National Grid
General counsel: Alison Kay
Team size: 200
Major law firms used: Norton Rose Fulbright, Addleshaw Goddard, Irwin Mitchell, Herbert Smith Freehills, CMS Cameron McKenna Nabarro Olswang, DLA Piper, Eversheds Sutherland, Linklaters, Berwin Leighton Paisner, Dentons
The in-house legal team at National Grid has transformed itself over the last three years, spurred by the realisation it was providing services that were not needed following an in-depth analysis of the function. The wider business was changing with the rapidly-moving energy industry and there was a recognition the legal function needed to move at the same time. As National Grid group general counsel (GC) and company secretary Alison Kay puts it: ‘As the business changed its ways, and became more efficient and focused on process efficiency, why on earth shouldn’t legal?’
Another driving force was broader changes in the legal world, and the expectation the in-house team would rely much more on technology to streamline processes. A significant part of that has been the oft-cited chief operating officer at National Grid, Mo Ajaz, who attracted multiple nominations for his work: ‘He’s been hugely instrumental in the operational efficiency and he’s very well respected externally. People are looking to him simply because National Grid has been earmarked as having taken a big step in this direction,’ says Kay.
Ajaz, who has been with National Grid since 2002, was appointed head of legal operational excellence in 2015.
‘As the business became more efficient, why on earth shouldn’t legal?’
The team is split into around 30 lawyers in the UK and 80 in the US, managing the core regulated businesses in each jurisdiction. From these teams, ten lawyers will transfer to National Grid’s new arm, National Grid Ventures, established in April last year to look at new energy opportunities outside those regions. To complete the realignment of the in-house team as a business partner to National Grid, Kay refreshed its panel, cutting the number of firms from 15 to 12 in 2015 and changing the emphasis to ensure it was an extension of the in-house team, delivering a more agile service.
The main project on National Grid’s books has been the £13.8bn separation of its gas business, announced in late 2016 and internally dubbed Project Piccadilly. Linklaters and Eversheds Sutherland advised, in what Kay describes as an innovative collaboration that provides a glimpse of the future of firms working together, an ‘absolute must’ for its panel. Otherwise, the in-house team is dealing with a sea of regulatory change, particularly the next round of price controls set by energy regulator Ofgem, effective from 2021.
Kay is most proud, however, when talking about the team’s focus on efficiency, words she confesses would never have come from her lips five years ago. One example of this is working on contract software in a bid to automate at least 15 of its largest, most repeatable contracts by the end of 2018.
‘We still need legal advice in many, many areas, but it’s absolutely beholden to us to ensure that we do it at the best possible price, only using it when absolutely needed,’ Kay says. ‘We’re operating it as a true business and I have no hesitation in saying that none of it would have happened without Mo at my side.’
PERSPECTIVES: Alison Kay, group general counsel and company secretary, National Grid
The National Grid legal team has been repositioning itself. What’s changed?
We started with a complete bottom-up analysis of the services we provide across the business and worked out we were doing things that weren’t needed. We began to position the team to be much more strategic, rather than doing the day-to-day legal advice, and in doing that we elevated the expertise within the legal team, and also gave the business much more autonomy and power to deal with some of the things that had been coming to legal unnecessarily.
How did you do that?
We really focused on our external panel: we did a review to ensure that we had firms that matched the needs of the business and were totally aligned with the goals of the legal team.
Why did it need to be repositioned?
The energy industry is changing beyond all recognition, at a faster pace than we ever could have thought, which means the business is having to change. Legal needed to change along with the business – as the business changed its ways and became more efficient and focused on process efficiency, why on earth shouldn’t legal? The other driving force was the legal world itself is changing – people are expecting it to move with the times, to rely much more on technology to look at how they can view transactions as a process and divide work up.
Has it been a success?
It has been really key to how successfully we’re regarded by the rest of the business. We’ve also tried to position legal as a business itself. There’s two definite strings: one is the culture of the business, but two, making sure that we are operating as a business unit, that we know what our budget is, that we’re not springing surprises, that we are looking at the operational efficiency of legal as a function. It is honestly something we probably hadn’t done very well until the last two or three years.
Your legal head of operations Mo Ajaz is well regarded externally. What role has he played?
I’m really proud of the focus we’ve had on operational efficiency within the team – what we can automate; what we can stop doing; how we can work better with the business; how we decide if a piece of work is going to be done internally or externally, all of which drives efficiency; getting lawyers to regularly timesheet so we know exactly where the costs are falling.
When was the decision made?
A couple of years ago I decided I needed a person in charge of operational excellence and I vowed that it would be a non-lawyer. Of course, it was a lawyer. Mo has been hugely instrumental in the operational efficiency. He’s very well respected externally and people are looking to him because National Grid has been earmarked as having taking a big step. I have no hesitation in saying that none of it would have happened without him at my side.
You’re a convert to in-house legal chief operating officers then?
