The Legal 500 GC Summit: Mumbai
It took 60 years for India to make its first trillion dollars following independence, with the country hitting $1tn in nominal GDP by 2007. Seven years later, in 2014, it had made its next trillion. By 2019 it will have earned its third trillion, and by 2030 is predicted to hit $10tn. Whether or not these projections prove accurate, it is clear that India’s level of growth will transform the way in which its businesses, both domestic and multinational, operate. Interaction with foreign counterparties will become more complex, recourse to Indian law will become more common, and litigation and arbitration will become both more common and complex. For India’s lawyers, finding ways to deal with an unprecedented lever of social transformation will become essential.
To find out what India’s rise means for its legal counsel, The Legal 500 joined together with CMS Cameron McKenna Nabarro Olswang (CMS), Vahura, Blackstone Chambers and Luthra & Luthra for this special summit.
Reaching New Heights?
The day began with a discussion of how the GC role is changing in India and what this change means for legal career paths over the coming years. Moderated by CMS partner Jonathan Warne, the session, titled “General Counsel: Reaching New Heights”, featured a high-profile panel: Debolina Partap, GC of Mumbai-headquartered global pharmaceutical company Wockhardt Group; Pramod Rao, GC of Citi India, and Ashok Maheshwary, head of legal for KCT Group, one of India’s leading business conglomerates.
Warne introduced the session by asking whether “head of legal” remained an apt description for the roles GCs were expected to perform within their organisations. ‘Orthodox legal work is barely 1% of what I do’, answered Partap. ‘Many times a decision or opinion is referred to me not because it is a legal question but because as GC I can see the entire spectrum of issues and address questions that might not be obvious to other functions: what constitutes a deviation in the business? What are the risks associated with a course of action, and, if it goes to litigation, what is likely to happen?’
KTC’s Ashok Maheshwary added: ‘The GC is as much a business manager as anyone else. While we use legal domain knowledge we use it to get commercial results. Any lawyer not capable of applying legal knowledge toward this end will not make it in a commercial organisation. This trend will continue and the GC of the future will not just advise on risks but encourage risk-taking behavior that delivers commercial results.’
However, noted Pramod Rao, the backdrop of intense regulation will affect how GCs articulate this risk-taking narrative. ‘If a GC is part of the senior management team then of course he must share in the risk-taking mentality of the company. However, I would emphasise that we are also representatives of a function, and if a matter goes to court it is the purely legal parts of that function that will be called into question. GCs should acknowledge that the commercial activities of the business generate their salaries, but they also need to emphasise independent leadership. After all, that is why a business takes on the considerable cost of employing lawyers in the first place. But we need to make it clear that our decision comes from a commercially-informed perspective and that there is nothing particular about GCs saying “no”. A CEO can just as likely say no if something is not in the interests of the company.’
‘Being risk averse is not a characteristic of the GC’, agreed Maheshwary. ‘No business wants to take a risk if the consequences of doing so are unknown. When a commercial leader becomes aware of the criminal and civil consequences of a plan they will listen. We should not be so afraid to push back on business that we become irresponsible.’ Partap added: ‘We are also able to see things in their broader context. Each business division tries to achieve specific objectives, which makes it very important to have a coordinator such as a GC who understands the impact of those things on the wider business.’
This led Warne to introduce the ‘8C’ Strategic Counsel Model, a competency framework identifying the range of skills – some quasi-commercial, some more leadership based – defining the GC role. There had, Warne noted, been a radical shift in the skills and capacities used to define successful performance in the GC role since he first introduced the framework in 2009. This shift in competencies has seen the GC role move ever closer to the core metrics of other functions. How far, he asked, do the competencies expected of a GC differ from those of a chief executive?
While Maheshwary felt it was unquestionable that modern GCs have all the attributes necessary to execute the position of CEO, Rao suggested the question somewhat undermined the “rise of the GC” narrative, noting that, ‘we are already shaping the enterprise in so many ways that it is possible to be a GC and have a board-level impact. We do not need to worry about making the move to CEO if we want to be leaders.’ Partap went further still: ‘The real sign of the GC brand becoming a success is when a CEOs are asked whether they have the skills needed to become GC!’
The Recruiter’s Perspective: What skills do boards look for in a GC?
If the GCs are moving beyond their traditional legal mandate, how are recruiters and boards changing their approach to identify candidates with the right mix of skills? This was the subject taken up by the second session of the day, which saw Karl Fernandes, partner and head of legal recruiter Vahura’s in-house practice group, interview one of India’s superstar GCs, Murali Neelakantan, executive director and global GC of Glenmark Pharmaceuticals.
Fernandes and Neelakantan agreed that the expectations placed on GCs were changing, but also felt boards had always looked beyond purely legal skills. Indeed, said Neelakantan, GCs themselves will look for extra-legal skills when hiring senior counsel. ‘We look for the attributes and attitudes that show us this person can handle complex relationships and apply solutions. Of course, we look for specialist knowledge in some areas, but I am more interested in people that can move up the management chain get into leadership positions. In that sense, there is no difference between joining the legal function and joining the finance function.’
