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Banking on legal

Henk Crouse was the first general counsel for HSBC in Africa, having taken the role upon the bank’s first entrance into the market. And now, nearly 20 years later, having been the most consistent presence in the South Africa office among multiple CEO arrivals and departures, Crouse is retiring.

Crouse entered the legal profession as most in-house counsel do: as a private practice lawyer. His first in-house job was as in-house counsel for Nedbank, a regional institution headquartered in South Africa. It was here that Crouse got the offer to serve as general counsel for HSBC, which, at the time, was preparing to open an office in South Africa.

‘I was at Nedbank for 12 years and was very happy, but I thought, “What a great opportunity to start a bank and see how that is done”. And the bank had a good reputation as well – the brand was beautiful – and I thought it would be good to work for a local bank, and then an international bank, and compare the two,’ says Crouse.

‘It was a special opportunity and I felt I’d be stupid not to grab it. With the bank’s reputation and the brand, it was an easy decision.’

Becoming integral to the business from the start

Any incoming general counsel will speak of an adjustment period as they grapple with the legacy processes and expectations left by their predecessor. To be the first adviser for a company entering a new market presents a different set of challenges, as Crouse discovered.

‘To a great extent, I carved the role out myself,’ explains Crouse.

‘A lot of it comes down to your relationship with the CEO and how you market yourself – how you’re seen, what image you want for the legal department. Do you portray yourself as an integral part of the business? Or do you see yourself as an independent legal firm giving advice? And I think in 2000 [the latter] was the approach. But I think things have changed quite drastically. Now, you’re part of the business, you run with the pack. You go out with the relationship managers to the client, you negotiate the contracts, and it’s absolutely essential to have a legal head.’

It has been this focus on relationships from the outset, Crouse says, that has shaped the growth and success of him and his team. This emphasis starts with team building and, as the inaugural member of the team in South Africa, the building started from the ground up, with the success or failure of the team largely relying on getting this preliminary step right.

‘My whole career, the relationship of the legal department with the rest of the business has been very important to me. So when I came to HSBC, I wanted to continue with that, to be the best legal department. So, certainly, I think the most important thing is to appoint the right people. I was in a privileged position to have my pick of the crop. And when I did my interviews, the most important thing to me was to get a cultural fit. Because if you have a cultural fit and you become a family and set the values, then everything is fine. But you may have very intellectually strong people that have different work ethics that wouldn’t work.

Cultural fit is hard to measure, but Crouse’s faith in his own selection process is well founded as it turns out: in the 19 years he’s been at HSBC, he’s had just four resignations. This is no accident and, according to Crouse, is the result of a carefully developed leadership approach that was borne of experience.

Cultural fit is hard to measure, but Crouse’s faith in his own selection process is well founded.

‘I drive to work every morning and I think: “Which of my staff members may be unhappy? What did they say yesterday? What did I pick up on?” I think it’s a manager’s job to make their staff happy. And it’s something very important at HSBC – we’ve got something called the “Healthiest Human” system, which is basically to say that staff are the assets of the business and we have to look after them. Therefore, we have to accommodate their needs as well. If you want to work from home, work from home. In HSBC, that’s become common in the last year, but it’s always been here in legal, because legal is so easy to see – for instance, if you are working on a contract from home, it’s either going to be done or not.’

He adds: ‘The most important thing for me in my relationship between me and my team is that it is a trust relationship – I think it’s essential. They trust me completely with what they tell me – they are extremely open and honest. And I am very honest with them as well. I think this is the secret of the success of what we are doing here.’

Setting the agenda

With his department’s relationship to the rest of the bank front and centre, each year for the legal team starts with a high-level strategy meeting, which stays relatively informal and takes place off-site. This, Crouse says, is as much about getting buy-in from the team as it is about the finer, practical points of the team’s plan for the year.

‘I first get their buy-in and ensure that we are all on the same page, that they are part of the decision-making. Then, we basically work out an annual plan. I look at our customers and clients: and, to me, that’s mostly internal parties. Each year, everyone on the team will have been allocated a relationship with somebody. For instance, I might be allocated global banking, someone else may be the IT person, and another will be trade. Then, you also get two dates a year in the annual plan where you have to go and see them, with a questionnaire, asking them what they’re happy with regarding the services our team provides.’

The focus on building the profile of the team within the business is the starting point, but it also influences the approach of the team throughout the year, as Crouse explains:

‘I have two golden rules in legal.

‘The first one is that there must always be somebody here. If you’re the last person that leaves, you are not allowed to leave. There must always be a physical presence here. If the phone is ringing – be it yours or somebody else’s – you must answer it.’

‘Secondly, you must be very well prepared for meetings. It’s the only window where you can show how smart you are in front of very important people. The challenge is not to simply be friendly and accommodating. You must challenge people in a friendly manner to make the whole committee think of different options. They may not be right, but the idea is to give options and not have only the chairperson saying one thing and then everybody following. To me, that’s the essence of marketing yourself and raising your profile.’

Keeping it together

With just four resignations in the nearly 20 years Crouse has run the legal function at HSBC, it doesn’t need to be said that retention is not an issue for his team. Though not entirely unique, such retention is uncommon on in-house teams, where progression isn’t guaranteed or definitively structured in the same way it is in private practice. He attributes this to a sense of pride that has been instilled in his team:

‘Retaining talent hasn’t been tough. We do the normal investment banking work and then we do derivatives and things like that, which are not that simple, but honestly, if you’ve passed an LLB then I think you can do the work. To me, it’s more about the leadership and how you can lead and infuse and inspire your staff and – most importantly – it’s about pride. What pride do they have in their work? And I think pride is, in essence, what drives my team.

‘We’ve got such a good reputation and you hold it so dear that you don’t want to let go of it. Yes, sometimes you work 14 or 15 hours a day because of pride, which is not good, when it would have been better to say “Sorry, I can only deliver that in two days” and get extra help. So there is a negative side as well – sometimes you push yourself too hard because of pride. Sometimes you have to just calm them and say, “Okay, this is going overboard – we must now send a message that we need more staff because we are consistently working too hard.”

‘I think if you ask me “What image do I want in the bank?”, I think I have that reputation in the bank and within my team that I am really trusted. People come to me with their problems. I really honour that.’

Changes

The life of the in-house counsel often changes significantly from year to year, so to have occupied the same post for nearly 20 means that Crouse has had an unusually consistent front-row seat to changes in the company, the industry and the wider profession.

For instance, having worked at HSBC for nearly two decades, Crouse has seen chief executives come and go and, as such, has been a part of multiple sea changes within the business, and has had to learn to communicate his team’s ethos and success to a variety of personalities.

‘There is a negative side as well – sometimes, you push yourself too hard because of pride.’

‘At HSBC, I’ve worked with four or five CEOs. Everybody had different styles. That is very important. My view, in interviews, as part of my questions – and something I honestly believe – is that EQ is more important than IQ. I think it is. If I negotiate, I must be able to read what that other person’s soft spots are, and how I should embrace them and make them see my point of view. So, basically, I have to take my glasses off and see him through his own glasses. That’s the same thing with the CEO. It’s very important that you can relate to them and they can relate to you. That you can form a trust relationship going forward. It’s essential for the CEO to trust you. The CEO trusts you, and you’re the right-hand man – you’re their legal adviser.’

Internally, Crouse also says that the role that external firms are playing in the market has changed over the years:

‘I think external panels are more expert and not so much general. I think your legal advisers in South Africa have become more generalist and not so much specialist, and you get your specialist advice from external legal firms.’

It should also be no surprise that technology has been a key driver of change over the course of Crouse’s career, and his team’s approach to external firms is no exception to this. Crouse uses an app to manage his relationship with his external firms, which tells him the general rate of each attorney and asks the user to give feedback on the attorney based on performance, whether he’ll use them again, whether their fee has changed since the last time they used them. All of this reduces overhead for Crouse and his team – a positive – but he still maintains a cautious approach when it comes to legal solutions promising cost-saving innovation.

‘HSBC is very particular about who we are dealing with. We only basically deal with very reputable legal firms where there is no reputational risk for us and no risk of bribery. It’s very easy for a legal firm to be involved in bribery in getting licences or preferable judgments. So we do a month’s due diligence on a legal firm before we have them on board. It’s unlikely that we will deal with a start-up company that we don’t know and that don’t have a reputation. It’s too difficult to get through all the layers. From a reputational point of view, we’re very hesitant to deal with start-ups.’

The marketing of legal

It is one thing to have a legal department that the general counsel knows is successful, but truly measuring that success and communicating it with the rest of the business is an important of the job for Crouse, and is integral in building the bridges with the rest of the business of which Crouse and his team are so proud.

‘I can honestly say that we are the poster-boy department – we are held in high regard.

‘Firstly, we are being recognised for prizes internationally, so that gets advertised within the bank and people respect you for that. Secondly, I do surveys twice a year. I will ask people questionnaires before the performance appraisal, and ask them what they think about the team, so I get feedback that I can monitor.

‘We also have a thing called “At Your Best” at HSBC, where everybody gets allocated a certain amount of points, and every point has got a monetary value. Let’s say everyone gets 100 points, and you can allocate that to staff that you think deserve it. And HSBC very often acknowledge the legal department.

The emphasis on ‘being seen’ that Crouse talked about before also plays a part here. He refers to it as the team’s ‘marketing strategy’ – asking questions of the business, both inside meetings and out; ensuring his staff are very well prepared for meetings internally; and ‘walking the floor’ among internal clients to have light conversation and give internal stakeholders the chance to ask questions and give feedback.

Retirement

Now that Crouse is approaching the end of his chapter at HSBC, this top-level strategy-setting has taken on a different character, and his attention turns to the future.

‘My approach has definitely changed. I have done some internal training for my successors, so I’m very confident and comfortable with that. I’ve already had an informal discussion around when I’ll start stepping back, what meetings I’ll no longer attend or what ones I’ll attend with my successor. There’s certainly a plan.’

Retirement means different things to different people but, for Crouse, it does not mean a total erasure of his working life. Crouse’s creative side has manifested itself already, with Crouse publishing a book alongside his time at HSBC in 2005. Titled Man Op Die Dak, the novel was shortlisted for the Eugene Marais Prize in 2006.

‘I would like to get involved in schools and start training and inspiring kids.’

‘I’ve published one book, I’m going to write another book and have been approached by a publishing house. They’re disappointed I haven’t retired already. I look forward to that – to touching the creative side. I like the arts.’

‘I want to give back to society – I would like to get involved in schools and start training and inspiring kids. I think it’s important to inspire youngsters who you can still set into the right direction. To inspire professionals – they’re already on the right track. If I were to give back, I’d rather work with kids that you can still form and change their lives. I think it’s possible to do that.’

‘I would rather train youngsters for the corporate world. I know that’s more my strong point – to enthuse people.’

Advice to younger self, leadership

Now that Crouse is looking back on a lengthy and prolific career, what does he wish he’d known from the start, and what advice would he give to others at the start of their legal and business careers?

‘Something that I wish I’d learned at a really early stage – and that is that the corporate world is not a popularity contest. Why I’m saying that is that the younger you are, the more insecure you are, and the older you are, the more comfortable you are in your skin.’

‘But when you are in your early 30s, it’s the decade that you have to work the hardest in your career, because those are the make-or-break years. When you’re 40, you realise what you will and will not achieve, and you will make peace with it. In the 30s, you don’t know where you’re going to end, you just know the harder you work, the better the chances are.

‘If you’re insecure, you want people to like you because you think that’s essential. But how senior management see it, is that if you’re popular and if there’s a meeting and X says “Let’s do Y” and you say “Yes, I think that’s the right thing to do” and you don’t challenge that, they see you as weak. So if you want popularity and it becomes evident in meetings that you say what is expected, then senior management frown upon it. You should rather be more challenging, and try to set the meeting in a different direction. They’ll have much more respect for you and you’ll be promoted much quicker than if you just become popular. I wish I’d learned that at a younger age.’

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Changing Gears

In the coming decades, fully autonomous vehicles are set to take over the mainstream. A 2017 study released by Intel predicted that, by 2050, autonomous vehicles will represent a $7tn revenue stream worldwide. Allied Market Research projects the autonomous vehicle market to grow worldwide from $54.23bn in 2019 to $556.67bn in 2026 – suggesting that the developed world is speeding toward ubiquitous adoption of autonomous vehicles.

The signs are already there: Tesla’s driver-assistance software, Autopilot, is inching closer to true autonomy all the time; in 2019, the United Kingdom government announced its intention to have fully driverless cars on British roads by 2021; and Uber has been testing self-driving cars in the US since 2016.

Autonomous and automated vehicle (AV) technology offers compelling and innovative opportunities for individuals, business and wider society, but such opportunity is also coupled with considerable risk. Therefore, in order for AVs to develop pervasively, they must be regulated.

Speeding

Given the technology’s potential to alter the fabric of society, the rate of its development has been surprisingly fast. But the scope for disruption is so total that the purported rewards of AV technology – in the best case – are set to be similarly all-encompassing, with both the public and private sectors having much to gain.

‘There’s been no precedent in history for a technology which is attractive to both sectors,’ says Richard Threlfall, partner and global head of infrastructure at KPMG.

‘Public authorities all over the world, at national and city level, can see the huge social and economic benefits of AVs. On the other hand, you also have private sector companies who can see that there’s an entire new market opening – indeed, The Economist said it was a new US$10 trillion market emerging and companies are therefore piling in at pace. It’s that twin push and pull of both public and private interests, which is why this technology is advancing so rapidly.’

For the public sphere, the case for AV technology almost makes itself. According to the World Health Organization, around 1.35 million people are killed in road accidents every year, with 90% of these accidents being caused by driver error alone. McKinsey’s 2015 report, ‘Ten ways autonomous driving could redefine the automotive world’, suggests that AVs could diminish such deaths by a mammoth 90%.

‘Eliminating all of the deaths and other accidents on roads from human error is a big prize,’ Threlfall comments.

‘AVs are expected to be much safer than non-AV vehicles,’ says Claire Bennett, general counsel of FiveAI, a leading European software company for self-driving vehicles, which has cars already being tested and demoed on London’s public streets.

‘There were about 2501 people killed or seriously injured on London streets in 2016. [Autonomous vehicles are] never going to get tired, drunk, emotional or distracted – unlike humans.’

