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13 May 2021

Beyond black letter law - why managing reputational threats is core to GCs' work

A top-level panel of in-house counsel hosted by HFW discuss the future of litigation

Symbol of law and justice on wooden table in lawyer office

By Aerial Mike; Shutterstock

This is an edited excerpt from a report by HFW on the future of dispute resolution. Click here to read the full report

Contrary to the expectations of many, the Covid-19 pandemic led to an initial lull in litigation as companies went into survival mode and courts around the world tried to adapt to the disruption of lockdowns and social distancing.

As Vodafone’s GC, Rosemary Martin, told a roundtable of senior in-house counsel convened by HFW: “We thought there was going to be an upswing in litigation and it would all become a bit contentious and difficult. Maybe that will come this year, but last year was weirdly business-as-usual.”

Court data suggests that the upswing Martin and others predict may already be starting, with new disputes materialising at a brisk pace in the last quarter of 2020 and early 2021.

Risk

For in-house counsel, this presents challenges and considerations that go beyond black letter law. The round table participants agreed that reputational risk is becoming increasingly core to GCs’ work.

“The reputation call almost trumps the legal call in some situations,” asserted KPMG UK legal head Jeremy Barton, citing the speed and severity with which damaging disclosures can impact on brands in a digital world. “Anything can suddenly go viral on the internet. Managing that is absolutely crucial now.”

The point was echoed by Sumitomo Mitsui Banking Corporation’s Sean Edwards, noting how reputationally threatening issues will swiftly reach his bank’s senior decision-making team.

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“Last year was weirdly business-as-usual" Rosemary Martin, general counsel, Vodafone

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Reputation is also a key factor in another arena highlighted by GCs as a growing area of liability and potential disputes: climate change and sustainability.

Maersk’s chief legal counsel, Michael Moller, said that while the nature of his company’s business means it is spared some of the reputational slings and arrows facing consumer-driven counterparts, the shipping giant is seeing increasing demands from customers for green-sourcing and decarbonisation in its services.

With GCs facing risks across a startling range of fronts, the panel discussed approaches to manage, mitigate and avoid these risks – and any associated disputes that may follow.

Group actions

Addressing an increasing area for risk and fines, easyJet’s legal chief, Maaike de Bie, related the challenges she is currently facing dealing with the aftermath of a cyber-breach that hit the airline in early 2020. After being asked by the Information Commissioner’s Office to notify millions of customers whose details had been compromised, easyJet is now facing multiple group action claims.

“Three days after [making an announcement to the market that easyJet was going to be notifying customers], we had the first class-action lawsuit and now we face many more, so our team will be busy for the next three-to-five years fending them off – and not just in the UK,” De Bie reflected. “It’s the follow-on class action that’s been really significant. I’m disappointed we’re facing this – it feels opportunistic. The type of data exposed was not the data typically considered more sensitive. No passport details, no passwords, no financial data.”

With the scope widening in recent years to launch group consumer claims in many European jurisdictions, most GCs are expecting class actions to be an ominous blip on their radar in the years ahead.

Advisers

If there was one topic that most strongly united the panel, it was how law firms need to evolve in order to address changing client demands.

KPMG’s Barton called on law firms to think more creatively about how they deliver service – both in how they gel with in-house teams and in offering more holistic services, such as using disputes disciplines to advise on risk management.

Richard Blann, head of litigation at Lloyds Banking Group, focused on the familiar refrain of law firms needing to further hone their client knowledge and communication skills, noting that there often remains “an awful lot of translation” to make external legal advice relevant for Lloyds’ wider leadership.

De Bie gave the example of setting easyJet’s new panel firms the exercise of turning page-long legal advice into a three-line Japanese poem format, commenting: “What was amazing was how quickly people were able to give the advice in a [very short] version.”

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“We have to encourage cultural change about the way we approach litigation" Richard Blann, Lloyds Banking Group

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HFW partner Brian Perrott, likewise, cited increasing demand for advice to be put in a more visual format – a stance that received a strong endorsement from Martin, who highlighted recent efforts by Vodafone to strip out pages of contracts in favour of easily understood diagrams. “For people who aren’t lawyers, and are not used to reading a 120-page document, if you show them a picture, it’s so much faster and stronger,” she said.

Bringing the discussion to a close, the panel discussed how to bring about positive change in the litigation arena.

HFW partner Damian Honey argued: “If there’s one thing I can ask the GC community to address, it is that I see too many litigators loving litigation in private practice and litigating for the fun of it, writing endless letters that are never read by the judge and just driving up costs. That has got to go.”

Perrott said that the industry must learn from the hard-earned experience of the Covid-19 pandemic. “Remote hearings, online case management…these are things we must build upon. Clients should give some thought to arbitration clauses that say the hearing should be virtual.”

Richard Blann, head of litigation at Lloyds Banking Group, called on his peers to engage with attempts to reform areas like disclosure and witness statements, concluding: “We have to encourage cultural change about the way we approach litigation and that’s driven, in part at least, by an attempt to manage the costs and keep the UK competitive as a jurisdiction.”

With the business world facing a decade that will be dense with increasingly complex disputes spanning borders and industries, such calls could not be timelier.

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