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Copyright © 2015 International In-house Counsel Journal

IICJ Annual Report 2015

An analysis based on a Survey of In-house Counsel Conducted by the International In-house Counsel Journal

The IICJ Report – Contents

PART I The In-House Counsel Universe and Sample - Who has been surveyed?

PART II Legal Teams and External Resources

PART III How In-House Counsel allocate their time and External Resources

PART IV Compliance and its relationship with in-house teams

PART V Training and In-house team development

PART VI Law Firm Selection

PART VII Panels and Reviews

PART VIII Communication with Law Firms

PART IX Legal Costs - internal & external

PART X In-house Management Systems

PART XI Press Relations and Directories

PART XII Summary

Part XIII Acknowledgements

About the International In-house Counsel Journal

Part XIV Preferred Law Firms By Area of Law

International In-house Counsel Journal – Annual Survey Report 2


Introduction

The objective of this 7th annual report is to provide a clear view of global corporate counsels’ major

concerns and priorities today.

This report is based on the seventh survey undertaken by the International In-house Counsel Journal in the Autumn of 2015. The survey was developed by a panel of senior in house counsel from a range of business sectors and jurisdictions in order to produce objective and comprehensive results. Since the inception of the IICJ annual survey back in 2008 the role of the in-house legal team has expanded considerably, providing greater opportunities for in-house counsel to advance within a company or as the case has been recently to move to other in-house teams.

The report has a number of objectives – first, to review the in-house landscape and gain an insight into the key issues and concerns of senior in house counsel of international global companies. Secondly, to present a template that senior counsel can use to benchmark themselves and their operations to an international standard. Thirdly, to provide an indication into how in house teams are managing their budgets internally and externally. With 7 years of data from previous surveys available, comparisons have been made and trends identified.

The survey was distributed to over 200,000 global in-house counsels across a wide range of businesses. This report summarises the major findings and provides invaluable information for benchmarking and intelligence for the in-house team.

The charts and analyses in this report paint a picture of global in-house law departments that are pro-actively improving their functions for higher performance and greater efficiency to respond to increasing demand. They are juggling priorities and trying to achieve progress on several fronts at one time.

Respondents to this in-depth survey, conducted from August – October 2015 are largely very senior corporate counsel. Respondents come from 71 countries on five continents and are employed by companies operating in all the major business sectors. This wealth of experience is brought together succinctly in the compilation of this extensive report.

The data has been presented in charts and graphs, where necessary commentary has been added, particularly where comparisons with previous years is required.

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Executive Summary

In-house teams have grown larger and more diverse over the last few years and this trend will continue, but not at the fast pace as previously experienced. The pressure on external law firms to deliver first class legal services for less cost remains high. Conversely the result is that more external lawyers are chasing less work at a lower cost, which has rippled back into in-house teams and for the first time since we started the survey it has been reported that in-house salaries have moved down. This may be attributed to the fact a larger sample was involved, up 30% over last year to represent 12,000 in-house counsel globally, but given that the number of respondents has increased each year and the salaries have continued to grow this is unlikely to be a factor. By continuing to cut costs the in-house teams have now reached saturation point, the external providers have cut costs considerably and many are working with fewer lawyers. The quality of the work has remained fairly constant, although many in-house counsel still feel that speed of delivery and attention to detail need to be addressed.

Law firms have made use of computer technologies to drive down costs and e-discovery tools coupled with other software have enabled law firms to remain competitive. Now the use of legal software tools has become main-stream lower cost offerings are now being presented to in-house teams, which will provide them with the same access to data as law firms. Where there are large in-house teams with strong software support external law firms have made use of their clients internal systems to reduce time and cost.

As mentioned in last report compliance is high on the agenda, but in-house teams are tightening up on data protection across all business sectors. How customer data is stored by companies is being challenged on a daily basis, for example the jurisdiction in which the physical and cloud servers operate in has a huge impact on the day to day business activity. It may be cost effect to store data in one jurisdiction over another, but will the data be safe guarded by legislation in which the data is stored? These questions and many others will be uppermost on the minds of General Counsel, not just in identifying possible failings, but convincing colleagues to spend more to protect the data.

Chief priorities include;

Developing software to reduce the dependence on external legal service providers

Monitor in-house legal department costs to ensure that they remain competitive

Manage the capabilities of the team and recruit where there pinch points

Review all data storage and ensure that any data stored by the organisation is managed according to the requirements of the legislators

Continue to develop compliance and ensure that the company is compliant and that the legal teams and compliance teams are working in concert

The in-house team structures that have been put into place in recent times will continue to grow during 2016 and the legal department will expand its role within the organisation, not just as a legal advisor, but also a business advisor.

More in-house teams are planning to spend more on external legal services than in previous years, which may contribute to a firming of rates as leaner law firms may not have the capacity for the extra work. It is evident that the priority for in-house teams is to spend more time focussing on internal issues in particular compliance and systems to increase the information flow into the in-house team.



Part I: The In-House Counsel Universe and Sample –

Who has been surveyed?

Figure 1 Business sectors represented as a % of overall respondents.

Participants in the survey are well distributed by industry sector, with the largest groups operating in sectors that are now dominated by multinational scale businesses: services, finance, telecoms, energy, insurance and life sciences. These sectors represent the vast majority of respondents and would reflect the increased globalisation of these sectors. The % responses are in line with the 2014 results enabling a direct comparison year on year.

Telecommunications

Energy

Life Sciences

Mining/Natural …

Pharmaceutical

Retail

Airline

IT

Industrial

Service

Publishing

Consultant

Banking

Finance

Insurance

Government

Association

Other

Business Sectors represented by respondent companies %



Nearly a third of teams employ over 50 in-house counsel. The number of 1-5 teams remains at 50%, which has been the case for several years now indicating that many companies prefer to keep their in-house teams small and use external law firms when required.

A third of companies with an in-house legal team have a member of the legal on the main board and two thirds hold directorships outside the company.