A 2017 report by Intel, Accelerating the Future: The Economic Impact of the Emerging Passenger Economy, predicts that autonomous driving will reduce heavy traffic and alleviate congestion on world roads by decreasing more than 250 million hours of commuting time every year and turning this extra time into productivity.

This goes beyond potentially making individual road users more efficient. AVs may develop into a more efficient road transport system, for example through fleets of autonomous taxis.

‘Eliminating all of the deaths and other accidents on roads from human error is a big prize.’

‘This could lead to less private car use, particularly in cities, and therefore fewer vehicles and less congestion on the road,’ says Nicholas Paines QC, Commissioner of the Law Commission of England and Wales.

‘Congestion is a problem,’ says Bennett. ‘Some of the figures I’ve seen, UK drivers lose an average of 170 hours a year whilst driving – that’s a ridiculous amount of time. With AVs, you could use that extra time profitably. Personal car use in London takes up nearly half of the street space but only accounts for 13% of distance travelled. That’s a real waste of space. On top of that, personal car use just isn’t sustainable and that creates a series of interconnected problems that are harming different aspects of our lives. Personal driving is bad for the planet, bad for our health and bad for our pockets. If you buy a car, it will depreciate in costs. You then have insurance costs, the servicing, fuel, MOT and tax. That’s quite a significant burden.’

Sarah Owen-Vandersluis, partner and head of public sector mobility at KPMG, notes that the declining demand for personal car ownership may be informing this change: ‘This is especially true among urban millennials, and companies have picked up on this trend. OEMs, technology companies and aggregators are together conceptualising new business models which recognise that fewer people want to own cars. Instead, they simply want to get in the vehicle and go.’

The effects of new alternative methods of transportation can already be seen, with the ride-sharing apps like Uber reaching near-ubiquity in cities across the world. Driverless cars have the potential to be similarly transformative.

‘I think we’re envisioning a future where there is the ability to use your phone to say, “I want to go to this place,” and for your phone to automatically know all the different ways that you can do that, whilst taking into account your own preferences in terms of time and cost,’ says Threlfall.

‘Once you confirm, you wouldn’t need to look at a timetable, consult a map, or pay a fare, because it’ll all be on the back office of the app, in the way that we’re used to for so many other services today.’

The future envisioned by Threlfall breaks the distinction between public and private transport, making it less likely that individuals will own their own car in favour of car use on an ad-hoc basis, where the vehicle will more likely be owned by fleet companies.

‘I think that sort of model, or more use of ride-hailing-type services is going to become prevalent. Obviously, in an AV world, you don’t even need to drive the thing, you just need to get in it and it takes you to where you want to go.’

Wrong way

However, according to counter research outlined in the Journal of Transportation Policy, there is a risk that AVs may actually add to congestion, rather than reduce it. There is concern among policymakers around the world regarding road capacity, specifically that AVs on their streets might not be an optimal scenario.

‘It comes down to how many movements you can enable in a particular period of time in a particular space. In a mass transit mode, buses, trams and trains offer far greater capacity than private vehicles, so the worst-case outcome from a city point of view is that the adoption of AVs increases the amount of private vehicle use, making congestion in cities worse,’ Threlfall notes.

Then, and perhaps more prominently, there are the concerns surrounding the safety of such vehicles. Despite the aforementioned projections showing that the technology can be used to make the roads safer, there is some latent anxiety around getting into a car that isn’t being driven by a human being.

‘It’s the risk, or rather the lack of comfort that people have around knowing that a human is not in charge. But this technology will not be permitted to go on the road unless it’s proven to be as safe as a human or, indeed, safer. There is also a danger that we don’t harness this technology and the advantages it brings, so it’s really important that we get the appropriate validation and verification systems in place to make sure that this technology is safe, and to make sure the process that underpins approving AVs is right, so that we can utilise the full benefits of this technology,’ says Bennett.

Though fully self-driving vehicles have the capability to reduce vehicle-related deaths, this outcome is not certain. While advocates insist that enhanced safety is one of the biggest draws of the technology, incidents involving self-driving vehicles tend to be well-publicised.

In 2019, a fatal crash involving a Tesla Model X made the news for happening just 10 seconds after the driver had engaged the car’s Autopilot feature. In 2018, an human-controlled Uber test vehicle operating in self-drive mode collided with and killed a pedestrian that it had failed to detect.

‘[In Uber’s case] there was both a design flaw in the machine, but also a social flaw in the supervision,’ explains Paul Thagard PhD, cognitive scientist and professor emeritus of philosophy at the University of Waterloo, specialising in ethics and AI. ‘That is where I think Uber is probably irresponsible, because it did not only have a machine that really shouldn’t have been driving around, but it also had inadequate supervision of that machine.’

UK Law Commission

In June and October of 2019, the Law Commission of England and Wales, in collaboration with the Scottish Law Commission, published consultation papers 1 and 2, reviewing the legal framework surrounding the use of AVs and their potential use as public transport and passenger services.

‘This is the first time that we, or any other law reform agency, have been asked to design law for the future, rather than to solve problems with the law in the present,’ says Law Commissioner Nicholas Paines QC. ‘The Law Commission’s two consultation papers are part of a wider effort with the UK government, both domestically and on the international plane.’

‘We’re very much in listening mode rather than the conclusion stage at the moment in terms of our project generally – we’re putting out consultation papers and chewing over the responses. But, we’re learning a lot about the problems and framing provisional proposals for dealing with them. It’s a challenging extension of our normal work. What we are doing at the moment is analysing existing law, talking to stakeholders, getting a handle on what the problems are likely to be. And we are producing consultation papers, which are published to the world at large.’

The Law Commission’s ‘Consultation Paper 1’ focuses on three themes: safety, liability, and the need to adapt road rules for artificial intelligence.

‘Consultation Paper 2’ focuses on the regulation of what it calls ‘Highly Automated Road Passenger Services’ (HARPS), which refers to services using highly automated vehicles to deliver journeys to passengers without human intervention. The Law Commission recommends that there should be a new regulatory regime for HARPS, as opposed to a combined regime that currently applies to taxis, private hire and public service vehicles.

‘Consultation Paper 3’, which has yet to be published, aims to delve deeper into the issues identified over the course of the consultation process by formulating more detailed proposals on the way forward, leading to a final report with recommendations on all issues in 2021.

Notwithstanding other successful tests taking place in closed surroundings, companies will eventually require the deployment of AVs on public roads at scale in order to establish their level of safety, thus placing members of the general public at the centre of likely hazardous research environments.

‘You can see how quickly public opinion can get nervous about the technology, but we have to hold that in perspective against the number of people who get killed on roads by human error,’ adds Threlfall.

Rules of the road

Malini Bose, a mobility policy expert in KPMG UK’s infrastructure advisory group, points out that the potential benefits and risks of AV technology ‘Are contingent on how policy and regulation evolve. Outcomes are not predetermined. It’s only with the right policies and right regulation that the right incentives can be created.’

Indeed, as the technology is advanced almost entirely by the private sector, lawmakers around the world are having to adapt nearly in tandem, either by updating the pre-existing standards or creating a new legislative structure for when fully autonomous vehicles finally grace our roads.

Richard Threlfall oversees KPMG’s Autonomous Vehicles Readiness Index (AVRI), which ranks 25 countries on their readiness for the oncoming autonomous vehicle revolution, assessing each based on four pillars: policy and legislation; technology and innovation; infrastructure; and consumer experience.

The Netherlands ranks first, having announced a legal framework for autonomous driving in 2018 that allows AVs to be tested on public roads without drivers, and for being proactive in assessing how AVs can assist the country’s freight industry. The next best countries are Singapore, Norway, and the United States.

Despite ranking just seventh overall, the United Kingdom posted the second best score in AVRI’s ‘policy and legislation’ category, thanks to a number of initiatives taken by UK lawmakers to further the country’s AV agenda. For example, the Automated and Electric Vehicles (AEV) Act was passed into law in July 2018, establishing that liability for accident or damage rests with the insurer of the vehicle. If the AV is not insured, then the owner of the AV will be liable for any accident.

‘Westminster’s focus on Brexit last year has not been particularly helpful in passing any legislation, let alone for AVs. But, given the recent election results, we hope to have a bit more movement,’ says Bennett.

‘We’ve been trying to educate policymakers and influencers about this technology. This includes working with the Law Commission to try to make sure that the right environment is created to encourage the safe expansion of this technology. The Law Commission’s first consultation paper on AVs in 2018 refers to our “Certification of Highly Automated Vehicles for Use on UK Roads” paper and the Law Commission’s report on the outcome of this consultation paper makes multiple references to our views. As one of the leading AV tech companies in Europe working in this area, we believe we can help this process,’ says Bennett.

Responsible driving

One specific legal question raised by AV technology is how the removal of the human element impacts the overall chain of liability when things go wrong.

Paines QC outlines how the Law Commission’s Consultation Paper 1 addresses who should have what criminal and civil liability, in a world where a car does not have a driver.

‘We analysed various civil and criminal liabilities that exist in connection with AVs and motoring. We looked at the liabilities that are imposed on the driver, because we had to rearrange those where there won’t be a driver, and made provisional proposals as to how those liabilities should be reallocated. We focused on the criminal side of things, because the AEV Act has already done a lot of work in reorganising the civil liability – basically by placing liability on the insurer who compensates the victim and can then make claims against people who can be proved to be legally responsible for an accident.’

‘Personal car use in London takes up nearly half of the street space.’

‘On the criminal side, we looked at the range of offences that can be committed by a driver. These fall into two broad compartments. There are the ones about the way in which you drive: speed limits and shooting red lights. But there are other offences which don’t relate to a driver’s manner of driving: like the offence of driving without insurance, driving without MOT or road tax. Under the current system, the reason why the driver has those responsibilities is because they are the person that causes the car to venture onto the road. But, where you haven’t got a driver, somebody else has got to be responsible.’

‘Another new framework that we are contemplating is the ongoing safety monitoring once these vehicles are on the roads. This involves a range of measures, including data collection to better understand performance and the creation of an accident investigation branch to investigate accidents which are caused by malfunctioning AV systems, in order to learn lessons for the future.’

There is a large supposition that automated driving systems (ADSs) will proceed to advance until the user has little-to-no contribution to road safety. This transfers liability for most road accidents from the driver to the ADS vehicle manufacturing supply chain. Considering a situation where there is an accident on the road involving an AV with no user in charge, where would liability fall?

The UK’s introduction of the aforementioned world-first AV insurance legislation is distinct from that of most of the EU (and world) in that it requires that the driver be insured rather than the vehicle itself. The UK Act neatly deals with the issues surrounding AV liability by effectively placing a requirement for insurers to deal with all claims, whilst retaining both the right of recovery against manufacturers and the right to exclude liability where an individual fails to keep their AV and ADS software up to date. This allows the normal and established process of the courts to then allow the insurer to take action against any party they think can be reasonably held responsible.

‘That feels like quite an easy solution to me. Other countries have been slower to look at this issue. The UK, by looking quite carefully at this issue, will start to become the lead in terms of where other countries go on this,’ Threlfall remarks.

Where a user is only in full automation mode for part of the journey (under the classification of ‘user in charge’), they will only be responsible for the driving they do before and after the automation.

‘We think that cars which are not capable of self-driving in all circumstances should have a user in charge, explains Paines QC.

‘The plan is that they won’t be responsible for the driving whilst the car is self-driving – on a motorway, for example. They obviously will be responsible for the driving that they do before and after the motorway, and we reckon that they’re the right person to have wider responsibilities, such as ensuring that the car has its tax, insurance, and is roadworthy and so forth.’

‘With regards to a highly automated road passenger service, operators of these services would carry all the legal responsibilities.’

With the introduction of a new and revised chain of liability, the role of lawyers within the case handling is also set to change.

‘The established business that lies around driver insurance and the role of lawyers in disputes between insurance companies will almost certainly completely disappear. It will be replaced with more of a business-to-business-liability-type profession,’ comments Threlfall.

‘I think the insurance sector is quite worried about how AVs will affect the insurance industry,’ says Bose. ‘Given the sheer range of uncertainties involved, pre-determined laws by themselves are not going to be exhaustive. Lawyers are going to have to navigate through everyone from manufacturers, to insurers and to users in charge, in order to write contracts and provide the necessary legal support.’

Roads

The future that is delivered by AV technology will depend on the answers to these questions. The technology exists at a nexus between public and private concerns – safety, practicality, ethics – and both spheres have their role to play. But Thagard argues that this nexus shouldn’t be forgotten, and that a principled approach should be taken when deciding how to develop, regulate and deploy this technology.

‘The principle is “need not greed.” The danger in these cases is that you’ve obviously got commercial companies regulated by profit, which is legitimate, but there is also a grave danger that human needs will be neglected. The greed for profit will lead to companies rushing out products which are simply not ready to deal with all the physical and social conditions that driving involves.’

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Beauty’s Black Market

With the cosmetic beauty industry valued at US$532bn worldwide (according to a 2019 report by retail researcher Edited), the beauty industry is growing at a rate far greater than ever before. It’s no surprise that this industry offers gargantuan profits for businesses all around the globe. But, as the general sale of personal beauty products has increased and continues to increase year by year, the same can be said about replicated counterfeit cosmetics – now a considerable industry in itself.

Aside from the obvious health risks that counterfeit cosmetics pose to consumers, fake makeup also represents considerable legal risks – especially in the new age of e-commerce – for cosmetic brand manufacturers, merchandisers, and retailers alike. To that end, the in-house legal teams in this industry are of paramount importance.

The growth of knock-offs

Given the mammoth financial opportunities counterfeit makeup offers, it’s no wonder that counterfeiters are taking advantage of this growing market. Although precise figures for black market sales are hard to come by, Statista reported that the counterfeit cosmetic and personal care industry cost retailers €1.9bn in 2015.

‘At the core of all counterfeits, it’s very economic. It’s a very dark forum of competition,’ says Corey Judson, in-house lawyer at Huda Beauty.

‘Makeup is very unique to counterfeiters because it’s very quickly transformational. People really like that quality of it: to go, within a matter of minutes, to feeling much more beautiful. It’s almost intoxicating. To do that at a very cheap price point motivates counterfeiters whilst motivating the counterfeit market.’

The surge of bloggers now sharing tutorials on social media platforms such as Instagram and YouTube has transformed the means by which shoppers find new products and interact with cosmetic brands. This means that social media platforms are no longer for social sharing alone, but are now closely tied to the direct consumption of products.

