An in-house lawyer vs. an outside counsel

Practicing as an in-house lawyer requires a radical shift in perspective and approach to the legal services provided under the “law firm model.” Depending on the structure of a specific entity, an in-house advisor often serves as a business consultant, if not a trusted consigliere. Of course, do not interpret this allegory as a direct identification of such a lawyer with a character from Puz’s novel; memory hinders a better comparison at this moment. Efficient procedures are sometimes necessary to avoid participation in purely business decisions. Conversely, it is almost universally acknowledged that in-house lawyers are expected to understand business and operations beyond what is traditionally considered legal advice. The distinction between legal and business advice can be pretty fluid.

In turn, discussing the specifics of the work of a law firm lawyer providing services to businesses may seem like an unnecessary truism. However, more than five years spent on the other side of the table as an in-house lawyer entitles me to some reflections on similarities and differences, the result of which is this column.

Communication is of utmost importance

Finding the right advisor involves more than just identifying the best lawyer in terms of service quality relative to price (my superior excelled in this area). Responsiveness and communication are equally crucial. Furthermore, an in-house lawyer should serve as the strongest ally to the law firms’ lawyers. Not long ago, I came across a comment from the head of the legal department of a large company. The attorney congratulated the law firms’ lawyers on their successes and rankings; however, she urged them not to overlook the role of in-house lawyers. It would be difficult to find a more fitting suggestion. An in-house lawyer acts as a “bridge” between management and financial services (as they decide on reserves or the initiation of legal disputes).

Ideally, the relationship should involve cooperation founded on effective communication and responsiveness. It does not matter whether, in a specific case, it concerns hiring an external lawyer for a transaction, an administrative proceeding (e.g., in the field of competition law), or a court/arbitration dispute.

The in-house lawyer indicates the need for external advice. Once the order is accepted, he serves as the guide and the provider of the necessary data. Most importantly, he communicates business decisions, allowing the external lawyer to formulate a strategy and convey it effectively.

I venture to say that traditional legal opinions will soon become a relic of the past. Even the necessity of demonstrating the legal-logical chain of reasoning from the external author of such a document does not justify excessive legal elaboration that hinders understanding. The opinion should aid in making a business decision rather than increase the doubts of its recipient (typically managers or in-house lawyers).

The demands and pricing

Without a clearly defined scope of demand for external advice from the business, achieving a positive result is impossible. This is especially evident in dilemmas between the need for amicable dispute resolution and court or arbitration proceedings. Reliable legal advice includes information about the project’s timeline and costs. In the case of court disputes, the prevalence of this resolution method for commercial conflicts remains unsatisfactory. This is primarily due to three factors: a lack of common knowledge about arbitration, a sense of wrongdoing from the party that loses, and the belief (is it that one always wins in state courts?) that an arbitration award is an inferior option compared to a state court judgment. Contrary to appearances, larger entities are often more interested in resolving disputes quickly (creating long-term reserves can be more burdensome than losing a case). This phenomenon receives little attention in discussions about business clients’ needs. Sometimes, a disconnect exists between clients and external advisors concerning the timeline for disputes or advice on state court cases (for instance, corporate disputes involving unfair competition are well-suited, even “modeled” for arbitration).

Simultaneously, one should assess the likelihood of winning the dispute with considerable reserve. Commercial disputes, akin to a kaleidoscope, illustrate all the flaws of the Polish justice system. To paraphrase Franklin, winning a dispute is seldom a “sure thing” under Polish conditions. Furthermore, even obtaining a payment order can take nearly two years. This possibility should certainly be communicated to the in-house lawyer. It is also essential to approach the client’s or their auditors’ expectations with kindness and understanding when estimating the potential chances of success in the court dispute. In terms of achieving favorable outcomes from collaboration with external law firms, transaction consulting proves to be more beneficial. In this regard, the chances of success are higher, considering the shorter duration of the transaction.

It is worth concluding contracts with external law firms for more complex projects. While an individual opinion does not require this (an email is enough), a court dispute is already a decision on whether settlements are made on a lump sum basis for an action in the case, according to the so-called cap, an hourly rate; and finally – whether they include advice for the first, second instance, and possibly procedural actions after obtaining a final judgment. Regardless of the choice of model: settlements according to an hourly rate, a lump sum, or a mixed model (cap), the client should have knowledge about the justification of the costs incurred.

Between the Theory and Business Practice

The idyllic vision of model cooperation between entrepreneurs and external advisors will confront reality. The more cooperation and exchange of experiences and expectations exist between lawyers working in the in-house model and law firms, the greater the demand for the services of law firms. The “fertility” of rational legislators allows us to accept the thesis of further professionalization (and risks) in business operations. Political considerations are, however, beyond the scope of this text. It is possible that the provision of services by external lawyers will evolve over time, aligning more closely with the business judgment rule.

The author is an advocate, doctor of law, and partner at the Warsaw law firm Jabłoński Koźmiński & Partners, where he heads the arbitration practice and conducts commercial disputes. For over five years, he was the chief lawyer of a large joint-stock company.