Client profile: Benoit Belhomme, British American Tobacco

BAT’s western Europe GC on the trials and tribulations of working in a controversial industry

Most general counsel (GCs) working for large multinational corporations will deal with regulation fairly frequently, but it is unlikely to be quite as stringent as that faced by in-house lawyers at one of the world’s largest tobacco groups – British American Tobacco (BAT).

‘We are working in one of – if not the –toughest regulatory environments that there is,’ argues BAT’s regional GC for western Europe, Benoit Belhomme.

‘You need to be quite thick-skinned, resilient and creative because you are working in what’s called a “dark market” from a marketing point of view. You have pressure from marketing teams who want to communicate with adult consumers and there are very serious restrictions, so there is a need for creativity in your thinking at the same time as being mindful of responsibility. As a legal function, we have responsibility both from a pure legal viewpoint and also from an ethical point of view.’

According to Belhomme, who started out in the Paris office of Clifford Chance (CC), training at the Magic Circle firm provided ‘invaluable’ grounding for the often difficult and challenging role at BAT, where he can be found dealing with anything from HMRC litigation to security issues involving stolen goods or internal fraud.

Belhomme had spent six years working at CC when he was approached by Rothmans International in late 1991, a British tobacco manufacturer and owner of brands including Benson & Hedges, Dunhill and Pall Mall. The company was looking for a French-speaking lawyer to complement their legal function and, after some consideration, Belhomme moved in-house because he ‘wanted to get involved in commercial decisions and be able to move the business forward’.

He adds: ‘The amount of travelling also appealed to me at the time. There were two main drivers really, owning the commercial challenges as opposed to being on the other side and being part of a global organisation.’

‘Because I am an M&A lawyer by training, I did some M&A deals for Rothmans all over the world – acquisitions, joint ventures – most notably in Africa and the Middle East, as well as eastern Europe before and after the collapse of the Berlin Wall. At the time, I was also involved with advertising and sponsorship. I did the Rothmans Formula One sponsorship deal and I was able to go to a lot of Grand Prix races as a result. It was a big difference from working in a Magic Circle law firm.’

In 1999 the company merged with BAT, creating a tobacco giant worth £13bn and Belhomme was appointed as regional GC for eastern Europe, the Middle East and Africa (EEMEA). He spent 12 years in that role before taking on his current position as regional GC for western Europe in October 2011 – although he maintains that some of his most notable career highlights occurred during his previous GC role.

‘Developing people in so many different countries, in developing economies, is probably what I am most proud of.’

‘I was very involved in setting up our Nigerian business from scratch in 2000. We started from nothing and now we have a business with an annual operating profit of £200m-£250m. The investment in the factory was the largest ever investment in sub-Saharan Africa and probably still is. In my GC role, I inherited three lawyers, which made up the entire legal function, and I then developed it into a team of over 90 lawyers. Developing people in so many different countries, in developing economies from the whole African continent to places like Turkey, Russia and Kazakhstan, is probably what I am most proud of.’

The European legal team at BAT is facing particularly stringent regulation at the moment, introduced at both national and European Union (EU) levels. On 11 March 2015, UK MPs voted in favour of regulations to implement standardised tobacco packaging, a measure first introduced in Australia in 2012 and recently approved by the Republic of Ireland – the first country in Europe to pass such legislation. The measure, which takes effect in the UK from May 2016, will make the removal of all branding – colours, imagery, corporate logos and trade marks – mandatory and will only allow manufacturers to print their brand name in a mandated size, font and place on the pack.

Unsurprisingly, Belhomme is against these measures, which he believes ignore various legal obstacles.

‘Obviously the regulations have significant implications, not only from a business point of view, but also from a legal perspective. We consider it as a misappropriation of our property – brands and trade marks. We also raised the government’s awareness as to the unintended consequences of such extreme regulation, ie the risk of “illicit trade”, or contraband, effectively.’