I completely and utterly believe every single team should be doing it and I don’t think any team is too small or too big. It can be naïve to think ‘we’re only a team of three or four lawyers, none of this applies to us’, because it does. I’ve had a complete epiphany here. We’ve reduced the budget by 25%. It’s real, tangible, progress.
Royal Dutch Shell
General counsel: Donny Ching
Team size: 825
Major law firms used: Clifford Chance, Allen & Overy, Baker McKenzie
For Donny Ching and his huge in-house legal team, 2017 represented an extended period of integration following the mega-merger between Royal Dutch Shell and British oil and gas company BG in 2016.
Shell had publicly pledged to divest $30bn worth of assets to help fund the $54bn acquisition that was completed in February 2016 – a seemingly strenuous task. But according to GC Ching, Shell are already over the $20bn mark.
It is clear there is a certain work ethic at Shell that enables the company to excel with such challenging matters and this is also demonstrated by the proportion of work that stays internal. Ching says that ten years ago, 60% of work was handled externally, compared to 40% internally. Now, it is the other way around.
‘One of the hallmarks of Shell legal is that we do a lot of work in-house. It gives us fantastic opportunities to grow and develop our lawyers, and to give them meaty work to focus on.’ Ching estimates that Shell’s external legal spend is merely in the ‘low $100,000s for some $1bn-plus deals.’
Shell’s legal team is broadly structured in alignment with the business. As such, there are GCs for corporate, litigation, intellectual property and compliance. The company has also recently promoted Vincent Cordo, formerly global sourcing officer, to a new central legal operations role.
‘About three years ago we hired a pricing analyst from a law firm,’ Ching recalls. ‘We have a very clear focus, so I said to him: “Vince, we want to drive pricing with our law firms.” He’s transformed how we approach alternative fee arrangements, he knows how they calculate their rates and therefore we have pretty transparent conversations with firms. He’s really shown us the opportunities.’
Another member of Ching’s team worthy of recognition is Roberta Lewis, a senior legal counsel based in Houston, Texas. Lewis received an internal Shell award for network performance after devising an invaluable crisis management handbook that was distributed to all of the company’s worldwide legal teams, spanning 52 countries.
Ching comments: ‘Of our biggest risks, a big safety or environmental problem, a refinery fire or an explosion, is absolutely on top of our risk matrix. How quickly can we respond to it? If something were to happen, who do you call? Who are the people you would invite into the crisis management team? Roberta was instrumental in bringing together a proper toolkit.’
As with peers, 2018 will see Shell contending with data privacy thanks to GDPR deadlines. Helen Graham, Shell’s chief privacy officer, will be ensuring that Shell stays compliant with the new regulation. According to Ching, it will be an uphill task: ‘Shell is the biggest retailer in the world. We have more retail stores than McDonald’s and Starbucks. Therefore we have been taking a lot of customer data.’
PERSPECTIVES: Donny Ching, legal director, Royal Dutch Shell
What makes Shell’s in-house legal team stand out?
One of the hallmarks of Shell legal is that we do a lot of work in-house. It’s not just about the cost: it’s a fantastic opportunity to develop our lawyers and give them meaty work to handle. On the costs front, it always helps to do the big projects in-house. For a lot of our $1bn-plus deals, our legal costs are likely to be in the low $100,000s, even below $100,000. We know our counterparts sometimes spend multiple millions.
Is that typical of your industry?
It’s different. The deal we have struck with our board is: ‘Allow us to develop and grow a large legal team and we will bring the work in-house.’ Since about ten years ago when we started focusing on this, we’ve shifted our spend. Back then we were spending 60% external and 40% internal, but we’ve flipped that around.
Aside from cost saving, what are the benefits of keeping work in-house?
One of the things we absolutely hone in on is business partnering. Ensuring that we have lawyers that understand the business, understand the risks, understand the objectives; that’s absolutely critical. You’re so much more effective and efficient. Otherwise, you have to brief external lawyers, they have to read into it and it is hard for them to truly understand our risk appetite.
Have any divisions of your legal team been particularly active?
We’ve been strong across the board. The main challenge we’ve had is oil prices over the last three years or so. That’s forced us to knuckle down. It’s forced us to ask ourselves: ‘How do we become more effective and efficient and productive? How can we continue to drive costs out?’
We have a mantra now of ‘operational excellence’. It’s part of our transformation programme we launched last year where we want our lawyers to understand that improving the work is the work. Every time they do a deal or work on a matter, they should ask how they can improve and be more effective next time.
Vincent Cordo, your central legal operations officer, has been working to drive more efficient pricing from external law firms. How receptive have they been?
It was a slow start. We started in litigation, and when we brought in the firms that did the most litigation work for us globally and told them what we were going to do, some said: ‘We’re prepared to partner with you on this.’ Some said they weren’t interested, but that’s fine. There was enough of a group remaining that we’re happy to work with. It’s not as if there’s a shortage of law firms out there!
