In-House Perspectives On Managing Your Legal Operations In India

Friday, June 1, 2007 - 01:00

The Editor is fortunate to report on a discussion between Aradhana Das, Corporate Counsel, Guardian Industries Corp., and Mark L. Shwartz, Senior Vice President & Senior Counsel, Capmark Finance, Inc., from the Practicing Law Institute web program entitled Doing Business In India 2007: Critical Legal Issues For U.S. Companies. To hear full remarks and other leading experts' commentary, visit www.pli.edu.

Editor: Would you tell our readers about your legal department's operations in India?

Das: Guardian entered the Indian market in 1988, well before the implementation of the current liberalization policies. From early on, we have had an active legal department in the United States that is responsible for the legal matters in India. When the legal department requires expertise in a particular field in India, we select and then interface directly with Indian counsel. This method has proven to be very effective for us. Other U.S. companies, however, find it helpful to work with U.S. outside counsel who advise them on selecting Indian counsel and then interface with the Indian counsel. Regardless of the approach taken, companies need to find a process where all those involved work seamlessly together.

Shwartz: I have also observed that cooperation among in-house counsel, outside U.S. counsel and outside Indian counsel can be a good approach. Capmark does not have local in-house Indian counsel. But, I am aware of a number of other U.S.-based companies who hire junior attorneys to serve in-house in their local Indian business with relatively limited experience and functions, such as contract work and licensing matters. Issues that are a matter of corporate concern risk mismanagement and/or missed opportunities if they are not managed and supervised directly by senior corporate counsel in the U.S. headquarters, albeit with support from the company's local team in India, including outside legal counsel and other advisors. Personally, I would not hesitate to turn to outside Indian counsel for assistance because their perspective and experience can be invaluable, provided there is good communication with and understanding of the U.S. corporate priorities and expectations.

Editor: Is it common for U.S. corporations with Indian subsidiaries to have an in-house staff?

Shwartz: I have seen more and more foreign companies integrate in-house counsel into their Indian operations. This function works best when the in-house counsel is working directly with the business decision-makers, and has both an understanding of the business objectives and sufficient experience to provide constructive legal counsel.

Das: Guardian has its own in-house counsel in the United States. As mentioned earlier, the U.S.-based legal department is responsible for coordinating with outside counsel in India. So, for now, there are no in-house counsel located in India. The work is all managed from the United States.

Editor: If a company is thinking about creating an in-house staff to do U.S. legal work in India, what advice would you give them?

Shwartz: The structure selected will depend on the special skill sets that are needed to support the business objectives in India. If the decision-maker is located in a subsidiary in India, there should be a seasoned in-house attorney at that location. However, if the decision-maker resides at the corporate level outside of India, it will be an added challenge for the in-house attorney located in India to fully appreciate the corporate priorities or to plug into the decision-making process occurring outside of India. That is when it is more effective to have an in-house attorney who has both hands-on experience on India-related matters and direct access to the business leader and the decision-making process. The company doing business in India in any meaningful way that cultivates or hires such an attorney to work in-house will be rewarded many times over.

Editor: What challenges should in-house counsel keep in mind when working with outside Indian counsel?

Shwartz: There are some cultural differences that you need to take into account before entering the market. For instance, I have had several instances where I asked colleagues in India if a project I assigned was "done." They would answer yes but I would later discover what they meant was that they knew what had to be done to complete the project, but it was not in fact completed. Meeting deadlines and using proper punctuation in written communications are other areas where the Indian approach can be more lax than what American attorneys and clients can take for granted. These differences are relatively easy to overcome with experience, good communication and continuity of relationships.

Das: Over the past 15 to 18 months, one of my biggest challenges has been understanding the differences in the way law is practiced in the United States versus India. For a lawyer new to India, it may be helpful to have American counsel who specializes in India to help the lawyer with the technical legal issues and practical advice that may not cross your mind. Once the lawyer is familiar with the way law is practiced in India, the lawyer may be more comfortable interfacing directly with the Indian counsel.

Editor: Are there benefits to working with local Indian counsel on certain matters?

Shwartz: For day-to-day regulatory compliance issues, it is important and valuable to have a local champion whether it is local outside counsel or an Indian partner that understands the Indian legal and regulatory framework. Having someone who can assist in the government relations arena is very important for companies entering the Indian market as well. Local in-house counsel and outside U.S. counsel tend to be less effective in my experience. Conversely, log-jams and bottlenecks with governmental authorities in India and local business partners tend to become "unstuck" by company executives who travel to India from outside the country. I call this "progress by itinerary."

Editor: There is a growing trend for outsourcing legal work to India. What factors should U.S. companies consider before taking that step?

Shwartz: Since there are various companies providing outsourcing legal services in India, those considering transferring legal functions should consider the types of legal work that would be appropriate for an Indian service provider to conduct. Legal assignments that can be performed by relatively junior attorneys or that involve substantial repetition, such as summarizing contract terms, document reviews and basic research with limited interpretive requirements, are good candidates for cost-effective outsourcing. For instance, underwriting activities tend to be repetitive in nature so if you identify and compartmentalize specific steps in the underwriting process, each step can be assigned to an individual who becomes an efficient sub-specialist in the overall process which can produce good quality work in a cost effective manner. For litigation you need to consider the skill level required because the Indian model does not always fit the U.S. model. As you move up the skill level, you need more quality control to satisfy expectations for clarity and consistency. The outsourcing agency may complete the work but it should be evaluated to ensure that the final result meets client expectations - and there are differences in the expectations of Indian and non-Indian clients. This is an additional expense that many companies overlook when determining whether to outsource a project. If you need to redo some of the work, the cost savings may not be as great as you had initially thought and/or the time delays can cause the original decision to outsource to be "penny wise and pound foolish."