Maintaining balance in ‘the rule of law’
Last week, I was contacted by an IACCM member who was struggling with questions about internal authorities related to contracts and negotiations. Their company – a large multi-national – had sought external recommendations on the role of lawyers in providing contract drafting, negotiation and advisory services. They wanted to determine the right balance between the use of the in-house legal team and granting authorities to their trained contract managers.
As brief background, this company has historically tended to use lawyers for front-end sales support and contract managers in the post-award environment. However, experience has led them to appreciate that contract managers bring a broader perspective, enriched by the practical experiences of implementation. Therefore, they are often better equipped to provide advice and avoid business pitfalls than their colleagues in Legal.
Based on this realization, they went to a top international law firm to obtain a risk assessment. They asked for advice in each major jurisdiction regarding the extent to which the role of the contract managers could safely be expanded. As the answers came in, they broadly supported a re-balancing of authorities – until it came to the US. There, they were told, it was extremely risky for anyone but trained counsel to make any decisions related to contract terms, negotiation or advice. In fact, the implication was that far from expanding authorities, they should even be cutting back on those that already exist and ensuring that every deal was subject to ‘active supervision by a qualified attorney’.
The reasoning appeared to be based on fear of the potentially disproportionate penalties generated by the US legal system and an argument that its relative unpredictability is something that can be managed only by the cognoscenti – in this case, the practising attorney. If true, it suggests that we have reached a point of major imbalance, where ‘the rule of law’ is becoming somewhat tyrannical in its application. Certainly that is a growing concern for businesses outside the US, for whom the fear of litigation within the United States has become an increasing concern. That fear is driven by the sense of unpredictability and shifting standards which make litigation a lottery.
Of course, an alternative (perhaps cynical) view is that the US has far too many lawyers and they need work. They would also prefer this work to remain highly paid. Therefore it is in the economic interests of any law firm to portray levels of risk and complexity that demand the expert intervention of counsel, whether external or internal. Grasping control over contract management disciplines is therefore just a further extension of already broadening control and influence.
My simplistic view of this is that lawyers are an important stakeholder in the contracting process, but as a specialist function they are not the natural owners of that process. Good contracting, rather like any other form of complex integration, demands a consolidation of specialist views and wider stakeholder interests. Maintaining balance is key to good decision-making and to successful business outcomes. Dominance by any specific group undermines that balance.
What are your thoughts regarding the role of lawyers in business contracts and, in particular, the allocation of roles in drafting, negotiation and contract advice?