1-5

6-10

11-25

26-50

51-100

101-250

251-500

501-750

Number of in-house counsel in respondent companies %

32%

68%

Your Organisation

Outside Organisation

Do you or members of your legal team hold directorship positions in your organisation or outside?



The revenues of respondent companies represent a good cross section but significantly 35% of respondents have revenues of between $1 – 10bn indicating once again the multinational status of the respondent industries as well as the size of the legal teams.

The number of respondents in the up to $50m category has increased dramatically, which is due to the fact that more companies are employing in-house counsel. However the number of teams in the £50m to $10bn categories has declined, but the number in the £10bn plus category has grown.

Revenues of Respondent Companies

Revenues of Respondent Companies 2014 2015

0

5

10

15

20

25

30

up to 50m 50 - 100m 100 - 250m

250 - 500m

500m - 1 bn

1bn-2bn 2bn - 5bn 5bn - 10bn 10bn +

Market Capitalisation US$

2013 2014 2015



Part II: Legal Teams and External Resources

Spend on external advice will decrease at all levels, although where spend is over $5m per annum this will continue to increase with some companies planning to spend over $25m pa for the first time, which is due to increased economic activity particularly in the M&A sector.

The number of law firms providing advice has remained fairly static - this is in contrast with previous year’s results which saw the number of firms drop as in house departments sought better deals from their existing providers and dropped those they felt that were not performing. This exercise is now mostly complete and teams are either happy with their preferred suppliers and/or are seeking advice from alternate sources - regional/boutique/barristers or other sources of legal support.

0

10

20

30

40

50

60

Up to 1m

1m - 2m

2m - 5m

5m - 10m

10m - 15m

15m - 25m

25m - 50m

50m +

Spend on External Legal Advice US$

2013

2014

2015

0

5

10

15

20

25

30

35

40

Up to 5 6 to 10 11 to 20 21 to 50 Over 50

Number of law firms providing legal advice per company

2013

2014

2015



Part III: How In-House Counsel allocate their time and

External Resources

The majority of in house time is spent on contracts, corporate and regulatory matters, since the last survey more in-house counsel are reporting that they are spending more time on board matters and M&A work. With more GC’s on the board it can be accepted that time allocated will increase, however the amount of time on M&A issues may be related to the fact that more of this time of work is now being undertaken internally.

1-5 41%

6-10 14%

11-25 18%

26-50 7%

51-100 7%

100+ 13%

Number of In-house Legal Offices

HR matters (reviews, …

Board matters

Administrative matters

Legal / Regulatory/ …

Corporate outreach / …

Corporate

Litigation

Property

M&A

Regulatory Work

Intellectual Property

Employment

Contracts

Distribution Agreements

Government Investigations …

What percentage of your time is spent on:

26-35% 16-25% 11-15% 6-10% 1-5% 0%



The USA and Canada and Europe remain the predominant regions where legal services are required. 30% of respondents are still putting pressure on their external legal providers and anticipate further reductions in their services. Contrast this with those anticipating an increase in in-house counsel resource, exactly half of survey respondents are preparing to undertake more work in-house in 2016.

Continuing the trend over recent years, more work than ever will be undertaken in house with nearly 50% of respondents indicating they will be increasing the headcount in their teams in 2016. This is up

Currently, what percentage (by value) of your external legal work is undertaken in the following regions of the world?

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Do you anticipate the percentage of internal versus external work to change in the next 12 months?

Increase

Decrease

Remain Unchanged



from 25% in 2013, but slightly down over last year and signals a new optimism about building new teams and specialisations. Just under 20% will be increasing their external legal work with over 40% of all respondents indicting no change to their current strategies. It is reassuring that only 3% see a decrease in their internal capability with 20% planning to increase, this pattern is in line with previous years and the growth of the in-house team will continue throughout 2016. Tellingly the largest decrease in legal work will be that sourced from external law firms.

For the first time since the survey started more in-house teams are planning to spend more externally than reduce their external legal spend.

The area of dispute resolution will remain largely unchanged, with maybe slightly less litigation in preference for mediation and arbitration.

East Asia

South East Asia

Europe

USA & Canada

Latin America & …

Middle East

Africa

Will the percentage of your external legal requirements change in the next 12 months, if so how?

No Change Decrease Increase

In relation to the resolution of disputes, do you expect to see a significant or slight, increase or decrease in the use of the following methods in the

next five years?

Remain the same Decrease Increase



Compliance is top of the agenda at the moment and 90% of in-house counsel believe that this area will be their highest priority in the coming years up from 50% last year. Data Protection is all very important and will require considerable attention.

Competition/Antitrust

Consumer protection

Anti-bribery & Corruption

Taxation

Data Protection

Employment

Intellectual Property Rights

Compliance

What types of legislation are a serious concern to your business over the next five years?

Low Medium High

Lack of resources 30%

Lack of expertise 23%

So serious a second opinion is sensible

8%

Specialist area where not worth it to develop

in-house expertise 39%

What is the main reason for using external firms instead of undertaking the work in-house?



Reasons –

Direct pragmatic advice Availability Big cost savings (50% by going directly to the Barrister) Cost saving up to 30%; time saving up to 70%, however it was not a cost saving measure,

that was a welcome by product! Needed unique expertise. No need for law firm to be involved, saving was considerable (over £100k) Specific discrete matter that didn't require law firm involvement

Yes 18%

No 83%

Have you ever retained a barrister directly without going through a law firm? (applies to those jurisdiction with a Bar)

Fees

Reputation

Quality

Speed

Commerciality of the advice

Size of law firm

Diversity of services offered

Geographic reach

Geographic location

Specialist/boutique firms

Ranking in legal directory

Sector knowledge

Personal recommendation

A firm that you have worked for previously

Which of the following factors do you consider most important when selecting a law firm?