We’ve also repositioned our relationship with our global panel firms, which we’ve shrunk from 12 to six. We had hundreds of local panel firms around the world that we shrunk as well. We said: ‘For those of you prepared to work with us, we are prepared to invest in our relationship so that value flows both ways.’ I wanted to move the law firms away from looking at Shell and thinking the only value they get from us is in pure dollar terms. We have started conversations and launched initiatives where we’ve offered firms in-house training opportunities, presentations from our scenarios team and business leaders, and secondments. We’re also sharing our learning from the BG combination, and helping firms with diversity and inclusion.
ENGIE UK
Group general counsel: François Graux
General counsel: Sarah Gregory
Team size: 40
Group team: 490
Major law firms used: Addleshaw Goddard, Bevan Brittan, Burges Salmon, Clyde & Co, Gateley, Pinsent Masons, Stephenson Harwood, Walker Morris
During 2015, international energy company ENGIE began an ambitious transformation programme to reorganise its business lines, which collectively generate €70bn in turnover and employ 150,000 people, into 24 new geographical business units. The UK became one business unit, bringing together a number of legacy GDF Suez businesses, including service-provider brand Cofely and renewable energy developer West Coast Energy. This was followed in early 2018 with a further reorganisation in the UK, part of the group’s adaptation to new pressures in the market.
‘We are very aware that the future is going to be a decarbonised, decentralised and digitalised world,’ comments UK GC, Sarah Gregory. ‘As a group we’ve been rotating assets and moving into new areas, both in energy and services, to help prepare us for this transformation. Part of the legal team’s job is to support that transformation by developing the right infrastructure internally.’
‘A cracking team that drives change.’
Andrew Edge, head of corporate at Stephenson Harwood, says the legal team’s work in supporting this reorganisation has been ‘extremely impressive’, adding: ‘Sarah Gregory has built a cracking team around her that truly stands out for its ability to drive change across the organisation. Rarely have I encountered such a group of exceptionally-gifted lawyers.’
In the last 12 months the team has also supported a busy transactional workload, including ENGIE’s £330m acquisition of Keepmoat’s regeneration business from private equity owners and the purchase of a 23% stake in Moray Offshore Windfarm (East), which was awarded a 15-year contract for difference (CfD), setting the price to be paid for power at the end of 2017. It has also negotiated a number of large service contracts, including a five-year facilities management contract with Transport for London to deliver a range of maintenance services across over 500 locations.
This reflects a further shift in ENGIE’s business. ‘We are developing an integrated energy and services offering, known as place-making,’ comments Gregory. ‘Rather than offering everything as separate packages, the model seeks to develop efficient regeneration to local authorities across a broad sweep of services.’ In this, she adds, the legal team has played a pivotal role. ‘Lawyers are absolutely fundamental to the way we develop new business. ENGIE expects us to take a strong ethical stance to ensure any commercial relationship is able to stand up to scrutiny.’
SSE
General counsel: Liz Tanner
Team size: 80
Major law firms used: Freshfields Bruckhaus Deringer, Addleshaw Goddard, Osborne Clarke
For Britain’s second-largest energy supplier, 2017 was a year of upheaval after it unveiled an ambitious merger with Npower. For GC Liz Tanner and her legal team, the combination threw up numerous challenges, not least reorganising the team. Stuart Waddell, previously SSE’s head of legal for wholesale and corporate, will become director of legal services on a 12-month interim basis while Tanner and the rest of the team manage the Npower merger. Such is the scale of the integration task, Tanner is required to give it her full attention.
Before the merger-induced shuffle, Waddell was one of six legal heads reporting to Tanner, alongside disputes head Gaby Dosanjh-Pahil, networks head Mark McLaughlin, data protection head Janet Cursi, enterprise head Brian Sharma and retail head Laura McVean.
‘Lawyers are invited to meetings so it breaks down the barriers between the in-house team and external lawyers.’
There are legal ramifications as well, with Tanner pointing to the ongoing Competition and Markets Authority (CMA) review process into the tie-up. A trading update for the third quarter of 2017 revealed that SSE had been in ‘pre-notification discussions’ with the CMA, but that the merger ‘remains on course to be completed by the last quarter of 2018 or the first quarter of 2019.’
A distinctive feature of Tanner’s team is the prominent use of secondees. She says: ‘We find secondments really useful because they give the lawyers something new and different to do for a period of time. We are shuffling the deck a bit and allowing lawyers to step into roles on a project, then they can step back. It’s about getting a wider understanding of the commercial pressures clients are under. We ensure the lawyers are invited to meetings so it breaks down the barriers between the in-house team and external lawyers.’
Aside from standard legal work, she says that her in-house team has been aided by a fresh focus on technology. ‘We are halfway through a project implementing a new document-management system, which gives us great auditing ability and the ability to track advice. We will be using it for all of our property, litigation and commercial matters. The system, coupled with our new billing, means our lawyers can work in an agile way. They’ve got full visibility of all their records on their laptops, iPads and remote devices.’