves the dynamic nature of selling during the number of “festivals” that occur throughout the year. As noted above, during these festivals, significant amounts of goods are sold. But this is partly due to the following tactics designed to engage consumers and make sales throughout the course of the festival: strong participation of the product manufacturer or trademark holder in an ongoing program of discounting; product promotions; and constantly changing website displays to give prominence to

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particular products. It is not dissimilar to television shopping. The controls around the making of representations and the rules around pricing that the multinational corporation adopts need to be carefully considered to ensure that they are flexible enough to allow for these dynamic changes while following internal corporate guidelines.

2. Australian E-Commerce Australian consumers are familiar with e-commerce, having experienced it through purchases from US sites (such as Amazon. com), “Catch of the Day” and other similar sites, or local retailers using e-commerce platforms to sell and deliver products. The arrival of Amazon Australia, however, will create additional challenges to inhouse counsel. Amazon Australia has introduced two different business models— firstly, where Amazon itself purchases goods, sets prices and sells, and secondly, Amazon Marketplace where individual sellers use Amazon’s platform to sell goods.8 Regardless of whether the goods are sold by Amazon itself or through the Amazon Marketplace, the key challenge for multinational companies is that of parallel importation and brand protection. Australia has relatively weak protections against parallel importation. Traditionally, control over importation of goods into a country or region has ensured that the brand owner can manage the geographic availability of goods and, consequently, pricing and margins. Brand owners now increasingly face the prospect that Amazon or sellers on Amazon Marketplace will source identically branded goods manufactured overseas for other markets (e.g. the US market), import them into Australia and sell them here at prices that compete with the authorised import by a distributor or a brand owner.9 In particular, smaller sellers are less constrained by commercial margins than a distributor of a brand owner. Where the imported goods have different electrical standards,10 or may be restricted from importation due to restrictions from Australian biosecurity laws, a brand owner may have some recourse to prevent the parallel importation into Australia. However, in the absence of a clear process to report such importations and ensure that action is taken, it is a far from satisfactory process. A further element that may contribute to the unattractiveness of the importation of overseas goods to Australia is the current consideration around implementing a parcel tax to fund greater levels of parcel inspections.11 However, a more complex problem arises when the consumer, having purchased a product on Amazon, brings it to the brand owner seeking repair, replacement or a refund. Consumers are likely to be indifferent to the specific origin of the product and, having purchased a branded electrical item through an Amazon Marketplace seller, may bring it to the brand owner in Australia looking to enforce consumer remedies. The ACCC makes it clear that it is the parallel importer, not the brand owner, that has the responsibility for refunds, returns and warranties.12 But when faced with a product return from goods that are clearly branded with those of the brand owner, the brand owner is placed in an invidious position. Should the brand owner recognise the warranty, thereby providing good customer service and protecting its own brand? Or should it accept the goods even though it has not benefited from the sale and has now incurred the cost of providing a warranty or service for goods intended for another company? Even more complex is the case where the goods cause loss or damage to the consumer and a complaint is made against the brand owner even though they are not responsible. In the age of social media, brand owners are understandably wary of leaving customers without an adequate resolution.

3.Conclusion The key change that companies such as JD.com, Ali Baba and Amazon have brought is that there is no longer a clear geographical distinction between markets for products. In the past, factors such as international shipping, electrical standards, minimum order quantities, foreign currency and distribution arrangements all worked together to allow brand owners to have a reasonable amount of control over the markets for products. The advanced capabilities of the current e-commerce platforms and the broad consumer acceptance to purchase online have contributed to the ubiquity of e-commerce. These trends have also dramatically challenged pricing trends and product availability in favour of consumers. However, the practical issues that arise from moving from a territorial-based system of controls to one where goods can be purchased from almost anywhere will continue to challenge brand owners to devise practical ways to deal with consumers while protecting their reputation. a Footnotes 1. https://www.mckinsey.com/industries/retail/our-insights/mapping-chinas-middle-class at 20 December 2017 2. https://www.forbes.com/sites/helenwang/2017/11/12/alibabas-singles-day-by-thenumbers-a-record-25-billion-haul/#2ceb8e611db1 at 20 December 2017 3. https://www.statista.com/topics/2443/us-ecommerce/ at 5 April 2018. 4. http://www.afr.com/business/retail/amazon-to-change-the-game-on-deliveries-20171207h00lj9 at 20 December 2017 5. https://www.rvo.nl/sites/default/files/2017/03/Cross-Border%20E-Commere%20 Guidebook%20FINAL%20FINAL.PDF at 22 December 2017 6. https://www.rvo.nl/sites/default/files/2017/03/Cross-Border%20E-Commere%20 Guidebook%20FINAL%20FINAL.PDF at 22 December 2017 7. http://help.jd.com/rule/ruleDetail.action?ruleId=2517 at 12 January 2018 8. http://www.afr.com/business/retail/amazon-invests-700m-for-long-term-success-in-australia20171113-gzkb44 at 12 January 2018 9. http://www.klgates.com/change-is-coming-to-australian-parallel-importation-law--what-doyou-need-to-know-01-25-20181/ at 23 March 2018 10. http://www.saaapprovals.com.au/frequently-asked-questions/ at 23 March 2018 11. https://www.smh.com.au/politics/federal/department-of-home-affairs-plans-new-tax-onparcels-being-posted-to-australia-20180321-p4z5gw.html at 23 March 2018 12. https://www.accc.gov.au/business/treating-customers-fairly/selling-parallel-imports at 23 March 2018

Alistair Grant As General Counsel – APAC Region for Spectrum Brands, Alistair has a particular interest in the challenges presented to multinational companies operating within the APAC region. These include navigating the complexities of business culture and domestic laws in the countries in the APAC region while upholding the corporate culture and values adopted by the multinational company.

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theAustraliancorporatelawyer

2018 INTERNATIONAL ARBITRATION SURVEY: THE EVOLUTION OF INTERNATIONAL ARBITRATION The results of the 2018 Queen Mary White & Case International Arbitration Survey are now available. Record participation from stakeholders around the globe, including in-house counsel, provides the most comprehensive guidance yet as to what users want and expect, and the factors that may motivate the evolution of international arbitration.

he 2018 Queen Mary University of London White & Case International Arbitration Survey examined the theme ‘The Evolution of International Arbitration’, tracking the principal drivers and stakeholders that the arbitration community expects to influence the future direction of international arbitration. An overwhelming majority of respondents (97%) indicated that international arbitration, either as a stand-alone dispute resolution method, or in combination with other ADR methods, was their preferred option for resolving cross-border disputes. Similarly, most respondents agreed that the use of international arbitration was likely to increase overall across the Energy, Construction/Infrastructure, Technology, and Banking and Finance sectors. The full results are available online.1 In this article we provide a brief summary of the key findings and focus on the survey’s data about the perspectives of in-house counsel, who represent the ultimate users of international arbitration.

••

Present The findings of the survey are the most comprehensive in its history and are drawn from a questionnaire completed by 922 respondents and from 142 telephone or face-to-face interviews. Ten percent of respondents listed their primary role as in-house counsel and twenty five per cent of respondents were principally practising in the Asia-Pacific region. ••

••

Preference for arbitration. In total, an overwhelming ninety-nine per cent of respondents would recommend international arbitration to resolve cross-border disputes in the future. Both in 2015 and this year, only four percent of respondents expressed that they would rather opt for commercial litigation to resolve a cross-border dispute. Compared to the 2015 survey’s findings, there has been a significant increase in the overall popularity of arbitration combined with ADR around the globe: ninety-seven percent of respondents indicated that international arbitration is their preferred method of dispute resolution, either on a stand-alone basis (48%) or in conjunction with ADR (49%). This was an increase on the 2015 survey, which found that an aggregate of ninety percent of respondents preferred international arbitration, either as a stand-alone mechanism (56%) or together with ADR (34%). Characteristics. “Enforceability of awards” (64%) continues to be perceived as arbitration’s most valuable characteristic, followed closely by “avoiding specific legal systems/national courts” (60%), “flexibility” (40%) and “ability of parties to select arbitrators” (39%). Meanwhile, “cost” continues to be seen as arbitration’s worst feature, followed by “lack of effective sanctions during the arbitral process”, “lack of power in relation to third parties” and “lack of speed”. Institutions. The five most preferred arbitral institutions are (in order) the (1) ICC, (2) LCIA, (3) SIAC, (4) HKIAC and (5) SCC. Notably, Singapore has now passed Hong Kong as a preferred seat, with SIAC surpassing HKIAC as a preferred institution. There was also a trend of local institutions being in the top eight in their respective regions—for example, CIETAC in the Asia-Pacific region (eighth). Given the global nature of the 2018 survey, it is unsurprising that more remote seats (such as Australia) and smaller institutions (such as the ACICA) do not yet feature prominently. |

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••

The three most important reasons for respondents’ preference for certain arbitral institutions show that, when it comes to preferring one institution over another, arbitration users tend to look at them from a macro perspective, rather than measuring specific aspects of their administration of cases. Those reasons are: (1) general reputation and recognition of the institution; (2) high level of administration, including efficiency, proactiveness, facilities, quality of staff; and (3) previous experience of the institution. Seats. The five most preferred seats of arbitration are (1) London, (2) Paris, (3) Singapore, (4) Hong Kong, and (5) Geneva. For respondents in the Asia-Pacific region, the top four preferred seats are London (19%), Singapore (18%), Hong Kong (15%) and Paris (10%). When asked to indicate the four most important reasons for preferring the given seats, and to rank those reasons in order of importance, the reasons were, in order of importance: “general reputation and recognition of the seat” (14%); “neutrality and impartiality of the local legal system” (13%); “national arbitration law” (12%); and “track record in enforcing agreements to arbitrate awards” (11%). The last three reasons can be summed up in what the survey previously called the “formal legal structure” of the seat. These three reasons suggest that, by looking at the systemic legal traits of a seat, arbitration users will prefer a certain seat if the local legal apparatus provides them with sufficient assurances that they will be treated neutrally and impartially by its courts and that their recourse to arbitration will be unhindered. Ad-hoc regimes. When asked to indicate the procedural regimes respondents have used for ad-hoc arbitration, the single most outstanding result was the UNCITRAL Arbitration Rules (84%), followed by “national arbitration laws” (33%) and “bespoke regimes agreed by the parties” (15%). Diversity. Whilst nearly half of the respondents agreed that progress had been made in terms of gender diversity on arbitral tribunals over the past five years, less than a third of respondents believed this in respect of geographic, age, cultural and ethnic diversity. Information about arbitrators. Seventy percent of respondents stated that they had access to enough information to make an informed choice about the appointment of arbitrators. The most used sources of information about arbitrators included “word of mouth”, “internal colleagues” and “publicly available information”. Technology. Technology is widely used in international arbitration, and an overwhelming majority of respondents favoured its greater use in the future of “hearing room technologies”, “cloud-based storage”, “videoconferencing”, “AI” and “virtual hearing rooms.” Efficiency. “Due process paranoia” continues to be one of the main issues that users believe is preventing arbitral proceedings from being more efficient. Both the 2015 survey and the current survey found that the “lack of effective sanctions during the arbitral process” (including for matters such as dilatory tactics) was the second-worst characteristic of arbitration. Third-party funding. Ninety-seven percent of respondents were aware of third-party funding in international arbitration. The majority of respondents had a generally “positive” perception of third-party funding, particularly those who had actually used third-party funding.

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The perspectives of in-house counsel Preferred methods of cross-border dispute resolution. When asked about preferred methods of cross-border dispute resolution, in-house counsel, more than any other sub-group, reflected a clear preference for international arbitration, together with other forms of ADR (60%), over international arbitration as a stand-alone (32%). Practical issues with this were revealed in interviews, where most interviewees admitted that, in the context of using ADR in conjunction with international arbitration, ADR was generally resorted to only in cases where there was a contractual mandate to do so—i.e. through multi-tiered escalation clauses. Further, interviewees stated that unless the dispute resolution clause compelled the parties to attempt amicable resolution, arbitrators would not refer the parties to ADR at any stage of the proceedings. However, interviewees noted that some arbitral rules contain provisions asking arbitrators to instruct parties to attempt settlement (e.g. rule 23.1 of the ACICA rules). Most valuable characteristics of arbitration. In-house counsel rated “confidentiality and privacy” in third place as arbitration’s most valuable characteristic, in contrast to other groups that tended to rate it fifth. A significant forty-six percent of in-house counsel rated “confidentiality and privacy” among the top three most valuable characteristics of arbitration, with fifty-seven percent rating it as “very important”, and sixty-nine percent

having the view that confidentiality should be an opt-out rather than an opt-in feature of international arbitration. This result suggests that, from a commercial perspective, the ability to keep arbitrations away from the public eye in general, and competitors in particular, continues to be a highly valued feature of arbitration. Access to information about arbitrators. While seventy percent of respondents declared themselves satisfied with the information they had access to when considering the appointment of arbitrators, merely fiftyseven percent of in-house counsel replied “yes” to this question. A majority (80%) of in-house counsel indicated their primary source of information was “from external counsel”. As in the 2010 survey, in-house counsel tend to be heavily reliant on their external counsel for this kind of information. The top two choices, “word of mouth” (77%) and “from internal colleagues” (68%) show just how important it is for parties and their in-house or external counsel to be part of a sophisticated network of peers so that all relevant information is potentially just a few phone calls away.

Future Overall, users seem to be satisfied with the general framework and concept of international arbitration; but, when faced with various procedural aspects of it, they find much room for improvement in many specific areas.

In your view, which of the following factors will have the most significant impact on the future evolution of international arbitration? Increased efficiency, including through technology

61%

Create certainty and enforcability of awards

43%

Increased diversity across arbitrators and users of arbitration

33%

Protection of procedural flexibilty and adaptability

33%

Greater harmonisation of standards and processes

31% 28%

More transparency from arbitral institutions Emphasis on collaborative rather than adversarial processes

27%

More publically available information about arbitrators

26%

Other

00 ••

Use of arbitration. Respondents believed that the use of international arbitration was likely to increase in the Energy, Construction/ Infrastructure, Technology and (to a lesser extent) the Banking and Finance sectors.

••

Efficiency. More than half of the respondents (61%) thought that “increased efficiency, including through technology” was the factor most likely to have a significant impact on the future evolution of international arbitration. The interviews revealed the view that arbitrators need more tools to sanction poor conduct by counsel, but also that they need to make more effective use of the tools they already possess.

••

Role of institutions. A significant majority of respondents (80%) considered that arbitral institutions are best placed to influence the future evolution of international arbitration.