Low Medium High Very High



For the first time the number of in-house counsel reporting that they had persuaded their colleagues to in-source more legal work declined. Last year 39% reported that they had been successful, where as this time round just a third had made the case. This could be attributed to the fact that the remaining work being undertaken externally is too sensitive for the business to handle internally. Still one third managed to bring more work in-house and the reasons cited are:

Recruited a local counsel in European market We are drafting more consumer loan agreements in house Added lawyer in Poland where we do a lot of work. Bankruptcy matters now handled in house with an experienced practitioner Greater proportion of litigation work now done in house. Additional FTE and paralegals for our team We justified increasing head count based on legal spend and number of legal matters that

must be handled internally. Hiring of additional in house counsel. We have taken on debt collection Advocated for a mid level resource, given our work-load it was a short conversation. Small claims proceedings in Magistrates' Courts are no longer being outsourced Hired another experienced environmental lawyer to eliminate outsource need. Growing need for Law support by businesses Most all work begins with the legal department before it may be assigned outside Hired new -in-house associate for trademark portfolio management Hired in attorney to handle clinical contracts because of work load. Cheaper than relying on

outside firm. Routine work. Tax litigation and IP work Bring promotional sweeps/contest compliance in house Based on lessons learned in difficult transactions--do ourselves next time round Law firms being unresponsive, too busy - makes the case for building in house capacity We in-sourced employment and managed care contracting We constantly review the make or buy decision, e.g. we hired an in-house lawyer in Turkey

and in Latin America last year and are reviewing the situatiion in Italy and UK M&A as a result of increased recurring level of activity and number of projects Settlement agreement Comparison of potential reduction of outside legal cost vs. cost for new position inhouse The increased amount of work was the main driver Venture capital area, low $ value transactions - outsourcing not cost efficient In-sourced litigation to decrease costs and improve in-house competentcy Compliance M&A processes Cost analysis of in-house compared to external

Yes 33% (38% 2014)

No 67% (62% 2014)

Have you successfully made a business case in the past year to insource more legal work?



M&A, government investigations and litigation remain the highest types of legal matter outsourced to external law firms. In fact there has been a slight increase in the percentage of litigation work undertaken externally; this is most probably due to the fact that more legal work is being undertaken in-house and therefore litigation takes the majority share of work being outsourced.

More than 39% of in-house counsel reported that they had to terminate the services of an external counsel midway through a case. This figure is slightly up on last year and considering that 4 years ago only 6% were terminated during a case it appears that external advisors are still not delivering what was originally agreed.

Corporate

Litigation

Property

M&A

Regulatory Work


Employment

Contracts


Government Investigations

Typically, what percentage of work do you use external firms for?

100% 76-99% 51-75% 31-50% 21-30% up to 20% 0%

Yes 39%

No 61%

Have you ever changed your legal advisors during the course of case?



The reasons cited for changing legal advisors in the middle of a case are varied and the most common are:

Ineffective counsel Conflict of interest

Lack of responsiveness Discovered law firm was conflicted Due to the complexity of the case, it was deemed valuable to include additional counsel with

expertise in the area of concern. They committed malpractice by improperly perfecting an appeal to the State Supreme Court Lawyer was not willing to take leadership role in discussions with opposing counsel and

instead kept recommending settlement; we hired new lawyers and won the suit and paid no settlement amount

Unhappiness with litigation approach. Poor advice from first firm We were not happy with the performance of the firm up to the point of the change. Counsel was not providing the type of vocal and assertive representation I, as the client,

insisted on. Effectiveness, special knowledge Dissatisfied with service and quality of advice. Changed personnel within the firm as was not confident in team's ability to deliver not doing a good job Became appropriate in the circumstances Lack of energy, aggressiveness, time, and resources to manage to our expectations Fees and experience problems Poor performance in terms of responsiveness and quality of advice provided Unsatisfactory work, lack of responsiveness and unwillingness to push our position. Cost Expert with whom trust built up over the years changed law firm. Poor judgment and communication Poor performance has been the main root cause for the change. Was not receiving the appropriate level of support Action became much more involved than originally anticipated and we wanted greater

expertise. Fit. Bad Communication. They were losing Fired patent litigators for lack of drive. Service below our expectations. Change in strategy Lost confidence in prior counsel Level of expertise Lack of confidence in how original counsel performed. Less than satisfactory service and quality of advice A number of reasons including failing to follows client instructions, failure to update on

litigations, failure to get approvals prior to submission of memos, trying to renegotiate fees and threatening nonattendance at hearings

Less than satisfactory service or quality of advice Better quality and expertise We were thinking of changing firms but for several reasons have not done so in the course of

a case (but afterwards) Lack of responsiveness and disappointing quality of the work; lack of confidence in ability to

conduct winning strategy in litigation Not satisfied with approach to case Compatibility; lack of dedication; not fully defending our interests lack of leadership of the case; inappropriate staffing of the case Lack of progress in case. Strategic redirection Better management capabilities at another firm



Despite the increase in in-house teams and their considerable influence in terms of legal spend, still nearly half of a company’s legal spend is in the hands of business managers. In-house teams need to identify all legal spend to ensure that best value is being derived for the organisation. Only 14% of in-house have no input into which law firms are selected to undertake external legal work, which means they are exerting some influence over which firms are hired by the business units, although they do not hold the budget they will indeed be advising on the best rates to pay.

The promotion of in-house teams within companies has enabled them to add value and save their companies considerable sums of money. Nearly 40% of respondents had persuaded their colleagues to in-source more legal work, which has benefitted business units. In-house counsel are better equipped to manage legal spend and identify areas where cost reductions can be made.

In-house legal team 52%

Business Team 48%

Who is responsible for the external law services budget?

Yes 86%

No 14%

Do you have any input into which law firms are engaged?



Do you use law firms that are members of a legal network, such as TransatlanticLaw,

LexMundi, Meritas,TagLaw,TerraLex, FLI,

etc. for your cross-border work?

Do you use external resourcing firms such as Axiom to provide short term contract lawyers to

work within your team?

Do you have capacity during some weeks of the year to offer your in-house lawyers

services on a contract basis to other in-house teams in non-

rival companies?

Do you have a regular need for legal support beyond your in-

house capacities that in-house lawyers from other non-rival

companies could assist with?

Would you consider sharing your in-house lawyers with a

network of accredited in-house counsel teams from non-

competing companies when you have over/under capacity?