Here, noted one member of the audience, the Indian market differs from the Anglo-American model. ‘The GC salary is very competitive in India and can outweigh those of a law firm equity partner.’ Fernandes noted that in-house teams were frequently able to offer better terms than leading firms competing for the same talent and that the leading in-house functions were hiring and training graduates directly rather than recruiting from law firms. But as Neelakantan pointed out, it is not necessarily in GCs’ interests to weaken the private practice talent pool.
‘When unfamiliar issues arise we can struggle to find good advisers at short notice. For example, the growing influence of social media has made policy a pressing issue for businesses, but good policy lawyers are very hard to find in India. In the past, policy was about getting your name on or off a notification, but it has suddenly become a much more complex and important area of legal work. We are all asking how this change will affect us and what we need to do to protect ourselves but very few firms have built strong policy practices because many talented advisers have been poached by the in-house market.’
Managing international disputes
While the first two sessions had highlighted the movement of GCs toward the centre of business, the third session of the day took us onto more recognisably legal ground: the role of GCs and in-house teams in managing international disputes. Mat Swallow, deputy chambers director at Blackstone Chambers, moderated a discussion that saw Blackstone’s senior clerk Gary Oliver take to the stage alongside Nitin Banerjee, general counsel of Cairn Oil & Gas; Dipti Gandhi, head of litigation for Mahindra & Mahinda; Natasha Mangat, vice president and senior counsel for Citibank India; Mohit Shukla, head of legal of Barclays in India and Pranav Mago, head of South Asia for the Singapore International Arbitration Centre (SIAC), one of Asia’s preeminent disputes centres.
Cairn’s Banerjee opened the session by noting lawyers need to rethink their approach to disputes and see them as part of a process that starts long before and continues long after parties reach court. ‘Often there are a number of opportunities to identify and remedy certain issues and unless disputes specialists enter into debate and dialogue with business teams they will miss these opportunities to avoid litigation. It is therefore critical that GCs are involved at the pre-litigation stage to conduct appropriate risk analysis.’
When facing a dispute, he continued, one of the biggest concerns for any organisation is, ‘the horror of something spiraling out of control and affecting customer perceptions of the business, particularly if it hits social media. All of this has changed our attitude to handling disputes markedly, and it is now much less common to confine a matter to the litigation team alone.’
This is easier said than done. Returning to the theme of the opening panel, Dipti Gandhi argued that litigation counsel should be ring-fenced from commercial decisions makers. ‘When legal teams become driven by commercial targets, legal issues tend to take a back seat. If you are pushing to sign a contract you increase the risk of filling it with midnight clauses. From that perspective, it is always better to have specialist litigators who are removed from business legal roles advising on documentation and negotiations.’
The problem with this view, countered Natasha Mangat, is that in-house lawyers are never completely removed from business decisions. As such, it is better to think of a disputes counsel as ‘a point of contact who can bring together the views of the business with the views of the lawyers close to the product line and the views likely to be taken by the courts. The role does not call for an expert in litigation but an expert in bringing different stakeholders together.’
Mohit Shukla pointed out that in-house counsel in the financial services world are at a particular advantage here. ‘Banks are lean by their very nature and we have to learn to juggle a lot of skills very quickly. There is a common perception in India that a disputes lawyer is someone who handles the pleadings and little else, but actually we are among the most multi-faceted of counsel. For example, we are the best placed people to manage external communications with auditors and regulators. I see our role as a highly specialised one that can only be executed by a generalist.’
With a growing interest in arbitration among financial services providers, the panel was keen to hear from Pranav Mago of SIAC. Mat Swallow noted a particularly well-connected lawyer in India had told him that over the past two years he had not encountered a single contract without a SIAC arbitration clause. At the same time, there was a feeling that too little had been done by the major global forums to manage costs – while ad hoc arbitration has been remodeled and developed by the Indian government to expedite processes, institutional arbitration remains expensive. But, as Mago was keen to point out, institutions do at least offer a framework for the likely cost of a matter, and if the costs of institutional arbitration are high, it is mainly because lawyers’ fees are high. Indeed, only around 2% of the total cost of a hearing is related to institutional fees. Further, he argued, clients should be realistic and accept that the advantages offered by institutional arbitration come at a price.
‘In India, an ad hoc arbitration will likely be presided over by a retired judge or chief justice. Though clearly very capable, the arbitrator is likely to have spent a long time on the criminal bench while handling a wide spectrum of cases. If I were referring an oil and gas dispute with highly specialised or industry-specific elements I would want to have an expert hearing my case from the outset. Offering these experts is the big advantage institutional arbitration has, and finding the right expert is the big advantage one centre can offer over another.’
Dipti Gandhi felt the discussion was now in danger of focusing too heavily on headline cases. ‘From a volume perspective, the largest part of most companies’ litigation portfolios is made up of consumer litigation or disputes with SMEs or small land owners. If you are selling seeds to a farmer you are not going to arbitrate. Where we have agreements or joint ventures with distributors we will have to premeditate and think about whether arbitration is the right option, but for me the big question is not whether to litigate or arbitrate but how I can reduce the volume consumer litigation. How can the team learn about our products more effectively and use data analytics spot trends in notices or cases? These are the questions that keep me awake at night.’