••

Diversity. The top suggestions to encourage diversity were that (1) all stakeholders should expand and diversify the pool from which they select arbitrators; (2) more education and awareness is required about

10 10

20 20

30 30

40 40

50 50

60 60

70 70

80 80

the need for, and advantages of, diversity; and (3) legal education and professional training in less developed jurisdictions should be improved, which would lead to a larger, more diverse pool of arbitrators. ••

Feedback about arbitrators. Eighty percent of respondents would like to be able to provide an assessment of arbitrators at the end of a dispute. Nearly ninety per cent would do so by reporting to an arbitral institution.

••

Desired innovations. The survey provided a list of potential improvements and innovations to discover which ones respondents thought, if implemented, would make arbitration a better fit for each of those four industries. Respondents tended to show a similar degree of appreciation for all of the suggested measures across all four sectors. The results are broken down on the following page:

Footnotes 1. https://www.whitecase.com/publications/insight/2018-international-arbitration-surveyevolution-international-arbitration VOLUME 28, ISSUE 3 – SPRING 2018 |

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27%

26%

27%

24%

27%

28%

20%

24%

25%

21%

25%

22%

25%

27%

25%

26%

27%

28%

23%

22%

30%

22%

24%

Expedited procedures for claims

Wider and faster recourse to interim and conservatory measures

Publically available rosters of arbitrators with specialist industry sector experience

Summary determination procedures

More industry/sector-specialised arbitral institutions

More industry/sector-specialised arbitral rules

Which of the following improvements and innovations would make international arbitration more suitable for resolving cross-border disputes in these industries and sectors?

Technology

Energy (inc. Oil & Gas)

Construction / Infrastructure

Banking & Finance

Issues identified in recent practice. Recent arbitral practice has highlighted a number of recurrent issues that some users felt should be subject to a more focused regulation through arbitral rules. In particular: –– Respondents thought that arbitration rules should include provisions dealing with arbitrator conduct in terms of both standards of independence and impartiality and efficiency (or lack thereof ). –– Over seventy per cent of respondents expressed that the conduct of the parties (and/or their legal representatives) and their counsel, generally, and the consequences for their various dilatory tactics, in particular, should be subject to specific arbitration rules. –– The increased use of tribunal secretaries has prompted the need to better define their duties and the limits thereof (although most of the major arbitral institutions have now issued guidelines). –– The increasing role of expert witnesses in arbitral proceedings has led to users pondering whether experts should be held against the same or similar standards of independence and impartiality as arbitrators.

The views provided by the respondents to the 2018 survey show that, whilst international arbitration is a clear preferred forum for resolving crossborder disputes, there remain numerous opportunities for stakeholders, including arbitral institutions, to address respondents’ perceived drawbacks in opting for international arbitration over litigation, in particular cost and “lack of effective sanctions during the arbitral process”. Respondents are optimistic, however, about the continued growth of arbitration and about the role of technology as a driver of efficiency. a 12

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Max Bonnell As a Partner in White & Case’s International Arbitration Group where he focuses on international arbitration, commercial litigation and mediation, Max Bonnell has advised clients in multiple jurisdictions across a variety of industry sectors. Max has acted in arbitrations under the rules of the ICC, LCIA, LMAA, CIETAC, ACICA, SIAC, HKIAC and the Arbitration Federation of South Africa, as well as in ad -hoc arbitrations. Max regularly appears as an advocate before international tribunals, including in Sydney, London, Hong Kong, Singapore, Dublin and Geneva, and is often appointed to sit on international tribunals.

Stuart Blaxell A Senior Associate in White & Case’s International Arbitration Group in the Sydney office, Stuart has extensive experience with trade finance and the application of Incoterms and UCP 600 to disputes Working in international trade, Stuart has supervised or conducted litigation, arbitration and mediation across the world, with a particular focus in the United States and United Kingdom.

Marina Kofman As an Associate in White & Case’s International Arbitration Group in the Sydney office, Marina focuses on international arbitration and commercial litigation. Prior to joining White & Case, Marina worked in the international arbitration group of a leading international firm in London, where her work focussed on investment arbitration. Marina has also worked and interned at the Secretariats of the Hong Kong International Arbitration Centre and the Australian Centre for International Commercial Arbitration; and spent three years working in-house for two major international insurers.

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COPYRIGHT HERE AND ACROSS BORDERS – TIPS FOR AUSTRALIAN IN-HOUSE LAWYERS In a global economy, in-house lawyers must navigate and anticipate the costs and risks of varying standards in Copyright as it impacts Australian trade and export.

ike it or not, a corporate lawyer cannot pick up a newspaper or law magazine without coming across the trade war between the USA and China on the basis of intellectual property (IP) or forced technological transfer. As globalisation forces exponentially increase the speed of cross-border exchange in goods, services, capital and knowledge, the reality of economic structural changes has meant that knowledge creation and innovation are a nation’s most important tradeable economic assets of a nation. IP therefore is a daily concern for corporate lawyers. Australia’s economic growth previously aimed at increasing the volume of exports; however, long-term economic growth is now based increasingly on the quality of exports, regardless of the size of the country. This means that Australian businesses will be incentivised to create new products and services that are IP-dense, and the Australian Government will realise they must strengthen IP protection here and overseas and, to save costs, advocate for harmonised IP laws. Below is a DFAT1 image of Australia’s regional trade agreements. This network will expand with more bilateral (UK/EU) and regional agreements, all likely to contain IP harmonisation provisions in the future.

•• ••

generated economic value of $122.8 billion, the equivalent of 7.4% of GDP; generated just over $6.6 billion in exports, equal to 2.7% of total exports. This has grown at 5.7% per annum over the past five years.

In 2015 the World IP Office (WIPO)2 produced several reports on copyright and standardised copyright-dense industries into the following categories: - Press and literature - Music - Theatrical productions - Motion picture and video - Radio and television - Photography - Software and databases - Visual and graphic arts - Advertising services - Copyright collecting societies

Manufacture and sale of: - Media equipment - Electronic game equipment, and other similar equipment - Computers and equipment - Musical instruments - Photographic and cinematographic instruments - Photocopiers - Paper

CORE

INTERDEPENDENT

NON-DEDICATED

PARTIAL

- General wholesale and retailing - General transportation - Telephone and internet

- Apparel, textiles and footwear - Jewelry and coins - Other crafts - Furniture - Household goods, china and glass - Wall coverings and carpets - Toys and games - Architecture, engineering, surveying - Interior design - Museums

Copyright industries and trade The significance of Australian copyright industries as a contributor to the Australian economy is rarely reflected in intellectual policy debates. This is possibly lack of a central registration system or not locating copyright governance with the other IP rights in IP Australia. Surprisingly, copyright industries are the third-largest income generator in Australia. In 2017, the Australian Copyright Council and PWC identified that copyright industries: •• employed over 1 million Australians (approximately 1,022,000 people), which constituted 8.7% of the Australian workforce;

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Copyright law is designed to incentivise people to invest their time, talent and other resources in creating new works or material. Copyright is not intended to protect ideas, styles or techniques. It protects the capture of these in a material form and the right to use and reproduce this material. The Turnbull Government shifted the responsibilities associated with the Copyright Act 1968 (Cth), Circuit Layouts Act 1989 (Cth) and related regulations from the Attorney-General’s Department to Department of Communications 3. The Australian Copyright Council 4 and Arts Law Centre of Australia 5 provide great resources and events for corporate lawyers. At a broad policy level, copyright law is shaped by the copying technology available and the time that works have survived the lifespan of their creators. Copyright has subsequently expanded the categories of works to capture new material forms (i.e. books to video). The extension of duration has been from fifty years (based on time works remained in print after the life of the author) to seventy years. In Australia, copyright protection is free and automatic, provided the work in question falls within the Act. Australia historically had a copyright register, now abolished, whereas other countries (i.e. USA and China) maintain a copyright register.

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Copyright gives the owners the exclusive right to deal with the material in which they have captured their content. The owner’s exclusive rights vary with the kind of material. 1) In what materials does copyright subsist? Copyright subsists in two categories:

WORKS

SUBJECT MATTER OTHER THAN WORKS

Literary works: text in any format and including tables, computer programs, journal articles, novels, screenplays, poems, song lyrics, anthologies.

Films: the visual images and sounds in a film, video or DVD are protected separately from scripts and music.

Artistic works: paintings, drawings, photographs and works of artistic craftsmanship.

Sound recordings: the recording itself in addition to the music or story that is recorded.

Musical works.

Broadcasts: TV and radio broadcasts, separate from the copyright in the films, music and other material that they broadcast.

Dramatic works: choreography, screenplays, plays and mime pieces.

Published editions: typographical arrangements, separate from the copyright in works reproduced in the edition (such as poems or illustrations or music).

2) What are the requirements for subsistence of copyright? There are requirements for eligible works, authorship and originality. The threshold for originality is not high, just that the work is not a mere copy, some level of skill and effort has been exercised in its creation, and it has been created by a human author. Get advice, as this can be complex. 3) Exploitation and infringement Owners of copyright have different exclusive rights depending on the work. Ownership is a contested area, especially where there is more than one author, so dated evidence of authorship is helpful.

WORKS

SUBJECT MATTER OTHER THAN WORKS

Owners have the exclusive right to: • reproduce the work; • make the work public for the first time; and • communicate the work.

Owners have the exclusive right to: • copy their material.

Owners of literary, dramatic and musical works have additional exclusive rights: • to perform the work in public; and • to make an adaptation.

There are also rights relating to: • showing films/playing recordings in public; • transmitting films and sound recordings to the public using any form of technology; • rebroadcasting television/sound broadcasts.

Generally, the following ownership applies to copyright: •• Employees: If made by an employee (rather than a contractor) as part of that employee’s job, the employer usually owns copyright. This changes for people employed to create material for newspapers, magazines and other periodicals. •• Contractor photographers, engravers and portrait maker: Subject to agreements otherwise, freelance creators usually own copyright in what they create and provide a licence for use to the instructor. •• For films and sound recordings: The first owner of copyright is usually the producer or the person who paid for the film or recording to be made. •• Government: Government owns the copyright in material created, or first published, by it.

Understanding ownership and the rights granted are key for valid commercialisations of copyright. A copyright owner may be able to restrict an assignment or licence in various ways: to territory, time, a set number of copies, or format. Infringement Unless a special exemption applies (seek advice), infringement occurs when a person: •• uses copyright material without the owner’s permission; •• endorses or sanctions another’s infringement; •• imports certain types of items containing copyright material; or •• sells infringing articles imported without permission. Instead of a flexible factor defence regime (‘fair use’), Australia adopted a specific list of defences (‘fair dealing’.) Get advice on this issue for trade. Enforcement The usual civil and criminal enforcement procedures exist in Australian courts with various remedies available, including injunctions, damages and additional damages (subject of a further article). Australian Customs’ search and seizure is a strategic IP trade enforcement tool, particularly where crimes of counterfeit imports and export supply chains are concerned. Moral & Performers’ Rights “Moral rights” belong to the creators of copyright (even if they do not own it), which means they can: •• be attributed as the creator of their work; •• take action if their work is falsely attributed as being someone else’s work; and •• take action if their work is distorted or treated in a way that is prejudicial to their reputation. Performers’ rights enable performers to demand consent from those seeking to record or broadcast a live performance, or use an unauthorised recording of a performance. 4) How does copyright intersect with other IP rights? The key points of intersection are: •• Trade marks: Copyright can vest in the designs of logo trade marks. •• 'Passing-off' and Australian Consumer Law: Infringement of copyright can occur where packaging, logos and get-up are being copied. •• Designs: Industrial designs are often embodied in technical drawings. which fall within copyright protection as artistic works. However, Australian policy is that design law and copyright do not overlap. This is not the same overseas where both designs and copyright can coexist and be equally enforceable. Obtain advice, this is difficult! •• Confidential information: Copyright infringement occurs where a person reproduced materials disclosing confidential information . •• Patents: Patents can protect the idea behind software and copyright can protect the specific form of code. 5) Copyright issues and exporting Exporters often realise the importance of their copyright and IP when it is too late, after infringement, dissemination or once they have infringed another party’s rights. Frequently overlooked copyright issues by exporters are: •• There is automatic protection upon creation of a work in the countries of the Berne Convention for the Protection of Literary and Artistic Works or a member of the World Trade Organization (WTO).6 •• To maximize rights, if possible, register a copyright claim with the national authority. •• Copyright registration is worthwhile as it is evidence of copyright ownership if you wish to enforce your copyright against an infringer. VOLUME 28, ISSUE 3 – SPRING 2018 |

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••

Parallel importation (i.e. goods exported to markets where they were not intended) can be legal in many countries; however, it differs depending on whether the country adopted national, regional or international copyright “exhaustion” policies under TRIPS. Get advice on this point!

Finally, here are the most common mistakes in understanding copyright: •• Believing that IP protection is universal or assuming that laws and procedures for the protection of IP rights are the same worldwide. •• Drafting international contractual IP clauses without using TRIPS/WIPO treaty language. •• Assuming copyright exhaustion laws are the same as other IP rights. •• Disclosing information without a confidentiality or nondisclosure agreement. •• Flattering by imitation – not avoiding infringing upon others’ IP rights. •• Not defining issues of ownership of IP rights when outsourcing manufacturing. •• Exporting licensed products without authorisation from the licensor. •• Expecting international copyright expiry calculation to be simple. •• Forgetting – to conduct a 'freedom to operate' search; – to define who owns IP, good/service improvements; – moral rights and performers’ rights clauses; – the © symbol to put others on notice; and – customs procedures as an alternative to enforcement.

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1. http://dfat.gov.au/trade/topics/Pages/international-and-regional-economic-architecture.aspx 2. http://www.wipo.int/export/sites/www/copyright/en/performance/pdf/pwc_report_2017_ australia.pdf 3. https://www.communications.gov.au/what-we-do/copyright 4. https://www.copyright.org.au/ 5. https://www.artslaw.com.au/art-law/entry/contracts-and-other-forms-of-agreement/ 6. Check this list: http://www.wipo.int/treaties/en/ip/berne/

Jacqueline Plunkett A highly experienced Intellectual Property Lawyer, Jacqueline’s legal career has included roles with IP Australia, mdp Law, both of which preceded her current role as Intellectual Property Lawyer at Watermark Intellectual Property Lawyers & Attorneys. In addition to IP, Jacqueline boasts a deep understanding of alternative dispute resolution, policy analysis and emerging legal issues.