But just as social media is playing a key role in the cosmetics ecosystem, so too is it helping fuel the industry’s black market. According to Red Points’ 2018 research, social media contributes to over 50% of counterfeit cosmetic sales. Facebook alone constitutes a whopping 42.1% of those counterfeit sales (with eBay and Instagram following suit at 30.4% and 9.2% respectively).

‘Social media purchasing is a huge trend right now. You can find your favourite makeup YouTuber or Instagram artist and buy their makeup products from them directly. Counterfeiters can then comment on an Instagram or YouTube post saying “Check out my site” for these materials and they’ll have similar materials to what the artist is using in a good video and they’ll link it to counterfeit cosmetics. Within just one click, you’re exposed to buying counterfeit for an artist that you really like and that you’re following on Instagram,’ comments Judson.

Huda Beauty is emblematic of the cosmetics industry in the 21st century. The eponymous founder initially launched a beauty blog before eventually launching her own cosmetics line, amassing 40.9 million followers on Instagram, 3.78 million subscribers on YouTube, and earning roughly $30m in 2018. But as a brand in part borne out of the successful leveraging of social media platforms, it must also grapple with a black market that is making use of the same platforms, but for the wrong reasons.

‘As prolific as our Instagram account is, we have tens of thousands of comments on every single thing we post. Our social media team regulate the comments for a lot of different reasons, and counterfeits are definitely one of them. We often comb Instagram and Facebook for new counterfeit products. They show up quite quickly, so we have a really good relationship with the social platforms. We petition them to take certain sites, pictures and videos down – it’s a big deal for the platforms too that this material, for integrity, is not showing up on their website either. They’re very reactive with us,’ explains Judson.

The personal damage caused by knock-off beauty products cannot be ignored.

‘I think one of the things that is driving the popularity of counterfeits is the ease of transactions – it’s very simple for a consumer to just go online and shop for a deal that’s too good to be true, so it’s probably counterfeit,’ comments Ashli Weiss Uğurlu, legal counsel for intellectual property, marketing and advertising at Benefit Cosmetics.

‘Online sales are driving the popularity of counterfeits. It’s easy for a seller to hide the fact that the goods are counterfeit by using an image of an authentic product.’ With counterfeiters increasingly relying on the use of e-commerce to sell and distribute counterfeited goods, particularly on online marketplaces – auction and trading websites such as eBay, Alibaba and Amazon in particular – counterfeit cosmetics are flooding in from all over the world. This means that companies whose products are the subject of counterfeiting often have weak legal recourse when it comes to penalising counterfeiters.

Dangerous business

The personal damage caused by knock-off beauty products cannot be ignored. Fake cosmetics are generally produced under unregulated, unsanitary and contaminated conditions. Given the nature and intended uses of the product, effects of contaminated fakes can be devastating, with reports of rashes, infections and permanent scarring not uncommon.

‘I never know what’s in a counterfeit product, and that’s what scares me,’ comments Weiss Uğurlu.

‘We’ve done tests with counterfeits and they’ve come back with arsenic and asbestos, impure talc. It’s really scary,’ says Judson.

‘When you buy a Deciem product, there’s a lot of science going into creating the formula and selecting the ingredients used,’ says Dan Johnson, general counsel at Deciem, which owns and operates more than 10 beauty brands worldwide.

‘We take a lot of care to make sure that if you are buying a product from us you are getting a top-notch quality product. You lose all of this when selecting a counterfeit product.’

The harm generated by counterfeit cosmetics is not only limited to health risks for the consumer: by stealing respected brand trademarks, black market counterfeiters deny brand companies their entitled revenue stemming from decades of market research and development and billions of dollars spent on the final product.

‘Counterfeits in general have a negative economic effect. There’s fewer taxes collected from rights holders, fewer jobs, lots of lost revenue,’ notes Piotr Stryszowski, senior economist at the OECD’s Public Governance Directorate. Stryszowski manages the OECD task force on countering elicit trade.

Counter-counterfeiting

As e-commerce continues to revolutionise the way consumers shop, the barriers standing in the way of brands getting their product into consumer’s hands have never been lower. Unfortunately, this applies to illicit manufacturers also. In light of that, how can cosmetics brands protect their profits, reputation, and the safety of their customers? The answer namely concerns copyright and trademark rights.

‘Trademarks and customs are the bread and butter of counterfeit defence and enforcement,’ notes Judson.

‘We’re adamant about registering our trademarks and copyrights globally. If a counterfeiter is using our registered trademark, this is a direct infringement,’ says Weiss Uğurlu.

Trademark rights are usually considered to be distinctive to each nation or jurisdiction in which they are acquired. Cosmetics companies and brands usually obtain international trademark rights, which encompass a variety of rights across several countries and jurisdictions. However, as noted by the International Trademark Association, ‘the existence and enforceability of these rights are unique to each country or jurisdiction and, generally, not interdependent.’

‘We have a very large trademark portfolio. Protecting our rights is extremely important because our packaging is very simple – it’s not that hard for somebody to create confusingly similar packaging, so we are very quick to be in market, enforcing our legal rights to make sure that the assets that we have invested in and are building, are protected,’ comments Johnson.

But the efficacy of legal protections is contingent on being able to identify infringers in the first place – a difficult proposition when markets are being flooded with fakes by small-scale operations run from countries without robust intellectual property protections, if the origin is known at all.

‘The key is really understanding that counterfeiting is naturally going to occur and then catching it,’ Johnson continues.

‘Once you identify that, there are tools to enforce your rights. The challenge is that if the people who are doing it are a fly-by-night operation, they will just shut down operations and move on somewhere else. But my sense is that, if you’re aware of it, and it’s an operation that’s big enough where the person doing it has real financial weight behind them, then you can get some traction.’

‘The biggest issue that we’re facing is identifying the individual behind the counterfeit online seller account,’ notes Weiss Uğurlu.

‘It’s difficult, because a counterfeit online seller often uses fake information for their name, address, phone number, etc. Accurate personal information is crucial in the development of a case. The data we collect is passed off to law enforcement, who depend upon the accuracy of the information, so that they either continue building the case or move forward with a raid and/or prosecution.’

Enforcement, however, is only one component of the anti-counterfeiting effort.

By making cheaper and often hazardous black-market products, counterfeiters also cause substantial harm to the brand of companies whose products they counterfeit, and curtail consumer loyalty as a consequence. In recognition of the impact that fake products can have on a brand’s reputation, leading cosmetic brands have now increasingly taken specific measures to combat the growing prevalence of counterfeit products.

French heavyweight (and parent company to Benefit Cosmetics) LVMH is one of the world’s most counterfeited brands. LVMH boasts a huge intellectual property department based in Paris, employs over 250 agents globally, and manages over 12,000 intellectual property rights comprising trademarks and copyrights. Thousands of anti-counterfeiting raids are performed on behalf of LVMH each year, with such teams working with both national and international law enforcement agencies to uncover counterfeiters.

And the effort begins even earlier than that, according to Judson at Huda Beauty, who says that educating customs agents globally has proven to be an effective first line of defence for brand companies seizing counterfeits.

‘Customs are the first ones to intercept international trade – especially when things are suspiciously coming from China and India. It’s a great initial defence when making sure these things don’t spread onto the market,’ he notes.

‘We file our registered trademarks and provide training to customs offices in several countries to help officers recognise and seize counterfeits that may cross through their borders,’ explains Weiss Uğurlu.

‘We also work with law enforcement and attorneys in various countries to prosecute counterfeiters both criminally, which can include seizing counterfeit products in warehouses or at storefronts, and through civil cases, where we rescind some of the funds that sellers made through counterfeit sales.’

There is legislation in most cases addressing the counterfeit problem in detail.

Judson agrees: ‘Once we have the Huda Beauty trademark, the first thing we do is take it to customs. We make sure they’re aware of it. Last year, I went to Saudi Arabia and completed a three-city tour of training customs officials on how to differentiate genuine Huda Beauty products from the counterfeits. It was very successful – we started getting a lot of notifications from them after that.’

Fake beauty

However, legal protections that allow companies to enforce their rights differ hugely from region to region.

‘There are lots of differences when it comes to consumer protection, penalty schemes, or when it comes to even protection of right holders, but unfortunately these differences are exploited by counterfeiters who know how to target these weak spots when choosing their operations,’ comments Stryszowski.

‘We have the same general goals and objectives with counterfeiting enforcement, but the procedure behind doing that is wildly different country to country. And so that’s kind of the importance of having really good trusted local counsel throughout the world that can advise on the particulars of enforcement in that country,’ notes Judson.

‘Within Benefit Cosmetics, we will take a case pretty much anywhere,’ explains Weiss Uğurlu.

‘For the most part, the major economies of the world have laws in place to criminally enforce against the sale of counterfeit, but it’s helpful to know which government agency to partner with and the nuances of each. For example, in China we partner with the AIC or PSB, in the UK we reach out to Trading Standards, and in the US we have had great help from local law enforcement and HSI. In addition to maintaining relationships with individuals within each of these agencies, some helpful nuances include knowing the different monetary threshold of counterfeit sales for an agency to take the case, and the differentiating factor of your product that the agency is keen towards, for example, is there a healthy and safety hazard tied to your product?’

Johnson at Deciem echoes this sentiment: ‘We have global trademark protections and we have local partners that are really helpful in understanding cultural and legal challenges and opportunities, but I just find that we need to be very understanding of unique attributes of different jurisdictions, and one-size-fits-all doesn’t always work given the dynamics of each jurisdiction.’

Bargain hunt

Regardless of the ever-increasing expense necessitated by fake cosmetics and the dangerous safety risks that they pose to consumers, there is still a gap between the ambitions of various regulatory frameworks and the resources committed by agencies around the world to achieving them.

‘There is legislation in most cases addressing the counterfeit problem in detail. But what we are lacking are the efficient resources needed to be put into enforcement, and ensuring that necessary agencies will be capable of addressing counterfeits through efficient collaboration and information exchange,’ says Stryszowski.

There are several reasons as to why enforcement isn’t always top priority for those agencies on the front line of tackling counterfeit cosmetics.

‘The competing priorities of existing agencies that are in charge of anti-counterfeiting relates to the lack of enforcement. They have other things to do.

‘Take customs for example: they have a long list of things to focus on, like revenue collection and checking for narcotics. Their working day is only 24 hours, so they only have a specific amount of time and resources to tackle counterfeiting as an issue,’ says Stryszowski.

‘The second problem is that effective action against counterfeiting requires international collaboration. Right now, we don’t see efficient collaboration channels between dedicated agencies in countries who would be working solely on counterfeiting on a daily basis and actually trading information swiftly and coordinating the action in an efficient way,’ he adds.

‘It’s not something that I see as being a top priority for government or regulators. They seem to be more concerned about the claims we are making about our products. But, it goes without saying that we are grateful and willing to collaborate with governments. Working collaboratively with governments and regulators is a really important issue, but it also depends on the local government to see where it fits in with their priorities as well,’ says Johnson.

The creation of such an international collaboration forum may be a long way off.

‘If we see collaboration happening, it will be in certain areas related to anti-counterfeiting actions. For example, here at the OECD, we are working on addressing the problem of misuse of free trade zones. But it’s hard to really animate and then coordinate a general anti-counterfeiting enforcement action,’ notes Stryszowski.

Education

It is in the interests of cosmetics brands to educate consumers on the counterfeit market – not least of all because the purchase of counterfeit goods can be illegal, as it is in the United States. Furthermore, if consumers can be shown how to identify and avoid fakes themselves, a large part of the market for knock-offs will disappear.

‘We at Deciem also have a “Customer Happiness” team, which is a resource that consumers can contact and ask about any suspected counterfeit products. We also encourage customers to buy products directly from Deciem, to ensure the product they are receiving is genuine,’ explains Johnson.

‘The benefit of doing that is if you raise with them an outlet that’s not valid, then it’s on our radar. And then we can act on it as well. Being aware is the key to being safe. A bit of scepticism should be always there when you go to an unknown store and you see a damaged box of cosmetics, or when you go online and check out a website of an unknown origin with cosmetics at an astonishingly low price,’ suggests Stryszowski.

Educating customs agents globally has proven to be an effective first line of defence.

‘Always buy from an authorised retailer. If you’re unable to buy from an authorised retailer, stay away from deals online that are too good to be true. In other words, if you’re seeing a product marked down more than 50% from retail price, that’s a red flag right there that something is wrong with this product,’ adds Weiss Uğurlu.

‘If a consumer suspects the product is a counterfeit, they must not use it. For example, if you got a pill from a pharmacy and it didn’t look right, you would never just take it – the same thing is true for cosmetics,’ states Judson.

‘The number one thing is to know the retail channels. Huda Beauty only sells in a handful of retailers and our own online store. So there’s basically a 0% chance that retailer will also be selling counterfeit product. So if you’re at the right retailer, you shouldn’t have to worry at all.’

‘So long as they don’t buy it, they don’t create a market for it – and if there’s no market for it, it’s not going to be produced in the first place. I think what people don’t internalise a lot with counterfeits, is that when you buy them, you’re supporting a business that inherently engages in illegal activity. If what they’re producing is illegal, the business they run is illegal. It’s not just that you’re getting a discount, but you’re actually contributing to a really terrible cycle of crime.’

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Foreword: Steven Gartner

Diversity and inclusion initiatives have risen in prominence across the business world in recent years. They stem from core business goals – not abstract social objectives – and are publicly embraced and supported by leadership at the highest levels. Law firms around the world have long recognised the need to invest in diversity and inclusion programmes that further commitment to these ideals, but industry progress has been modest.

At Willkie, we believe everyone benefits from a diverse and inclusive workplace in which all personnel are treated with courtesy, dignity, and respect. The confluence of people of different gender identities, races, cultures, religions, beliefs, and sexual orientations across the firm yields a stronger team that is more adept at creative problem-solving on behalf of our clients. In fact, Willkie’s first female associate, Mary MacDonagh, was hired in 1939, which was extremely rare at the time. We have always known our most valuable asset is our people.

We are committed to continuing to enhance diversity and inclusion on a long-term basis, including in our leadership ranks. Currently, two women and one diverse partner are on our firm’s management committee. Seven women and five diverse partners serve as department or practice group chairs or co-chairs, five women and three diverse partners or counsel lead firm committees, and three diverse partners and two women serve as office managing partners. Of the US-based attorneys elected to the partnership this past year, 45% are women and 36% are diverse. The firm’s head of our Latin America Practice Group, Maria-Leticia Ossa Daza, who is profiled in this issue, has done a tremendous amount to support these efforts by actively supporting and mentoring other women at Willkie and across the industry. She leads our firm’s Latinx Affinity Group and regularly speaks about diversity at industry conferences in Latin America and the US.