In addition to having responsibility for the legal function, Belhomme is also accountable for anti-illicit trade and security and, as a result of the vote on 11 March, BAT is instructing one of its preferred advisers Herbert Smith Freehills (HSF) in challenging the UK Government’s plans. BAT, which will argue that plain packaging violates a number of UK, EU and international laws, as well as World Trade Organization rules regarding international trade, has also instructed Hogan Lovells to advise on intellectual property issues.

This particular case is just one example of the tough political environment the company is currently operating in.

As well as the plain packaging challenge, the team is also facing the implementation by member states of tough EU anti-smoking legislation over the next two years. Rules included in the Tobacco Products Directive 2014 are a ban on flavoured cigarettes such as menthol or vanilla styles while picture warnings will have to cover 65% of the front and back, with additional warnings on the top. The directive will affect every area of BAT, from growing the product to distributing and marketing.

‘We are an end-to-end business,’ comments Belhomme. ‘We grow tobacco; we then produce, sell, distribute and market the product. We therefore have to make sure that everybody involved in the supply chain is clear about what the regulations mean in relation to the product they are producing, selling and marketing.’

In addition to the responsibility of addressing regulatory measures and overseeing security, Belhomme’s role as GC for western Europe is one that covers almost every area of the business and on a day-to-day basis can cover legal work across up to 42 markets.

‘I could be speaking to the head of legal in a market for an hour about a complex joint venture in which the partner is threatening to exit and litigate, then spend time with the marketing director in respect of new product innovation to be launched in several markets that may be restricted by tobacco regulation and our internal marketing standards. I would then be briefed by the security team, who report to me on an internal fraud identified in one of our operations. I could have lunch with a group of managers – non-lawyers – whom I am mentoring. Following this, I could be spending a couple of hours in the afternoon with my senior legal team and external counsel on a strategic litigation, helping provide business background and context, and ensuring relevant company officers become available to support the case. I could also be reviewing a due diligence report on a prospective acquisition target. I could be dealing with ten different end markets in one day quite easily, on two or three major issues. It is an incredibly stimulating and rewarding position.’

And such a varied agenda lends itself to a lot of support. There are a total of 58 lawyers in the western Europe regional legal team including 13 heads of legal – each with their own respective teams. Belhomme has historically preferred to keep legal work in-house, but this has changed in recent years as a result of the level of new legislation in European law.

‘We are working in one of – if not the – toughest regulatory environments that there is. You need to be quite thick-skinned, resilient and creative.’

‘I make balanced use of in-house and external resources. We have an extremely close relationship with our preferred partners, who have a clear and deep understanding of our business and its challenges, and are therefore able to contribute to our role as risk managers and business partners. At the same time, we need to be smart in how we manage cost generally, whether this is an in-house or external cost, and make the best resource allocation decisions.’

The team handles a lot of its commercial work in-house, but typically farm jurisdictional employment mandates and some specific constitutional or complex regulatory issues to external advisers. Although Belhomme doesn’t have a formal legal panel, he keeps preferred relationships with four firms: Baker & McKenzie, HSF, Hogan Lovells and King & Spalding.

For commercial work, the team at BAT usually agrees a fixed fee, however for litigation this is more difficult and is usually based on a system of discounted hourly rates instead.

Internally at BAT, in-house counsel are expected to take an active role as a leader of the business. Belhomme sits on the regional board of directors for western Europe and the global legal board along with the director, legal and external affairs and GC Jerome Abelman, other regional GCs, and the heads of corporate and litigation. The legal organisation is built around the idea of legal means business – promoting the legal function as a balance between creative legal responses and the traditional risk manager’s role associated with in-house counsel.

And although many of the challenges at BAT are unique to those faced in the tobacco industry, Belhomme’s opinion on what makes a successful legal function is a concept familiar to most in-house counsel.

‘”Legal means business” is the concept that underpins the legal strategy and was launched several years ago. Imagine a set of balanced scales and on one side the lawyer acts as the risk manager and on the other side the lawyer performs the role of business partner. Balanced in the middle is that legal professional at the heart of the business.’

kathryn.mccann@legalease.co.uk