Conclusion At a strategic level, Australian lawyers must add to their 'Priestly 11' a clear understanding of Australian intellectual property law in addition to international and trade IP issues, not only because IP forms the base for intangible economic law asset creation. In-house lawyers are expected to navigate and anticipate the costs and risks of varying standards in IP, enforcement and IP exploitation avenues. Whilst pressure to globally harmonise IP laws is increasing, it is up to today’s corporate lawyers to manage the costs and risks to the business both domestically and abroad.

Footnotes

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THE ISSUES OF WORKING ON CROSS-BORDER TRANSACTIONS AND DISPUTES Cross-border disputes can present a number of technical and practical challenges for appointed financial or accounting experts engaged to investigate issues, value assets or estimate losses for their clients. This article sets out some of those challenges.

ross-border disputes can arise in many situations where parties, assets or operations are based in different jurisdictions or transactions or investments occur across national lines. Increasingly, this activity involves high-growth economies in emerging and frontier markets such as China, India, Brazil, former Soviet Union and Eastern bloc countries, and African nations. With emerging and frontier markets often comes a less developed or transparent economic, political and legal system compared with the developed markets of the investor or trading partner. An obvious challenge for financial experts can involve foreign currency considerations. Economic and political uncertainties have continued to cause volatility in global currency markets and, as a result, exchange rates can have a significant impact on valuation and damages assessments. It may be argued that currency volatility has in itself contributed to an alleged loss. An expert may need to use an entity’s books and records, as well as source empirical evidence, to assess the strengths of statements made regarding the relationship of foreign currency to the entity’s financial performance and financial position. Another significant consideration relates to when local currency cash flows included within a quantum loss assessment are translated into the currency in which damages will ultimately be paid. The estimated date that a cash flow would have occurred determines the relevant date for which the prevailing exchange rate should be used in translation. Any resulting currency gains or losses can significantly affect the quantum of the claim. When an assessment spans a number of years, the cash flows need to be ‘discounted’ to the valuation date to reflect the time value of money (a dollar today is worth more than a dollar in 10 years). Generally, the later the estimated cash flow arises within a loss period, the lower the discounted value of the cash flow at a given valuation date. Therefore, the timing of foreign currency fluctuations and related gains and losses will affect the overall quantum. Both foreign exchange gains and losses should be considered equally, so that the award puts an entity in the same financial position it would have been in but for an event—i.e. no better or worse off. The discounting of future cash flows to a valuation date is fundamental and crucial to loss analysis. Not only does this account for the time value of money, but also the risks or uncertainty of achieving those cash flows. Discount rate assessment can be complex; but, at a high level, it is based on the expected returns of the market, those of a theoretical risk-free asset (generally government bond rates), as well as the volatility, or systematic risk, of the asset or business in question compared with the market as a whole. The higher the risk of future cash flows occurring, the higher the discount rate applied. The discount rate has a significant impact on the calculation of quantum, particularly where the losses run over a long period or indefinitely. Crossborder disputes raise a number of unique considerations in determining the discount rate. Take as an example a US company whose main operations

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are located in Venezuela and whose transactions are denominated in USD. Aspects of the discount rate to consider include: •• Whether the selection of an appropriate risk-free rate should be the basis of government bonds issued in the US or Venezuela—there is likely to be a significant difference between the two. •• The tax rate, theoretically, should be the marginal tax rate prevailing in the jurisdiction in which relevant profits are taxed, which may be the US or Venezuela. •• Whether the assessment should be affected by location—in this case, the risk of doing business in Venezuela. This conceptual question has roots in a fundamental aspect of finance theory—i.e. that the value of an asset should not be affected by diversifiable risk. In practice, adjustments to valuations to reflect country risk are routinely made; the task then becomes how this country risk is measured and applied and the extent to which country risk is reflected in the assessment. Financial assessments also need to consider the basis on which financial information, particularly financial statements, have been prepared. Companies may adopt different accounting standards, which can produce divergent results and likely affect the conclusions of an analysis. Therefore, it is important for the financial expert to understand the basis of preparation and whether any adjustments ought to be made to reported figures. International parties or operations also bring into play different tax regimes. Taxation issues in a valuation or damages assessment can have a significant impact on a claim and subsequent award. The treatment of tax in the calculation of damages that forms the basis of an award may be different from the tax treatment of the award in the hands of the recipient. The overarching principle of damages is to restore the claimant to the same position that it would have been in but for the complained-of event, including the impact of the tax treatment of the award. If the taxation of the award is not considered, the claimant may not be “made whole”. In accounting for tax on the award, there are inherent uncertainties. For example, the timing of any award may not be known if a hearing date has not been set and therefore the tax position of the entity at that time can be unclear. The claimant may have complex tax structures spanning multiple jurisdictions designed to minimise tax liabilities. Some jurisdictions have more complex tax systems than others—there may even be no taxation, such as the British Virgin Islands or the United Arab Emirates. The issue of tax can be an additional complex element in an already complex dispute. Aside from technical issues, cross-border disputes also present a number of challenging practical hurdles that may affect both the timeframes and costs involved. First, consider access to information and relevant individuals. A fundamental step in undertaking a financial analysis is to gather and analyse financial information, and, where necessary, make enquires of relevant personnel. There may be limitations in the information available depending on the subject’s document-retention policy or the overseas country’s legal requirement for data retention. There may even be laws that prohibit data from being taken outside of the jurisdiction.

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A clear challenge is coordinating across time zones. It may be more effective to deploy a team to the location of the business, either by flying in the project team or, where available, using personnel from local associated firms. Site visits can be pivotal to an understanding the financial issues by directly observing the operations and conducting face-to-face interviews with key personnel. Given that the subject business or asset is likely to be located in a foreign jurisdiction, proper planning for the visit is paramount to ensure that time is used effectively and efficiently, particularly having regard to the time and costs incurred in travel. The fruitfulness of a site visit also depends on the level of cooperation extended by those in the country, as well as those being interviewed. Investing time to brief the expert on cultural differences is important to minimising issues along the way. The information (written or spoken) may be presented in a language other than English. This requires translation, either by instructing counsel, the client, or by a member of the expert’s team. It may be a substantial exercise depending on the volume and complexity of the information. Additionally, a translator is required during discussions between the expert and key individuals where a common language is not shared. Care must be taken to ensure that there are no errors or discrepancies between the native and translated text, particularly where it may affect the expert’s analysis and conclusion. Similarly, nuances and slight differences in phrasing between languages should be appreciated to ensure that there is no misunderstanding between what is said and what is translated, particularly with financial “jargon”. Cultural differences, particularly in the conduct of professional relationships, should be acknowledged to ensure that a constructive working relationship is established and maintained with the client throughout the process. Observing the details of business etiquette goes a long way to fostering a positive working relationship. Lastly, a vital consideration for your experts engaged in cross-border matters relates to risk management and their code of ethics, just as it does to legal advisors. This requires specific attention where a matter involves jurisdictions that are exposed to a high risk of bribery and corruption or money laundering. Emerging and frontier markets are often considered high risk and service providers, including your experts, will be cognisant of the potential reputational risks that may arise. Take, for example, the scrutiny of London-based law firms working with Russian oligarchs.

Australia to provide all professional accountants with a process to follow when they become aware of non-compliance or suspected noncompliance with laws and regulations. A key aspect of NOCLAR is that accountants may set aside the duty of confidentiality where disclosure to an appropriate authority is appropriate. a

Janine Thompson A Partner of McGrathNicol Advisory, specialising in dispute advisory and forensic investigations, Janine Thompson is a Chartered Accountant with more than 17 years of dedicated forensic experience. Janine has led and worked on a broad range of dispute advisory engagements and forensic investigations across a number of industries within Australia.

Cathy Zhao As a Senior Manager of McGrathNicol Advisory and a Chartered Accountant with more than seven years of forensic experience, Cathy focusses on dispute advisory services involving business valuations, economic loss assessments, financial analysis and investigations.

Your experts will be fully aware of their obligation to report any illegal behaviour that has become known to them through the services they render. From 1 January 2018, a framework for responding to noncompliance with laws and regulations (NOCLAR) was put in place in VOLUME 28, ISSUE 3 – SPRING 2018 |

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CONDUCTING LITIGATION EFFICIENTLY AND COST-EFFECTIVELY – TIPS FROM SEASONED LITIGATORS In many companies the in-house legal team does not have a specialist litigator. However, dispute resolution work (litigation/arbitration and/or alternative dispute resolution) is the second most significant area of legal work performed by in-house counsel1 and is one of the most common areas of legal work to be outsourced.2 Accordingly, it is important for in-house legal teams to manage disputes efficiently and cost-effectively.

lternative fee structures, discounted hourly rates, technology and flexible staffing are now common in managing litigation costs. It is also worth considering the approaches taken by seasoned and repeat litigators, such as in-house counsel with more experience and dispute financiers, such as IMF Bentham, who work on litigation strategy and execution every day. Nick Galloway, Regional Legal Counsel at global manufacturer PPG, and Matthew Kennedy and Kate Hurford, Investment Managers at Australia’s leading third-party dispute funder, IMF Bentham, share some fundamentals to assist in-house counsel to better manage disputes and conduct litigation more efficiently.

very pragmatic approach to the resolution of disputes, focusing on the arguments and the range of possible outcomes. Brief your commercial lawyers for as long as possible before handing over to litigators. Legal costs stay low because you are working on the arguments and the outcome, not on the process. The client needs to work hard, and they don’t always thank you, but not as hard as they’ll have to work during and in the lead up to trial!

A commercial lawyer’s perspective

My concern with the process of litigation is that it can create impediments and obstacles to resolving a dispute that’s capable of resolution. One aspect that’s underestimated is the effort required in educating all the people involved in the technical aspects of your case. Adopting a commercial approach can lead to a satisfactory outcome quicker and more cheaply.

Nick Galloway: Every dispute looks the same to me — you want $1 million, I want to pay you $0. Whether the dispute resolves at plus or minus $500K depends on the merits, the availability of evidence, cost, risk, prospects for success, the relationship between the parties and each party’s belief in their contribution to the problem. Notice that the merits are only one consideration? That’s sometimes hard to swallow. So too is the reality that in a $1 million dispute, costs will very quickly become more important than all other considerations. All the more reason to focus on the result and not get caught up in ancillary details (discovery, rules of evidence, court rules, affidavits, pleadings, directions hearings — that type of thing). It’s important to note that this is the perspective of an in-house counsel who has spent seventy percent of his time in the commercial world. My view is open to comment and criticism and it is limited by my experience. Still, it’s where I’ve landed, and it’s shaped by different experiences. •• •• ••

••

I have won small disputes and would have been financially better off paying one hundred percent of the claim on Day one without argument. I had one go right through to trial and the decision was so strange the parties reached an agreement on the court steps — not before trial, after the trial! A court was so generous to an incompetent defendant builder that innocent home owners (how can their contribution to the loss be > $0!) suffered terribly from delay, stress, legal and unrecovered remediation costs. Frequently, the client says they want to send a message and it’s your job to talk them off the ledge. They don’t mean it (and they wouldn’t say it if they knew the real cost and time implications). They need to burn off some steam and quickly find the cheapest available solution. Most settle at some kind of mediation.

In transactions, you’re working constantly to find acceptable common ground. Claims look like a type of deal to me and that’s why I take a 20

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Of course, if you can’t resolve a dispute, you need litigation, and good litigators are some of the best lawyers in the profession. Good litigators will also be very commercial, but if the dispute has gone this far they need to take additional considerations into account. It’s time to hand over to Matthew and Kate to discuss the efficient management of claims that reach this stage, but I want to finish with a couple of important points. ••

••

If you have a good argument, you should bring your claim. The system isn’t perfect, but it will generally yield the right result. The same goes if you have a strong defence or the claimant has a weak case. You will have to work for it, but, ultimately, I strongly believe the system will deliver the right outcome. Don’t let anyone tell you that the costs and risks and the challenges of the process are so significant that you should walk away. Even mediators do this and we all know why, but if your position is strong you should use the system to your advantage. There is room for principle. External counsel rub their hands together when they hear this and you need to be careful, but there are times when a message needs to be sent. Disputes are often about cost– benefit; find the cheapest certain outcome and move on quickly — but, if you have a point of principle, don’t be afraid to make it. You should understand the additional costs you’ll incur as a result, but cost isn’t the only consideration. Not always.

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A Dispute Financier’s perspective

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Kate Hurford & Matt Kennedy: If a dispute can be resolved to your company’s satisfaction, without resorting to litigation, then that is often the best outcome. If not, the key becomes how you use and manage the litigation process. Although companies may have reasons of principle or precedent for pursuing litigation (as Nick has indicated), disputes between commercial parties are usually about money. Accordingly, a cost–benefit analysis of the litigation is required. Below, we set out tips on how to manage the litigation process as a claimant for in-house counsel who are not frequent litigators.

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Objectivity and strategy ••

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Assess the action objectively. Rather than focus on how large your company’s losses are or might conceivably become, focus on how much a court will realistically order in damages, if the action is successful. Consider the other side’s arguments, defences (they may have already raised them with you) and financial position. These issues will also provide an insight into how they are likely to respond and conduct themselves in the proceedings.

••

Involve barristers early to help you best assess the company’s prospects of success, the strength of any defences, the costs and how long the case might take to resolve. Barristers will also assist in the selection of the jurisdiction, considering matters such as filing fees, workload and expertise. Too often, parties only consider all the litigation risks, including the risk of having to pay the other side’s costs, once the matter has been listed for trial. Rigorously quantify the estimated costs of the litigation, including the cost of using the in-house team and company resources. Require your external advisers to provide a budget with as much detail as possible of the cost of each stage of the proceedings (while recognising that this may change as the action progresses). This includes the cost of discovery (by estimating the number of documents involved), experts and potential interlocutory disputes (over pleadings and the scope of discovery). With that information, clarify your definition of success and design a strategy. What is the financial result you want and do you want any other non-financial remedies or outcomes? Your definition of success may change as the litigation proceeds, but keeping a reasoned definition of success in mind will help you to make decisions during the litigation and when you have opportunities to resolve the litigation. Articulate your commercial strategy to your external advisers and require them to advise you on a complementary litigation strategy, VOLUME 28, ISSUE 3 – SPRING 2018 |

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reflecting the cost benefit analysis. The strategy should be designed to achieve the best recovery for the costs your company is willing or able to expend on the proceedings. Accordingly, the best strategy may not be the most aggressive, nor include every conceivable cause of action. One of the most fundamental strategic considerations is whether to fund the litigation from your company’s balance sheet, or outsource the cost and risk to a third-party financier. Allowing a financier to pay for some or all of your dispute costs can convert your dispute from an expense to an income-producing asset — turning your in-house legal department into a profit centre.