Is your outside counsel a member of a legal network, such as TransatlanticLaw, LexMundi, Meritas,TagLaw,TerraLex, FLI, etc. for your cross-border work?

Yes No

No 31%

Don't use a legal network

59%

Yes 10%

Have you ever been referred to another law firm within a law network?



The move away from large city firms is declining, although in 2014 around a third of respondents intend to move the work away to less expensive regional firms, just under a quarter plan do so in 2016.

For those who answered yes to the above question the reasons were varied but the over- riding reason was one of costs, some of the answers included:

Better attention and local knowledge Better price Better results. Better service, better rates Cheaper, equal quality, we're a more important client Commerciality and cost Cost differential may be significant but it is difficult to find firms with equivalent skills/expertise Efficiency Employment law matters are often determined based on local rules and relationships/respect

with other attorneys and judges Fees, fees, fees! For our business, major city firms can often not contribute sufficiently and

are too expensive. Generally more cost effective and find same quality Less travel expenses New York firms are rarely worth New York fees. Repetitive work at low cost Tend to be more responsive and lower cost The business is regional with compliance laws which vary by region. To connect to the local community where our principal place of business is located. To find the best talent--many top performers are leaving Big Law for region firms in US We have had best success with using local counsel, especially in more remote areas. we have to cut external cost Yes, the is better value and a high level of competence

22%

75%

3%

If your outside counsel is a member of an international alliance/network, if you have you utilised any of their affiliated member firms what was the

standard of work?

Less satisfactory than expected Satisfactory Better than expected

Yes 24%

No 76%

Have you / are you intending to move work away from major city firms to regional/local firms?



Part IV: Compliance and its relationship with in-house teams

We posed the question for the time last year and were fully expecting more heads of compliance to report into the General Counsel, in fact the ratio remains unchanged as below. This can be attributed to the fact that there is still caution amongst boards to integrate the two functions to ensure that there is an element of impartiality, particularly in financial institutions.

The percentage of General Counsel reporting into the CEO has remained at around the 70% level for the last 2 years, although just 4 years ago half that number were on the main board.

Where the Head of Compliance does not report into the General Counsel they report into:

Audit Committee Board member Board Member Legal and Compliance Both the GC and the Audit Committee of the Board Chairman and CEO Chief Executive Officer Chief Financial Officer Chief Legal Officer Chief Risk Officer

No 33%

49%

51% of

Compliance heads report into General

Counsel

Yes 67%

Does your organistion have a compliance team?

Chief Executive Officer 70%

Chief Financial Officer 10%

Chairman 3% Managing Director

3%

Main Board 1%

Other 13%

Which function does the General Counsel report into?



Part V: Training and In-house team development

This is the first time we have asked whether in-house have ever worked in private practice, nearly a quarter have not.

After a slight decrease from 22% in 2013 of respondents training solicitors to 17% last year the number of companies training solicitors has increased to 30%.

Yes 76%

No 24%

Have you ever worked in Private Practice?

No 70% (83% 2015

Yes 30% (17% 2015)

Are you training solicitors in your Legal Department. If so, how many?



Are you training solicitors in your Legal Department. If so, how many?

Does your Legal Department hire students/interns. If so, how many?

Intern-ships and personal development

0 1-3 3-5 5-10 10+

No 55%

up to 5 9%

5-10 4%

11-20 5%

21-50 6%

51-100 5%

101-200 7%

201 or more 9%

Does your organisation hold a general annual convention with all lawyers of the group, if so, how many attend?



The vast majority of in-house counsel have no formal or informal PSL and make decisions on a more ad hoc basis using information available at the time. Recruitment of in-house lawyers along with external lawyers is extremely important and the chart illustrates the lack of formal processes in place to recruit in-house counsel, which is also mirrored in the recruitment of external lawyers from law firms. In-house teams need to pay close attention to this crucial element in delivering legal services to their companies.

Attend Conferences

20%

From relationship

law firms 11%

Participate in a Continuing Legal

Education / Continued

Professional Development

scheme 39%

Attend training courses

12% Internal Training Programmes

5% Distance Learning

2% Webinars 11%

Ongoing training and professional development: How do you ensure that you and your team are kept up to date with the law in

your jurisdiction?

What do in-house counsel look for and find useful in terms of “added value” from their law firms?

Very High

High

Medium

Low

Very Low



Salaries have largely remained unchanged over the last three years, except this year where salaries have fallen in all regions. This maybe a time lag in that law firms restructuring led to a surplus of lawyers looking for work thus enabling companies to pay less, however this may be a short term adjustment.

Average Annual Salary of In-House Counsel $USD

Europe Middle East Africa

2014 2015

% Change 2014 2015

% Change 2014 2015

% Change

General Counsel/Chief Legal Counsel/Head of Legal

384,600 376,000 -2 354,000 348,000 -2 275,000 238,000 -13

Head of Legal in country 270,000 217,000 -20 243,000 216,000 -11 220,000 167,000 -24

Corporate secretary & GC 315,000 256,000 -19 288,000 236,000 -18 229,000 182,000 -21

VP and GC 304,000 243,000 -20 269,000 247,000 -8 236,000 206,000 -13

Associate GC 201,000 180,000 -10 195,000 185,000 -5 170,000 155,000 -9

Senior In-house Counsel n/a 147,000 n/a 143,000 n/a 123,000

Counsel - IP 166,000 137,000 -17 158,000 136,000 -14 148,000 115,000 -22

Counsel - Competition n/a 142,000 n/a 129,000 n/a 117,000

Counsel - HR n/a 123,000 n/a 126,000 n/a 107,000

Locum/Intern/Secondee 80,000 78,000 -3 76,000 72,000 -5 72,000 65,000 -10

Asia USA/Canada Latin America

2014 2015

% Change 2014 2015

% Change 2014 2015

% Change

General Counsel/Chief Legal Counsel/Head of Legal

378,500 354,000 -6 464,000 496,000 7 323,000 286,000 -11

Head of Legal in country 276,000 228,000 -17 344,000 339,000 -1 239,000 202,000 -15