As companies around the world have implemented comprehensive diversity programmes, law firms have welcomed the opportunity to partner with clients in these efforts. At Willkie, we regularly collaborate with clients on initiatives to further diversity and inclusion, including educational seminars, conferences and roundtable panels, and pro bono and mentorship programmes. Diversity also plays a major role in the success of our Latin America Practice Group, made up of lawyers from Brazil, Mexico, Colombia, Chile and Uruguay. This diversity enriches our practice and client relationships across Latin America, and our firm generally.

On a firm-wide level, embracing diversity and inclusion is critical to our overall success. We recognise that there is still much more to do at Willkie and across the legal industry. Diversity and inclusion will remain core to the values of the firm. We look forward to continuing our work, in conjunction with our colleagues and clients, of cultivating an environment that is diverse and inclusive at all levels.

Steven Gartner Chairman Willkie Farr & Gallagher LLP

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A new era of matriarchal lawyers

As a region, Latin America accounts for a 22% share of all lawyers globally, and an estimated 33% share of female lawyers globally. Despite this, just 25% of top management roles are occupied by women, and those in top management roles earn just 60% of that paid to their male counterparts. In Argentina, Brazil, Colombia, Chile, Mexico, Peru and Venezuela, women earn between 49 and 68 cents for every dollar that men earn in the same or similar roles.

Disappointingly, this is in step with much of the rest of the world. According to a 2019 report published by the World Bank, just six countries globally achieved a perfect score in gender equality, which means that the law in each of those countries treats men and women equally in every dimension measured by the research. The report covered 190 countries.

While Latin America shares the struggle for gender equality with much of the world, it faces unique barriers (in addition to those common to the rest of the world) in achieving that goal. Chiefly, the region’s distinct cultural and religious history has led to especially institutionalised gender bias, informing modern day attitudes which in turn make efficient reform difficult. A 2013 McKinsey & Company survey of 547 executives across Latin America found that 70% of those surveyed indicated that societal views of women’s primary responsibilities – namely, the raising of families – were a strong influence on how women make career decisions.

In some countries in the region, the institutionalised gender bias is subtle, but in others it is more obvious. Jair Bolsonaro, president of Brazil, Latin America’s largest economy and the world’s fourth-largest democracy, is renowned for his ‘government-by-machismo’ approach to politics, and is illustrative of populist attitudes toward women. Bolsonaro has been the subject of numerous protests since his inauguration, due to his inflammatory comments regarding women, as well as various ethnic and sexual minority groups. Bolsonaro has outright placed himself in opposition to what he pejoratively calls ‘gender ideology’ – a largely conservative term used to undermine pushes for equality as antithetical to religious and family values.

“Bolsonaro has outright placed himself in opposition to what he pejoratively calls ‘gender ideology’.”

But it is not just men who perpetuate gender stereotypes. Arguably, a large number of Latin American women also feed into these traditional gender roles. They believe it is their responsibility to take on all of the ‘home work’, which becomes more apparent after having children. Patricia Barbelli, Diageo’s legal and corporate security director of Paraguay, Uruguay, and Brazil, argues that men and women may take up distinctly separate positions at both work and home, to encourage a work-life balance.

Female perpetuation of stereotypes has also been seen through the remarks of Damares Alves, Brazilian minister of human rights, family and women, who assists Bolsonaro in his battle against ‘gender ideology’. Alves strongly supports traditional gender roles and is an opponent of so-called ‘ideological indoctrination’. In January 2019, when Bolsonaro came to power, Alves tweeted: ‘Women are made to be mothers’ and ‘It’s a new era in Brazil: Boys wear blue and girls wear pink!’. Alves asserts the view that diversity and inclusion programmes are a ‘threat’ to Brazilian families. Bolsonaro has also concisely propagated the long-peddled excuse for gaps in pay between men and women, arguing that men and women should not receive equal salaries and that he wouldn’t hire women with the same salary as men because women may fall pregnant.

The gender pay gap

According to the World Economic Forum, the gender pay gap of 29.2% in Latin America will take an estimated 64 years to close. The lack of practical regulation requiring businesses to observe compliance with equal rights legislation, especially gender pay regulation, to government and authoritative bodies, remains a substantial obstacle in ending the gender pay gap. Currently in Latin America, recording obligations exist only in Peru and Colombia. That said, Latin American governments are increasingly making an active effort to rectify this.

Gender discrimination is expressly prohibited in Argentina, Brazil, Colombia, Chile, Mexico, Peru and Venezuela. These nations all allow for provisions for differing legal action in relation to employees, against their respective employers, who permit gender discrimination within the workplace. For instance, in Mexico, employers who allow gender discrimination in the workplace may face labour ministry sanctions. Mexican employees are also able to bring civil action for ‘moral damages’ and criminal action under discrimination against their employer. These employees can also choose to file a complaint to the National Commission to Prevent Discrimination for payment of damages, a public warning, and/or a public or private apology.

In 2011, the Colombian Ministry of Labour stated that all Colombian businesses must document a gender pay record for audit or visits. Though this is not a direct recording requirement, it requires businesses to retain salary, job specifications, and requirements when beginning employment at the business via a gender lens.

More recently, in 2017, the Peruvian government passed a law prohibiting discrimination between men and women. The law prohibits salary discrimination between men and women, implements a recording specification (similar to that of Colombia) and prescribes businesses to notify their respective employees of payroll initiatives (and aspects affecting wages). Failure to comply with such laws may result in severe penalties for the employer. The 2017 law also recognised that sustained discrimination within the workplace would be treated as a ‘hostile act’, raising grounds for legal action against employers to allege ‘constructive dismissal’ and the payment of ‘mandatory severance’.

Research suggests that one of the primary causes of the gender pay gap is lack of representation of women in senior roles, but the lack of women in senior roles is a problem in itself. Companies and law firms are only now beginning to view gender bias as a problem. This is seen to be a separate issue that must first be addressed before the inclusion of women in senior roles. ‘The top levels of companies and most partners within law firms are still being filled by men,’ says Barbelli. According to the 2018 McKinsey & Company and LeanIn.org ‘Women in the Workplace’ paper, men surpass women at every level within the workplace.

Mónica Jiménez González, secretary general of Ecopetrol Colombia SA, outlines how instead of taking slow and rigid action in addressing the gender pay gap, Ecopetrol is analysing its own company data. Ecopetrol assesses the salaries of their employees at all levels with reference to their job title. When the company has completed a comparative analysis of all job specifications, then Ecopetrol decides the employee salary. This comparative method disregards any gender bias.

Private progress

With negative attitudes toward the position of women in the workplace common at all levels of Latin American society – from religious institutions to the highest of national offices – and with governments occupied by more imminent concerns (such as widespread corruption), it may fall to private businesses to take the lead in correcting entrenched biases and disparity in the workplace.

‘We can see that in the last few years significant efforts have been made by various governments, but most importantly by the privately-owned companies, which I believe are the present leaders when talking about changing traditional mind-sets, not only as a part of natural evolution, but also as a way to improve their labour environments, which can surely lead to a revenue increase as well,’ says Ivonne Romero, SSA Mexico’s general counsel.

As such, internally developed policies and efforts in the private sector might become the most effective tool at advancing the cause of diversity, equality, and inclusion in Latin America.

‘We make sure that we have recruitment processes with an equal number of men and women candidates, in order to ensure that we have an expanded applicant pool that allows professionals to be selected objectively,’ says Sandra Monroy, legal director, Andean region for Uber and Uber Eats.

Programmes such as diversity in candidate pools, as implemented at Uber, are intended to safeguard the inclusion of women and other specified groups within the workplace. The 2016 Harvard Business Review article ‘If There’s Only One Woman in Your Candidate Pool, There’s Statistically No Chance She’ll Be Hired’ outlines that when ‘there were two women in the pool of [four] finalists, the status quo changed, resulting in a woman becoming the favoured candidate,’ and there would be a 50% chance of hiring a woman. These initiatives, if implemented, will undoubtedly increase women’s representation within the workplace.

Although law firms and companies have, in recent years, focused on recruitment processes to tackle the lack of women of women in top management roles, firms and companies alike are now increasingly identifying that more action is required to help women advance. Men and women progress through the workplace pipeline at differing rates and it is clear that gender prejudice and discrimination are an explanation for this. As far back as 2011, Catalyst’s report ‘The Myth of the Ideal Worker: Does Doing All the Right Things Really Get Women Ahead?’ outlined the idea of a ‘social penalty’ where women are more likely to be perceived negatively when asking for work promotions and salary increases, than their male counterparts. But thankfully, that is slowly starting to change with the growing influence of women in senior roles.

‘At SSA Mexico the legal function is part of the executive team, so we have the opportunity to advise the company on how to deal with gender inequality. In my team there are women lawyers (mothers and single). They know that they can count on my support when speaking of their development as women and lawyers,’ adds Romero.

As research continues to be conducted on the effects of diversity in firms – legal and otherwise – the business case is becoming increasingly hard to ignore, and charges of ‘meaningless box ticking’ hold less and less weight.

‘This is not just a moral obligation, but a sound business strategy,’ Barbelli surmises.

Diversity and business value

There is an established connection between gender diversity and a company’s bottom line profit. There is also clear connection between focussing on the gender pay gap and the war for attracting and retaining talent.

Regional trends Regulation concerning discrimination, harassment or sexual assault within the workplace differ from region to region in Latin America. However, ‘if a company has strong policies defining what is acceptable or not in regard to behaviour that may be considered discrimination or harassment in the workplace, this will help a lot to define the boundaries of what is tolerated or not from the employees,’ says Barbelli. Diageo implements a global ‘Dignity at work’ policy whereby every employee is individually responsible for demonstrating the highest standards of integrity in their behaviour, and harassing, sexually harassing or bullying, victimising, threatening or retaliating is not tolerated. Romero states that, ‘it is important to realise that although a company’s nationality can potentially help create a cascade effect in its corresponding subsidiaries in terms of policies, it does not necessarily mean that the company will completely follow that model in a local context, such as Mexico. For instance, we can see that a lot of Mexican locally-owned companies are currently putting a lot of effort in to inclusion, sometimes even more so than international ones. The latter are probably at a loss when trying to apply inclusion policies at a local level.’

Studies also suggest that one of the leading reasons women are deterred from pursuing leadership and partner roles stems from a lack of flexibility, and a lack of positive women role models and mentors.

Various businesses are now active concerning women employee advancement, and this often means going beyond statutory regulations. SSA Mexico, for example, operates ‘flex time’ working schemes and offers additional maternity days, which are not necessarily specified under Mexican law.

‘Uber has several employee resource groups, devoted to women, such as “Women of Uber” and “Parents at Uber” among others, which allow women to embrace themselves and improve every day in their working environment,’ says Monroy.

Mentorship can play an important role in development, with ‘a good role model inspiring you to be the greatest version of yourself, not only on the professional, but personal field too. We [women] are often seen as rivals, when we should be allies. The importance of advocating for women’s higher performance, mentoring, and establishing a support network, all help to erase damaging stereotypes,’ Monroy says.

Fatima Picoto, assistant general counsel and legal director Brazil at GlaxoSmithKline (GSK), also speaks of the value in mentorship for progressing in the workplace, arguing that it is a valuable tool for all employees, not solely women. ‘However, considering the different challenges that women tend to face, identifying someone who can support and sponsor you will have a huge impact,’ Picoto adds.

Pregnancy discrimination (despite being against the law) still exists within Latin America. According to the US Bureau of Democracy, Human Rights and Labour, ‘some employers sought sterilisation certificates from women job applicants or tried to avoid hiring women of childbearing age.’ In the past, it was known that some Latin American employers went so far as to dismiss women employees from their job after hearing of their pregnancies. Despite both actions being unlawful, these laws are seldom enforced across the region. Pregnancy discrimination is inherently linked to a society that has historically tended to view women as home makers and mothers, rather than individuals valued in a workplace.

González notes that Colombia’s 18 weeks of maternity leave is unsatisfactory. Ecopetrol has an extended maternity leave due to the benefits it provides to both parents and children (the World Health Organisation recommends at least six months breastfeeding): ‘This will mean more breastfeeding in Colombia. In the cities, breastfeeding is almost disappearing, but in rural areas, breastfeeding is very high. Working while breastfeeding can be very tough. At Ecopetrol, we still want people to be able to breastfeed, if that’s their choice. We have maternity spaces in our buildings for women to breastfeed, which is very important. But, there’s still a long way to go,’ adds González.

Barbelli adds that ‘achieving gender equality in the workplace requires fundamental changes to a range of working practices. It is of utmost importance to reinforce that men’s parental leave is key to women’s progression.’

The ‘trickle down’ effect

Many Latin American businesses have increasingly encountered demand from, mostly foreign, shareholders to implement equal pay for equal work, or at least conduct equal pay equity audits. According to the 2018 ‘Women in the Workplace’ report, women continue to remain considerably underrepresented in the workplace, and corporations and firms must alter their approach in the hiring and promotion of employees at both an entry and manager level ‘to make real progress.’

Nonetheless, international investment in Latin American conglomerates and corporate governance in global companies is having a progressive ‘trickle down’ influence via region-specific diversity and inclusion policies. Several international businesses with teams in Latin America have voluntarily begun to enforce reformist initiatives such as extended maternity leave, flexible working, and mentoring programmes. These initiatives are aimed to appeal to, engage with, and advance women in the workplace.

Romero notes that as a subsidiary of Carrix, which is headquartered in the US, SSA Mexico ‘offers additional benefits to me as a woman who is working in an executive position. At SSA Mexico, we have a great local executive team, which is on the same page as our US counterparts.’

Many Latin American corporations are now embracing and implementing initiatives that go far above the present national statutory guidelines. Barbelli states that Diageo, which is headquartered in London, England, is transparent and candid when it comes to discussing the progression of women with careers in legal with their panel law firms.

Diageo’s credentials concerning the betterment of women in the workplace, without the existence of formal legislation, is outstanding. Women at a senior level have grown from 22% in 2017 to a mammoth 50% in 2019 and 49% of employees in Brazil’s São Paulo office are women. From July 2019, Diageo has offered six months fully-paid parental leave to both men and women employees, without any existing statutory requirements.