Project management One of the risks of proceedings is that, when an in-house team hands over a dispute to the company’s preferred legal adviser, often a good deal of control is lost. The litigation process takes over. ••

••

Choosing the right team: Relationships with particular lawyers and their knowledge of your business is important. However, effective litigation is a specialist skill and it is equally important to identify practitioners capable and prepared to execute a strategy and who understand the particular type of dispute and causes of action. You may need new or different advisers for your litigation. Selecting your litigation team yourself allows you to discuss your requirements as part of the engagement. You should discuss with your advisers how many lawyers, and at what level of expertise (at what fee rate), will be required and allocated to the action and why. At times the team may need to expand to manage the work, but discuss the parameters of this up front. Resource allocation: Discuss which lawyers will be assigned with what tasks. The assignment of tasks should be based on skill set and efficiency. It may be more efficient to allocate particular tasks to junior counsel, instead of to a team of junior solicitors. Communication: Agree on communication channels, frequency and format. Formalise the reporting requirements and inform the external advisers about how they will be monitored. Require open communication channels and transparency, including with your barristers. You should be able to directly communicate your commercial and strategic objectives, as well as hear advice and opinion directly from them. Billing & Budget: Find out what billing requirements your external advisers have and negotiate mutually beneficial billing methods. Query whether you will be charged for four people to read an email or attend court when only one or two people may be required for that task. Once the litigation commences, regularly review invoices against the initial budget, task allocations and agreed billing methods. Involvement: Finally, ensure your external advisers involve you in all cost-sensitive aspects of the litigation, such as discovery, selection of experts and narrowing of the issues in dispute – not just settlement discussions. Do not allow mistaken assumptions to be made by external advisers on your, or the company’s, behalf.

Nick Galloway An in-house lawyer with 25 years’experience advising in all areas of commercial law, Nick currently holds the role of General Counsel (ANZ and SEA) at PPG industries, a leading global coatings manufacturer. As a director of the local subsidiaries he has developed an interest in business ethics, the role of the General Counsel and the challenges of wearing many hats.

Matthew Kennedy Prior to commencing as an Investment Manager with Australia’s leading dispute financier, IMF Bentham Limited, Matthew was a barrister for seven years. Prior to joining the Bar, Matthew held a range of roles including a solicitor at Minter Ellison, an associate to a Federal Court judge and an adviser to the Premier of Victoria.

Ongoing review

Kate Hurford

Litigation never goes one hundred percent according to plan. Regularly review the cost–benefit of continuing the proceedings, strategy, allocation of resources, budget and project management. Be prepared to revise all of them with your external advisers when the actions of the defendant and/or progress of the litigation require it.

An Associate Investment Manager with Australia’s leading dispute financier, IMF Bentham Limited, Kate previously worked as a solicitor for Piper Alderman in Adelaide and Herbert Smith (now Herbert Smith Freehills) in both Hong Kong and London. She has also worked as a consultant for legal publisher, Practical Law, part of Thomson Reuters.

By actively managing the litigation, the costs and risks of the process can be mitigated and meritorious claims can be seen through to their most valuable stage, whether that is settlement before trial or a court judgment.

Footnotes 1. ACC Benchmarks and Leading Practices Report 2017 (page 82). 2. Ibid, p. 126.

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2019 THURSDAY

A C C A S I A - PA C I F I C ANNUAL MEETING

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S AV E T H E Mark your calendars for the 1st ACC Asia-Pacific Annual Meeting. Coming to Hong Kong in 2019. For more information visit www.acc.com/education/apac19/

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MANAGING A REGIONAL AND DISPERSED LEGAL WORKFORCE IN ASIA There are two basic dimensions to managing a regional team â&#x20AC;&#x201D; managing a report at a distance and building and managing a team at a distance. The importance of forging a team may vary depending on business needs and risk and the way the company is organised and run. However, as I will explain, there are benefits to collaboration and communication in even the least interdependent of teams.

aving a dispersed team drive a project will require more in terms of project management than what is addressed here. The focus of this article is therefore on the general management of a regional function â&#x20AC;&#x201D; in this case, a regional legal team in Asia.

The various challenges and opportunities relating to a dispersed team in this region can be captured under three headings: communication, cultural differences and efficiency. Which of them is the greatest challenge will depend on your business needs and the issues you face, but effective communication is likely to be the most critical.

Communication Manage expectations and make clear what kind of manager you are. Generally, it is going to be challenging to manage legal support in a region without at least having senior lawyers who can act independently in the hubs or key jurisdictions. However, you may not have that luxury. Either way you will need to spell out your expectations in terms of what you need to be kept informed on, what you consider material or urgent, how to communicate on urgent matters, speed of communication and updates. The ad hoc communication, which will be matter driven, will be a dialogue in addition to the regular, planned calls that are critical for a number of reasons. Then there is team communication, which is also an instrument for sharing among the team and building team identity. This needs to be encouraged but will require a structure and routine. It is important to have regular meetings, which will typically be by audio or video. I have worked for a company before now that had a tele-presence, a great way to further reduce the sense of distance as it provides the opportunity to observe body language. Calls should in any event include both 1:1 calls and calls with the team as a whole. These are for all intents and purposes always going to have different dynamics and purposes. If your team is too large or it is inefficient to communicate with each member of the team on a regular basis, then you should consider finding ways to speak to the more junior members from time to time. Ideally, this would be during an in-person visit and not always with the manager present. When you organise team calls, make sure you stay on top of the agenda. Try to give the junior members in the team some air time too by, for instance, asking them to present on topics. Make sure the reports and team members know how to contact you. You should at least try to match the responsiveness you expect of them in order to set the right example. Most, if not all, companies nowadays have clearly defined annual goalsetting processes. Make sure the goals are clear for each report and, where required or beneficial, add goals conducive to forging a regional team. Ideally, performance appraisals are conducted in person and therefore provide a reason to have a face-to-face meeting with the report. 24

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If you have department or group goals, then make clear what the goals are, who is going to be responsible and who will contribute. Department goals can again be an opportunity to forge cross-border collaboration and work on the cohesion of the team. As it becomes more of a team, you will need to be increasingly sensitive to a fair distribution of work. If language is a barrier in communication with certain contributors, consider making more use of documentation to support the communication (e.g. slide presentations) than you might otherwise. Always allow for off-line communication outside meetings in order to give reports who find it difficult to speak up, or do not want to share their views for a certain reason, an opportunity to raise concerns or ask questions. The team will probably be spread out over different time zones. You may need to consider alternative times for calls to ensure there are not one or more team members who are always on the receiving end of time differences.

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Technology can help shrink the globe and improve communication in the team. The way Google Drive facilitates sharing of files and collaboration on the same product is an example. Video conferencing will give you benefits over and above calls, particularly in a multicultural environment. Depending on your management style and own preferences on effective communication, Google Hangouts or similar tools can help position you as an accessible manager, thereby further improving communication.

Culture Although you have the advantage as a law department of all being professionals with a similar training, there are likely to be cultural differences. The impact of culture and cultural differences should not be underestimated. Not hearing anything does not mean everything is okay. If certain team members do not say much or anything at all for that matter during meetings, that does not mean they do not have

an opinion or good ideas. You may need to think about soliciting their ideas in another way and having them, at least initially, collaborate more in a 1:1 setting with you or their peers. Another challenge that may be difficult to detect is that in the local culture your report may be expected to show deference to the local general manager. Despite the fact the ‘solid line’ reporting is to you and the reporting to the local GM is ‘dotted line’, there may be a risk that in practice it seems more the other way around or that the effectiveness of the lawyer is seriously inhibited. In the worst case this can have a negative impact on communication, and the critical and independent role of that lawyer will be undermined. The lawyer may even end up being co-opted to do all sorts of odd jobs for the GM. In such a situation the manager may, in addition to trying to train the local lawyer in meeting the expectations of the role, need to identify compensating measures in order to counterbalance this influence. More frequent visits as a manager, 1:1 conversations with the local GM, deliberately discussing on certain topics in a wider forum or co-opting VOLUME 28, ISSUE 3 – SPRING 2018 |

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the local HR manager are among the many ways in which one can try to help out the local lawyer and balance the influence of the GM. There will be other cultural aspects that make working at a distance and managing a regional team more challenging. In some cultures admitting a mistake may be more difficult or the response of colleagues may look like they are avoiding responsibility. It is important to talk about these aspects as barriers to success at a multinational. This can be done in performance appraisals, but HR colleagues can also help. You could consider cultural awareness training for the team, as this will not only raise awareness of other cultures and how to respond but also shed light on the particular cultural traits of each contributor’s cultural heritage. You can think about setting development goals that specifically play to the need for better communication or overcoming cultural barriers, as well as generally contributing to effectiveness as a regional team. If your budget allows, face-to-face meetings as a team, one or even a few times a year, can contribute significantly to motivation and the effectiveness of a regional team. Personal contact can quickly lower the barriers and distance and rapidly contribute to building trust. Colleagues will often have chosen a career at a multinational for the opportunity it offers for exposure to working with people outside the home country. In terms of development and retention the prospect of such meetings can be an important pull and they offer a golden opportunity to have the participants come together to discuss the different issues they face. The team members can compare notes and share how they may have solved issues. While such discourse can also take place by phone, the willingness to share concerns and experiences is likely to be greater in person and there is an opportunity to then invite speakers, in-house or external, to attend the meeting in person, contributing to further development. There is of course also an opportunity to organise team building. All these aspects can contribute to better communication and breaking down cultural barriers.

Efficiency The way a law department is organised can also have a significant impact on how you manage a regional team. Depending on the size of your workforce and the needs and risks of the business, there will be a question whether you create law department hubs or whether you have lawyers sit as close as possible to the business. While the latter may mean the lawyer will know about issues quicker and will know the local team better — also possibly contributing to better compliance oversight (and in some cases it may be easier to find a suitable lawyer because it does not require a relocation or finding a rare combination of a lawyer from a certain jurisdiction but located elsewhere) — a hub offers the opportunity of more sharing, quality control, some career progression in an otherwise flat organisation and possibly even the opportunity for appointing specialists for the region, as the hub may have the critical mass required to justify such an appointment. Actions taken to reduce the distance among the team members for reasons of communication and bridging the cultures can equally contribute to more efficiency, as team members will find it easier to reach out to one another with questions or even to share the workload, leading to a more efficient use of resources.

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In terms of decision-making, there will be a need for clarity on the level of empowerment. This touches on both efficiency and communication. One example of how this can affect communication is whether or not to encourage direct communications with your own boss or colleagues at Corporate on, for instance, updates on matters in a particular jurisdiction instead of up the chain reporting. Considerations for directly reporting in such a case could include speed, being able to provide more, first-hand detail, but also the development of the lawyers in the region. Lawyers in the region may rarely get a chance to interact with the most senior colleagues in the organisation. Often they have been hired for their knowledge of a particular Asian jurisdiction. However, there may come a point where they will want to escape the orbit of their national jurisdiction. Exposure to work and colleagues outside the jurisdiction is a first step and can be an important building block to a conversation with the head office where you put someone forward for a role at a regional level or even the head office. Even if the opportunity does not arise or there is no willingness to move abroad, having the international exposure can be an important retention tool, setting the lawyer apart from many peers. A number of reasons for in-person meetings have been mentioned such as culture and motivation. These are critical for managing remote teams and reports. There will be other aspects too. As you visit the team and meet the local business management, you are adding visibility and credibility to the team. You are also creating an opportunity to reinforce messages or iron out issues for the team with local management or even third parties.

Conclusion Much about managing a regional, dispersed team in Asia or elsewhere is similar to managing a team in one location. However, there will need to be a greater emphasis on building trust, being sensitive to cultural differences, fostering communication, implementing ground rules on how the team interacts, seeking out opportunities to collaborate and possibly meet and, last but not least, utilizing technology in support of communication. And as a manager, you will need to carry out your own sanity check from time to time on whether there is a need for change or room for improvement. a

Graham Wladimiroff Based in Hong Kong, Graham is Vice President and Assistant General Counsel for the Retail Branding Information Solutions (RBIS) group of Avery Dennison Corporation; a global manufacturer and distributor of adhesive materials, apparel branding labels and tags and specialty medical products. Prior to joining Avery Dennison in August 2017, Graham enjoyed an eighteenyear career at AkzoNobel, holding various roles including Board Secretary and Director Legal Asia Pacific.

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TAILOR YOUR INTERNATIONAL ARBITRATION AGREEMENTS TO REDUCE TIME, CONTROL COSTS, AND REACH DESIRABLE OUTCOMES The international business community has expressed frustration over the cost and time of arbitration proceedings. Arbitrators, the business community contends, are not sufficiently proactive in moving cases along because the longer the case drags on, the greater the arbitrators’ fees. However, the alternative of litigating in foreign courts is not an attractive option. With no obvious recourse, there is more attention given to effective means and methods to reduce the time, cost, and uncertainty of international arbitration.