Corporate secretary & GC 341,000 230,000 -33 357,000 362,000 1 255,000 234,000 -8

VP and GC 348,000 227,000 -35 345,000 331,000 -4 258,000 220,000 -15

Associate GC 201,000 196,000 -2 233,000 233,000 0 201,000 186,000 -7

Senior In-house Counsel n/a 144,000 n/a 182,000 n/a 138,000

Counsel - IP 162,500 138,000 -15 219,000 174,000 -21 158,000 132,000 -16

Counsel - Competition n/a 142,000 n/a 178,000 n/a 128,000

Counsel - HR n/a 121,000 n/a 159,000 n/a 181,000

Locum/Intern/Secondee 78,000 77,000 -1 90,800 103,000 13 77,000 69,000 -10

13%

6%

11% 70%

When externally recruiting a lawyer into my Department/Team I:

a) use a Recruitment Agency from a formal Preferred Supplier List (PSL) put together by Head Office

b) use a Recruitment Agency from a formal PSL put together specifically by my Legal Department



Part VI: Law Firm Selection

Along with internal recruitment appointments, close attention needs to be made to the recruitment of external advisors, particularly as costs tend to be three times higher than using internal resources. Quality, sector knowledge and personal recommendation are the most important elements used in the selection process.

Matter co-ordination across practice areas is the most important factor with single point of accountability also being viewed as highly important.

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00

Fees

Reputation

Quality

Speed

Commerciality of the advice

Size of law firm

Diversity of services offered

Geographic reach (has offices predominantly …

Geographic location

Specialist/boutique firms

Ranking in legal directory

Sector knowledge


Which of the following factors do you consider most important when selecting a law firm for litigation matters? Importance ranking 1 = low 2 = medium 3 = high 4 = very high

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Matter coordination

across practice areas

Matter coordination

across geographies

Single bill Single currency Single point of accountability

Do you consider the ability of a firm to serve as a "one stop shop" when selecting counsel? If so, which of the following elements do

you consider important in assessing their offer?



Personal recommendation and market reputation are the most important factors when selecting external advisors. However selection from company list of recommended firms is increasing year on year from 10% two years ago to 30% now.

Once again almost 50% of respondents do not use beauty parades and of those who have almost 25% did not find them effective.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

How do you make the initial selection of the candidates to tender the supply of legal services to your organisation?

Do not use this method

50%

Not very effective 27%

Reasonably effective

23%

Highly effective 1%

On appointment of firms, how effective do you think "beauty parades" are?



In the 2012 survey only 1.3% of respondents were using boutique firms, this figure had increased to 8% in 2013 and in 2014 had increased again to 13%. This trend has continued in 2015 with just 18% using boutique firms, putting pressure on mid and large international firms. This year we included data for law networks, which at 1% is just a small fraction, it will be interesting to see whether this share also increases with more boutiques joining law networks.

What other methods do they use:

Seek recommendation from trusted provider Ask for recommendations from colleagues Use international networking firms Rely on my relationships with law firms. I also call my fellow General Counsels and ask about

the firms they have had good work from. Use our insurers global network of legal advisors Usually ask preferred firms for recommendation of local counsel Preferred firm finds local qualified team Internal research to gain an initial understanding and steer Harvard Law School Alumni network Send an in-house lawyer for a short period Depends on the matter and how "small" it is - more often we may try to handle it in–house

Boutique/niche firms, 17.9%

Mid-sized firms, 49.0%

Large international general all-service firms,

32.4%

Law firms that are members of a Law

Network, 0.7%

What type of firms do you prefer using?

Use a preferred law firm with a presence in the

jurisdiction

Identify a local firm to undertake the

work

How do you deal with small matters in jurisdictions where you do not have a presence or expertise?



0% Up to 10%

10-20% 20-30%

30-40% 40-50%

Above 50%

Do other staff retain/engage law firms within your organisation? If so what share of the legal spend do they have?

In-house Legal Team 60%

Business Team 40%

Who would be responsible for the budget

Yes 92%

No 8%

Do you have any input into which law firms are engaged?



In-house are increasingly more involved in decisions to appoint external legal advisors – even if a decision is made by a committee, general counsel have greater input than previously.

Committee

An individual (please indicate)

Who is involved in the decision to appoint an external law firm?

In-house Counsel

Director

Managing Director

Chairman

The main board

Purchasing Officer

HR

The insured stipulates preferred law firms to use in such an eventuality

The insurance company lists preferred law firms that they insist on using

The insurance company and insured agree which law firm is used as required within an agreed budget

The insurance company pay a fixed sum, which can be utilised by the insured either to cover external

and/or internal legal costs

No insurance cover

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0%

To defend your company from major casualty claims that, although insured, could nevertheless adversely affect the company’s operations, reputation, etc., how do you prepare?

Trademarks Patents Copyrights Maskworks Moral Rights Trade Secrets

Allocation of time spent on specific Intellectual Property matters: What percentage of your time is spent on:

0%

1-5%

5-10%

10-15%

15-25%

25-35%



Part VII: Panels and Reviews

Over the past 12 months the use of panels has declined dramatically, previously the decline was steady by a few percent. In instances where firms still use panels it would appear that the optimum number is up to three law firms, this law number is easier to manage and still provides the element of competition.

Company wide

Competition/Antitrust


Employment

Property

Contracts

Taxation

Litigation

Corporate Crime

Privacy

Data Protection

Please indicate whether you have a panel of law firms and whether panels are selected for different types of work, i.e do you have a panel for IP,

litigation, employment law etc?

Panel of 20 plus law firms Panel of 10-20 law firms Panel of 5-10 law firms

Panel of 3-5 law firms Panel of up to 3 law firms No Panel



The majority of in-house teams are reviewing their legal advisors on an ongoing basis or within the last year. Although a much higher proportion of in-house teams review their external advisors on a more regular basis than 5 years ago, this year saw a slight decline in this activity.

within last 12 months

33%

within last 18 months

8% within last 2 years

10% within last 3 years

9%

On going basis 40%

When did you last formally review your legal advisers?