Monroy raises how the development of technology has impacted the increase of diversity policies globally: ‘One of the perks of the digital era is having the possibility to be connected, and somehow close, as if we are all in the same place. Uber has a global policy on diversity and inclusion that applies worldwide, allowing diversity initiatives to take place everywhere without limitations like distance.’

Many Latin American corporations are now embracing and implementing initiatives that go far above the present national statutory guidelines.

There is now a strong movement whereby women and minority groups are gaining momentum in Latin America. Picoto observes that, ‘GSK has 51% of women in our total staff and 49% of our leadership positions are also occupied by women in Brazil offices.’

#MeToo #NiUnaMenos

The advent of the #MeToo movement (or #NiUnaMenos, ‘not one less’, the #MeToo equivalent term coined in Latin America) has created a sense of ‘familiarity’ across the board with all women in their respective geographical regions, while providing them with a platform to voice their own experiences and concerns.

Given the historical role that women have traditionally played in Colombia (and Latin America as a region), the movement has started conversations about what is appropriate in the workplace and what is not. González argues that ‘#MeToo made people think: “What is that?” “Why is that everywhere?” “Why is it on Twitter?” “Why is it in the press?” “What does #MeToo mean to me?”. I have heard a lot of conversations concerning #MeToo in Colombia – this is amazing because you’re seeing women, and vulnerable women, in Colombia talking about it, which means that they are realising that they do indeed have a voice and it’s not okay for those lines to be crossed.’

“Many Latin American corporations are now embracing and implementing initiatives that go far above the present national statutory guidelines.”

The #MeToo movement created an awareness of the difficult reality that many women were, and still are, facing within the workplace environment. After recounting her own experience of harassment, Monroy states that #MeToo has had a positive impact on the women of Latin America in that they are now able to voice their concerns. This helps other women to come forward. Monroy also describes how the #MeToo movement has had a direct influence on Latin America’s ‘cultural institution’ where women who were once afraid of speaking out now have the confidence to do so.

#MeToo is a spawned concept: despite not yet being on a legislative level, it has bought awareness to the topic in Latin America. González does however note that ‘the Colombian government is of course aware of the movement and it’s making them, along with companies, ask themselves “how is this impacting us?”.’

Monroy adds: ‘Don’t ever let society-established parameters define what you can do and how far you can get.’

The barriers that women face in the Latin American legal profession originate from their historically weak status within society: from traditional gender roles to the stereotypical cultural norms of Latin America as a region. This has led to the arguable continuation of work place sex discrimination across the region. We are seeing the remnants of the Latin American ‘cultural institution’ filter down into the way women in law are perceived, with research even suggesting that the gender pay gap primarily concerns gender representation rather than pay discrimination, naming the causes as existing bias and historical pay discrimination allowing for the continuation of the gender pay gap.

Discrimination due to socioeconomic status, sexual orientation and gender identity continues in schools, reproducing stereotypes and traditional roles for women, particularly in relation to their role within the household. This ‘cultural institution’ has not only been fed by men in powerful positions, such as politicians, but also by women themselves who believe that there are specifically established roles which men and women should play. This can clearly be seen with the lack of women in senior roles and the very existence of the gender pay gap.

However, Latin American firms and companies are now seeing more and more women question how executive corporate decisions are made. The current unstable political climate in several Latin American nations, supported by the arrival of the #MeToo movement, and the ‘trickle down’ effect of conglomerate businesses, have all encouraged women to contest their role within society and workplace. This intervention by multinational companies may even cue Latin American governments to begin to include gender-related issues in their own policy programmes.

But, only a handful of Latin American nations have made headway in making motherhood and employment harmonious. Despite the majority of Latin American countries legislating to require businesses who employ 20 or more women to establish day care facilities, these laws are rarely ever enforced. The same can be said about laws governing pregnancy discrimination. There is obviously a disconnection between Latin American legislation and general attitudes towards women in the workplace. Increased efforts are required on behalf of national governments to enforce inclusion and other diversity policies locally.

We are slowly starting to see cultural developments in Latin America that don’t necessarily conform to the traditional historical norms and this has been a direct result of the advancement of the lives of women themselves. This activity will help facilitate the ending of discriminatory obstacles that Latin American women in law must overcome. As Monroy points out, the stereotypes have ‘if anything, challenged us [women] to reach our best within the legal profession,’ and that the progress in Latin America in recent years is ‘extremely valuable because of its history and the rough path that women have been through to get to this point’. Although progress on this front may be gradual, the long established cultural perimeters of specific gender based roles are also slowly (but promisingly) being eradicated.

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Turning of the tide

Research continues to show the positive correlation between a diverse and inclusive workforce, and an organisation’s bottom line. In response, there has been a sharp increase in C-suites giving strategic priority to diversity and inclusion (D&I) challenges, and there has been a significant rise in roles dedicated to it. There has also been a significant increase in the number of initiatives and training sessions aimed not only at increasing minority representation, but also tackling the underlying culture, which frequently prohibits inclusion.

But many times, these initiatives don’t work – and sometimes achieve the opposite of what is intended. It is a sad fact that, despite the substantial number of programmes in place, equality isn’t improving. Or, at least, it isn’t improving at the pace one would hope. So, what elements need to be in place for a D&I initiative to work?

Through a series of in-depth conversations with senior in-house counsel across Latin America, GC magazine looks at some of the D&I challenges the Latin America legal industry faces, the common elements that make for successful D&I programmes, and offers advice for how to effect real change – now and in the future.

Legal industry challenges

The perception of the legal industry as – in the English phrase – ‘pale, male, and stale’, is not new and is, unfortunately, only too applicable to Latin America as well. ‘Latin American law firms are, generally, predominantly male and conservative environments; that is, not inclusive towards minorities,’ says Publicis Groupe’s LatAm regional legal director, Véronique Ramon Vialar-Déchelette. ‘This is perpetuated not only by a traditional men’s club perception of law firms, but also by women’s unconscious self-discrimination and behaviour.’

“It is easier and more comfortable to deal with people of the same gender. Because, historically, the majority of CEOs are men, it is easier for them to deal with other men.”

Women are also much more likely to adapt their behaviour to fit in to this environment. ‘Even today, in traditional law firms, many women do not dare to ask for salary increases or more senior positions, they are scared to compete “as men”, and frequently prefer to resign rather than to ask for flexible working arrangements when they have children,’ Vialar-Déchelette continues. ‘As a young lawyer in a law firm, I was often very careful regarding the way I used to dress (to avoid being considered too feminine or sexy), or the way I expressed myself about work situations or problems (to avoid being considered as less capable by my male colleagues). I also avoided being too friendly or empathetic in certain situations to avoid being considered too soft, too “woman-like”.’

Of course, the problem doesn’t only exist in law firms; those ingrained biases still exist and need to be challenged in corporates as well. ‘The biggest barrier is confirmation bias, rather than unconscious bias,’ says Valéria Camacho Martins Schmitke, Zurich’s LatAm regional general counsel. ‘It is easier and more comfortable to deal with people of the same gender. Because, historically, the majority of CEOs are men, it is easier for them to deal with other men. They go to have lunch together, they talk “man talk” – they care less about words and feeling comfortable with each other. Many times, this is not conscious, but it prevents many women being promoted or hired for key positions.’

Against this backdrop, effecting real change might seem impossible, but of course, it’s not. We are seeing a slow, positive evolution across the industry. Law firms and corporates alike are committing to strategies and programmes that go beyond lip service to embed D&I into their corporate DNA.

Positive reinforcement

One of the key elements in ensuring a D&I programme or initiative is successful is positive messaging and positive reinforcement. In their 2016 Harvard Business Review article, ‘Why Diversity Programs Fail’, authors Frank Dobbin and Alexandra Kalev assert that most executives ‘favor a classic command-and-control approach to diversity’, which often leads to extensive lists of dos and don’ts. This approach, though, ‘flies in the face of nearly everything we know about how to motivate people to make changes… You won’t get managers on board by blaming and shaming them with rules and re-education. We can’t motivate people by forcing them to get with the program and punishing them if they don’t.’

This is especially true of lawyers, who can often be resistant to the idea that they might behave unfairly. Bias is often linked to being unethical, and it is ingrained in lawyers that their job is to be advocates of justice. Where companies start to see positive results is when they employ tactics that do not focus on control. When messaging is positive, involvement is voluntary, and there is social accountability, willing participants will come forward.

“People need to be conscious of their biases, and conscious of their lack of diversity. And then you can move to implementation of D&I policies, pillars, and training.”

For a D&I strategy to be successful, it must go through three phases, says Schmitke. First, awareness; second, training and development; and third, monitoring. ‘People need to be conscious of their biases, and conscious of their lack of diversity. And then you can move to implementation of D&I policies, pillars, and training.’ Once those are in place, you can start to monitor the success of your various programmes.

Policy change

Law firms and corporates are seeing their biggest successes when specific initiatives go hand-in-hand with actual policy change, and where D&I policies ring true with the employees they most affect. Matt Krentz, who leads Boston Consulting Group’s diversity and leadership efforts, wrote in a recent Harvard Business Review article that women employees seek policies that allow them to balance career and family responsibilities, and in particular ‘practical tools that would help them progress, regardless of their family status: parental leave, appropriate healthcare coverage, childcare assistance, and flexibility programs’.

The law firm perspective: D&I at Willkie Farr & Gallagher LLP

At Willkie, we believe everyone benefits from a diverse workplace, and we are firmly committed to creating and maintaining a diverse environment by recruiting and retaining people of all backgrounds and cultural experiences.

The firm has several active committees that focus on the recruitment, retention, and promotion of our attorneys and, in particular, our women and diverse attorneys. These committees’ initiatives include expanding mentoring programmes, improving communication between partners and associates, recognising the contributions and accomplishments of our attorneys, offering insights from our clients on best practices for associates, and providing opportunities for attorneys to connect in informal settings.

Our Women’s Professional Development Committee (WPDC) was established more than a decade ago to offer professional development programmes and guidance to women attorneys. The WPDC is comprised of partners (including a member of the Executive Committee), counsel, and associates, and receive support from our chief human resources officer, chief marketing officer, chief diversity and inclusion officer, and associate director of professional development. The WPDC highlights the accomplishments of our female attorneys, providing opportunities for networking at the firm and with other successful women across industries, and ensure that they are positioned to assume leadership roles during their careers.

In 2019, Willkie also introduced a Parents Group for associates at the firm. The group provides a forum for attorneys to share strategies and ideas about parenting and work-life integration. The Parents Group is planning programming to hear from experts on topics ranging from financial planning for families, time management, and talking with children about sensitive topics.

Long-term goals

We are particularly committed to continuing and further developing strategies to D&I on a long-term basis, including in the leadership ranks. In fact, today, 40% of members of our Compensation Committee are diverse and 40% are women. In addition, of the ten members of our global Executive Committee, 20% are women and 10% are diverse. Moreover, seven women and five diverse partners serve as department or practice group chairs or co-chairs, five women and three diverse partners or counsel lead firm committees, and three diverse partners and two women serve as office managing partners. Finally, from 2016 to 2018, our partnership classes have averaged approximately 36% women, respectively, and of the thirteen global attorneys elected to the partnership in 2019, five (or 38%) are women and four (or 31%) are diverse.

Willkie is deeply committed to creating and maintaining an inclusive environment by recruiting and retaining people of all backgrounds and cultural experiences. To that end, in mid-2016, the chairs of the firm charged the chairs of the firm’s Diversity and Inclusion Committee, Professional Personnel Committee, and Women’s Professional Development Committee to create the firm’s Task Force on Retention and Inclusion. The task force meets on a bi-weekly basis to collaborate on initiatives designed to retain, develop, and promote attorneys, particularly with respect to diverse and women attorneys at the firm. It focuses on an array of topics, including mentoring, work assignments, integration, partner accountability, annual reviews, and inclusive programming and reports regularly to Willkie’s chairs on progress and initiatives.

Working with clients

We welcome opportunities to partner with clients on D&I initiatives. In May 2018, we partnered with a client to host a panel on the business case for D&I. The panel was moderated by our chief diversity and inclusion officer and consisted of several of the client’s top female executives. In February 2018 we partnered with a client to host a panel on diversity, as well as a networking event for diverse law students in Willkie’s Washington, D.C. office. In addition, we presented a CLE on LGBTQ immigration rights at a client’s offices during Pride Month 2019 and we are currently partnering with a client to mentor foster children aging out of care.

Additionally, we’ve hosted programming that facilitates relationships between our women and diverse associates and clients. As an example, we partnered with four clients and invited diverse associates to host a Build-a-Bike event in our New York office, resulting in the presentation of new bicycles to 50 underserved children. In addition, the WPDC hosted a client networking event on International Women’s Day with women attorneys and clients.

We are always happy to share ideas with clients interested in our diversity and inclusion efforts. We welcome meetings to discuss our initiatives and how we can help clients implement them.

by Maria-Leticia Ossa Daza

‘My company has a very active diversity and inclusion group, with many different focus areas, one of which is women,’ says Erica Barbagalo, Bayer’s legal, patent, and compliance lead. ‘The aim is to enhance women’s participation in the company and in leadership positions, but mainly to ensure equal opportunities for everyone, regardless of gender. As such, our company has extended maternity leave, and also an extended paternity leave policy. Both offer more than the statutory minimum. We also offer flexible working hours.’

Anabell González Nava, legal director, North Latin America division at Arcos Dorados, agrees: ‘We implemented a programme, “Red Mujeres”, aimed at increasing the equity with women in our company. The programme focusses on developing initiatives in which we see opportunities to increase the number of women in key roles within the company, which has included implementing policies that ensure women have equity in salaries and compensation at the same level as men with the same responsibility.’

Schmitke, who was the first local leader on Zurich’s ‘gender pillar’ (part of their overall D&I programme, which started four years ago), points to several policy changes that have helped the insurer to attract and retain female talent. This includes extended parental leave (for both women and men), a milk room, and changes in the hiring process. Policy change and diversity ‘occurs in the HR function,’ she says, but ‘inclusion has to occur through the entire company, with all employees.’

Mauricio Rosillo Rojas, corporate vice president at Bancolombia says that companies are increasingly developing more policies favouring inclusion: ‘At Bancolombia, we are working to transcend the corporate environment in order to impact social structures through a transformation in our organisational culture, strengthening the competences for women’s empowerment, and providing support from the financial business to give a boost to the economic capabilities of women. We have set up a committee in charge of gender equality, and Bancolombia has also signed an agreement with the United Nations to achieve Sustainable Development Goals.’