he costs of arbitration can vary. It can be more expensive than court litigation because the party needs to select and pay an arbitrator in a private proceeding. Hearing facilities do not come without significant fees. Court judges, their clerks and officers, and the courtrooms in which they reach a decision are publicly supported and therefore less expensive. But the value of having a panel of experienced, expert decision-makers, with limited prehearing discovery, flexible procedures, and limited opportunity to challenge an arbitration award, can easily compensate for the added expense of a private proceeding and will often be less expensive than litigation. Still, the expense of international arbitration is the greatest concern of arbitral process users. The International Chamber of Commerce (ICC) Court of Arbitration issued its first report on Techniques for Controlling Time and Costs in Arbitration in August 2007.1 The report presented statistics provided by the ICC Court of Arbitration, based on ICC cases that went to a final award in 2003 and 2004. Interestingly, the earlier edition of the report indicated that the lion’s share of arbitration costs involved the preparation and presentation of the case, specifically noting that, on average, the costs of arbitration broke down as follows: •• Costs incurred by the parties to prepare and present their case: eightytwo per cent •• Arbitrators' fees and expenses: sixteen per cent •• Administrative fees and expenses: two per cent. These earlier findings show that not much has changed. The costs of prehearing document disclosure and discovery still generally consume the majority of arbitration expense, as also indicated by more recent surveys and reports. Corporate counsel have an opportunity when entering into contracts to control arbitration costs, reduce delay and promote efficiency, but they only have that opportunity once, and it is often difficult to negotiate these provisions. That leverage is also dramatically reduced once the contracts are in place. International arbitrations, in particular, are more sensitive to arbitration agreements than are US-based arbitrations. International arbitrators and arbitral institutions are exceptionally keen to “follow the agreement”, because if they don’t any award is subject to challenge under one or more of the applicable international conventions, treaties, or local laws where the arbitration agreement or contract will be enforced. There is a distinction between the arbitration agreement and the underlying business contract, of which the arbitration agreement is typically only a part. This is because the arbitration agreement, which typically obligates the parties to resolve disputes arising out of the business contract by arbitration, is considered a separate or “severable” or stand-alone agreement for purposes

of conferring jurisdiction and authority upon the arbitrators. In other words, legally, the agreement to arbitrate is considered as a separate or independent agreement from the commercial contract, and in some cases the parties will actually have a separate arbitration agreement that is entered into after the dispute arises. But in the vast majority of instances the agreement to arbitrate (referred to in legal literature as the “arbitration agreement”) is included as part and parcel of the commercial transaction. International arbitration takes place within a legal framework of international conventions and local laws, whether case law or legislation or a combination. The starting point for any discussion of international commercial arbitration is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (New York Convention). More than 140 countries have acceded to the New York Convention, making it one of the most widely adopted and most successful pieces of international legislation in history. The New York Convention is primarily directed at two points in the process of resolving disputes by arbitration: the beginning (i.e. recognition of the agreement to arbitrate) and the end (i.e., enforcement of the resulting arbitration award). There are two practical reasons why arbitration awards that are enforceable under the New York Convention are preferred to court judgements. First, because more countries are parties to the New York Convention, as contrasted with treaties recognising the validity of foreign judgments, enforcement of international arbitration awards is generally easier and more reliable than enforcement of a foreign court award. This is because an enforcement of an international arbitration award is mandatory in countries that are parties to the New York Convention without a treaty between the country rendering the judgment and the country in which enforcement is sought. By contrast, enforcement of a foreign court award depends upon local country considerations of comity. Second, very few commercial parties are willing to subject themselves to the vagaries of litigation in foreign courts. In many international transactions, this second consideration is especially significant because the parties to a contract may have little or no connection to the place where the contract is to be performed or where its effects may be felt. A second category of international agreements relevant to international arbitration is investment-related conventions and treaties, most notably the “Convention on the Settlement of Investment Disputes between States and Nationals of Other States of 1965” (the Washington Convention). As its name implies, the Washington Convention is concerned with investment disputes arising between states and nationals of other states. Similarly, bilateral investment treaties (BITs) and multilateral investment treaties, such as the North American Free Trade Agreement (NAFTS), provide an avenue VOLUME 28, ISSUE 3 – SPRING 2018 |

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The Top 10 things In-house Counsel Need to Know About International Arbitration

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Corporate counsel have the greatest power to control arbitration costs, reduce delay and promote efficiency when the business transactions are being negotiated. Unilateral clauses—giving one party the sole right to elect arbitration if a dispute arises— are enforceable in some states, but not all. Parties should carefully research the law and court decisions of the jurisdiction(s) where the agreement is likely to be enforced. Counsel should consider having an appropriate, pre-arbitration ADR clause (e.g., mediation), which may result in the resolution of the dispute by a relatively cost-effective procedure without the necessity of resorting to arbitration. Counsel should carefully define the scope (issues and disputes) and the parties agree shall be subject to arbitration. Selection of the tribunal is very important and counsel should specify in any arbitration agreement how the arbitrators shall be selected, the number of arbitrators, the appointing authority and the qualifications of the tribunal. Although some parties prefer non-administered or ad hoc arbitration, surveys indicate that most business users elect to use institutionally administered arbitration. Consideration of the legal “seat” or “place” of an international arbitration will have implications on the extent to which an award can be challenged or enforced. Time limits should be included in arbitration clauses with care so that an award is not invalidated, set aside or vacated because it was not rendered within a set time frame. Confidentiality is a noted benefit of arbitration, and is generally reflected in the rules of most arbitral institutions, but the record of the proceeding may not be confidential unless expressly agreed to be so by the parties and required by the tribunal. Avoid drafting arbitration clauses as an afterthought. Careful drafting of an arbitration agreement can avoid substantial time and costs when serious disputes arise.

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for commercial parties to resolve investment disputes against foreign governments. Whereas the New York Convention is designed to facilitate the resolution of all manner of private commercial disputes, the investment treaties are primarily designed to facilitate trade and investment between or among the signatories, including the instrumentalities of the state parties. NAFTA is one of the most well-known. Although the New York Convention is one of the most important pieces of international legislation establishing a framework for the practice of international arbitration, there are various regional conventions and treaties that may also be relevant in a given dispute. Thus, for example, there are regional counterparts, including the Panama Convention and the Arab Convention, that may include signatories that have not acceded to the New York Convention or create rights and obligations not otherwise present. However, the regional treaties consistently recognise the same types of exceptions for both recognition of agreements to arbitrate and enforcement of arbitration awards as those found in the New York Convention.

Arbitration Agreements – The first and best opportunity to reduce time, control cost and have a desirable outcome.

The arbitration agreement, which may be only a part of the underlying business contract, is the starting point for determining the authority or lack thereof that the arbitrators will have over the arbitration process. If there is an arbitration agreement in a commercial contract, it may likely be basic and bare-bones, as are those typically recommended as the standard by various arbitral institutions and ADR organisations, or they can be comprehensive and elaborate, designed to deal with the probable and possible issues that can arise in a commercial context. The key objective is to try to tailor the dispute resolution process to deal with the potential problems that are likely to arise between or among the parties on that particular transaction, and with a view to avoiding or resolving issues fairly, efficiently, and economically. Parties have maximum flexibility in drafting arbitration agreements, but there are a few provisions that can have the greatest effect on the outcome of a dispute and how arbitrators will manage and administer an arbitration proceeding. Unilateral option to arbitrate — The greatest uncertainty in drafting arbitration clauses is that one cannot know, until the dispute develops, whether certain tactical or strategic benefits may accrue from submitting the dispute to a court or to an experienced arbitral panel. While most arbitration agreements provide that both or all parties to the agreement have the right to arbitrate disputes, it is not unheard of for a party with frontend transactional leverage to insist on a unilateral right to elect whether to arbitrate or litigate disputes. While there seems to be a trend toward enforcing such provisions, despite defences of lack of mutuality, absence of consideration or unconscionability, the legal authorities in the United States indicate no clear majority rule or consensus among the state and federal courts regarding this issue. If the law applicable to the substance of the contract, or the place or seat of the arbitration, is that of another country, the laws that may be applicable to both the substance of the contract and to the arbitration process should be carefully examined before relying on an asymmetrical clause affording one party, but not another, the right to arbitrate a dispute. For example, recent decisions by the highest courts in both France and Russia have held that contractual provisions under which one party has the unilateral right to select the procedure for resolution of disputes are invalid. Pre-arbitration tiered or stepped processes — It is now common in arbitration agreements to find tiered or stepped dispute resolution clauses, particularly in long-term commercial relationships. The chief reason for stepped provisions is to save time and cost by resolving the dispute at the earliest stage possible. The various tiers or steps of dispute resolution often found in commercial contracts include:

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•• •• ••

Required submission of notice of the claim or dispute to a designated professional — for example, in the construction context, an engineer, quantity surveyor, or other official or agent acting on behalf of the responding party — to make an interim decision, pending further proceedings; Required negotiations concerning the claim or dispute, usually between senior executives having no direct involvement with the circumstances giving rise to the dispute; and/or Submission of the dispute to mediation or conciliation, failing voluntary or ultimate resolution by the parties to the dispute; Submission of the dispute to final, binding arbitration.

While arbitration is generally regarded as the preferred method for resolving major disputes in international contracts, even at its best arbitration is costly and time-consuming. For this reason, arbitration should be thought of as a last resort, when all else fails. If the parties do choose to attempt to resolve a dispute by mediation or mandatory negotiation prior to resorting to arbitration, the procedure can be specified in the arbitration agreement. Having an appropriate, pre-arbitration ADR clause may often result in the resolution of the dispute by a relatively cheap and cost-effective procedure without the necessity of resorting to arbitration. Scope of issues to be arbitrated — Perhaps the most important clause of an arbitration agreement, certainly the clause that has

received the most attention, is the “scope” clause. This is the clause that defines and describes the types of differences, issues, and disputes that the parties agree shall be subject to arbitration. For example, some fairly common limited “scope” clauses in arbitration agreements have to do with the amount in controversy. The parties may be comfortable with arbitration only when lesser amounts are at stake and will agree to arbitrate claims for amounts under the monetary ceiling, but they may reserve for litigation claims and disputes involving amounts in excess of the ceiling. Similarly, the parties may want to restrict the types or amounts of damages that can be awarded. Another option is preserving issuance of injunctive relief to the judiciary, while agreeing that the arbitrators shall have authority to grant all monetary relief. Selection of tribunal — One of the most important provisions in an arbitration agreement is specifying how the arbitrators shall be selected, including the number of arbitrators, the appointing authority, and the qualifications of the tribunal. If the arbitration agreement fails to make provision for selection of the tribunal, the selection process will be administered under the applicable arbitration rules, if any, designated by the parties, and the decisions respecting the number and qualifications of the arbitrators will then be made by the designated arbitral institution or appointing authority. In virtually all cases, the parties to the contract have the highest and best VOLUME 28, ISSUE 3 – SPRING 2018 |

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Case study:

Location Preferences Because English common law is a widely accepted legal system throughout the world, London and New York are favored seats of commercial arbitration. Both have strong legal infrastructures and a wide pool of qualified arbitrators, leading to trust in final awards and their enforceability. A majority of international arbitrations are conducted in English, which is the common language used in both cities, as well as Geneva, which is another favored location for international arbitrations. London, New York and Geneva are perceived as neutral and impartial in addition to being arbitration-friendly. Paris has its own obvious charms, not the least of which is its strong laws favoring arbitration and the enforceability of arbitral awards. Singapore and Hong Kong are increasingly chosen as arbitral seats as both locales are actively positioning themselves as leading destinations for arbitrations. The Singapore government strongly backs efforts to promote it as an arbitration hub in Asia, relying on its geographical location and trade ties to China and India. Maxwell Chambers is home to a number of international arbitral institutions. And in Hong Kong, a number of arbitral institutions maintain a strong presence, including the Hong Kong International Arbitration Centre (HKIAC), the International Court of Arbitration of the International Chamber of Commerce (ICC) and the China International Economic and Trade Arbitration Commission (CIETAC).

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appreciation of who their ultimate judges should be, and it is almost advisable to consider and specify those requirements in the arbitration agreement. Choice of institutional or non-institutional arbitration — The various considerations for determining whether an international arbitration should be administered by an established arbitral organisation or whether the parties themselves should administer the arbitration ad hoc are discussed widely in the arbitration literature. While some parties prefer non-institutional or ad hoc arbitration, surveys indicate that most corporate business users elect to have institutionally administered arbitration. However, if the decision of the parties is that the arbitration shall be administered by an arbitral organisation, the various arbitral organisations and institutions have recommended, but not necessarily required, that clauses be used that specify administration of the arbitration by that particular institution along with that institution’s arbitration rules. Legal place or “seat” and location of arbitration — The significance of the legal “seat” or “place” of an international arbitration is critical, because the arbitration laws of the legal seat will determine the extent to which, on the front end, the arbitration agreement will be recognised and enforced and, on the back end, the grounds on which an award can be challenged. Recent surveys indicate that the preferred countries as “seats” of international commercial arbitrations (not necessarily in order of preference) are: London, Paris, New York, Geneva, Hong Kong, and Singapore. The key factors in choosing a “seat” of arbitration are said to be whether the local jurisdiction has “arbitration friendly” laws and courts; arbitration laws that are similar to or consistent with the New York Convention; proximity to the parties or where the transaction took place; convenience to the parties, witnesses and counsel; and various other nonlegal factors such as accessibility to international airports and good hotels and restaurants. However, it may be more convenient for the parties, counsel and tribunal to conduct the actual hearings or deliberations in locations other than the designated “seat” of the arbitration. To accommodate these differing needs, it is perfectly acceptable to provide one location or place as the legal “seat” of the arbitration, while a portion or all of the hearings, meetings, and even deliberations are conducted in different locations. Time limits — Some drafters, with the understandable motive of curtailing the time and cost of arbitration proceedings, will attempt to place time limits on the time or duration of the overall process or the dates and time for hearings. But unless the nature and scope of the dispute can be predicted with accuracy, the attempt to limit, by advance

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Sample Agreement Any dispute, controversy or claim arising out of or relating to this contract, including the formation, interpretation, breach or termination thereof, including whether the claims asserted are arbitrable, will be referred to and finally determined by arbitration in accordance with the JAMS International Arbitration Rules. The tribunal will consist of [three arbitrators][a sole arbitrator]. The seat of the arbitration will be [location]. The language to be used in the arbitral proceedings will be [language]. Judgment upon the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof.

agreement, the duration and times of the process can cause more problems than benefits. One reason that careful thought should be given to placing absolute time limits on the length of arbitral hearings or the time for rendering awards is that, if the award is not issued within the time specified, a court may determine that the award is not valid and should be set aside or vacated. The International Bar Association has suggested a “middle ground” type clause, with certain time limits on prehearing procedures but with a “best efforts” requirement on the rendering of a final award. For example, the clause may provide that the award shall be rendered within specified days of the appointment of the arbitrators, unless the arbitral tribunal determines, in a reasoned decision, that the interests of justice or the complexity of the case require that such limit be extended. Confidentiality and privacy — One of the selling points of arbitration is that it is private and that the proceedings are not accessible by persons not involved in the transaction or dispute. While this notion is generally true and reflected in the rules of most arbitral institutions, it is not necessarily the case that the record of the proceedings, including the testimony and evidence offered in the arbitration, will be confidential unless expressly agreed to be so by the parties and required by the tribunal. When commercial contracts are negotiated and drafted, the provisions for dispute resolution do not normally attract great attention. It has been said that the dispute provisions in most contracts are “midnight clauses” because they are drafted, almost as an afterthought, during the last hours of negotiation. Others have noted that “arbitration is a procedure that has too few lawyers in the beginning (when the clause is drafted) and too many at the end (when an arbitration is actually under way)”. This is unfortunate because careful drafting of an arbitration agreement can avoid business catastrophes and save days and months, if not years, and thousands, if not millions, of dollars, especially when a serious dispute arises. With these realities in mind, corporate counsel have the first and best opportunity to control the destinies of their clients at the time of drafting the arbitration agreements — before disputes have arisen, when business relations are at their best, and when everyone is cooperating to “get the deal done”. a Footnote 1.

https://iccwbo.org/publication/icc-arbitration-commission-report-on-techniques-forcontrolling-time-and-costs-in-arbitration.