Legal expertise

Adaptability

Building and mending relationships

Building effective teams

Change leadership

Coaching

Collaboration (working across boundaries)

Credibility

Decisiveness

Driving innovation

Influence

Leveraging differences

Managing effective teams and work groups

Valuing diversity and differences

Developing others

Communicating effectively

Thinking and acting systemically

Taking risks

Delegating

How confident are you in the leadership ability of your outside counsel?

Very confident Confident Not confident



Select from your company list of recommended firms


By market reputation

Consult legal directory

Read a press article

Law firm website

Request for quote

Panel (preferred providers)

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

How do you make the initial selection of the candidates to tender the supply of legal services to your organisation?

Matter coordination across practice areas

Matter coordination across geographies

Single bill

Single currency

Single point of accountability

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

Do you consider the ability of a firm to serve as a "one stop shop" when selecting counsel? If so, which of the following elements do you

consider important in assessing their offer?



Part VIII: Communication with Law Firms

The most popular and effective method of communication between client and external law firm is email with very few disliking this method and none at all hating it. Twitter and Facebook are the least popular methods of communication with in-house counsel.

Bearing in mind that nearly 40% of external law firms have had their services terminated midway through a case, communication with in-house teams is of high importance. One of the many reasons cited for termination is lack of communication. Effectively getting the balance right requires close attention by both parties to ensure that timely and relevant updates are delivered in a manner that is agreeable for the client. The chart illustrates the mediums most popular, a very small number like Twitter as a communication tool and a large number prefer email. Although considered a minor element, agreeing an effective way of communicating updates in a case at the outset will reduce the feeling of isolation that in-house teams feel when they receive updates by a medium they do not use. This chart does not include face to face meetings, which should be included at certain “way points” in a case to ensure that all parties are fully briefed on the case.

Email on the case

Tailored to your sector

Tailored to your company

Half-yearly CPD sessions

Monthly CPD sessions

Telephone call

Twitter/Facebook

In an ideal world, how would you like knowledge and updates to be delivered by your law firm?

Dislike strongly Dislike Like Like a lot



Part IX: Legal Costs - internal & external

Corporate

Litigation

Property

M&A

Regulatory


Employment

Contracts


Government Investigations (where various government

agencies ask you to produce a lot of documentation

When estimating the cost of certain types of legal work undertaken by your team internally, what would you budget for in $USD per hour?

$1000 plus $900-$999 $700-$899 $400-$699 $200-$399 Up to $199



For externally placed work the majority of respondents anticipate to pay between $200 and $699.

Certainly the perception is that work undertaken in-house can be done so more cost effectively with a sizable proportion of respondents budgeting in the up to $199 per hour bracket. There was a lesser proportion budgeting in the $200-$399 range but practically no representation in the $400-$699 range which featured quite substantially in the external hourly rates question.

Corporate

Litigation

Property

M&A

Regulatory


Employment

Contracts


Government Investigations (where various government

agencies ask you to produce a lot of documentation

When estimating the cost of certain types of legal work sourced externally, what would you anticipate to pay in $USD per hour?

We do not do this analysis $1000 plus $900-$999 $700-$899 $400-$699 $200-$399 Up to $199



Despite many attempts by law firms and in-house counsel to create new methods for billing, both parties have the realisation that it all comes back to an hourly rate, which is revealed in the chart above in that the single most popular method is that of hourly rates with agreed discounts.

Hourly rates with agreed discount

Hourly rates without agreed discounts

Retainer plus hourly rates

Blended rates

Fixed fee

Capped fee

Conditional fee arrangements

0.0% 20.0% 40.0% 60.0% 80.0%

What fee structure do you most prefer using?

Yes 18%

No 83%

Have you ever retained a barrister directly without going through a law firm? (applies to those jurisdiction with a Bar)

No 82%

Up to 10% 12%

10-15% 3%

15-20% 1%

More than 20% 2%

Does your organisation outsource legal work to providers which are not law firms (contract drafting and administration firms, for instance)? Please indicate the approximate volume by value as a percentage of your total legal spend.



It would appear that very little outsourcing to non legal providers which is in keeping with previous year’s results. This can be attributed to the fact that law firms are highly active in this area and have sophisticated systems in place for their clients to take advantage of.

Yes, only if the firm is hired

14%

Yes, to all tendering law firms

1%

No 85%

Do you pay the cost of preparing a litigation budget?

Totally accurate 9%

10 - 15% below budget 17%

16 - 25% below budget

7%

10 - 15% above budget 39%

16 - 25% above budget 18% More than 25%

above budget 10%

Based on your past experience, how reliable have you found the litigation budgets that outside counsel prepare for you?



Part X: In-house Management Systems

No 16% (30%2014)

Intranet 36% (37%2014)

SharePoint 48% (33%2014)

Do you use collaborative tools such as intranet, SharePoint, etc. within your legal department?

Contract management system

E-billing/legal spend management system only

Matter management system only

Combined e-billing/legal spend and matter

management system

Which of the following management systems do you utilise?

No, will never use Yes, developed internally

Yes, purchased bespoke system No, intend to within the next 12-24 months



Just two years ago 30% of in-house teams use software to manage the function, now 70% of in-house teams are using such software.

The systems they favour are listed below.

Ariba

Axiom

Bespoke

Complytrack

Contiki

CRM

CSC

eCats

Effacts

Ekaulit

EnBase

Exact Synergy

Fondia Tools

IBM Lotus notes

Internally Developed

IQS

Legal Files

LegalSuite

legisway

Local

Onbase

OpenText

SAP

SciQuest

SEAL

Selectica

Service Now

Sharepoint

Verbatim

Winra

WorkflowGen

Contract management system

E-billing/legal spend management system only

Matter management system only

Combined e-billing/legal spend and matter management system

0.0% 20.0% 40.0% 60.0% 80.0%

If you do use a purchased solution, which system/vendor do you use for the following?

