“Efficiency, not quantity: modernising legal disputes management”

It is no secret that construction and energy companies are operating in an unpredictable environment, facing ever increasing challenges such as price inflation, supply chain instability and often inappropriate risk allocation and contract administration. As such, claims and disputes can be simply a cost of doing business and protecting cashflow and managing relationships and budgets is critical.

That said, depending on a variety of factors (their size, the jurisdictions and sectors in which they operate and in-house legal or contract management support), different businesses will have different needs and methods of operating when it comes to procuring and managing the support they require from external lawyers. Some companies will be looking to manage or outsource a portfolio of concurrent disputes or arbitrations on various projects whilst others will be focused on avoiding disputes but deploying a closely integrated legal and commercial team to manage business critical arbitrations or disputes to resolution. There is no one-size-fits-all solution.

Following on from our recent roundtables with senior in-house counsel on the subject, what can clients do to ensure law firms respond to these differing needs and challenges?

Efficiency and value for money

All businesses operating in the construction, infrastructure and energy sectors are reporting to us a need to ensure certainty over legal, claims consultant and expert spend and, more than ever, to keep costs proportionate and deliver maximum value. As such, it is important for law firms to recognise the internal pressures (some of which they may not know about) that legal in-house counsel are subject to when seeking external support and what shape and size that support needs to look like.

There is a general (well founded) conception that traditional law firms have inflexible pricing structures which work in favour of big legal corporations rather than clients, who often feel a lucrative industry has been created around their difficulties. Clients have all said they wish to move away from a cost-plus hourly rate model and an open and frank discussion is needed at the outset to scope and price external support. Importantly, law firms need to be flexible and be willing to offer a range of pricing options tailored to the matter in question sharing risk where appropriate.

Clients recognise it can be difficult to assess full pricing proposals at an early stage and expect the process to be iterative, which may require budgeting in stages depending on how a dispute evolves.

Another theme is clients value the team on large-scale construction, infrastructure and energy disputes recognising the complexity and document heavy nature of such disputes. However, that team needs to work efficiently and appropriately and clients often see inappropriate delegation to inexperienced junior lawyers with minimal supervision, leading to additional costs.

For the right cases, success fees or conditional fee agreements have a role to play. Yet, there remains a certain reticence by traditional law firms to offer them by virtue of the business model or being non-compliant in certain jurisdictions. Where they are offered, clients mention inappropriate risk allocation and success fees, which risks perceptions of conflict. However, all agree that with the right team and strategy, these arrangements can be an efficient way to manage litigation risk, incentivise the legal team, promote creativity and a healthy fighting spirit.

Building the right team: “Know Your Lawyers”

With all clients reporting a maddening year-on-year increase in hourly rates legal bills have been subject to increasing scrutiny. Put simply, companies are no longer able or willing to pay lawyers for tasks that could have been done in-house or client paid-for learning of law firm junior lawyers. As such, clients are all reporting a need for a small experienced legal team which not only has sufficient bench-strength if needed but can integrate with the client’s own contract management and project team. To ensure ready access to experienced lawyers, clients are reporting implementing measures where the law firm team composition cannot be altered by the law firm without consultation and approval.

Efficient document and information management : ensuring clients are getting value for money

Document and information gathering is a key aspect of managing any construction, infrastructure and energy dispute, and often represents a significant part of legal spend. Too often, disclosure (or discovery) involves significant time spent by overly qualified lawyers reviewing quantities of documents which will have little to no impact on the case. Clients are wanting more efficient management of these tasks in various ways – including teaming up with in-house lawyers or trainees and using the in-house team’s knowledge of the project and company. Where a project has been effectively managed and documents filed (representing a significant in-house investment), this should be taken advantage of to its fullest. Conversely, where documentation is scattered over multiple systems and largely duplicated, third party e-discovery systems can be used to realise value. Artificial intelligence now offers many attractive ways of better managing large amounts of documents.

The wider role of a disputes lawyer: project counsel

The most successful disputes are those which are avoided and this is the in-house mindset. Due to the heavy workload and financial pressure placed on in-house legal departments (likely paired with the common perception that legal fees are increasingly costly) it may be tempting for businesses to wait until an issue reaches a tipping point or a formal claim appears in their inbox before seeking external advice. Unfortunately, this is almost always a false economy as issues that could have been caught and resolved early will now present further challenges and legal costs to manage them.

Clients report an increasing need to actively manage disputes throughout the course of their projects placing emphasis on dispute avoidance. Having project counsel on call to support the project team (providing bespoke advice, suggesting amendments to standard terms or reviewing specific notices or correspondence) is being seen as value for money.

Adapting to regional realities and cultural preferences

Finally, especially in international arbitration, Anglo-Saxon firms often underestimate the importance of regional culture and how it might influence collaboration and decision-making. In France, for instance, clients can be particularly averse to disputes, especially with long-term commercial partners or key players in their industry. This is part of the approach to business and resolving problems. This is when lawyers should demonstrate soft skills and aim to bridge the gap between those cultural habits and the legal realities, to ensure their proposed strategy takes account of what cultural traits may influence a company’s decision-making, whilst clearly highlighting the risks associated with that approach.

Alice Andreoletti
Senior Associate at Mantle Law, London

Posted by: Alice Andreoletti

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