Kim Taylor As Chief Legal & Operating Officer, Kim Taylor oversees JAMS global operations and works closely with the general counsel to manage the overall risk of the company, advising management and the board with respect to transactions and negotiations. She works with the CEO to lead corporate strategic initiatives and participates in the definition and development of corporate policies, procedures, and programs.

John W. Hinchey An internationally recognised leader in resolving significant commercial disputes as a mediator and arbitrator, John previously led King & Spalding’s commercial contracting and construction disputes practice for 18 years. He is now a full-time arbitrator who is listed on several global panels of arbitrators, including the JAMS engineering, construction, energy, and international panels.

An original version of this article appeared in the June 2018 issue of the Docket. VOLUME 28, ISSUE 3 – SPRING 2018 |

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MOVING BEYOND RELATIONSHIPS FOR SMARTER, MORE STRATEGIC ENGAGEMENT DECISIONS Good data is only effective when applied effectively. So how are you using data in your decision-making processes?

•• •• ••

he modern legal department no longer exists merely for the provision of legal advice. A critical component of an organisation’s internal and external mechanics, it is increasingly relied upon to:

Identify, manage and monitor risk. Deliver efficient, effective and reliable legal advice designed to maximise organisational and shareholder value. Develop and foster an agile, responsive culture that encourages innovation and ongoing improvement.

Amidst this change in focus also arises an immense amount of environmental change.

micro view of the financial matters that can either make or break the value provided by the legal department to the broader organisation. Consequently, it will become significantly easier for legal teams to develop an engagement strategy that relies on historical and contemporary data, as well as existing relationships. With the two working in concert, legal departments can provide the service that underlies their existence, while contributing to the greater financial objectives of the organisation as a whole.

Matters

Changes in the law, projects spanning multiple jurisdictions and increasing pressure to streamline and digitise processes have all combined to create a markedly different working environment from that of decades past.

Before the legal department can critically assess their engagement processes, they must have a detailed overview of the matters they are responsible for.

However, as legal departments accept and even embrace the need for change, one element stubbornly resists transformation.

Types of matters The first logical step is to compile a list of all the matters that the legal team is responsible for (whether they’re completed in-house or externally) and categorise them by type.

Despite the growing availability of digital technology designed to assist with relationship management and engagement processes, the hiring of outside counsel is still overwhelmingly influenced by pre-existing personal and professional relationships. According to a recent Globality and The Lawyer Research Service survey of over 300 General Counsel and other senior members of in-house teams across Europe, North America and the Asia-Pacific, only thirty-two per cent reported instructing firms beyond their existing network. The remaining sixty-eight per cent sourced providers from pre-existing relationships or referrals from their existing network or existing outside counsel.

Once distinct categories have been established, the next step is to examine each category, separating the matters dealt with in-house from those dealt with externally. It may be useful to begin with a broad overview, e.g. matters over the last 12 months, and then drill down into more distinct periods like quarters or months, or both. It is at this point that helpful patterns may begin to emerge.

Interestingly, when asked which factors influence those engagement decisions, sector breadth and expertise were cited as being the most important. Therefore, why is this not reflected in engagement decisions?

Were specific types of matters kept in-house during specific times of the year, can external engagements be connected to staff movements (in-house or externally) or are certain types of matters always dealt with inhouse or externally? Which firms are continually dealing with specific types of matters?

One may argue personal relationships trump all. However, with the plethora of data available at our fingertips, this seems like far too easy an answer.

Exploring the matter type further, there may be certain matters where different legal service providers are engaged for certain stages.

The difficulty, then, lies not in moving away from a relationship-based decision-making model. Rather, the challenge is in identifying and harnessing the data required to make more strategic, results-based engagement decisions.

Data collection by category

For example, legal process outsourcing providers may be engaged for due diligence, some stages kept in-house and some stages briefed to external counsel. In-house legal teams are quickly understanding that there are benefits in managing legal matters this way, even large complex ones. However, engagement decisions ultimately come down to the internal resources available at the time.

So, what kinds of data should in-house teams be collecting to positively influence their engagement decisions?

This information will help in-house teams uncover the factors that influence engagements, providing valuable preliminary food for thought.

Data collection activities can be split into four distinct categories: matters, personnel, finances and performance.

Complexity Once the split of matters dealt with in-house versus externally has been established and categorised, consider the associated complexity.

By collecting data on each of these core components, in-house teams can gather a body of evidence that encompasses different types of matters and engagements. Importantly, they’ll also have access to a macro and

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Are more complicated matters always farmed out to external counsel or are they kept in-house? Is this true across the board or is it restricted to certain categories? Does this information highlight expertise held in-house or within specific law firms (or even specific external counsel)? The primary benefit of this data is that it allows legal teams to identify and

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define their areas of expertise. As the value add of the legal department is fully realised, the passage of matters to external counsel will slow, external legal spend will reduce and legal’s resources can be efficiently and fully exploited. An additional benefit is the creation of a ‘go-to’ list of specialist practitioners, firms and alternative service providers that may, in turn, build a firm foundation for the creation of legal panels down the track. Length of engagement The final step is to consider the length of each engagement. Do external firms have management of matters from beginning to end? If so, when and for which kinds of matters? Is external counsel more commonly engaged for matters lasting a short or long period of time? This information adds another level to the engagement story and will assist teams to compile a spend/time analysis that can be used to justify the decision to engage (or not engage) external counsel.

Personnel Once matters have been categorised and split into in-house versus external, it’s time to consider personnel-related matters. Who, what and when Understanding who in the organisation is briefing which law firm for which type of matter is extremely valuable, particularly in larger organisations operating across diverse geographical locations. This data not only leads to new insights and opportunities for process improvement but promotes greater transparency and strategic alignment. There may even be opportunities to streamline future procurement and engagement decisions that can deliver potentially lucrative savings. Making sense of this data involves calculating how many personnel were involved in each matter (both in-house and external), along with the types of personnel involved (e.g. paralegals versus associates versus partners). Then, layer in how much time each level of personnel spent on the matter and on which types of engagements, e.g. bespoke panel, existing panel or single engagement. As with the matters observation, this exercise will uncover patterns over time and highlight engagement practices that require more detailed consideration. It also adds another layer to the spend/time equation.

Finances Although engagement decisions should never be made on price alone, financial statistics form an important part of the story. Working on a matter by matter basis, collate the following information: •• Original matter budget. •• End of matter costs. •• Anticipated costs and budget changes throughout the matter. •• Professional fees versus disbursements. •• Spend by month, year and law firm. •• Work in progress. Again, for a critical analysis of engagement processes, it is important to collate the data for matters dealt with in-house, as well as externally. Without this comparison, it will be impossible to uncover the patterns that underlie engagement decisions and determine whether relationships have exerted an undue influence on who was engaged, when and for which matters.

Performance The final factor to be considered is performance. By gathering objective and subjective data on partner and law firm performance, in-house teams can identify benchmarks for future engagements and set the stage for continuous improvement initiatives. With that in mind, teams should be looking for the following data/ information: •• Commerciality of advice received. •• Firm and partner responsiveness across a range of matters and situations.

•• •• •• ••

Evidence of consistent and effective project management processes. Proactive communication of scope changes/amendments. Willingness to move away from hourly billing and explore alternative billing arrangements. Firms or partners consistently exceeding fee estimates.

If engagement practices are to move away from a relationship-based model, ongoing performance management is an absolute must. Practical, actionable feedback should be shared with legal service providers on a regular basis, paving the way for open, honest discussions about service delivery and the strengthening of ongoing working relationships.

Making sense of the data With large amounts of data on hand, it’s not uncommon to become overwhelmed. To ensure the data collection and analysis process is as efficient and effective as possible, it is imperative that manual processes are minimised or eliminated altogether. The data collected must also be accurate, securely stored and easily accessed. This is where technology steps in. Thanks to the growth of legal technology, in-house teams no longer have to rely on outdated data collection programs or applications designed for industries outside legal. The needs of the legal department are unique and, although bespoke systems are not a pre-requisite for successful data collection and analysis, programs built specifically for the legal team are. Thankfully, the number of cost effective, user friendly tools built specifically for the legal department is growing all the time. However, there is no such thing as a ‘one size fits all’ solution. Legal teams should clearly define their needs (and prioritise them in order of importance) before implementing a solution. They should also be prepared to undertake a detailed needs analysis before embarking on their digital transformation journey. Adopting new technologies and processes requires careful change management, not just from the time, budget and technical perspectives, but from the human perspective as well. With this in mind, involvement from internal stakeholders should also be encouraged. This not only ensures the needs of every user is accommodated, but helps foster and strengthen a department, if not organisation-wide approach to innovation. Sustained leadership support from management is also mandatory for a successful change process and, for the full benefits to be realised, the General Counsel or equivalent must also actively demonstrate their commitment. All in all, with the advent of new technology designed to simplify and streamline a host of sometimes laborious legal processes, it’s an exciting time to be exploring change. With the right mindset and useful, actionable data on hand, in-house teams can seize the initiative and bring decades old processes into a new light. a Sacha Kirk A passionate writer, researcher and commentator on the emerging field of legal procurement, Sacha is CMO and co-founder of the innovative Australian legal tech company, Lawcadia. Sacha is also a co-founder of the Legal Procurement Conference AsiaPacific, the first event of its kind in the Asia-Pacific region and recently published the Legal Department’s Guide to Legal Procurement. VOLUME 28, ISSUE 3 – SPRING 2018 |

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LEADING HIGH-PERFORMING PROJECT TEAMS IN CROSS-BORDER ENVIRONMENTS The concept of trust is an often ignored building-block in enhancing team performance. When considering cross-border teams, its significance increases enormously.

RUST ME, I’M A LAWYER. This saying feels more apt as the punchline of a joke, rather than as part of any serious discussion about high-performing teams. And yet, trust does underpin this articles' primary assertion — that contrary to the micro-management inspired by six-minute billable increments, legal project teams deliver better value and greater success when they are trusted to do so as part of a team whose foundations are built on trust. In order to understand why this is the case, we first need to understand what type of teams we are talking about and how such teams develop trust both from a process and people perspective.

An academically ‘exciting’ definition of a team is: ‘a collection of individuals who are interdependent in their tasks, who share responsibility for outcomes, who see themselves and who are seen by others as an intact social entity embedded in one or more larger social systems, and who manage their relationships across organisational boundaries’.1

But what’s more useful is taking this concept of team and stretching it out along a continuum of autonomy so that traditional managerled teams sit at one end, and fully self-directed teams at the other.2 We contend that legal teams perform best when they sit in the middle of this scale — as self-managed work teams — and particularly so when their members are not co-located. Selfmanaged work teams are nothing new — using multidisciplinary project teams to discover integrative solutions for complex and unstructured tasks was heralded as ‘the productivity breakthrough of the 1990s’, and there are numerous reports about Fortune-500 companies using these structures to respond effectively to unexpected critical incidents under dynamic conditions.3 In keeping with other management techniques of the 80s and 90s that are now resurgent under the banner of ‘legal project management’ (including Design Thinking, Agile, Lean and Six Sigma), selfmanaged work teams are worth a closer look. Give the tech-driven disruption currently facing the legal sector, all of these management techniques can improve operational performance in some manner — with the specific benefit of self-managed work teams being that they generally perform faster and are more flexible and creative than traditional functional groupings.4 Why are self-managed work teams relevant to managing successful cross-border legal teams, and what is it about the way they operate that means we should trust lawyers to deliver high performance? To answer this, we need to delve into some (now historic) research looking at their underlying preferred structure and behaviours:5 34

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TEAM SIZE

PREFERRED

UNDESIRABLE

15 or fewer

More than 15

Skill levels and mix

Skills needed to perform/manage work

Single skill

Information

Sufficient to manage task

Insufficient to manage task

Feedback and Customer

Frequent feedback; direct client contact

Infrequent feedback; indirect client contact

Membership and Resources

Mostly stable; controlled by team

Highly unstable; controlled externally

Attention to process

Frequent, expected

Infrequent, by exception

Task

Complete

Part of a larger task

Evaluation

Peers

Superiors

Looking at these attributes, we intend to focus upon ‘attention to process’: simply put, self-managed work teams are trusted to have the self-discipline to operate without line-of-site direct supervision. It is this team culture, when coupled with enabling governance, sufficient resourcing and information, and appropriate projects, that delivers superior performance. Given that non-colocated legal teams (whether cross-border, cross-office, or even simply within different practice groups) are generally required to operate without the benefits of direct in-person communication and supervision, they must rely upon other strategies to maintain alignment and performance. Structuring these as selfmanaged legal teams — in particular, trusting them as such — is a key enabler for this. In most real-world circumstances, organisations do not have the luxury of sculpting high-performing teams for each project. Team selection within a legal context is generally based upon technical expertise and availability and does not usually consider matters such as mindset and behaviours that drive team dynamics and success. As such, those organisations need to implement processes and structures that can enable and sustain self-managed work teams that are (if possible) agnostic of the individuals in question. Being that every paper written about team formation is seemingly obliged to mention Tuckman’s ‘forming, storming, norming and performing’ approach6 at least once, here is that mention: in our experience, little effort is generally expended in the proper establishment of teams (covering the ‘forming’ and ‘storming’ stages) — and which should include critical micro-organisational processes such as: •• clarifying team/project objectives, scope and constraints •• identifying work teams, and clarifying governance structures and processes •• identifying and designing any team integration requirements and processes •• developing performance management processes, and forming a baseline for team performance, and

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••

coaching project sponsors and team members on the required mindset and behaviours for self-managed work teams, including understanding individual communication styles and preferences.

