North West: Not so grim

The Co-operative Group general counsel Alistair Asher has not had an easy job over the past year. The company hit the headlines in 2013 following the discovery of a massive capital shortfall in its banking arm, coupled with governance failures which pushed the whole group close to failure.

But the company has weathered ‘crisis mode’, as Asher terms it. ‘As an organisation we are emerging from a very bad time,’ he says. The 18-month crisis period saw the group restructure the bank, revise its entire governance structure and sell off its pharmacy and farm businesses.

In an organisation as diverse as the Co-op, there are a number of other directions in which to look, not least of which is its food business, which it plans to grow. ‘Our other businesses, such as funerals, insurance, legal services – it is now a question of turning round some of the bad publicity that we’ve had in the last year and rebuilding those businesses,’ says Asher. ‘Many of them needed to be reset in terms of their operating models and there are a number of internal inefficiencies which we’re adjusting.’

The recent difficulties have caused former Allen & Overy partner Asher and his acting head of legal, Jim Tully (a secondee from Addleshaw Goddard), to operate ‘as a mini law firm’. ‘What we had in the last couple of years has been way beyond the resources of the internal legal department, so we’ve been very dependent on external firms,’ says Asher. ‘Through the bank crisis last year, I counted something like 22 law firms involved in some way for some party or other.’

However, that is about to change, as the legal support the Co-op needed then is totally different to the sort of ‘business as usual’ support it will need in the future. This won’t necessarily lead to a wholesale restructuring of the legal function but a ‘repositioning’, he says.

With the intense national public scrutiny of the group’s problems, and around 87,000 people employed around the country, it is easy to forget that the company is a Manchester-based operation. ‘There are cultural roots in Manchester – the values and principles of the organisation are based on the Rochdale Pioneers,’ says Asher. ‘With headquarters there and 5,000 people working in the building in the centre of Manchester, this gives it a centre of gravity.’

Despite the company’s long past, and recent troubles, it remains committed to the future, and was one of the first alternative business structures to open under the Legal Services Act. And despite a loss-making start in legal services, Asher says those losses have been turned around. ‘We are actually beginning to see the light at the end of the tunnel in terms of exciting future business,’ he says.

Cheshire-based Seatriever International Holdings is small (its turnover is less than £15m) but ambitious. It currently offers two flagship products: Waterbuoy, a device to retrieve valuables from underwater, and Illoom Balloon, a glow-in-the-dark balloon.

With innovation at the fore, enforcement of the company’s IP occupies the bulk of group legal counsel Andrew Vickerstaff’s time. ‘Because our products have been successful, we do have a number of imitation products out there and a number of counterfeit items in the market, which obviously we’re looking to remove as quickly and cost-effectively as possible, as and when identified,’ he says. Despite being a one-man legal team, the majority of work will stay in-house, he says, although, ‘management of patent and trade mark portfolios would be outsourced to external law firms and if there’s a specific unique international aspect to any work we’re doing, then I would look at seeking external advice as and when required’.

Although he undertakes most of the UK-focused work himself, when he does outsource domestic matters, he prefers to stay local. ‘We probably have a tendency to use regional firms just because it means you can have a face-to-face-meeting if necessary, which can aid a greater understanding of the business and what we are trying to achieve,’ he says. ‘If you use regional firms, there are cost savings to be made and I don’t think there’s an impact on quality of advice.’

For overseas matters – the group has issues in the US, Australia, China and Europe – Vickerstaff often goes on personal recommendation. ‘The Dutch firm that we are working with was recommended by the German lawyers that I’d appointed because I knew the German lawyer from previous experience. I feel it’s important on cross-jurisdictional issues that our external advisers have a good working relationship with each other as well as me to form a cohesive team,’ he says.

What is most key is the outcome, he stresses. ‘Obviously, if we’re dealing with infringement issues overseas then a lot of the fee structures we agree are based on how successful they are in pursuing those infringers, and the value that’s recovered to the business either in the value of products that are destroyed or the actual compensation that’s recovered on our behalf.’