Training and culture change

When approached in a positive way, formal or informal training can change how employees interact with each other, and in essence, change a company’s culture for the better. ‘To really implement D&I in a company or law firm, all employees must be educated and trained. It is pointless having more women on the board and more minority people in the company if they do not feel respected and included by their peers,’ Schmitke says.

“It is pointless having more women on the board and more minority people in the company if they do not feel respected and included by their peers.”

‘We are part of a global organisation, and we are subject to a set of global training, one of which is called “Be Bold for Inclusion”,’ says Guillermo Castillo, chief compliance officer at AFP PlanVital. ‘The objectives of this programme are to build an understanding and commitment to making progress on diversity and inclusion, increase insight into the beliefs and behaviours that are the main barriers to inclusion, and to increase confidence in how to lead change and walk the talk. Unconscious bias can be a huge setback in creating a truly diverse and inclusive workplace. We need to understand that employees need to feel comfortable and empowered to discuss diversity and inclusion in order to be more productive.’

For Castillo, this has positively affected how his team works together: ‘The rule is that everyone gets a fair hearing and has an equal chance to give their opinion; everyone can speak out if they notice bias in the team; and, most importantly, offer an apology if they get it wrong. We can only really deal with bias if we’re honest and admit our mistakes.’

Training is also an essential ingredient at Bancolombia, where women represent 67% of the workforce, and 57% of senior positions. ‘We want to ease conversations about the experiences and day-to-day life of women in corporate environments to define what gender equality means, what decisions we have to take, the behaviours that need to change, and all the processes we must change,’ says Rosillo. ‘In our organisation, we run a programme called ‘Me la creo’ (I believe it), which is focussed on removing bias and stereotypes and promoting female empowerment. Under the initiative, we provide online and onsite training for every team member, as well as a toolkit for those in leadership positions.’

Creating spaces where employees are comfortable enough to call out the bias they see is important in moving things forward. Barbagalo points out that she has ‘often seen unconscious bias in action – for example in several situations of performance evaluation, or promotion discussions’.

‘Sometimes I have had to point out that the “aggressiveness” identified in a woman professional was the same “straightforwardness” valued in a male professional. I have been able to point out on several occasions the fact that women are generally not well versed in self-promotion. I have also been able to point out the bias in women themselves – they don’t believe in their own capabilities, and don’t apply for more senior positions.’

Training in the form of mentorship is one of the most valuable ways to educate and effect change. Every lawyer we interviewed for this publication pointed to mentorship as a key element in their success. A lack of formal mentoring initiatives is not a barrier, however, as Ana María Delgado, vice president of corporate affairs at Corona in Colombia, explains: ‘At Corona we have created and actively promote spaces for women to share their experiences with other women, and I have personally committed to mentoring several young women with great potential.’

Bancolombia has developed a training programme with CESA, a well-known training institution in Colombia that works with high-potential women for boards of directors. It also uses its ‘Me la creo’ initiative to invite women in high positions in other local and regional companies to join them in the mentoring process. ‘It is important to us that our mentors and mentees have a safe space for the mentorship to occur, and where there is a certain level of affinity, comfort, and familiarity between them,’ says Rosillo. ‘We provide several open spaces where top management executives (both women and men) and other relevant attendees address their experiences, obstacles, fears, prejudices, challenges, and misconceptions surrounding this subject. The dynamic of these events is meant to be sincere, open, and without a hidden agenda because the purpose is to start creating an environment where this subject is addressed by every employee within the organisation, to make the whole workplace a safe place to raise your hand and discuss pros and cons, and have an open discussion without feeling threatened or constrained.’

Be the change you want to see

Barbagalo believes it is vital to act as a catalyst to hear the challenges coming from other women and to ‘voice them to the leadership. It is important not to lose opportunities, and to point to all the things that could be different to improve inclusivity, no matter how hard or how challenging. If it is the right thing to do, then it has to be done.’

The legal industry as a whole has a long way to go before equity and equality are achieved. There needs to be more women in leadership positions – both in private practice and in-house: that is undeniable. What we are beginning to see though, is the turning of the tide. With each year, we see more representation, more women role models, and more organisations and law firms turning their words into very visible actions. While there may still be a lot of room for progress, it does mean that, from here, the only way is up.

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Breaking Latin America’s glass ceiling

Over recent decades, Latin America has seen significant change in the makeup of its labour market. An increase in women’s representation and participation in the workforce, and organisational and various governments’ strategies are evolving to incorporate practices and initiatives to manage, enhance, and promote the role of women in the workplace. Foreign investment into the region is having a positive impact as demonstrated by the increase in Latin American companies adopting HR policies that go beyond legal requirements. That said, many Latin American countries and corporates still fall well short when it comes to opportunities for women and their economic participation. The gender pay gap remains significant. And despite the existence of legislation prohibiting gender discrimination, it still happens on a daily basis.

Why, in the 21st century, is this the case and how can meaningful change happen? Unfortunately, there is no single, silver-bullet cure for the gender disparity prevalent across the Latin America region. Change comes slowly, through education, by having uncomfortable but necessary conversations, and through the subtle shift of centuries-old biases that have kept one gender subordinate to another.

In a series of exclusive interviews, GC magazine speaks to senior and general counsel from across Latin America (both women and men) about how the more traditional landscape of the region plays a large role in how women are perceived in the workplace, and how they, along with their colleagues and companies, are slowly changing the experience for women lawyers across the region – but also for women in general.

Chauvinist society

For women working in Latin America’s legal industry (both in private practice and in-house), the challenge of getting ahead, of being ‘heard’, and respected, is two-fold. The legal industry is, and has long been, dominated by men, but that is hardly surprising when seen through the lens of a still largely traditional societal view that men work, and women stay at home. Anabell González Nava, legal director, North Latin America division at Arcos Dorados, says that even though organisations are making important diversity and inclusion improvements, ‘the culture of a society plays a key role in the habits and behaviours of men and women, and consequently of companies.’

‘Traditional gender roles are still very strong and create real and persistent inequalities among men and women in the workplace and in general in Latin American society,’ agrees Mexico-based Véronique Ramon Vialar-Déchelette, LatAm regional legal director at Publicis Groupe.

“Traditional gender roles are still very strong and create real and persistent inequalities among men and women in the workplace and in general in Latin American society.”

Valéria Camacho Martins Schmitke, LatAm regional general counsel at Zurich in Brazil, goes further. ‘Women pay a high personal price for equality with men. Some countries more, others less – but all are very chauvinist societies, and men still believe that taking care of children is a woman’s job. They also feel less empowered if their wives make more money than them. They expect women to be home when they arrive, and to prepare dinner. Women can work, but more as a hobby.’

These entrenched views have a serious impact on the industry, and how it is perceived. As Andrea Camargo, director of international legal affairs at Odinsa S.A. states in her profile interview in this publication, ‘It is a paradox that the profession in charge of providing justice is so full of inequalities.’

Despite these challenges, change – although slow – is happening. In interviews, several factors were highlighted as having a direct impact on the region: (i) a new willingness to discuss gender diversity and inclusion; (ii) a concerted effort from leaders to address challenges head-on in meaningful and practical ways, and to lead by example; (iii) the increase in men putting their heads above the parapet to argue that gender diversity benefits everyone, not just women; and (iv) the growth of multinationals, with more advanced diversity policies, establishing subsidiaries in the region.

On gender equality issues, Ana María Delgado, the Colombia-based vice president of corporate affairs at Corona, believes her country (which the World Economic Forum ranked as 40 out of 149 countries in its 2018 Global Gender Gap Report) has been evolving positively and that the participation of women in the workforce, as well as in leadership positions, has increased significantly over time. ‘Although there is still a long way to go, I have seen an increased willingness to openly discuss these types of issues,’ she says.

A recent country survey of Chilean in-house counsel showed that only 25% of general counsel positions were held by women. However, ‘statistics also show an increase in professional women’s careers with far more successful female roles and role models,’ says Guillermo Castillo, chief compliance officer at AFP PlanVital. While women hold only a small percentage of board seats and other influential positions, the pipeline of future leaders is starting to swell.

Zurich’s Schmitke is also seeing progress at a societal level, which will, in turn, have an impact on the Brazilian workforce: ‘I have seen men participating more in family tasks, with some men following their wives to another country because of her career. I believe that with every generation, we get closer to equality.’

Although she believes that Latin America is evolving more slowly than North American and European countries, Vialar-Déchelette says the region is walking the same path. ‘Private and public conversations regarding gender and equality are common, but quite recent,’ she told us. ‘These traditional prejudices need to be properly, widely, and honestly addressed and tackled so that public and corporate leaders understand their stereotypes and are willing to act accordingly to change.’

Tone from the top

The importance of strong leadership in tackling gender equality is a common theme. In her article, ‘How to get more men to take gender balance seriously’, for the Harvard Business Review (November 2019), Avivah Wittenberg-Cox argues that ‘it isn’t enough for the CEO to say gender balance is important once a year in a management conference. Nor even to set draconian and highly publicized targets… Until leaders are convinced that gender balance is a strategic lever for the business and become authentically and articulately convincing to their colleagues about why that is, balance remains a politically correct sideline.’

The 2016/2017 McKinsey report, Reinventing the workplace for greater gender diversity, supports the idea that real change must be led from the top. For women in the workplace to have better opportunities, to train and work in skilled and better-paying jobs, and to work in environments that support work-life balance and reshape social attitudes, organisations must challenge their fundamental and prevailing leadership styles and thoroughly re-evaluate traditional performance models. This is something that is particularly difficult for the legal industry, where the traditional structures and performance measures – such as billable hours as the primary measure of success – are inherently biased towards men.

The report goes on to say that organisations with a strong CEO and senior leadership commitment to gender diversity (i.e. those who place gender diversity as one of their top three strategic priorities) are twice as likely to integrate gender diversity successfully through all levels of their organisation. However, the report also shows that most organisations are falling short in transforming that commitment into a truly inclusive working environment, with many employees citing that they often don’t see words backed up by action, nor do they feel confident calling out gender bias when they see it.

Authenticity and ‘walking the talk’ are, therefore, key. ‘There are lots of good intentions, but not a real, open-minded approach to challenge the existing establishment,’ says Erica Barbagalo, legal, patent, and compliance lead at Bayer in Brazil. ‘The tone has to come from the top. The company needs its leaders engaged and acting as role models to succeed in promoting diversity and inclusion. It is not easy: changing the culture to break biases causes discomfort, and only courageous companies and leaders can bear that.’

Sometimes, it’s small gestures that have the largest impact as Barbagalo explains: ‘At a company event for hundreds of employees, the majority of them men, a guest speaker made a light joke about women. After his speech was over, one male leader got on the stage and explicitly disqualified the statement, making it very clear that this behaviour was not accepted in the company. He apologised for the insensitivity of the speaker. Needless to say, that speaker was banned from future events. Nobody, though, remembers the joke. But everyone remembers, to this day, the leader’s message.’

Diversity is a men’s issue

What came through loud and clear in all our interviews for this publication was the need to redefine gender diversity and balance as not solely the concern of women. For far too long, it has been accepted that fixing sexism is women’s work. But, actually, this is work that everyone must be a part of, because real gender balance has a positive effect for both men and women (see Michael Bruce’s interview in this publication for more on that topic). Wittenberg-Cox’s article states it clearly: ‘Companies whose balancing initiatives involve men are more than three times more effective than those focussing only on women.’

Castillo concurs: ‘Men’s partnership is required in addressing the issues that hinder women, including structural barriers and discriminatory practices that prevent women from participating on boards and receiving equal pay. Male executives can help lead the charge with women in enacting internal regulation that promotes benefits for women and men equally, and repealing policies that discriminate and limit women’s opportunities.’

Vialar-Déchelette believes the support of men is absolutely vital for change to occur: ‘Latin America is traditional regarding gender roles, and women on their own are making slow progress; thus the proactive support of men is necessary as a starting point. These are not just “women’s issues”; they are issues for the whole of society.’

What is key is how companies go about engaging with men on the subject of gender balance and equality to ensure maximum commitment. While this might be difficult for many women to read, Wittenberg-Cox’s advice is, essentially, to present the argument using ‘existing male-dominated hierarchies.’ In short, making the case for diversity based on moral grounds rarely has the desired effect. Instead, frame diversity as a business issue; make gender diversity and balance personal, measurable, and accountable. Position and normalise the issue as a business skill. Make male support the norm, rather than the exception. When the link between gender balance and positive business results is clear and explicit, men are more likely to engage with and support it.

“Position and normalise the issue as a business skill. Make male support the norm, rather than the exception.”

Another key factor is for more men to mentor women, and to be open to recognising their own biases (this applies equally to men and to women). Many of the women we interviewed across this publication spoke of male mentors whose support had a significant impact on their careers. ‘I have been very lucky to have great male mentors through my professional life. They have offered me support in changing career paths, in taking risks, and following my dreams,’ Delgado says. ‘Those decisions have helped shape and define who I am today, and I am very grateful.’

Vialar-Déchelette echoes the importance of male mentors: ‘I was very fortunate to have a modern and supportive chief when I was first employed as a paralegal in a major firm. He repeatedly said that if I wanted power, I just had to take it and not to wait for someone to give it to me. He constantly promoted me over the years, in discrete but effective ways, by teaching the profession and encouraging me to take huge responsibilities without questioning my capabilities as a young lawyer, as a foreigner, or as a woman. In fact, in a male-driven industry and firm, gender has never been a subject between us. He acted with me as if gender didn’t exist. I believe that this kind of mentoring over the years gave me the confidence to drive my career as I have wanted, without fear or self-limitation.’

International influence

There are many reasons attributed to why, in Latin America, there is a growing openness to discuss gender diversity challenges, why more leaders are waking up to the power of a diverse and gender balanced workforce, and why more and more men are beginning to vocally and actively support women’s advancement in the workplace. One of these is, of course, the growth of multinational companies, headquartered overseas, which are now opening subsidiaries across the length and breadth of Latin America.

Many of these multinationals go far beyond local legislative requirements (particularly on the gender pay gap, where legislation in some countries is still slow to come), and are putting in place progressive policies, particularly in regard to flexible working arrangements, maternity and paternity leave, and mentorship programmes. These companies are consistently outperforming their peers, particularly in their ability to attract and retain top talent. The policies are seen as reflecting a commitment to equality and serve as an indicator, to current and future employees, of a more inclusive culture.