The most remarkable attribute about this list is that it is unremarkable — all of these actions represent expected behaviours for the ‘good’ matter management of legal work and can be implemented without significant (or indeed any) technological investment. From a professional perspective, it can be argued that these behaviours form part of lawyers’ existing professional responsibilities under the Legal Profession Uniform Law. And there is an ever-growing list of available digital collaboration platforms suitable for both small teams and large enterprises.7 Circling back to communication styles, a certain comfort level among team members is required before trust within the team (and high performance) is possible:8 behavioural tools such as DISC, developed by Harvard Professor William Marston, can build awareness of self and others and enable adaption of communication styles when working with others to deepen trust through relatedness. Marston found that people have an unconscious preference for ‘pace’ (how quickly they move, talk and make decisions) and ‘focus’ (whether they focus on logic, data and projects or experiences, emotion and relationships with others). We can therefore be more effective if we learn to adapt our style and language use for others. For example, if team members discuss what they did rather than who participated, they are more likely to be task orientated; whereas if they speak quickly with lots of gestures they may prefer a faster pace. By adapting their communication styles to each other, team members can accelerate their level of mutual trust. Traditionally, lawyers have not tended to focus upon the development of team behaviours and performance-related mindsets — perhaps most notably because tertiary legal studies have to date been limited to black letter law. Fortunately, the market is now shifting as universities, colleges and professional associations increasingly offer courses, training and certification in relevant competencies such as legal project management, communications, team behaviours and strategy — as well as ancillary areas such as product development and process design. For example, we have collaborated with the Australian Institute of Project Management to deliver the first nationally recognised certification for lawyers in legal project management. So, what can we do to further enable legal teams to flourish and be trusted? Part of the answer is that we need leaders to appreciate the importance of trust in driving project-team effectiveness and to implement cultures and processes that build and maintain that trust:

One of the key things to developing high performing teams is to remember that successful teams simply do not happen. They take much effort and time. They take proper guidance and support from the team leader.9

In particular, leaders play a critical role in setting the ‘mindset’, which drives motivation at the individual, team and organisational level.10 Leaders can do so by conveying the importance of learning, curiosity and failing fast by raising their team’s awareness of communication styles. And by connecting each team to their project’s purpose and objectives, these types of leaders are more likely to foster employees and teams that define clear goals, roles and responsibilities11 — and in doing so, trust each other for collective achievement. Given the nature of a legal system, which enshrines concepts such as precedent (i.e. courts are bound by the previous decisions of higher courts), it is not uncommon for lawyers to have a fixed mindset regarding their abilities and to approach their tasks in the same way rather than asking preliminary questions such as: what are we looking to solve, what is the best way to get there, and what did/didn’t work previously? If we want teams to start from a place of growth, they also need to understand “why” they are doing something rather than just “what” they are doing or “how” to do something.

and then encouraging others to take risks and share ideas. Once this has been implemented, the team’s genuine commitment and accountability to the project’s milestones can begin, as the team matures into a self-managed work team. In conclusion, we recommend that your leaders invest in developing the underlying mindset, culture and processes that enable self-managed work teams; and then trust your legal team to do what needs doing. They will reward you with high performance, innovation and the ability to adapt, even when operating in complex, emergent and cross-border environments. a Footnote 1. 2.

3. 4. 5. 6. 7. 8. 9. 10. 11.

Cohen, S.G. and D.E. Bailey (1997). What makes teams work: Group effectiveness research from the shop floor to the executive suite. Journal of Management 23(3): 239-290. Hackman, J.R. (1986). The psychology of self-management in organizations. In Pollack, M.S. Perloff, R.O. (eds.) Psychology and work: Productivity, change and employment. Washington, DC: American Psychological Association. Oliver, D. and Roos, J. (2003). Dealing with the unexpected: Critical incidents in the LEGO Mindstorms team. Human Relations 56(9): 1057-1082. Lipman-Blumen, J. and Leavitt, H.J. (1999). Hot Groups: Seeding them, feeding them, and using them to ignite your organisation, New York: Oxford University Press. Pasmore, W.A. and Mlot, S. (1994). Developing self-managing work teams: An approach to successful integration. Compensation and Benefits Review 26(4). Tuckman, B.W. (1965) Developmental Sequence in Small Groups. Psychological Bulletin 63: 384-399. https://www.geniusproject.com/guide/project-collaboration-tools/project-collaboration. Leoncini, P. (2005) The five dysfunctions of a team: A leadership fable. Jossey-Bass. De Meuse, K. (2018). A comparative analysis of the Korn/Ferry T7 Model with other popular team models. Korn/Ferry Institute. Dwek, C. (2017). Mindset: The new psychology of success. Ballantine Books. Rubin, I.M., Plovnick, M.S. and Fry, R.E. (1997). Task-oriented team development. New York: McGraw-Hill.

Peter Dombkins In leading Gilbert + Tobin’s Legal Project Management function, Peter oversees the development of legal project management competencies and supporting technologies firm-wide. Peter is certified by the Australian Institute of Project Management (Certified Practicing Program Director) and has over a decade’s experience in organisational change management in Australasia, the Middle East, Africa and the UK.

Anu Briggs Over a combined eighteenyear career encompassing in-house and private practice, Anu has managed commercial matters for clients such as MTV and Arsenal and Liverpool FC in the UK. Since 2009, Anu has lead HR and learning teams in both law firms and corporates. Anu now serves as G+T’s resident performance coach, across both legal and operational teams.

Leaders that want to embrace a growth mindset need to create an environment that is open, safe and adaptable — starting with sharing their own reflections, VOLUME 28, ISSUE 3 – SPRING 2018 |

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EXPANDING CROSS-BORDER ROLES OF LEGAL TEAMS IN EMERGING SOUTHEAST ASIAN MARKETS The challenges and opportunities for legal teams working in the developing economies of our region.

he duties of a general counsel (GC) have evolved over the years from a purely legal-jurisdiction-specific position to an important strategic advisory role. Cross-border activity is on the rise and emerging economies in Southeast Asia (SEA) present untapped opportunities for business expansion plans. Business units now rely heavily on internal leadership from their GCs to enable them to exert an important influence on their business locally, regionally and internationally. Legal teams are expected to keep on top of all regulatory changes that might affect the business, such as changes to ABC and AML enforcement; changes to data protection and privacy, including the extra-territorial effects of the GDPR; digitisation and understanding how to incorporate new technologies into one’s business; and even industry-specific legislation. The 2018 Lex Mundi Summit, which saw 24 CLOs of multinationals gather in Amsterdam for a leadership workshop dedicated to exchanging and enhancing management practices, identified horizon scanning as a vital part of a GC’s role as strategic adviser to the business. However, as GCs are asked to do more with less, preparing for shifting business environments has become increasingly challenging. In this digital era, harnessing technology to promote a business and its operations efficiently is particularly demanding for GCs with oversight over jurisdictions where modernisation is underway but legislation has not yet fully adopted digitisation. Further, managing cross-border transactions within a region with disparate levels of development, in innovation and legal framework, can prove difficult. According to Najla Zamri:

… the capital markets sector is seeing a lot of technological innovation, with the use of blockchain and tokenisation to enhance efficiencies in the market. 2018 is seeing increased deal flow into SEA, and most businesses are seeking new technologies to facilitate traditional businesses, particularly in the form of capital raising and secondary offerings. However, the regulatory development in this space on a global level is varied, with developed economies taking a hard stance while emerging economies are still grappling with their approach. For example, capital raising is made cheaper and faster with tokenised assets, and it allows businesses of any size to undertake cross-border capital raising without the need for multiple counterparties to be part of the ecosystem. However, the lack of consistency in development of securities laws across SEA can hamper this exercise. GCs would need to solve for these idiosyncrasies by keeping abreast of the developments of each country within the region, to facilitate business needs in this new environment. In developed countries, where regulatory requirements are clear and supportive of new technological innovations, GCs can play an important role in identifying a clear scope for the permissible adoption of new technology to promote operational efficiency. One of the key examples in recent years has been the adoption of e-contracts, with strategic advice from GCs often essential to market entry. In SEA emerging market countries, it is often the case that law relating to e-documents can lack sufficient clarity and certainty, and can vary substantially from country to country. Their use is no less important and GCs must be equally adept at navigating the law affecting them. Saovapha Chutrakul, Legal Lead, Emerging North Asia Cluster at Pfizer, covering Thailand, Vietnam, Pakistan, Myanmar, Cambodia and Laos, notes: 36

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… while I need to ensure that I know each location well enough to understand the market conditions and dynamics and thus be able to provide practical and solution-oriented legal support to our inhouse clients, who are based in different countries and have different background and cultures, I expect technology and digital tools will play a significant role in making me better and more efficient in my regional role. In order to achieve an efficient strategic advisory role, GCs in emerging countries may therefore need to work twice as hard— especially in situations where the international standards of the home office require 100% compliance. Although this article should not be treated as formal legal advice, it identifies and addresses some of the key issues surrounding this topic in Cambodia, Laos, Myanmar, Thailand, and Vietnam. The article is designed to assist GCs who are responsible for these markets in their regional strategic advisory role and enable them to direct business operations by using technological innovation to promote business efficiently and cost effectively, while ensuring that regulatory compliance with local laws is not compromised.

Is a digital contract 100% enforceable? Can it entirely replace a written hardcopy contract? A common query from businesses is whether contracts can be executed electronically in SEA emerging market countries, and, if so, whether the e-contract can replace the legal requirement for a hardcopy document. Myanmar, Thailand, and Vietnam have adopted the same principle, whereby “electronic transactions cannot be denied legal effect, validity or enforceability solely on the grounds of their being made through electronic technology”. The specific law in these countries further elaborates that e-contracts are permitted, so long as they comply with the specific requirements stipulated under the law (e.g. the e-contract must be generated in a form that is accessible and usable for subsequent reference, without its meaning being altered). Once these requirements are fulfilled, the e-contracts are validly enforceable and can entirely replace the hardcopy contract. Laos also has a similar concept of law that permits e-contracts to be created and used, thus replacing the use of traditional hardcopy contracts. It remains to be seen whether these concepts of electronic transaction law can be expanded to include smart contracts made through blockchain technology, and whether these can also be acceptable and enforceable in accordance with this law. Since the concept of a blockchain dictates that amendment of content within a block (the contract) is impossible after it has been created, one could argue that blockchain-based “smart contracts” should be acceptable and enforceable in these four countries. As smart contract execution relies on the actual drafting of legal obligations and rights, GCs need to acquaint themselves with how the technology in smart contracts operates in order to be precise with the drafting of these contracts. The technological execution is only as good as the input; thus, GCs need to ensure that the drafting of legal rights and obligations are coherent enough to fit into computer codes. At present, Cambodian legislation on e-contracts differs from similar laws adopted by its neighbours. Sophea Sin, local counsel for Tilleke & Gibbins (T&G), Lex Mundi member firm for Thailand, has identified that:

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… although not expressly recognised under the current law, provided that the contract meets the basic validity requirements under the Civil Code, a digital contract should be fully enforceable to the same degree as a hardcopy. The only exception is for contracts requiring notarisation, such as transfers of land or registration of encumbrances. However, there is no case law on this subject, and currently, digital contracts are carried out on a trust basis between the contracting parties. Closer attention is required when a business elects to adopt the e-contract approach entirely without a hardcopy in Cambodia, and it remains inconclusive whether another set of hardcopy contracts would still be required.

Is it legally permissible to send a notice or file electronically? The consensus in all five jurisdictions is that the law does not clearly specify this—except in the case where the notice is served between parties in performance of the contractual obligations, provided that both parties had contractually agreed to this e-notification approach in advance. However, for all five countries, unless expressly permitted by law (e.g. Myanmar’s Electronic Transaction Act), e-notices should not be used if notice needs to be formally served or filed with a government authority. The recommendation would be for parties to continue to use traditionally accepted methods (registered mail or hand delivery). T&G’s counsels in Laos, Dino Santaniello and Saithong Rattana, observe that:

… in practice, emails can be used as a formal notice/communication between parties, including colleagues and partners, in the private sector only. Emails cannot be used as a formal method of notice or communication with the public sector (government offices). In Vietnam, T&G’s registered foreign lawyer, Waewpen Piemwichai, commented that:

… electronic submission is increasingly being accepted by the authorities. As a matter of practice, many Vietnamese authorities, such as labor, investment, and tax authorities, require submission in the form of both electronic and hardcopies, whereby electronic application files and documents must be submitted in advance, before their hardcopies can be submitted.

Can documentation be stored electronically and still meet statutory data-retention requirements? Another contentious legal point that could prove very costly for business operators, particularly long-established entities, is related to statutory data-retention requirements. For example, Cambodia requires companies to maintain their accounting records for a period of 10 years. If there is no requirement for the records to be in hardcopy format, and electronic records are acceptable, time and costs would be saved. In Cambodia, there is no specific law that would prohibit retaining such records in an electronic format. Market practice shows that data retainers must ensure such information can be retrieved and printed when requested by competent authorities. In Laos, Thailand, and Vietnam, the general answer to this point should be “yes”, unless the law or any authority’s guideline specifically requires that it must be kept in a hardcopy format. These requirements seem to be logical and realistic; a business operator should not be required to print out records simply for the purpose of storing them, especially when the filing or transaction that they relate to was made electronically. The current approach adopted in Myanmar appears to differ from these other countries, as the general answer to whether records can be made electronically appears to be “no”, except where certain legislation and regulations permit such practice. However, this approach is subject to change (i.e. the scope could be broader) when the new Companies Act comes into effect on 1 August 2018.

Can electronic transactions and information be treated as evidence at the local court? The answer in all five jurisdictions is generally “yes”. The most recent change to permit the practice occurred in Myanmar, where the Evidence Act now expressly includes electronic documents in the definition of “documents”, allowing electronic documents to be treated the same as paper documents. In all five jurisdictions, the party that uses such documents as evidence generally has the burden of proving their integrity and meeting accessibility conditions as set out by law.

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Can board and shareholders’ meetings be conducted via a video conference?

Najla Zamri

Can participants join annual shareholders’ meetings via a video conference and, if so, will attendance validly be counted as a quorum, and can the vote be counted?

As co-founder & General Counsel, Funder Exchange (FEX), Najla has enjoyed a diverse legal career and has leant her considerable legal expertise to a variety of roles. These have spanned launching an e-commerce start-up in London, to being part of the team responsible for introducing the Netting of Financial Agreements Act 2015, which promoted Malaysia as a transparent and efficient market for derivatives. A Malaysian citizen, Najla holds an honours degree in law from Queen Mary University of London.

Only Thailand and Vietnam permit attendance via video conference, provided specific requirements are fulfilled. In Cambodia, Laos, and Myanmar, the law is still silent on this point at the time of writing, but this is changing as the countries modernise their company legislation. T&G’s local counsel in Myanmar, Nwe Oo, identifies that the new Companies Act, which becomes effective on August 2018, “allows directors’ meetings to use video conferencing and by any other instantaneous communications medium, provided that it is consented to by all directors or as provided in the company’s constitution”. Although there is still no clarity in Cambodia, the law allows board and shareholders’ meetings to be conducted via means other than a physical meeting. This means that conducting meetings via a video conference could be acceptable if all parties agree, and if it is permitted under the company’s articles of association (Articles). In Laos, the law is silent for shareholders’ meetings. With regard to board meetings, however, the board may hold informal meetings through any means of communication. Further, the adoption of resolutions in informal meetings must be determined in the Articles, when these resolutions are passed by specific means of communication. Articles will therefore frame the possibility of conducting meetings by video conference.