For Sefton Metropolitan Borough Council’s head of corporate legal services, Jill Coule, local government budget cuts are currently a major preoccupation. ‘Our budget has been reducing,’ she says. ‘There’s a £55m cut coming off a £180m to £200m budget. So it’s not an insignificant sum of money! The question is how services are going to respond to that – what proposals they will put forward to cease, reduce, reform, change, and work with others. You know all of those things will be quite a big legal challenge.’

Currently the council’s in-house legal function is split into three teams – one dedicated to children and adult social care and education; another focused on non-contentious legal areas such as contracts, conveyancing and freedom of information issues; and a group dealing with litigation issues such as prosecutions, employment matters and planning.

One of the most-publicised activities of Sefton’s in-house legal team has been its pivotal role in setting up and hosting the North West Legal Consortium, a grouping of over 37 public authorities collaborating in the procurement of legal services. ‘In essence, the consortium is designed to meet the procurement needs of members: local authorities, fire services, police authorities – quite a range of public bodies,’ says Coule. ‘The consortium procures on behalf of members and has the capacity to extend that should others join.’

An initial framework was put in place for both solicitors and barristers, although this is not a static arrangement. Members do have the freedom to go outside of the consortium if a certain specialism is needed, and Coule herself has done so. ‘I had an employment tribunal a little while ago and I went off consortium for it, because of the specialist area and issues that were involved, but I still put it through the consortium process, checking it against a couple of barristers’ chambers before I let the work out.’

When working with a selected provider, Coule expects them ‘to bring something I can’t to the equation. As an in-house lawyer, I’ve got a fairly narrow perspective at times by definition of who I work for, how long I’ve worked for them, and what I do. So I expect them to bring perhaps an opposite point of view – are they adding that value to the advice that they’re giving us? I expect that insight’.

Stockport-based industrial IT provider SolutionsPT is a small company, but one of the best to work for, according to this year’s Sunday Times 100 list. Last year’s turnover was £11m, and it employs around 75 staff members.

None of those staff members is a lawyer, however, according to commercial manager Neil Pearce. ‘We have a professional finance resource, which is myself, we have professional human resources and professional IT capability. We don’t have an in-house lawyer.’

But it is not a problem for Pearce. ‘We’ve got professionals in those other disciplines who are experienced in that field of work so there is an element of legal compliance which we’re comfortable to take and understand,’ he says. ‘In addition, the team uses the support of online legal document providers for more routine issues. But, he explains: ‘If we get anything that goes beyond routine and we want pragmatism, then we’ll talk to our solicitors.’

Changes are afoot for the company right now. ‘We’re entering into a service provision with customers, as opposed to a pure product supply,’ says Pearce. ‘So for example, we may supply some software for a customer, historically then they would have had their own resources which would develop, support and maintain that, and the infrastructure upon which it runs. There’s potentially a move towards organisations wanting to buy a service that says, “you make sure my IT system in this manufacturing environment is up and running for this percentage of time” and we would take responsibility for delivering that up-time.’

Such a pivotal development requires careful legal handling, says Pearce, and areas such as contract negotiation with customers might take the group out of their comfort zone, as it discovered recently. ‘Because it was the first time we were doing it, it represented a level of risk different to what we’d experienced before,’ he says. ‘We thought it was right and appropriate to get formal legal guidance and support in developing that contract with the customer.’

He sums up the reasoning behind decisions to outsource or not as follows: ‘It’s really where our activity is breaking new ground and where we don’t have experience of that to call upon.’

Key to impressing the company are quality and connection. ‘I suppose the most important thing is that they’re right, that the advice we get is correct! I guess there would be an element of relationship somewhere in there. They may be perfectly capable and giving us the right advice, but if the relationship is not there that would make it more difficult to deal with.’

What is not particularly important is location – the company is not defined by its location, and doesn’t consider it a critical factor when choosing its law firms either.

Paul Taylor is EMEA counsel at Pearson VUE, a subsidiary of Pearson specialising in computer-based testing applications, with its EMEA main headquarters in Manchester and Warrington.