Barbagalo says that ‘countries such as the US and some European countries have been discussing equality long before Latin American countries, and by establishing their subsidiaries in the region, these multinationals are able to promote their culture and also set examples – some have women CEOs or other high-ranking women leaders. There are, of course, local companies with high levels of awareness and actions towards gender equality and diversity, but they are the exception rather than the rule.’

And while, currently, it may seem that Latin America-domiciled companies are not as advanced as their overseas competitors when it comes to diversity, progress is being made. Many of the lawyers interviewed can point to success stories thanks to increased awareness and understanding of gender balance.

‘In many of the countries in which we operate, we have seen an increase in women in leadership positions,’ explains Nava from Arcos Dorados’ headquarters in Uruguay). ‘We have three women market directors in Martinique, Puerto Rico and Venezuela. We also have a woman sitting on our board, who is the vice president responsible for government relations.’

While these steps may seem small, they are significant, and show that the tide is certainly turning.

Michelle Obama, former First Lady of the United States, once said: ‘No country can ever truly flourish if it stifles the potential of its women and deprives itself of the contributions of half its citizens.’ And what is abundantly clear throughout this publication is that Latin America is not short on talented, strong, passionate, and determined women lawyers who have begun to pave the way for other women to follow. Despite the still patriarchal and entrenched views of women’s place in the world, these women are breaking glass ceilings. They have gone beyond merely boosting the diversity statistics of their organisations to prove that the acceptance and inclusion of women in the workforce – at all levels – has a significant positive impact, both on business and society.

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An Honest Day’s Work

Since the beginning of the internet, the potential for technology to be exploited and misused has been a primary concern for policy makers. As technology has continued to expand and play an ever more prominent role in our everyday lives, these concerns have only broadened, becoming both more frequent and unique – and with each new technology comes a host of new ethical concerns.

As technology continues to evolve in the business world, while the legal profession may have been slow to adapt and progress, times are changing. The development of technologies such as machine learning and artificial intelligence are being applied to legal in an effort to reduce overheads, improve accuracy and boost efficiency. But despite the advantages legal tech brings, there remain concerns around technology and how it may implicate professional ethics.

In the research that underpinned this report, 18% of those surveyed said that implementing new technologies within their teams had raised ethical questions. On its surface, this would suggest that in the legal space, the use of technology was almost always done in an ethical fashion and didn’t raise concerns. But speaking in more detail with some of those counsel who had faced ethical issues painted a different picture, suggesting instead that many general counsel are not yet attuned to the new types of ethical questions arising.

Ethical by design

Just how technology is developed for, and used within, various legal functions is one source of significant ethical debate – particularly given the inherently secretive nature of the profession. One general counsel working in the banking sector, describes some of the ethical issues encountered with how legal software is applied.

‘In Brazil, we have a major problem dealing with the volume of mass litigation cases involving consumer and labour issues that we face. Here at the bank, we currently have over 120,000 active lawsuits.’

‘To help deal with this, I have software that allows me to access cases to find out what judges are doing, or have done, in cases related to my company and/or my competitors.’

Having software that enables counsel to quickly view other similar cases from the past is not revolutionary, but having cases analysed in order to provide suggested arguments according to the jurisdiction and the judge is.

‘The information is public, but this system can offer me suggestions on which versions of arguments would be best for certain judges. It can also help with predicting what may happen in my case.’

‘Using this, I can build a better defence or consider alternative options. For example, if the software revealed that I have a 70% chance of losing a case, I can use this information to propose that we may be better off agreeing to settle the case. Then, when it comes to working out a settlement, I have the statistical information that would allow me to know how many other similar cases have been settled. That provides me with the information that will help me decide how much money I should settle a lawsuit for.’

Using statistics and predictive capabilities in themselves is not inherently unethical, but the potential to build on this system in unethical ways is apparent. The potential for alternative sources of data that could be used to help build a better profile on judges and predict their behaviour is vast – social media is just one prominent example of this.

‘This kind of concern is being raised, but it is not a major concern right now. What may be an ethical concern is the data itself. The real problem arises only if you use confidential information, or if the data could be used to make correlations,’ says Marcelo de Araujo associate professor of philosophy of law at the Federal University of Rio de Janeiro.

De Araujo has worked closely with developing ethical protocols and codes for emerging technologies, including machine learning. He says that the data used to teach these systems can itself be an unintended source of ethical issues.

Using statistics and predictive capabilities in itself is not inherently unethical.

‘Machines can be influenced by human bias and emotions. If the original data is biased, the output delivered by the machine will also be biased. Machine learning will typically find out underlying patterns in the data set, a task that would take too much time and expertise for human beings to do unaided by AI systems,’ he says.

‘But if the original data set contains an unusual number of references to decisions that, for instance, marginalise black citizens, chances are that the prediction suggested by the AI system will reflect that kind of pattern.’

Alejandro Fernández R-B, head of legal at Cotemar, has grappled with similar issues.

‘In Mexico, when you have a labour case, mainly it’s because the former employee feels that he was entitled to receive a bigger compensation. Some cases, they are right; some cases, they are wrong.’

‘But the software might recommend that I can settle with them for a lower figure that they are entitled to. So, that is the ethical issue. Because in some part, I want to, and it’s my duty with the company, and on the other hand of course, I want to be fair with the former employees. So, that is an ethical issue that I am seeing as a result of this software.’

Show me the data

Since the implementation of the General Data Protection Regulation (GDPR), safeguarding data has not only been an ethical responsibility for general counsel, but a legal obligation. Many countries across Latin America have followed the lead of the European Union and aligned their existing regulations or introduced new laws around data protection.

Brazil’s suite of data protection laws are set to come into force in August 2020. The Lei Geral de Proteção de Dados (LGPD) stands to have a marked impact on business and broader society, with protections possibly set to be enshrined in constitutional law in the future.

‘The public at large increasingly perceives the protection of their personal data as a pressing question. There is now a new bill for an amendment to the Brazilian Constitution that would turn the protection of personal data into a fundamental right,’ explains de Araujo.

‘Most citizens seem to be aware that they are giving away too much personal information online, and that it is far from clear what private companies are currently doing with their personal data. Over the last few months, there have been reports of two cases of technical failures which compromised the personal data of 28,000 citizens in one case, and 70 million in another case.’

Fair and Available

There are a number of ethical rules that apply to general counsel, irrespective of technology. However, as legal tech becomes more prevalent, new ethical dilemmas begin to arise. In Brazil, AI tech is being introduced to reduce the time it takes to settle disputes.

‘The Brazilian supreme court announced in 2018 that an AI system called Victor was being tested in order to speed up court decisions,’ says de Araujo.

‘Currently, the court may take as many as ten years to settle a dispute. Many citizens die before they can obtain the benefits of a favourable decision.’

Victor is an artificial intelligence tool developed in partnership with the University of Brasília. The AI software is designed to process thousands of court decisions already made and identify links between cases. By identifying and analysing previous precedents, the aim of Victor is to increase the speed of legal proceedings through the development of neural networks. Technology has the potential to play a major role in improving legal services in Brazil, but de Araujo believes that algorithmic bias needs to be accounted for.

‘There has not been much public discussion on how Victor is supposed to deal with algorithmic bias. Speeding up court decisions would be a huge improvement in the Brazilian legal system. But quicker decisions will not promote justice for ordinary citizens unless unjust patterns of decision-making in the past are also avoided in the future. For now, it is unclear how the Supreme Court intends to address this issue.’

To avoid transferring prejudicial precedent to future cases, more oversight and transparency within machine learning services is required.

Says de Araujo: ‘The problem could be addressed by examining what exactly the system is doing as it provides scores for risk assessment. But developers may be unwilling to make their AI systems more transparent. They fear that, by making the system more transparent, other developers might take advantage and copy their technology.’

In both of these cases, the culprit was a government institution, heightening public awareness of data-related issues at a time when business is preparing for increased scrutiny with the introduction of the LGPD.

‘As a banking service, we provide credit cards to a lot of our clients. Using this data, I could learn, for example, that a client of the bank is going to the beach every weekend, because they buy something on the way there,’ says the banking GC.

‘The specifics of what you buy is information that is protected by law, but a bank could use other information from the transaction to try and sell the client a product. For instance, you could contact the client to try to sell them travel insurance, because you know that this person goes to the beach every weekend.’

Equally, it could be said it would be unethical if a bank were to use this information to discriminate against a client by developing assumptions based on spending patterns.

‘People who go to the beach every weekend could be discriminated against if I make a correlation with something else that affects their credit score. The client could call the bank and ask, “Why is my credit score affected?” Right now, if I say that our system says you go to the beach every weekend and your salary is $1,000, therefore you probably cannot pay your bills, we would face problems,’ explains a GC in the financial sector.

‘If we make a lot of correlations like this, we can face problems. This kind of model can become so sophisticated – it deals with a lot of data and one of the dangers is that this data could trigger a warning that says this person is a good or bad client for the bank. I think we could face real problems in the future.’

In order to address the potential for making such ethical and legal breaches, banks across Latin America have implemented measures to limit data access across a company.

‘We have a specific department here at the bank comprised of lawyers, software engineers, operations people and risk analysts. They analyse and see the flow of all data in the company and check to see if the information is sensitive or if it must be kept confidential,’ he says.

‘This team applies the law in order to protect the information of the people linked to these types of risks. I think we have this department in the bank after the implementation of the GDPR law and we are spreading this culture of data protection in banking – we are not only compliant to banking secrecy law, but for data protection. There is still a lot to do, but the bank is in a good shape’.

In the future, the implementation of new technology will only continue to make data collection and analysis more sophisticated and complex. Data protection has always given rise to ethical concerns for corporate counsel, but technology has made data security a major point of concern. With data breaches gaining global attention, some general counsel in Latin America believe that it will only be a matter of time before stricter global controls are implemented.

‘I really believe these types of regulations will become global at some point. Maybe the United Nations or another global entity will try to implement regulations that are more globally focused, but I would guess that, regardless, the principles surrounding data protection will all be the same,’ says Pablo Enrique Urrego Hernández, head of legal at Diageo Colombia.

Will Siri practice law?

Separate to the ethical concerns raised from algorithmic bias and data protection are the fears surrounding legal tech’s potential to replace lawyers.

‘Some people believe that there is an ethical discussion surrounding legal software that could attempt to destroy the value lawyers bring,’ explains Urrego Hernández.

‘If you develop software that could replace lawyers, then essentially a lawyer could be replaced by a machine. The idea of technology is not to be viewed as a risk to job opportunities, but instead as a tool that could help lawyers focus on tasks that are much bigger and add more value.’

Despite the way legal tech is viewed, its potential to be an industry disrupter is generally accepted. Of the more than 200 general counsel surveyed across Latin America for this report, 84% thought that technology would be a moderate to great disrupter over the next five years.

‘What will probably happen is that systems will be so highly developed and so detailed on what we want them to do, that tech will probably not take into account any human emotion. There are so many factors and possibilities that could be used to create a system that could probably emulate repetition, but, in the end the human factor is key,’ says Urrego Hernández.

‘At the moment, there is not true artificial intelligence – I do not know whether this could change in the future – but, up until now, there has been no system that can replace human behaviours and ways of thinking.’

Legal tech across Latin America, like much of the world, is still in its development stage. Most of its implementation has revolved around low-level work but, as technology continues to develop, the issues that could be raised by legal tech are still fundamentally unknown.

‘Experience has taught me that while you develop these things, you start seeing issues you have never seen before, and there is no doubt that the future of legal tech will present many barriers that will need to be addressed. At the moment, what we need is to be objective, although imagination is powerful and out-of-the-box thinking is good,’ says Urrego Hernández.

‘The list of ethical concerns that could be raised by new technology is extremely extensive. What should happen is that ethics should be part of your life. At the end of the day, ethics should be one of those main considerations that you have to take into account in every aspect of your life.’

Whether in-house counsel across Latin America resist or embrace technology, legal tech will inevitably transform the delivery of legal services, though not without a host of other issues to contend with. Ethical conduct will remain pivotal to ensuring the legal profession remains independent, effective and accountable.

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Data Analysis Part One: Size matters

In-house legal teams come in all shapes and sizes: some companies will have small teams, preferring instead to outsource the bulk of their work to external firms, while others have internal legal departments that would outnumber many major law firms. For the purposes of the research that underpinned this report, a small legal team is classified as one with ten or fewer members, while a large legal team is one with more than ten members.

Of the 140 people who participated in our research, 65% of those were from small legal teams, with the remaining 35% coming from larger teams. The attitudes, ability and budgets of these two different groups had a number of notable differences – and not always in the way one might typically expect.

While our research showed that the overwhelming majority of all legal teams in Latin America used specialised legal technology in some form within their department at 96%, the few that didn’t all came from respondents from small legal teams. How that technology was used was relatively similar between the two different groups in most areas – use for factors like contract management, human resources and law firm relationship management was nearly identical. Where large teams did differ was with case management and dispute resolution, where large legal teams were nearly twice as likely to use specialised case management and dispute resolution technology.

The vast majority of our respondents held a positive outlook on the extent that they believed technology could enhance outcomes for in-house departments, with 66% of all respondents believing it can enhance to a great extent and 31% to a moderate extent. Those from larger teams, however, retained an even more upbeat stance than their smaller counterparts: 85% of those from larger legal teams believed that technology could enhance outcomes to a great extent, compared to 56% of those from smaller teams.

Larger teams were also more likely to have a positive outlook on how their department fared compared to their peers. While the majority of small legal teams retained a positive outlook, at 55%, that number was dwarfed by large legal teams, where 70% said they thought that their department’s use of technology compared favourably with other companies.

Interestingly, while small legal teams were much less likely to have received an increase in their technology budget over the last five years compared with their larger counterparts, that didn’t necessarily translate to feeling unsupported by their company when implementing new technology. While only 52% of small legal teams had received a boost to their budget, 90% of those we surveyed from small legal teams felt that their company was supportive. Compare that to larger legal teams, where 74% had received an increase in their tech budget, but only 78% felt that their company was supportive.

Based on the interviews that complemented the quantitative component of the research, the reasons for in-house legal teams feeling supported by their companies were more nuanced than simply being given the green light to purchase new services. Getting buy-in from the wider company was important to a number of those who we spoke with, with a range of factors noted, including assistance with integrating legal systems across the wider business.