What are the strategic challenges and opportunities related to digitisation? Doing business in emerging markets can often throw up challenges that are unfamiliar in other jurisdictions, and the developing markets of SEA are no different. Although the law in the five jurisdictions covered by this article remains uneven, each of these countries has some measures in place to address e-contracts and modernisation is underway. Although progress may be slow, it is clear that each of these countries is seeking to create an environment in which digital business can operate. This makes sense—internet use in SEA is increasing more quickly than anywhere else in the world, thanks to inexpensive and readily available smartphones and mobile data plans. Although these countries may not have the digital business chops of more developed countries, the opportunity for digital business is certainly there for those willing to put the work in, and the benefits of first-mover advantage cannot be underestimated. A thorough understanding of the legal regimes applicable in each jurisdiction can allow GCs to guide their companies through strategic market entries, or strategic product launches, with relative ease. However, investing in indigenous knowledge and deep-rooted local connections on the ground are critical to getting the right information about how business models are set to advance with the modernisation of local legislation. Doing so proactively can mean the difference between a jurisdiction-specific GC who is only consulted when a lawsuit needs to be avoided, and a GC acting as a strategic regional advisor who sustainably contributes to a company’s growth. By tapping into the local capabilities and connections of indigenous firms, GCs ensure that they stay at the forefront of evolving legislation in the digital era. a

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Athistha (Nop) Chitranukroh A partner in Tilleke & Gibbins’ corporate and commercial group, Athistha (Nop) is one of the lead partners for the firm’s insurance and technology practices. She represents multinational and local corporations on a range of key matters, including privacy and data protection, fintech/ insurtech, and tech-related regulatory compliance across Southeast Asia. Prior to moving in-house, she worked at the Bangkok office of a leading international law firm.

Jenny Karlsson Prior to joining Lex Mundi, a global client services platform with 160-member firms across more than 100 countries, Jenny worked as an international corporate lawyer, both in private practice and in-house, in Asia, Europe and North America. Jenny is a dual-qualified lawyer in New York and England & Wales and holds a Bachelors of Law degree from Durham University and a Master of Laws degree from University College London.

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Are You More Than A Lawyer? ACC is excited to announce the launch of our social media campaign, More Than A Lawyer! Being more than a lawyer means breaking the perception of the legal sector and exposing the diverse functions and wide-ranging contributions of in-house lawyers across the world. Our goal is to leverage social media channels (yours and ours) to support the in-house profession, while promoting the various and significant roles our members play across businesses globally.

“Working hard for something we don’t care about is called stress; working hard for something we love is called passion.”

To get involved, snap a photo of yourself in the lab; at the construction site; in a factory; in the training room; or anywhere your in-house role takes you. Post the image on your preferred social media platform, and tell us what you’re up to — and don’t forget to include #morethanalawyer in your post! Get involved, encourage your colleagues to get involved, and tell us why you’re #morethanalawyer. Take a look at your fellow ACC members showing how they’re #morethanalawyer!

Karen Grumley

Whether she’s behind her desk or out in the dirt, for Karen, working at Pacific National is never dull.

Queensland at Pacific National Legal Counsel ACC Australia President

Beyond the legal role, Charles occasionally wears the Sales and Marketing hat by assisting the Marketing team in conducting full day pop-up lacing Charles Chen stations demonstrating Hickies Deputy General Counsel the company’s product (HICKIES® no-tie ACC New York City shoelaces).

Tara shows that she’s #morethanalawyer while taking a plant tour of the NV Energy cogeneration facility.

Tara Young NV Energy Senior Attorney ACC Nevada Immediate Past President

Membership Chair

Please contact chapters@acc.com with any questions. ALABAMA

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IS THE GENERAL COUNSEL THE MORAL GUARDIAN OF THE COMPANY? The recent sacking of the AMP General Counsel & Company Secretary in relation to the alleged wrongdoing by AMP, revealed at the Banking Royal Commission, is a stark reminder to every General Counsel that we need to better understand the extent of our duties.

e have explored this topic in three presentations to ACC National, Victorian and ACT corporate counsel days. We are no closer to the answer and, judging from the polls we ran at our sessions, neither are you!

The question we asked was: “Is the General Counsel (GC) the moral guardian of the organisation?” Each time we ran the poll, the result was against this proposition. Being lawyers, there was some debate about whether we had asked the right question—fair point! The latest poll at the ACT conference in early July was seventy-four per cent against and twenty-six per cent in favour of this proposition. In total, we polled almost 200 in-house lawyers and the majority did not support that the GC is the moral guardian, although in subsequent discussions there seemed to be some support for the GC being one of the moral guardians (along with other officers and directors). These responses made us question whether the growing expectation that the GC carries special ethical or moral responsibilities is at odds with the view of many practitioners and possibly the Australian Solicitors Conduct Rules themselves. This article explores the Rules, articulates a narrow view of the role of the GC and steps through some of the influences on the GC that might broaden their responsibility. It ends by asking some questions we haven’t yet been able to answer ourselves. The narrow view of the role of a lawyer was described by David

A narrow view of the role Fagan of Clayton Utz during the controversy that arose out of the McCabe v British and American Tobacco litigation, (McCabe v British American Tobacco Australia Services Limited [2002] VSC 73 as reported by Margaret Simon in“Lawyers not moral judges: Clayton Utz chief”, The Age, 4 August 2002):

Moral judgments have no place in the advice a lawyer gives to a client. The clients are entitled to avail themselves of the full protection of the law and the lawyers are there to advance their clients’ interests subject to their professional duties and in particular their duties to the court. But if they operate within those constraints they are acting appropriately. We don’t take a moral stance and it’s not up to us, as advocates for a client, to take a moral stance. Ultimately that comes to a decision by the client, not the lawyer. What we aspire to ensures that we act with integrity at all times, but I don’t think that involves bringing moral judgment to who we act for and who we don’t act for.

What do the Rules say? Legal Profession Uniform Law Australian Solicitors’Conduct Rules 2015: 3. Paramount Duty to the Court and the Administration of Justice 3.1 A solicitor’s duty to the court and the administration of justice is paramount and prevails to the extent of inconsistency with any other duty. 4. Other Fundamental Ethical Duties 4.1 A solicitor must also: 4.1.1 act in the best interests of a client in any matter in which the solicitor represents the client; 4.1.2 be honest and courteous in all dealings in the course of legal practice; 4.1.3 deliver legal services competently, diligently and as promptly as reasonably possible; 40

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4.1.4 avoid any compromise to their integrity and professional independence; 4.1.5 comply with these Rules and the Law. These rules apply to solicitors and in-house corporate and government lawyers alike, although the context of legal practice differs greatly between these different branches of the profession. Do these rules form a ‘bottom line’for legal entitlement to practice, as opposed to a standard of ethics expected by the community? Is the duty to the court and the administration of justice so broad a duty that it encompasses the role of moral guardian? Read on their face, we don’t see a broad duty to act in the best interests of society. But for a General Counsel there are other things that should be considered.

Are you a Director/Officer? Section 9 of the Corporations Act defines an officer of a corporation to include a person “… who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation”. Sections 180 and 181 of the Corporations Act oblige company officers to discharge their duties in good faith, in the best interests of the corporation and for a proper purpose. They must exercise the degree of care and diligence to be expected of a reasonable person. Many in-house lawyers are company secretaries, and many, if not most, General Counsel are senior executives. As such, they would find it hard, if not impossible, to mark where their role as “adviser”merged with their role as “decision-maker”, and hence may fall within the definition of officer. In a James Hardie-related case, Shafron v ASIC [2012] HCA 18, the High Court would not distinguish between the role of General Counsel and Company Secretary to determine if Mr Shafron would be considered an “officer”under the Corporations Act 2001. The corporate counsel/company secretary was held to have been a company officer because he “participated in making decisions affecting the whole or a substantial part of James Hardie’s business”. He, therefore, had a positive duty to act with “due care and diligence and in the best interests of the company”, and, in the circumstances, he had failed to discharge his duty. These obligations are similar to both the Victorian Public Sector Values/Code of Conduct and the APS Code of Conduct.

Acting in the best interests But what does “acting in the best interests”mean? Like the “administration of justice”it can be read narrowly or expansively. In-house lawyers are often asked to advise on a lawful way around an obstacle. When does “acting in the best interests” require you to give advice that the whole endeavour might have a negative effect in the long term, perhaps on the reputation of the company? This is extremely difficult in practice. In the food-for-oil scandal, the lawyers at the Australian Wheat Board advised on the legality of contracts that breached UN sanctions. The General Counsel received adverse comments from the subsequent Cole Inquiry, which commented that the lawyers should have raised the alarm.

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Lawyers at General Motors were criticised for settling many personal injury claims in litigation concerning a faulty ignition pin in the Chevrolet Cobalt, leaving the Chevrolet Cobalt on the road with fatal consequences. Similarly, lawyers for the Catholic Church appear to have settled many abuse cases without raising the issue further. While it’s clear in these extreme examples that the in-house lawyers should have acted differently, there is no doubt that “acting in the best interests”is a more difficult standard to apply than it first seems (and hindsight is an excellent arbiter!).

Expectations from the community Adding to the debate, in-house lawyers are told that they have moral duties and obligations to society.

ACC Guidance for In-house Counsel on Ethical Decision Making for in-house lawyers provides the following guidance: •• Act in a spirit of public service. •• An obligation to the court is a commitment to justice. •• Subject to this, the in-house lawyer must act in the best interests of the client. •• Must discern between clients’ interests and ‘wants’. •• An adviser is not a mere agent. •• In-house lawyers owe their client the benefit of the full range and depth of their knowledge and skill—not just their technical expertise in law. •• The practise of law requires moral courage. Nicola Roxon, while she was Shadow Attorney-General, commented on the role of the lawyers at the AWB (“AWB lawyers part of a broken system: Roxon” by Lawyers Weekly, 9 October, 2006):

Law is not based solely around service to a client. Rather the business of law is predicated on a social consensus that there is a public good in having a stable framework for regulating society and resolving disputes peacefully. Steve Mark, former long-serving NSW Legal Services Commissioner, in his article “Walking the Ethical Tightrope: Balancing the responsibilities of inhouse counsel to key stakeholders” (Legalwise Seminars Pty Ltd, 12 November, 2009), commented that:

In-house counsel have a duty to their client – the organisation for which they work – but that duty is overridden by a primary duty to the Court and the administration of justice. In-house counsel also have an obligation, as do all legal practitioners, to act morally and ethically. In lieu of the overriding duty to the court and the obligation of morality, in-house counsel must thus reject a client’s requests if the requests undermine the primary duty to the administration of justice and the rule of law. Synonymous with this very role is the role of “gatekeeping” and acting as a corporation’s moral conscience.

company, the social licence to continue operating and, in the case of the public sector, the public trust in government. But is this duty peculiar to GCs or does it apply to all officers or public servants? In addition, lawyers, through their training and position in the organisation, tend to be capable of a high degree of analytical thought and display an independence of mind; and, by virtue of their position, GCs are able to see across the organisation in a way that few others can. Perhaps that is what creates the higher expectations of the lawyers’role. But are these higher expectations reasonable and, if so, where are they enunciated? If in-house lawyers are losing their jobs when ethical problems arise in their organisation, then this debate needs to continue until the requirements are clear.

Margaret Gillespie An experienced inhouse commercial lawyer and manager, with a passion for the environment and building stronger communities, Margaret boasts extensive private sector experience gained across a number of listed companies. She also has significant experience gained in managing commercial transactions and large litigation including a Royal Commission and class action. Beyond her inhouse roles, Margaret has spent a number of years supporting public sector and not-for-profit Boards.

Nick Galloway An in-house lawyer with 25 years’ experience advising in all areas of commercial law, Nick currently holds the role of General Counsel (ANZ and SEA) at PPG industries, a leading global coatings manufacturer. As a director of the local subsidiaries he has developed an interest in business ethics, the role of the General Counsel and the challenges of wearing many hats.

Why might it be reasonable to expect the General Counsel to be a moral guardian of the organisation? If the GC is an officer of the company or subject to one of the public-sector codes of conduct, there does seem to be an increased duty to look after the long-term interests of the organisation. Those longer-term interests include, in the case of a VOLUME 28, ISSUE 3 – SPRING 2018 |

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ACC G LO B A L U P D AT E ACC 2018 Global Compensation Report Now Available The 2018 ACC Global Compensation Report— which includes the inaugural ACC survey on salaries, benefits, and other forms of compensation, with responses from more than 5,000 lawyers in 65 countries—is now available. Among a range of questions, respondents were asked to provide information about their practice area, industry, tenure (at their current company and in the in-house profession more generally), as well as expatriate status. The report offers benchmarking data in the areas of base salaries, performance-based bonuses, total compensation, equity-based pay, benefits, and retirement/pension plans for fifteen in-house job titles. ACC has also developed an interactive online dashboard that allows users to examine compensation in more depth than that offered within a static document. The online dashboard is available via a twelve-month subscription and allows the user to manipulate the data fields to create custom benchmarking reports. Click here to access the interactive dashboard.

In addition to the published reports, the data are accessible via interactive benchmarking dashboards at www.acc.com/compensation.

earning the designation of In-house Counsel Certified (ICC).

In-house certification The second ACC In-house Counsel Certification Program will take place 3–6 September 2018 in Dubai. The program, presented through the association's credentialing arm, the ACC Credentialing Institute, is a collaboration between the Association of Corporate Counsel and the Government of Dubai Legal Affairs Department. The certification program is the first of its kind for any legal association, with a curriculum designed by leading international general counsel. The program creates a standard of best practice for in-house lawyers working worldwide. Thirty-six in-house lawyers graduated in the inaugural class of the ACC In-house Counsel Certification Program, which took place 30 April – 3 May 2018. After four days of live instruction, the program concluded with a final assessment. All 36 students passed the final assessment,

The students travelled to Dubai from seven countries, and represented 24 companies, including Abu Dhabi Investment Authority, Asteco Property Management, AstraZeneca, British Telecom, Caterpillar, Cummins, DAMAC, du, Emaar Properties, General Motors, Johnson Controls, Merck Sharp & Dohme, MetLife, Nestlé, Reckitt Benckiser, and Sherwin-Williams. September's program will follow the same format as the inaugural class, including substantive programming, group presentations, and team projects. Participants are instructed across three core areas: stakeholder relationships, law department management, and legal services. After graduates pass the final examination and receive their ICC designation, the designation remains valid for one year. After the first year, 14 hours of continuing legal education or continuing professional development (CLE/ CPD) are required annually to maintain ICC status. For more information on the program visit https://accci.inreachce.com/. a

By in-house counsel for in-house counsel.®

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