Proactive Law – does it help General Counsels in business?

Blogs April 4, 2013


Corporate lawyers have been expected and asked to act proactively for as long as I have been in-house lawyer, which is almost 30 years. This is nothing new, so why write about it? Some decades ago businesses did not need as many lawyers as they need today, and the costs of legal services were not as high as they are today. Agreements have grown longer and longer, business is very international and there are a lot of new international and domestic legislation that needs to be taken into consideration. The need to be proactive is a must and lawyers need to concentrate on finding more effective and less costly ways of working.

Last week's Fondia's General Counsel Round Table Event, together with several General Counsels, focused on the Proactive Law concept and on the proactive approach in general. One of our speakers, who has been very active in developing the Proactive Law concept explained us in the audience what the concept ( ) is all about. Afterwards I came to conclusion that Proactive Law could be a way to decrease legal costs. It was recognized that the concept means, in practice, being proactive in all aspects when advising businesses. Ok, what does this mean? Let's talk about contracts as an example:

Research shows that when negotiating business agreements the longest time is spent concerning indemnity and limitation of liability clauses. The price was third on the list. The contracts could be negotiated faster without those liability clauses. Why not to trust in the law? The other example was that the court found it very difficult to interpret the termination clause due to the way the clause was written.

How could the proactive approach be helpful in these cases? One way would be to include in the contract a visual explanation, like a timeline chart, how the termination clause is meant to be by the parties when negotiating instead of just relying on very complicated legal language the lawyers have used when writing the contract.

Indeed, liability is a very complicated issue. The bravest opinion was; what if the parties only relied on the law and didn't add anything about limitation of liability in the agreement? The deals would be done faster and the negotiation costs would be much lower. Well, this is not an easy solution and not a recommendation. However, it was agreed that lawyers should not just continue writing longer and longer agreement with difficult wording. Instead, lawyers should try to develop agreements which are easier to read by the business people and that the agreements should also be understood completely by both parties' business people, not just lawyers.

The lawyer's attitude and approach were also considered when discussing about the proactive approach. In-house counsels must take an active approach; they must have good communication skills and be co-operative.

To summarize the discussion, the result was that lawyers and in-house counsels need to take an active and innovative approach in order to add value to the business and at the same time decrease costs. Lawyers need to inform the business what needs to be done to improve the company's legal ground, make initiatives, interact with the business people, aim for shorter agreements and make them more understandable etc. That is what the business also expects! Why not learn more about the Proactive Law and see how it gives you tools to improve your approach!