The subject of costs also raised questions on the role of barristers – often the final piece of the jigsaw when it comes to a dispute. Blackstone’s Gary Oliver noted: ‘We have over 100 barristers, around half of whom are QCs. We are not a law firm and we do not have the luxury of assigning lots of junior staff to a matter but, like everyone else, we are facing huge demands on costs. The question we and our clients face is how the bar can be used economically and effectively alongside law firms. Deciding when to bring in that expertise is key. The in-house sector is very sophisticated now, which means we have to work harder to establish what end users want. Hourly rates are academic because you will always find someone who is prepared to quote lower. Establishing a price for the different stages of a matter and working with clients to outline where we can add value is far more important.’
India on the World Stage
For the final panel of the day, Mohit Saraf, senior partner at Luthra & Luthra, returned to the topic of growth. India is growing: its law firms are growing, its in-house community is growing, and its economy is growing. What, asked Saraf, does this growth mean for the audience of in-house lawyers who will see the country’s GDP treble in size within their working lives? A large and diverse panel was gathered to give their thoughts: Shujath Ali, general counsel of PAREXEL; Suraj Singh, vice president and head of legal of Wells Fargo Enterprise Global Services; Gaurav Arora, general counsel and company secretary of Huawei; Zameer Nathani, legal director of Raymond Limited and Joyjyoti Misra, general cousnel of Uber.
The first to comment was Uber’s Misra, who noted that the government would need to match the work done by private companies on the policy side. ‘If we are to become a leading global economy then we need to think ahead. Our laws and policies should not just look at the next year but at the world businesses will operate in five to ten years from now. [At Uber] we innovate ourselves in terms of technology and are constantly aware of the ways in which new technology will disrupt established way of doing things. Wider policy needs to take the same approach and ensure we are not working against each other.’
Gaurav Arora of Chinese tech giant Huawei countered that the Indian government has made some positive changes in recent years, from reforming the Insolvency and Bankruptcy Court to updating the Companies Act. However, he said, structural problems with the economy would be far more difficult to address. ‘In spite of all these reforms, companies are not coming to India to manufacture their products. India is one of the largest importers of IT and telecoms products globally, and while foreign manufacturers would love to take advantage of the huge population and potential they are hamstrung by problems with regulations, infrastructure and supply chains.’
Often, he continued, these three problems merge together. For example, local sourcing norms state that foreign-owned businesses need to source 30% of their parts from India to operate single-brand retail outlets in the country. ‘To comply with this regulation is all but impossible because domestic manufacturers are not part of the global supply chain and poor infrastructure means that it unlikely to change. It also misunderstands, at a basic level, how international supply chains work. Without the demand for parts no one will invest in building factories. The domestic sourcing requirements are just one example of how regulations are holding India back from competing as a manufacturing economy.’
A second problem, the panel agreed, arises when a myriad of customs authorities and officers begin to interpret the regulations. ‘At a high level, as far as the government is concerned, the regulations are investor friendly. But the regulators lack the capacity to correct inconsistent interpretation among regional officials. They do not see how chaotic and variable the enforcement of regulations can be.’
Suraj Singh suggested piecemeal reforms to laws and regulations had made India even more difficult to understand for international businesses. ‘We have laws designed to attract foreign investors sitting side-by-side with archaic laws. In some sectors we see special economic zones and inducements such as tax breaks, yet the huge facilities that have been constructed on the back of these reforms must follow nineteenth-century employment laws and trade with companies that pay punitive taxes. Without wholesale reform we cannot hope to address the problem.’
Here Mohit Saraf turned to Shujath Ali of PAREXEL, one of the largest contract research organisations (CROs) in the world, to ask if the approach of regulators was changing in the life sciences space. ‘In last three years’, said Ali, ‘I have seen very significant changes in legislation and I can honestly say that global clients have responded positively to these changes. However, the problem [Suraj Singh] identified remains. Regulation is too variable from sector to sector and from region to region. If a manufacturing company wants to set up a factory then the local regulations and timeframes will vary hugely from one place to another. This really needs to be unified if we are to improve the ease of doing business.’
Saraf pointed to the notable successes India had achieved through targeted reform, entering the top ten for ease of doing business in insolvency and bankruptcy, credit availability and protections for minority shareholders. At the same time, he conceded, more was needed. ‘A $4tn economy can’t be ranked 100 for ease of doing business and sustain the expectations its citizens have. Change can’t happen overnight but without clearer signs of progress there is a risk that people will become disenfranchised with the current approach.’
Raymond’s Zameer Nathani is well-acquainted with international best practice. With post-graduate degrees from Stanford, Harvard, and the London School of Economics he has spent a large part of his professional life engaging with legal and business professionals outside India. The message that India is open for business is, he said, slowly starting to spread to the US and Europe. ‘The big problem the Indian government has had for a long time is that when it wants to start a new initiative it will hire from its own bureaucracy rather than looking outside for talent. However, that is changing. There is a growing interest in learning from the international markets and I am heartened to see that government officials are now spending time in the US and UK to learn how things can be improved or pick up new ideas.’