Total legal spend - monthly/quarterly/YTD

Legal spend by practice area

Budget vs. actuals performance

Matter volume by type/practice area

Top matters by spend

Significant matters with high exposure/reserve

requirements

Top vendors by spend

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

If you do use e-billing/legal spend management or matter management, what are the 3 most important metrics/KPIs that these systems enable your legal department to track?



Systems used are:

Archer Bespoke CSC descartes Effacts EthicsPoint Ethidex, TR accelus Intranet LRN Navex Global

policyIQ Prewise Riskonnect Sharepoint TeamConnect Trace United Lex Winra, sharepoint, intranet

Compliance/obligation management system

Policy management system

Third party management system

Issue reporting and management system

If you also oversee the compliance function, which of the following management systems do you utilise?

• No, will never use

Yes, developed internally

• Yes, purchased bespoke system

• No, but intend to purchase within the next 12-24 months

Compliance/ obligation management

system 28%

Policy management system

20% Third party management system

24%

Issue reporting and management system

28%

If you do use a purchased solution, which system/vendor do you use for the following?



Part XI: Press Relations and Directories

In terms of publications they read on a regular basis, they tend to prefer substantive publications as opposed to the weekly “gossip” publications. Unsurprisingly, the International In-house Counsel Journal is the most popular, this may be attributed to the fact that many of its subscribers contributed to the survey and also it fits into the substantive category.

In-house Counsel are reticent in publicising the fact that a particular law firm has acted or acting on their behalf, which leaves law firms with little scope to gain press coverage.

Practical Law The Journal

8%

Lexis Nexis 6%

American Bar Journal 10%

Inside Counsel 10%

Lexology 10%

ACC Docket 16%

International In-house Counsel

Journal 40%

Top 6 Journals Read by In-house Counsel

The fact that they are acting for your company

Press releases on completion of a particular

deal or project

Disclosure in confidential bid documents

What is your attitude to law firms publicising various items relating to work they have done for your company?

Unfavourable Favourable



Chambers remains the most popular directory used by in-house teams to assess the capabilities of the lawyers and law firms they select with around a third of respondents favouring Chambers. Chambers has consistently outperformed their competitors in the seven years the IICJ has been conducting the survey.Bearing in mind that the initial selection of a law firm is based on personal recommendation the directory provides in-house counsel with verification of the capabilities of the law firm and it is most likely that a higher ranking law firm will be selected from several recommendations. Law firms expend a great deal of resource in terms of time and money to ensure that their entries are accurate and reflect the expertise of the lawyer and law firm. For the law firm they need to ensure that the resource is directed to directories most favoured by in-house teams.

No 39%

Yes 61%

Do you use directories?

0

5

10

15

20

25

30

35

40

Martindale Hubbell Legal 500

Chambers & Partners

Directories most favoured by in-house teams

2015

2014

2013

Attend Conferences

From relationship law firms

Participate in a Continuing Legal …

Attend training courses

Internal Training Programmes

Distance Learning

Webinars

Ongoing training and professional development: How do you ensure that you and your team are kept up to date with the law in your jurisdiction?



Part XII: Summary

In-house teams have matured considerably over the years gaining greater independence from external legal providers, which has enabled them to reduce costs considerably. The issues facing in-house counsel now are how do in-house teams continue to deliver greater efficiencies for their companies? The most obvious is to employ the very same technologies law firms utilise such as e-discovery software, which will save time internally and require less staff to undertake such tasks. Another strategy being adopted is to monitor compliance issues more robustly to avoid non-compliance at all levels of the business.

Training the business teams to ensure that for example they understand anti-bribery and corruption laws, pricing is in line with competition regulations and IP rights are observed. Since the survey was conducted the VW scandal has clearly identified the need for in-house counsel to take extra care that the companies staff do not consider themselves above the law however big the company or onerous the legislation. One multi-national organisation operating in Africa has taken the novel step of advising the US government that they do in fact pay small facilitation fees to transport workers to ensure that the goods are delivered. Clearly this is in breach of US anti-bribery laws, however the company making these payments has been granted a waiver until such time this can be addressed. This is a logical way forward and ensures that staff can approach superiors and explain that they have an issue and a resolution can be found.

In-house teams are moving towards focusing within the company, rather than expending considerable time managing outside counsel. One aspect that has vexed and continues to vex in-house counsel is managing the fee structure and ensure that law firms bill as agreed. By taking more work in-house these issues are greatly reduced providing more time to ensure that the company is properly protected.

Key Points for 2016:

In-house teams will need to work more closely with business units to ensure legal spend is

kept under control

Compliance teams will be under the spot light

External legal providers need to improve their offerings in terms of quality, speed of delivery

and efficiency

Computer software will continue to empower in-house teams

In-house need to be mindful that cost savings have “bottomed out” and need to focus on their

own teams to ensure that the quality of service they deliver to their companies remains high

2016 will provide interesting challenges to in-house teams as they continue to build the legal services

they offer to their businesses. The interesting consideration is that being closer to the business the

legal teams will be able to identify legal needs faster and pre-empt any intentional or unintentional

illegal conduct internally or externally.

Salaries will be under closer scrutiny as lawyers become more embedded into organisations so will

they remuneration and benefits become closely aligned to other managers within the organisation.

The rise of computer software and the oversupply of lawyers will also contribute to a softening in

salaries.



PART XIII Acknowledgment

The IICJ wish to thank all the in-house lawyers who responded to the survey, in each case it will have

taken considerable time and effort to complete, the results of which have enabled the IICJ to produce

this report.

About the International In-house Counsel Journal

The International In-house Counsel Journal (IICJ) is the only publication dedicated to providing the world’s in-house counsel with a voice. The IICJ enjoys an enviable reputation amongst the in-house legal community affording them the opportunity to write and exchange opinions and ideas, issues and information amongst themselves.

Each year the IICJ seeks the views of in-house counsel selected from the IICJ data base comprising over 200,000 in-house counsel worldwide.

