Canadian Lawyer

w w w . C A N A D I A N L a w y e r m a g . c o m M a r c h 2 0 1 4 27 handle unique issues that arise without the help of outside counsel. "By the time you gear up your outside counsel, or by the time an executive gears up an outside counsel, it ends up costing more than if it was kept in-house," he says. "People don't realize there are legal implications if they have to dial up a lawyer, explain it all, and things get missed." The questioning of the cost of in-house counsel is part of a much broader issue, says Maharaj. It's not so much about being employed by an American or multinational company but about being part of an economy in which people are doing more with less and trying to maximize efficiency with each person in their organization. "What I've seen is companies have gotten rid of their Canadian operations and have just a sales force in Canada and everything else operates out of the U.S. It's what I like to refer to as an accordion economy because you have this contraction of work in Canada and then people realize they're not optimizing the business in Canada so we need a fully functional force in Canada and then it expands and then may contract again." Maharaj, who has held his position at Kellogg for 10 years, has heard the questions before. In the past, senior manage- ment has come to him and asked if some aspect of the depart- ment could be farmed out to external providers. "There is a sense that in many ways as issues become more integrated between the Canadian/U.S. border that the issue of distinc- tiveness between the countries tends to fade as it relates to our lawyers in the U.S.," says Maharaj. "They often forget there are fundamental differences and so it does help to have someone on the ground here identifying those differences." When those kinds of questions are posed, in- house lawyers need to be ready with an informed answer that doesn't appear entirely defensive. "The answer needs to be: Here's what we do, here's what is farmed out, and this is what the U.S. would have to pick up or here's what we are willing to take a risk on. The answer back is often that it's going to take too long or it will be too expensive and so well then, we have to keep the people." There are currently three lawyers, including Maharaj, in Kellogg's Canadian legal department. His was a new position within the company when he took it on a decade ago. "Initially, it was thought external counsel could do the work," he says. He says the usefulness of local lawyers has to be consid- ered based on the facts and risks in the particular market. "I don't think people start with the premise that legal, per se, is bloated, but rather: 'How do we function with less people?' Secondly, you have to look at what your legal spend is in that market and then third, what is your delivery/quality of ser- vice? If you look at those things you may be able to come up with an answer as to whether you need to buy legal services or just rent them — very often the numbers just sort of jump off the page at you. We do get the question: 'Well, should we be farming out all legal services?' But the research out there suggests 70 per cent of legal services should be in-house." Generally, law departments for U.S. companies with Canadian offices are already small, says Warren Bongard, president and co-founder of ZSA Legal Recruitment. He says they carry "lean staffing" for legal this side of the border often because the issues that happen in Canada are mirrored in the U.S. "So when programs are rolling out in the U.S., they may have a couple of lawyers in Canada handling the regulatory regime that goes along with what they are doing," he says. However ZSA recently did a placement in a large $1-billion- plus company that was looking to add a second lawyer to the Canadian in-house team. "So they aren't reversing, they are adding head count." Sascha Hindmarch is with London, U.K-based law firm Hausfeld & Co. LLP and is a former general counsel in Australia who writes about global practice management issues in an in-house context. She says companies need to be i can see where organizations that may not be on ascendancy and therefore in cost control mode may say, 'We're not doing that much business in canada, why do we have a lawyer or so many lawyers — there are other ways we can deal with these issues.'" bArrY fisHer, sAp canada inc.

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