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This article is written by Sai Manoj Reddy L. pursuing Certificate Course in Arbitration: Strategy, Procedure and Drafting from LawSikho.

Introduction

With the increasing economic development around the world, there are a large number of companies or corporations that are being registered year on year and the business world is seeing exponential growth. Following this is the compliances and regulatory norms to keep everything accountabl’e and transparent. Due to these developments companies started to hire lawyers as in-house counsels to work solely for the company. An in-house counsel should be a type of lawyer who is a jack of all trades as he has to know a lot of laws and business practices to advise the company in day-to-day legal issues and take care of the various compliances. 

The role of an in-house counsel is completely different in many ways than an associate in a law firm or a litigating advocate. In-house counsel needs to have a very good understanding of the business, hierarchy, clients, working environment, the field in which business sells or provides service, etc. unlike the litigating advocate or an associate in a law firm who masters few fields of law and focuses their practice in those areas alone. 

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An in-house counsel works on different legal and non-legal aspects, depending upon the company and nature of its business. Some in-house counsels draft and negotiate contracts. Some of them oversee the securities and investor-related functions which include mergers and acquisitions. Some of them advise the human resource department regarding labour and employment laws in hiring, managing, and firing the employees. Some of them protect the company’s intellectual property. Some of them advise the company on compliance with specific types of laws and regulations put by various statutory bodies. Some of them advise the company on international trade and related legal aspects. Some of them handle real estate matters, competition, and antitrust matters. This is far from an exhaustive list but in general, in-house lawyers collaborate and coordinate with different departments in the company to preserve the company’s good reputation, to prevent the company from violating the law or its own key principles, and to find a suitable solution to problems quickly when they arise.

Nowadays the role of In-house counsels is widening in its scope, they have a key role to play in dispute resolution mechanisms when a dispute arises in the company. In-house counsel’s role starts from the time of drafting a contract and a suitable dispute resolution clause in it so that if a dispute arises in the future it can be resolved in an effective and efficient manner. Critical thinking and anticipation of an In-house counsel play a key role in this stage. Once a dispute arises the In-house counsel has to analyse it and advise the higher authorities in a company like the CEO on the situation and try for an amicable settlement as far as possible keeping the best interests of the company in mind. If the dispute is complex then an in-house counsel plays a key role in selecting and hiring an external counsel who has expertise in a particular field in which the issue has arisen and coordinating and briefing the external counsel about the issue. If the dispute goes to arbitration then coordinating with the external counsel and providing necessary documents and witnesses abiding by the timelines of the arbitration becomes the key responsibility of a good In-house counsel so that there is no wastage of money and resources of the company and the dispute gets resolved in a very smooth manner.

This article further explains the role of the in-house counsel in international arbitration by dividing the topic into two sections namely the role of the in-house counsel in the pre-dispute stage, post-dispute stage for a better understanding.

Role of in-house counsel pre-dispute stage

The role of the in-house counsel starts at the stage of drafting the contract and incorporating a suitable dispute resolution clause in it. 

  • Active role during contract drafting and negotiations

The in-house counsel has to play an active role in drafting the contract by participating in the negotiations and advising the company in legal aspects of the contract and then make the other party agree to choose arbitration as the dispute resolution mechanism. 

  • Active role during drafting a comprehensive dispute resolution clause

Once arbitration is agreed as the dispute resolution mechanism a proper arbitration clause has to be drafted and incorporated into the contract where the in-house counsel plays a major role. He has to select whether the arbitration will be ad-hoc arbitration or an Institutional arbitration, law governing the arbitration, the number of arbitrators and their selection criteria, scope of the arbitration clause, language in which the arbitral proceedings be conducted, seat and venue of arbitration, and the payment of fees by each party. 

This is the first and crucial stage where the in-house counsel has to be very careful and keep the best interests of the company at all times as this is the stage where most of the mistakes are made by not taking the necessary steps in drafting an airtight dispute resolution clause. If there is complacency at this stage then once the dispute arises the whole process will be delayed and further becomes complex that the whole resolution process becomes useless and it will cause more damage to the company. This is a very crucial stage for that reason.

Role of in-house counsel post-dispute stage

We have seen the role of the in-house counsel pre-dispute stage in drafting a good contract and incorporating an air-tight dispute resolution clause in it and also advising the company and its management during the contract negotiations on possible outcomes if there is a dispute in the future. Now let’s look into what is the role of in-house counsel once a dispute arises between the parties. 

  • Looking for possible settlement options for an amicable settlement through negotiations and mutual discussions

The in-house counsel has to look for all possible settlement options where the parties can amicably settle the dispute through methods like mutual discussions, mediation, etc. the in-house counsel has to actively take responsibility for this so that if there is any chance of settlement the parties can come to that and it avoids going into arbitration and saves a lot of time, resources and money of both parties and it can be a win-win situation. An in-house counsel has to advise the management of the company on the benefits of settling the dispute amicably and coordinate the same with other parties and organise the negotiations.

  • Advising the management of the company regarding available options and resolution of a dispute through arbitration

Let’s say that a dispute has come into existence and all the efforts to amicably settle the dispute have failed then it is the responsibility of the in-house counsel to advise the management of the company to commence the arbitration to resolve the dispute. Before advising the management to commence an arbitration in-house counsel has to do a thorough and objective evaluation of the merits of its own claim as well as the risks of not getting the favourable result and weigh them properly before advising the management of the company to commence the arbitration. 