Since 2007 when the IICJ first started, over 600 papers have been published making the IICJ truly a global product and uniquely in touch with the in-house world. Papers published cover a range of topics including case studies, new laws and their impact, managing an in-house team and their approach to the use and selection of law firms.

The IICJ has a main editorial board consisting of over 25 top General Counsel (refer to www.iicj.net for more details) and currently the IICJ hosts an in-house counsel conference at the Law Society in London. This forum will discuss, share and implement ideas and best practice in the management of in-house teams and their external law firms, criteria for their selection of panel law firms and their expectations on price and value services as well as new legal developments and legal issues arising out of doing business internationally.

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PART XIV Most Preferred Law Firms by Practice Area

Preferred law firms by Practice area recommended by international in-house counsel in the IICJ 2015 annual survey.

General Practice Litigation

Beiten Burkhard Alston & Bird

Bird & Bird Arslan Lawyers

Blake Casssels Benson Percival

Blakes Bird & Bird

Bryan Cave Boies, Schiller

Cliffe Dekker Cliffe Dekker

CMS Clifford Chance

Cooley Godward CMS

Davis & Gilbert Davis & Gilbert

Dentons Dentons

DLA Piper Donovan Hatem

Dorsey Dua Associates

Dua Associates Fried Frank

Foulston Seifken FTPA

FTPA Hadef & Partners

Gadens Herbert Smith Freehills

Hogan Lovells Husch Blackwell

Husch Blackwell IKMS Law Firm

IKMS Law Firm K&L Gates

McDermott Will & Emery King & Spalding

Olswang Latham & Watkins

Osler LeClair Ryan

Ropes & Gray McDermott, Will & Emery

Schulte Roth & Zabel Mitchell McNutt & Sams

Squire Patton Boggs Osler

Stinson Leonard Street Porter Hedges

Sullivan & Cromwell Rouse Hendricks German & May

T&A Associés Seyfarth Shaw

Vinge Skadden

Vrana & Partners Sullivan & Cromwell

Webber Wentzel T&A Associés

Wenger Plattner Tamimi

Wong Partnership Thompson Hine

Troutman Sanders

Wenger Plattner

Compliance Taxation Ballard Spahr Blake, Cassels & Graydon

Covington Cliffe Dekker Dentons DOGRUSOZ ELIG EY J Sagar Associates Franchini, Folani DaBerti Jacchia K&L Gates K&L Gates Osler Latham & Watkins Seyfarth Shaw NortonRoseFulbright Sullivan & Cromwell Osler

PwC

Thorsteinson

Webber Wentzel



Litigation Mergers & Acquisition

Adams & Adams Amarch & Mangaldas

Arslan Lawyers Baker & Hostetler

Baker & McKenzie Baker Botts

Baker Botts Bird & Bird

Barnes & Thornburg Blake Cassels

BechBruun Blakes

Blakely, Sokoloff, Taylor & Zafman Bryan Cave

Cooley Godward Chadbourne

Davis & Glibert Cliffe Dekker

Fenech Clifford Chance

Finnegan De Brauw

Foley & Lardner Dentons

Fross Zelnick Dorsey

FTPA ELIG

Harness Dickey & Pierce Fried Frank

Hazeltine & Lake Herbert Smith Freehills

Hovey Williams Husch Blackwell

Knobbe Martens Latham & Watkins

Mayback & Hoffman McDermott Will & Emery

McDonnell Boehnen Hulbert Norton Rose Fulbright

Osler Olswang

Owen Wickersham Osler

Oyen & Wigg Ropes & Gray

Patent Outsourcing Limited Sullivan & Cromwell

Seyfarth Shaw Webber Wentzel

Ström & Gulliksson Weil Gotschal

Sullivan & Cromwell Wenger Plattner Tarter Krinsky & Drogin

Wenger Plattner

Winthrop & Weinstine

Employment Regulatory Bird & Bird Aldrich & Bonnefin

Blakes AZB Partners

Davis & Gilbert Ballard Spahr

Dua Associates Borden Ladner Gervais

Ekmekci Cliffe Dekker

Hadef al Dhaheri CMS Hasche Sigle

Haynes and Boone, LLP Coats Rose

Hirschfeld Kraemer Copeland Cook Taylor & Bush

Isler Dare Crowell Moring

Jackson Lewis Dechert

Littler Mendelson Dorsey

Lutz Abel ELIG

Mathews Dinsdale GorrissenFederspiel

Mirick O'Connell K&L Gates

Ogletree Deakins NortonRoseFulbright

Olswang Olsen Frank

Quarles & Brady Origonni Gripo

Rubin Thomlinson Osler Hoskin & Harcourt

Seyfarth Shaw Seyfarth Shaw

Shields, O'Donnell, MacKillop Skadden

Thomson Lawyers Sullivan & Cromwell

van Cutsem Webber Wentzel

Wenger Plattner Wenger Plattner

Vorys



Contracts Corporate Governance

Addleshaw Goddard Aldrich & Bonnefin

Axon Lawyers Blakes

Baker & McKenzie Clifford Chance

Beiten Burkhard Dentons

Bird & Bird DLA Piper

Cliffe Dekker Dorsey

FTPA Haynes and Boone, LLP

Gadens J Sagar Associates

Holec, Zuska & Partners Latham

McDermott Will & Emery Osler

T&A Associés Skadden

Wenger Plattner Sullivan & Cromwell

Winston Strawn Unal & Taylan

Webber Wentzel

Wenger Plattner

Wilke Farr

Disclaimer

The contents of this report are based on a survey conducted by the International In-house Counsel Journal (IICJ) in September and October 2015. Whilst every effort is made to ensure the accuracy of the information in this publication, the IICJ make no warranty, express or implied concerning the content of this publication, products or services offered herein, all of which are provided “as is”. The IICJ expressly disclaim all liability for reliance upon the information contained herein. In no event will the IICJ, their affiliates or other suppliers be liable for direct, special, incidental, or consequential damages (including, without limitation, damages for loss of business profits, business interruption, loss of business information or other pecuniary loss) arising directly or indirectly from the use of (failure to use) or reliance on the information contained herein.

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