Legal Counsel for a Global Age
Wolniansky, Natasha, Management Review
Legal Counsel For a Global Age
There are 675,000 lawyers in the United States, and not one is a global lawyer. Rather, according to Ralph J. Gilbert, a partner at Baker & McKenzie law firm in Chicago, there are plenty of lawyers who practice internationally or transnationally. "An American company doing business transactions in Europe, for example, has to deal with two jurisdictions, two tax systems, two legal systems and a third supranational set of EEC laws and regulations" that may override national commercial laws and frequently are contradictory. "In such cases," Gilbert adds, "a company has to think in terms of three interacting sets of laws in negotiating and structuring the transaction." For complex transactions, this can be a complicated matter at best. For less monumental deals, however, the situation is less forbidding then it would initially appear.
IS A TEAM SPORT
Not even Superman - much less one lone attorney - could handle all aspects of transactions that may cover such diverse issues as trade and customs laws, export controls, tax laws, technology-transfer contracts, and international finance and investment arrangements of transnational litigation. (Whew!) Such transactions require no less than a team approach.
Stuart Freedman, a partner at Schulte Roth & Zabel, recently led a team of 15 lawyers representing Dai-Ichi Kangyo Bank in its $1.4 billion purchase of Manufacturers Hanover's CIT Group - the largest move yet by a Japanese company into the American banking scene. Freedman's 150-lawyer firm, small by Wall Street standards, enjoys a significant Japanese client base. When asked to what he attributes his firm's success among Japanese clients, Freedman replied: "Time. As a team we spend a lot of time understanding our client's objectives." This is critical. An Asian company's objectives may not be the same as an American firm's.
The legal team must understand the client's overall strategic plan, why it wants to make the merger or acquisition, and how it wishes to conduct its business. But a Japanese company, for instance, may prefer to maintain a lower profile in a large purchase than would an American firm. "People talk about the high profile of the Japanese, but this is not always true," Freedman states. And it was not the case in the Dai-Ichi deal. Even after the Japanese purchase, it was business as usual at the CIT Group.
With a U.S. company, a few hours with the client may be enough for the legal team to find out all it needs to know. But when involved in transactions in the Pacific Rim, the law firm must spend more time developing a fuller understanding of the client's motives and objectives. Patience is the key. An attorney must be willing to listen a great deal to determine what is essential for the client and what is not.
PAY NOW OR REGRET LATER
A sophisticated corporation looks for an attorney or law firm with battle scars of judgment and experience overseas, for one veteran is frequently worth two recruits. When you go to your attorney with a question about corporate law in Great Britain, for example, and the lawyer answers, "I'll have to ask my associate and get back to you," it's time to move on to a law firm with a proven track record and political connections abroad, Gilbert advises. Such a law firm may be pricey but worth the added cost. Even at a higher hourly rate, an experienced lawyer may come out cheaper in the long run by spending fewer hours on the transaction, identifying the substantive issues and giving practical advice to the client - experience will keep the veteran from wasting time on non-issues or dead ends.
A top-notch attorney knows not only the legal and business sides of a deal, but is also attuned to the nuances of an international transaction. "I know of a transaction overseas where the attorney spent two years negotiating the wrong issues with the wrong party - someone with no real authority to finalize the deal," says Robert Goodwin of the Washington D.C. firm Goodwin & Soble. If the lawyer doesn't know the real issues, and if the attorney doesn't know the power structure, it's hard to recognize the right person to talk to.
While most of the legal work you'll need falls under corporate law, occasionally your lawyer may be involved in other areas of the law as well. Goodwin was called in to represent Richard Ondrik, an American businessman working out of Hong Kong charged with starting a fire that killed 10 people in a hotel in Harbin, China. The crime was labeled "unintentional." Ondrik had supposedly been smoking in bed.
Chinese law does not allow foreign attorneys to represent their clients in court. So, being attuned to the nuances of his client's situation - which were particularly touchy because two of the persons killed in the fire were Communist North Korean officials - Goodwin insisted on choosing the Chinese trial attorney for his client and worked closely with her throughout the hearings.