There can be many factors that affect the management decision like difficulties in understanding the other side’s behaviour because of cultural and language disparities, logistical problems, aggressiveness due to the interruption of once happy commercial relations. Parties to the dispute may be also driven by considerations that are not strictly related to the merits of the case. The arbitration may also be started in some cases simply to show the other party that a claimant is serious about its claims, in the expectation that it will then be easier to reach a settlement. In some other cases, there may be some emotional factors in an arbitration strategy; high-level management of the two parties may have had, for example, a confrontation and they may be led by the desire to assert their “ego”, to protect their reputation or to be vindicated. All these motivations are of dubious value and may well lead to an unfavourable outcome of the arbitration and in-house counsel have to keep in mind all these possibilities and advise the management accordingly so that an objective decision is made and it is beneficial to the business at large.

  • Selection of a good and compatible external counsel to represent the company in the arbitration proceedings

The next important stage is to select an external counsel to represent the company in international arbitration. Normally a big reputed law firm will be hired to represent the company in arbitration proceedings and the role of in-house counsel is not just to select the best law firm but to select the best advocate in that law firm who has a set of skills that complement and not duplicate those in the in-house legal department. 

A report of ICC task force on the problem of excessive time and cost in arbitration says that 82 percent of the costs of the arbitration are nothing but the fees of the external counsel hence the role of the in-house counsel is to negotiate an appropriate fee arrangement with the external counsel to avoid future issues with them. In-house counsel should do an evaluation of whether the external counsels, who are normally litigators, also possess the necessary negotiating skills to reach a settlement, when this should or could be negotiated. 

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  • Deciding the arbitration strategy and coordinating with the external counsel

The in-house counsel has a major role to play in deciding the arbitration strategy and how to plan the entire strategy by coordinating and discussing it with the external counsel. Even though generally the written submissions and other documents are drafted by the external counsel the in-house counsel has to actively ask the external counsel to send final drafts of those filings and review them to check if they are according to the arbitration strategy and check if there are any mistakes or further suggestions that can be given to the external counsel. In-house counsel should also attend the hearings because there may be issues and questions arising with regard to the company’s business, activity, or structure, or other factual issues, on which in-house counsel are better informed compared to the external counsel. 

  • Organising internal resources like required documents, witnesses, experts, etc.

In-house counsel has a major role to play in organising internal resources throughout the arbitration proceedings like preparing the necessary documents, arranging for the witnesses and experts, coordinating with the external counsel regarding the necessary contracts and other documents necessary for arbitration. When arbitration starts, the in-house counsel’s main role is to identify and review at a very early stage all the documents in support of the claims of the company brought to arbitration. The documents should address not only liability but also the quantum of damages because often in many cases arbitrators have very little evidence on the number of damages suffered by the winning party and have to apply equitable criteria, which are not always the most desirable. 

Identifying and arranging for the witnesses is another important responsibility of the In-house counsel. He has to identify all the persons within and outside the company who have knowledge of the dispute and are related to the dispute and can be used as witnesses to support the claim brought about by the company to the arbitration. The In-house counsel has to anticipate the possible problems which may arise in arranging the witnesses like the retirement of the employee or the witness leaving the country at the time when he is needed to present before the tribunal etc. and make necessary arrangements to all possible problems that can arise.

  • Looking for an opportunity for possible settlement between the parties amicably during the arbitration

The in-house counsel has to keep looking for any possible settlement opportunity while the arbitration proceedings are going on. On many occasions parties who failed to reach a settlement before the commencement of the arbitration try to settle the dispute after the commencement as they see the reality of what happens in arbitration or their case may be a little weak and many other reasons. An in-house counsel needs to have an eye for such opportunities to agree to a settlement because a settlement has some obvious advantages in saving time and costs as well as preserving business relations.

Role of in-house counsel during the arbitration proceedings

We have seen the role of In-house counsel pre-dispute and post-dispute but there are few roles an in-house counsel plays during the arbitral proceedings as well.

  • Attending the initial hearings to assist in setting up schedule/road map for the entire arbitration proceedings

We have seen that an In-house counsel will coordinate with the external counsel to prepare the arbitration strategy and how to go about the arbitration which will probably get a favourable award. It is becoming very common in the international commercial arbitrations where the in-house counsel attends the initial hearings where the schedule and dates and alternate dates for hearings are decided. At this stage, the in-house counsel plays a major role from the side of the company which he is representing to create a road map of available dates and alternate dates for hearings, witness cross-examination, etc. which will avoid delays and saves time and resources, and helps the arbitration to go on smoothly.

  • Coordinating with the arbitral tribunal/institution as a channel for communication

In-house counsel can save a lot of time and resources and can make the arbitration effective and efficient by being a one-point communication for the arbitral tribunal/institution and assisting them in various procedural aspects which will allow the arbitration to run smoothly without unnecessary delays due to communication gap.

Conclusion

This article is not intended to put forth an exhaustive list of roles of an In-house counsel in international arbitration but the above-mentioned roles are some of the very crucial roles and responsibilities of an in-house counsel which cannot be delegated or left to the external counsel. In-house counsel has to actively monitor, coordinate and play a crucial role in performing the above functions. 

A company may benefit from hiring an external counsel who is an expert in international arbitration but without the help and coordination of the in-house counsel who knows everything about the company inside out even the expert, external counsel will be handicapped to an extent in the resolution of dispute through international arbitration. At the end of the day, in-house counsel will be held accountable by the company for the entire management, coordination, and the end result of the arbitration proceedings.

References

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