by Peter J. Rees QC and Kathleen Bryan
You hear it all the time: “the world is flat” and “our business is truly global, with the majority of our profits coming from markets outside the United States.” Indeed, large businesses are now almost always multinational, with markets on every continent.
The legal function, however, has not always kept up. It can still have a predominantly local focus, because laws are country-based and local expertise is often necessary to provide the proper understanding of very different legal systems. In the past, litigation risk for major corporations had been primarily a US phenomenon, with the majority of the focus, staffing, cost and exposure in the United States. This is changing, and savvy companies are getting ahead of the curve by taking a global approach to dispute management.
Three factors primarily drive the change to a global approach. First, the level and “Americanization” of disputes — both litigation and arbitration — is increasing outside the United States. Greater regulation, a move in some countries to create an enforcement scheme through private remedies, and a gradual breakdown in solving issues through local relationships all contribute to an increase in litigiousness around the world.
Second, management of disputes is a distinct skill set that can and should be handled by lawyers trained in that specialty, rather than handled by in-house commercial lawyers or simply turned over to outside counsel. While reliance on local outside counsel is necessary for specific legal knowledge, local court experience and, in many jurisdictions outside the United States, rights of audience, in-house lawyers with dispute management skills are needed to manage outside counsel, take a risked approach to the dispute and improve results.
Third, adopting a company-wide system for handling disputes is vital if a global perspective is to be taken on risk management and cost-effective dispute resolution. This is epitomized by the International Institute for Conflict and Prevention’s (“CPR Institute”) 21st Century Corporate ADR Pledge. As a signatory to the CPR Institute’s 21st Century Pledge, Shell has committed to approach its entire portfolio of disputes in a way that understands the pros and cons of the one-size-fits-all litigation model,and explores alternatives, including consensual ones, to resolve matters more quickly and with less cost. This approach applies equally to US and non-US matters, and requires training and educating business people, as well as in-house and outside lawyers supporting the company.
Traditionally, companies have approached each case in its particular jurisdiction and solely on its own merits, using litigation or arbitration process tools and expertise. A more sophisticated approach, however, considers the wide spectrum of alternative dispute resolution (ADR) options, de-escalates conflict, creates feedback loops and prevention opportunities, and examines how this case, and all cases with similar attributes, might be resolved more quickly and more effectively before the transaction costs increase. To be highly skilled in ADR, lawyers need resources, training and the ability to share innovations with each other as they develop.
To respond to this need, Shell created a global disputes function to establish single-point accountability for the management of Shell’s litigation portfolio. This single-point accountability enables Shell to drive best practices in the critical areas of early case assessment (ECA) and budgeting, coordination with outside counsel, and the collection and review of information for regulatory purposes. It enables a common approach to dispute analysis, strategy and resolution, and ensures a thorough understanding of the available tools and techniques. In doing this, it receives valuable assistance through the resources and training of the CPR Institute to help educate its in-house lawyers and outside law firms.
This consistent and coordinated approach to dispute management promises to move this global function to more creative and cost-effective solutions, which will assist Shell in maintaining and building relationships with its stakeholders, and adopting a focused and appropriate approach to each of its disputes. This article illustrates how to establish a robust dispute management system and shows why it is most effectively deployed on a global basis for large companies.