Skip to content
Corporate counsel

More Asian legal business moving work in-house

Ranajit Dam  Managing Editor, Legal Media Group, Thomson Reuters

Ranajit Dam  Managing Editor, Legal Media Group, Thomson Reuters

Survey of Asia-based corporate legal professionals

A wide-ranging survey of Asia-based corporate legal professionals sheds light on interesting trends and gives some clues as to which way the industry is heading. Certainly, more work is moving in-house, while clients are growing more discerning about the firms they employ.

The facts

The survey, conducted by Asian Legal Business, a Thomson Reuters magazine based in Singapore, was open between Nov. 15 and Dec. 31, 2015. More than 200 in-house counsel from across the Asian region (excluding China and Australia/New Zealand) took the survey. Among the final list of respondents, those based in North Asia (Hong Kong, Japan, South Korea and Taiwan) slightly outnumbered those in South and Southeast Asia by 52 to 48 percent.

Asia’s in-house counsel have spoken. More than 200 corporate legal professionals took the ALB In-House Survey 2016, which quizzed them on a variety of subjects, including the work that’s keeping them busy, the technology they’re using and how their relationships with external counsel are evolving. The results were most illuminating, offering a snapshot into the way the region’s legal industry is headed.

For starters, 93 percent of respondents say that their in-house legal teams will either increase or, at the very least, stay the same. Additionally, 44 percent describe their team as “highly internal,” which means the company has a highly developed in-house legal function that relies very little on external resources. Combined, these underscore the fact that an increasing amount of work is being carried out in-house. “These days, almost every part of the business is expected to manage costs and expenses,” says Jil Leong, Hong Kong-based Assistant General Counsel at Thomson Reuters. “Legal teams are no different.”

Charts illustrate asian legal business team makeup

But it’s not just budgeting pressures that are driving the work in-house. More than half (54 percent) of survey respondents observe that it is regulatory or governmental changes that keeps their departments most busy, and 42 percent cite ethics and compliance issues. Leong points out that the increase in regulatory and compliance functions that in-house teams have to carry out is also a factor. “A law firm can give you guidance and advice around the changing regulatory landscape,” says Leong. “But for day-to-day monitoring and enforcement, there is typically a heavy reliance on your in-house team.”

Charts show practice areas and regulatory issues for Asian Legal Businesses

That said, only 21 percent of the respondents say their budget for external counsel will decrease, with 22 percent noting that it will increase and the rest expect it to stay the same. That is a statistic that Thavakumar Kandiahpillai, VP Legal Affairs at SapuraKencana Petroleum in Malaysia, finds most surprising.

Asian legal businesses use tools inconsistently and with unstable budgets

“Everyone is being asked to cut costs, and even legal departments are not being spared the squeeze,” he says. “Whether you’re in oil and gas or banking, China’s and the entire region’s slowdown is having a considerable knock-on effect across the region. Companies are tightening their belts everywhere.”

When asked about the main services respondents would require from external counsel in 2016, regulatory advice unsurprisingly came out on top (50 percent), with M&A/corporate work and arbitration and dispute resolution tied at second place at 47 percent. Then there is intellectual property, technology and data protection (28 percent) with employment law (24 percent) and general commercial transactions (24 percent) and banking and finance transactions (20 percent) just below that.

Regulatory advice, M&A/Corporate Finance, and Arbitrationa nd disput resolution are among the top services needed from external counsel.

A new relationship

With more and more legal work now being undertaken by in-house teams, the relationship between external counsel and their clients is also evolving. For one, in-house lawyers are becoming more discerning, both in terms of quality of work as well as fee arrangements. While survey respondents say they are “generally” satisfied with the law firms they are using, some concerns remain; and the topmost among this, unsurprisingly, is fees. Around 66 percent of survey-takers feel fees are too high or unexplained.

Chart shows Asian legal businesses are generally satisfied with their external counsel

“I don’t tend to get too shocked when the legal bills arrive because it wasn’t that long ago that I was on the private practice side of the fence,” says Leong. “But some of my business colleagues are genuinely surprised at the cost of quality legal services. Part of my job is to manage expectations internally, and also make sure the company gets value-add advice from the law firms we’re using.”

Of more importance to Kandiahpillai is the fact that lawyers in firms sometimes do not understand the company, and in some cases, the industry they are meant to offer guidance on. The same concern is echoed by more than a third of the respondents. “Take oil and gas, for example. Asian law firms rarely possess a high level of expertise, and international firms that specialise in the field have all their senior partners – the experts if you will – based in places like Houston, New York and London,” he says. “Most of the partners I come across in Asia are not the most experienced that a particular law firm has available on a global basis, so there’s a dearth of real experts here. Sometimes I want to ask them: ‘Do you even know what crude oil smells like?’ Receiving advice from them occasionally feels like being a parent receiving advice on parenting from someone who’s never had children.”

Thomson Reuters Leong says that it is important as a result to pick the right lawyers for each particular transaction. “Ideally, an external counsel should know both the law and the industry extremely well,” she says. “But the ones that really set themselves apart are the ones that take the time and effort to know your company.”

Also on the list of concerns that in-house counsel have about the law firms they use is a lack of adequate responsiveness to concerns (33 percent) and that they are slow, inefficient or give bad advice (20 percent).

It is no surprise that when it came to naming factors that will influence the selection of external counsel in 2016, expertise in the industry came out on top (76 percent), followed by responsiveness (70 percent) and favourable fees and billing policies (65 percent). As to how these lawyers would be located, nearly half say they will depend on referrals from other in-house lawyers. “I’m not surprised that in-house counsel seek referrals from their colleagues because that’s one way we keep each other informed about who’s good and who’s not,” says Kandiahpillai of SapuraKencana. “If someone messes up, word will get around.”

Learn more

Forum Magazine: Shaped by Innovation
Read more from Forum Magazine in the Know 360 app