While artificial intelligence remained a rarity in legal departments across Latin America, it was currently being used almost exclusively in large legal teams. Those we spoke to who utilised AI tended to have legal teams that were at the top end of large – with upwards of 50 members on their team – and were primarily utilising it in order to either reduce the more menial tasks their businesses required from legal, or to assist in departments that had large amounts of litigation and disputes work.

That attitude broadly aligned with the reason behind technology implementation. Between the two groups, what was most important when considering legal tech was one area where there was a difference. While smaller teams were mostly concerned with using technology to improve the quality of their work, at 69%, those from larger legal teams were less likely to value improvement of quality, at 57%, and put a higher priority on using technology to reduce costs.

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El Sendero de la Innovación

On the international stage, Mexico is known for many things – stunning mountain ranges, distinctive folk art, white sand beaches, and well-exported tradition. Now, another distinction is emerging from the Latin American country: one of entrepreneurship and innovation. According to a survey conducted by the Association for Private Capital Investment in Latin America (LAVCA) in 2019, Mexico accounts for the second-highest proportion of Latin America’s start-ups, second only to Brazil.

With this renown comes investment; money poured from around the world into companies of Mexican origin – so much so that, in 2015, Mexico actually overtook Brazil, becoming the most popular destination for private equity vehicles in Latin America, reaching USD$2.1bn in raised capital, according to the Emerging Market Private Equity Association (EMPEA).

In a funding round this year, card payment start-up Clip raised USD$100m, including a USD$20m investment from Japanese giant SoftBank Group. In 2018, Mexican scooter start-up, Grin, raised a Latin American-record breaking USD$20m in a seed round just months after its founding.

But among the positivity to be found on the ground are worrying signs that Mexico’s hard-fought status as an innovation hub is fading: the government in Mexico has softened its commitment to supporting the country’s start-up scene, and hasn’t been able to make a dent in global innovation rankings, in which it ranks near the bottom of the table out of fellow industrialised countries.

Nevertheless, the demographic case is a strong one (a median age of 27 and 86% mobile phone penetration, according to a 2019 report by the Center for Strategic & International Studies (CSIS) Americas Program), and there are highly motivated parties throughout Mexico that are forging ahead, excited to play a role in helping Mexico achieve its massive potential as a nexus of innovation and entrepreneurship in Latin America.

Innovation Actors

Mexico has gradually positioned itself as an innovation hub and global investment destination, but it wasn’t wholly organic. Rather, it has been the result of a push on many fronts: from the federal government, to Mexico’s educational institutions, to the general counsel of industry companies on the ground.

On the government’s part, the Secretariat of Economy established the National Institute of the Entrepreneur (INADEM in Spanish) in 2013, in order to support entrepreneurs and SMEs throughout Mexico, both financially and otherwise. It was the subject of criticism for alleged corruption and inefficiency – and was dissolved in 2019 – but provided direct support to budding entrepreneurs and was initially well funded, with a budget of USD$664m in 2014. The dissolution of INADEM has left a void, and it’s unclear how the new administration plans to enable innovation moving forward. But the economic benefits of realising Mexico’s entrepreneurial potential should be an easy sell for governments.

‘In the beginning, there was a trend, with the government implementing INADEM, in having federal resources used on national investments. At the time, at least 50% of the money invested was put up by INADEM,’ explains Mariana Romero, general counsel at LIV Capital, a leading Mexican private equity fund.

‘You had to compete to get the funding, and fit certain criteria in order to be eligible for the funds. Although it has been terminated now, they are trying other programmes, but they haven’t been so effective. But, the non-financial resources INADEM provided are still being used.’

Azael Capetillo is the director of the INNOVaction GYM – a centre for innovation and entrepreneurship at Mexican university Tecnológico de Monterrey. The centre is located within the university’s school of engineering and, among other things, is focused on accelerating disruption. While the centre caters mainly for students, it is open to enthusiasts and entrepreneurs from the wider community. From that position, Capetillo has seen how the government, both locally and federally, have interacted with the entrepreneurial community in Mexico.

‘The economic office of Monterrey, one of their roles is to increase economic development. They can see through these kinds of actions that their own goals are starting to be accomplished as well. It gets to a point in which this becomes strategic for them, because it progresses their own goals,’ he explains.

‘Sometimes, one of the things the government doesn’t understand is the pains of the industry or entrepreneurs. By working with these kinds of initiatives, they get a close understanding of the problems suffered by the industry and entrepreneurs. Once they understand the problems, they take actions to fix those problems. Most of the time, it’s not that the government doesn’t want to help, it’s that they don’t understand exactly what the problem is.’

This can be of particular concern for start-ups whose business needs have advanced beyond the regulations already in place. For instance, Mexico City-based fintech start-up Credijusto provides asset-backed loans to SMEs in-country.

‘Even though we do structure our loans in a way that you would call traditional lending, the means that we do it from are pointed toward the technological,’ says Ariel A. Lupa Mendlovic, chief legal officer at Credijusto.

‘For example, we are trying to do non-present lending, and that’s where there is a lack of regulation. The regulators are not ready for a company like us approving loans without being in the same room as a client. So, we’re pushing for e-signatures for mortgages, and we are pushing for non-present signatures for IOUs or promissory notes. This is an area of opportunity.’

Mexican Economy

The way that Mexico is governed, together with the economic success that smart regulation and legislation bring, are co-dependent with the well-being of the innovation scene. A healthy Mexican economy will attract more capital, as will inviting regulation – but it is the success of innovative companies in Mexico that feed back into the economy. The result is that every player in the ecosystem plays a significant role in the overall success of the Mexican economy.

‘There are tonnes of opportunities here in Mexico. Mexico is not always seen as that opportunity, because there are worldwide investors that look at other places,’ says Romero.

‘But when you see that there are a lot of good examples in Mexico that we can bring to the world, and put us on the map for investors to see – that’s when you start attracting money to come here.’

Credijusto is a good example of this interconnectedness – in this case, in the fintech sector. Credijusto was born out of the need of SMEs to be able to secure loans at a time when the large, incumbent financial institutions were unwilling to adequately cater to them.

‘Here in Mexico, for instance, there has been a real gap to fill in terms of financial inclusion,’ explains Mendlovic.

‘Banks have been historically fairly conservative in their lending practices – young companies that are creative need a certain amount of financing, but banks would only authorise small amounts, so they were getting left out. But, at a macro level, SMEs are the ones that drive the economy.’

And yet, federal regulations happened to be such that a start-up like Credijusto would be a viable proposition.

‘The gap was easy to fill for Credijusto and similar companies, because regulation in Mexico has been fairly convenient for non-bank lenders.’

Mexico has gradually positioned itself as an innovation hub and global investment destination.

This is also the case for Carlos Sánchez Almada, director of legal, compliance and public policy at Kuesk, another fintech start-up in Mexico offering small loans made available via mobile, facilitated by advances in AI and machine learning, which allow funding decisions to be made in minutes.

‘We are very grateful to the Mexican government because they have given us the opportunity to develop as a new business model, not only by supporting our new concept, but also by allowing us to share our good practices in order to receive their recommendations and apply them to our projects,’ Sánchez explains.

‘Presenting the company and the business model to the authorities is one of my activities, and it is maybe the one I enjoy the most because Kueski has become a high-impact company in Mexico. This is due to the high need for credit accessibility in our country’s population.’

Monterrey, the site of Capetillo’s INNOVaction GYM, is a renowned hub for innovation in Mexico. The reason behind that is another illustration of the interface between business and government, and the roles each play in developing the economy. Initiatives such as Nuevo León 4.0 (Nuevo León being the state in which Monterrey sits) was introduced to modernise the state, long known for its traditional manufacturing and production industries.

‘Monterrey has been an industrial place for many years – over 100. It was a strategy of the government in those times, and now you can see that industry here is very well known for product manufacturing and efficiency. A few years ago, the Secretary of Economy at the time was a businessman, and he realised that the industry here needed to adopt new technology, and he pushed for the creation of this programme – Nuevo León 4.0,’ explains Capetillo.

‘There has been a strategy behind this – that if we don’t change the industry from being a production industry to a knowledge industry, we are sooner or later going to be displaced by someone else. So there is this strategy of moving into a knowledge industry, creating an industry which is leveraged by the previously established companies who create a demand for these new applications. So it’s not only by chance – there has been a lot of planning in the community.’

Romero, having been in the private equity industry for more than a decade, has had a front row seat to the government’s efforts in this area and has taken note of what has specifically contributed to the growth of investment into Mexico. Of particular importance was the recent decision to allow Mexican pension fund managers to begin spending into a broader set of investments than was originally allowed (since the creation of the Mexican retirement fund regime in the 1990s, these pension funds were limited to investments in public debt and foreign currencies). Now, as the Mexican economy has become increasingly sophisticated, regulations have delimited these funds accordingly.

‘Ten years ago, that was unmentionable,’ she explains. ‘Mexican funds had a lot of money and it was just sitting there, and would only be invested in places where there wasn’t much risk, but also not much in the way of returns.’

Education

The aforementioned demographic advantage held by Mexico also means its educational institutions are a critical cog in the machine. According to a 2018 white paper by Mexican industry advocate Entrada Group, Mexico graduates more engineering and technology students on an annual basis than the United States.

‘What the universities have done is to push for knowledge in these areas. Now, it’s a common topic to have blockchain, artificial intelligence, data analysts, cybersecurity and additive manufacturing,’ explains Capetillo.

‘Regulation in Mexico has been fairly convenient for non-bank lenders.’

‘In Monterrey, we have four main universities, which are in the top ten universities in Mexico. Two of our projects, Nuevo León 4.0 and MIT REAP, have joined the universities in pushing for this knowledge and these skills. You have students come in for workshops in Monterrey and then another in other universities and so on. Universities have tried to democratise knowledge and skills in these new technologies.’

Nuevo León 4.0 is a collective effort between the state’s universities, business community and government to maximise output from the longstanding manufacturing centre. MIT REAP – short for Regional Entrepreneurship Acceleration Program – is an innovation accelerator initiated by the eponymous United States university, which isolates regions with great potential for innovation and establishes partnerships with their local communities – particularly their educational institutions – in order to share knowledge across borders. It admits up to eight regions into the programme annually – Monterrey joining in 2018 with Tecnológico de Monterrey as a key stakeholder.

Investing With Mentorship

An indispensable part of the global innovation economy are private equity venture capital funds. Aspiring innovators, with ideas they believe have commercial value, have few options when looking for funding given the chasm between early-stage business propositions and the thresholds and preparation required to embark upon an IPO. Private equity and venture capital firms serve as a facilitator, connecting innovators with sources of cash.

Romero is undoubtedly a reflection of the bullish attitude those GC spoke with towards the role Mexico has to play in the global investment economy, and her enthusiasm for Mexico’s potential and LIV Capital’s ability to realise it is palpable. She joined the company in 2013 as its first in-house legal counsel, at a time when few other funds were considering establishing their own legal team.

‘At the beginning, many firms saw inside counsel as just a cost, and they’d rather hire outside counsel to look after their fund. But I thought that was a mistake: you need a lawyer, and you never know what’s going to happen and you want to save costs by not hiring someone in-house and outsourcing everything to your external lawyer, but he or she does not know the whole story. They don’t know the history of the fund or the portfolio companies. How can an external person be familiarised with the whole structure of the fund?’ she says.

‘Now, I see many fund managers have their own in-house counsel and legal team. You’ll always need support – in-house counsel can’t be all hands-on with everything that happens in the fund; for instance, you might have labour claims or criminal claims – but you need someone to have the ability to collaborate and create a structure in the fund where everything works.’

Starting up the legal function

If the proliferation of in-house counsel within equity funds has been slow to become commonplace, then it’s been even rarer for the high-growth companies they count amongst their portfolio – especially those on the start-up end of the spectrum.

Credijusto, for example, hired Mendlovic as a dedicated legal director at a relatively early stage – and he can see problems arising from a time where there was no legal department within the company. So Credijusto is certainly better off for it, he contends.

‘Our contracts were a mess, and no one in the company could collect on their contracts because they weren’t feasible to litigate. So I came in on a clean slate, and convinced the CEOs that at the core of what we’re doing is selling contracts so it’s very important to have a strong legal team,’ says Mendlovic.

‘We were also wanting to secure VC funding and investments from banks so, on that side, we get all of our advice externally and we were advised well. But, on the other side of the business, that was abandoned to third parties, and external lawyers generally don’t have a deep knowledge of the company, which will always lead to some messes needing to be cleaned.’

‘I like to think of myself as a problem-solving lawyer, and I need to think outside of the box.’

And here again, there is an illustration of how the many ingredients of Mexico’s start-up world connect.

‘You are starting to see a trend – which I’ve been pushing from my side – to have our portfolio companies have their own legal counsel, at the company level,’ says Romero. ‘But it’s often thought that the lawyers of the funds would also be posing as the lawyers of the companies they’ve invested in. Imagine that. How many portfolio companies do you think we have? If I was acting as internal counsel for each of those companies, I wouldn’t have time for anything,’ she says.

‘So, what I have started doing in the past four years is, of the companies we invest in, I make sure they bring in someone. It doesn’t have to be someone that is experienced, because I would be mentoring her or him, and I can be in constant communication with them. We try to differentiate from many other private equity funds. For us, it’s not just money. It’s intelligent money. We’re bringing in the money to grow the business, but we are also helping them – from the business side – to make sure their business is running well on the legal as well as the financial side, so that when an investor eventually comes over, the company has everything they need.’

While ‘fast growth’ might not inspire thoughts of management overly concerned with legal, Mendlovic has found that being the in-house adviser for a start-up has been an experience like no other.

‘Being in a fairly small company – we’re still 260 employees – the environment is actually pretty horizontal. Members of the management team, the CEOs and the founders and the investors walk around through the office and there’s always an element of “Hey, Ariel – we need X. Can we do Y to get it?” And I get interesting questions. I like to think of myself as a problem-solving lawyer, and I need to think outside of the box. It’s pretty interesting to get different members of our team join the compliance perspective with the more aggressive sale perspective to find the perfect solution.’

This aligns with Sánchez’s experience at Kueski.

‘One of the benefits of advising a younger company is the opportunity of establishing the legal foundations from the very beginning,’ he says.

‘As a young, growing company, Kueski faces challenges every day but we do not consider them as problems, but opportunities to learn and become stronger in our determination to be an honourable leading enterprise which can set the example to other start-ups in Mexico.’