In a diversified global business, one of the biggest issues for Taylor is that of regulation and compliance. Given its information-based products, data and privacy are obviously huge concerns too. Here, the aim is not to be just compliant, he says, but to ensure ‘that we’re demonstrating best practice and we’re constantly thinking about security both strategically and from a legal perspective. We want to make sure that we’re carrying appropriate risk and that we’re managing that well and we’re aware of the global regulatory landscape’.

Innovation and development are also key in the sector, and for Pearson VUE, ‘a key driver is that our technology is robust, that it is innovative and is delivering what the customers are looking for’. The company delivers what Taylor describes as ‘high-stakes testing, professional examinations, whether that’s in accountancy, financial services or healthcare. We can’t afford mistakes and we can’t afford for things to go wrong, because it’s our customers’ reputations at stake and clearly if we damage the customer then that has a massive impact for us as a business’.

Due to the geographic spread and nature of the business, Taylor does not hire external counsel based on their location. In the UK he puts out tenders on a national basis and has observed, interestingly, the lack of gap between London firms and larger regional firms in terms of price. For him at least, the received wisdom of sending work to the regions for a cost advantage does not hold water as it might once have done. This, he says, is down to a combination of ‘London firms pricing themselves more competitively now and regional firms having large, chunky overheads’.

He concedes that with commoditised contracts there may still be a discrepancy but feels that ‘on the projects I tend to work on, I’m always quite surprised that you don’t see that massive price differential’.

At Manchester Metropolitan University, where Sara Shanab is general counsel, the five-person legal team has naturally had to integrate well into the academic side of the institution, in order to gel that together with the corporate, contracting aspects of the job. Building its research and knowledge exchange capability is a major area of concentration for the university, as is improving its sports offering. A notable development recently has been the move to rationalise the property estate from seven campuses to two, and embark upon the building of a large new campus in the centre of Manchester. ‘We wanted world class, state of the art, purpose-built buildings and we’ve achieved that,’ says Shanab.

The legal affairs of a university are complex and require a shift from the commercial mindset of a law firm. ‘We don’t talk about profit, we talk about surplus,’ Shanab points out, adding that: ‘In public sector, or quasi-public sector organisations, there are many more shades of grey, which makes it tricky for us as lawyers – you have to pitch your advice differently.’

The legal work includes property and procurement of construction contracts, as might be expected from the campus-related activity that has been ongoing. Any forays into foreign jurisdictions must be properly managed from a legal and regulatory point of view, and even business-as-usual matters, such as student and staff disputes, can take a complex turn. Shanab has team members who are specialists in academic matters, internationalisation, research and knowledge exchange contracts and IP issues, as well as construction, property and procurement, although all are able to function as generalists.

This makes it easier to keep much of the work in-house, although she admits that the university’s estate rationalisation strategy has meant that recently she has had to increase the level of support from external law firms. ‘In the last year or so I’ve probably spent more in legal fees than I have in the last few years, but that is a reflection of the fact that we’ve been supported in our asset disposals by firms externally.’

Outside of these areas, the team outsources as specialist matters arise, and there is a panel of four firms to choose from, although this could soon be changing. ‘We are actually just reviewing our business needs before we start the process to re-procure that panel,’ says Shanab. ‘Every five years tends to be about right.’

Shanab values pragmatic solutions from a law firm: ‘No instructing solicitor wants two pages describing the law these days.’ Instead, it’s about ‘finding a way through – understanding the institution’s risk appetite and the factors that influence our decision-making’.

Responsiveness is another important quality, as is good communication. Ultimately, ‘it’s not as simple as what it will cost us – it’s more nuanced than that’, argues Shanab. But in the end, keeping work in-house is preferable. ‘Where we have a gap, I would rather support my staff and upskill them through training and development; rather than relying too heavily on the outside. Part of my job is to make sure that my team are not only kept interested, but are also developing their own skills.’

catherine.rodgers@gcmagazine.com, catherine.mcgregor@gcmagazine.com