Goodwin advised his client to take a non-adversarial stance throughout the trial and closing remarks to the judge. "At times," Goodwin says, "you almost have to go against some of your American law school training." His "non-American" approach paid off. Goodwin's client received a minor sentence - five months in jail instead of the expected 15.
Choosing the right lawyer for the job cannot be underestimated. An individual or company should think in terms of the final outcome and total fee, not the hourly rate.
COMMUNICATION IS THE KEY
Whether your international transaction is complex or simple, most attorneys agree ...that - as in life - the biggest problem is communication.
The attorneys I surveyed who do not speak a foreign language said that knowledge of languages is not important. Those who are bilingual insist that knowledge of a foreign language is absolutely essential.
Frank G. Helman, an attorney with Walter, Conston, Alexander & Green of New York City, points out that a lawyer must be able to read and research statutes in the original text, not in translation. Bilingual in German himself, Helman tells us that one-third of his firm's attorneys and support staff speak German. Letters and telephones also are answered by staff in German.
Without people, language and culture, there is no law. If an attorney does not understand the language, all the information he or she receives will be automatically secondhand. A lawyer must not only be well versed in the body of law itself, but should have a feel for the social, political and cultural climate in order to bridge the gap between parties and avoid traps.
Therefore, when selecting legal counsel, pay attention to possible commercial and political repercussions. Find out who your attorney's clients have been and how the lawyer is perceived by the other side's government and business community. Some lawyers, for example, have made their reputations by successfully handling cases in the People's Republic of China (PRC). Fluent in Mandarin Chinese, they are looking to expand their horizons by taking on clients in Taiwan, the Republic of China (ROC). Such "AC/DC" lawyers are considered opportunists by business executives in both Chinas. Find out whether the lawyer you bring to the table in Beijing today will be in Taipei tomorrow. It may not make any difference to you, but it will have an effect on the other side and may reflect poorly on you.
One of the loudest non-verbal communications U.S. companies send out unintentionally is, "We don't trust you." In many cultures, lawyers are viewed as technicians hired to clean up the fine print, not as integral members of the negotiating team. By marching in with an attorney to a first meeting with an Oriental firm, a U.S. company immediately would send the wrong message. You may have exchanged numerous telephone calls and corresponded extensively by mail, but it is still not appropriate to bring your attorney to the very first meeting. Shake hands instead, and when you do introduce your counsel, downplay the legal team's involvement.
When communicating in other cultures, even if the conversation is in English, your lawyer must know how to ask the right questions and interpret the answers correctly.
Preston Torbert, a partner with Baker & McKenzie in Chicago, gives the following example: Early in his law career he visited Taiwan and met with a local attorney who had graduated from Harvard Law School. The Chinese attorney told Torbert that there were no antitrust laws in Taiwan. Later, Torbert learned that police had arrested some men for price fixing. He also heard about a tieing arrangement in patents. When Torbert asked about these cases, both of which were in violation of antitrust, the Chinese lawyer answered that yes, they had such crimes, but they had no antitrust laws as such. Price fixing and tieing arrangements were against another law, he explained.
"An attorney must be able to get behind the words of the law and not just ask simple questions or else he'll get simple - and incorrect - answers," Torbert advises. Your attorney must be able to get to the substance of the law, its actual effect, not just the literal name.
One final example of a communication misunderstanding: A U.S. firm had negotiated a sale of technology to the PRC. When the Chinese saw the contract, they complained about the high cost of electricity to run the machinery. The Americans were perplexed; there was nothing about electricity in the sales contract. The Chinese told the Americans to refer to Article 10 of the contract. Sure enough it said, "The current value of the machinery is $1 million." A high electric bill indeed.
So choose your lawyer carefully. Cull through all 675,000 if you must, but be sure you find the right one to do the job.
Natasha Wolniansky is a consultant with International Business Alliances Inc., a New York-based firm specializing in Soviet-American ventures, and she is a frequent contributor to Management Review.…
Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Legal Counsel for a Global Age. Contributors: Wolniansky, Natasha - Author. Magazine title: Management Review. Volume: 79. Issue: 2 Publication date: February 1990. Page number: 55+. © 1988 American Management Association. COPYRIGHT 1990 Gale Group.
This material is protected by copyright and, with the exception of fair use, may not be further copied, distributed or transmitted in any form or by any means.