George Klopper, legal manager at Mitsubishi Hitachi Power Systems Africa in South Africa, talks to James Wilson about in-house counsel needs and the company’s relationship with external counsel
What is the scope of your responsibilities at Mitsubishi Hitachi Power Systems Africa?
Mitsubishi Hitachi is currently building the boiler packages for the Medupi and Kusile power stations in South Africa. It is the first and only company in the world which is building 12 super critical boilers simultaneously; it has never been done before. These are two very, very large projects. As the legal department we are responsible for the contractual and legal aspects of the execution of these projects. Health, safety and environmental issues are dealt with by the specific departments focusing on these areas, however they also consult with us on a regular basis. We also assist project management, HR and construction management with legal matters which they encounter. As for litigation and arbitration, the department’s function is to manage those disputes until finalisation, after having referred them to external counsel and making sure that internal processes are being followed. It is a very broad role and one almost acts as a jack of all trades. We therefore act as the primary interface for any legal related matters.
How big is your team?
The team currently consists of four people, including one Japanese colleague, who is assisting us with contact to the legal department in Japan. One person is a litigation specialist and a former head of the litigation department of one of the more well-known law firms in South Africa.
When exactly do you decide to turn to external legal counsel?
That is a million dollar question. It depends on the kind of dispute or, for instance, if someone asks a very specialised question i.e. a tax question. I have a bit of a tax background but usually, because of the amounts involved and the importance of the matters, I would only venture an initial opinion and immediately refer the matter to an external expert. Similarly, if I am being asked to provide guidance on a major environmental issue, I can read the legislation and advise in broad terms about the company’s obligations but for a detailed opinion and where major risks are involved, I would only venture an initial opinion and refer it to external counsel. Once a matter involves a huge amount of money and risk, it is almost inevitable that one would want external counsel to cast their eyes over whatever you have advised, making sure that all the angles have been covered. Also to look at the merits of the matter and either confirm the legal strategy or steer you in a different direction. There is therefore no one hard and fast rule. One would really look at the type of matter, the risk involved, the amount involved and the complexity.
What are the key attributes you look for in external counsel?
The person we ask for a definitive opinion must be skilled and have specialist knowledge on the particular subject; you are not going to ask somebody with two years of post-qualification experience. It must be somebody from a well-known firm who specialises in that area or can refer you to someone who specialises in that area. Extensive and specialist knowledge on the subject is one of the key attributes. One obviously builds up a relationship with law firms and specific partners over a period of time, so the speed with which they are willing to help you is also important. Some of them are very busy and sometimes you can wait a while for an opinion, but if you are a regular client and have built up a relationship, one usually gets some preference. Response times in the business we are in are very important.
Do you look specifically for people with previous practical experience in the power sector?
We are primarily a construction and engineering company and the primary issues we are dealing with on a daily basis are construction and engineering related. It is fairly important that the external counsel consulted or law firm has that kind of experience. However, when you start asking a tax related question or seek environmental law advice, or even for difficult employment law related matters, practical experience is not as important, as most of our questions will relate to the law or regulations applicable.
Which law firms have you had most experience working with?
The major law firms that we instruct at the moment are Fasken Martineau and Baker & McKenzie and we have on occasion looked for advice from Webber Wentzel Attorneys. I may however also use smaller firms on occasion. For instance, we would use smaller firms for investigations of compliance related matters. I would not brief big firms in cases like this simply because of cost.
Is it important to you that your local counsel has an international network?
Absolutely. We rely very heavily on UK precedents for construction law and construction related issues so it is important to have a firm with links to the UK. In that regard Baker & McKenzie is great. Fasken Martineau is a Canadian firm but still has the international experience, exposure and links which are comforting as it sometimes is necessary to obtain international opinion.
A number of international firms have opened offices in South Africa recently, would you in theory consider working with newcomers?
A lawyer is like a doctor, you build up a relationship with them, which tend to get closer over the years. I have built up such a relationship with partners at both Faskens and Bakers. One obviously knows people at other law firms and I would not rule out completely to expand the number of firms we currently use. Let’s say for instance Pinsent Masons opens an office in South Africa. I have dealt with them previously and would look very, very seriously at moving some of our business to them. I have a lot of respect for them and I think they are one of the best construction firms in the world.
What is your position on fees and fee structures?
We use our law firms extensively and they make good money from us because of the size of the projects and the nature of the litigation. It was therefore important that we negotiated fees with them. It is however not only about negotiating fees, one also need to control legal expenditure. We carefully monitor invoices sent to us to ensure that we have properly charged. I certainly take the liberty of contacting the partners involved in this regard and disagree on the hours charged for. Luckily I have a very open relationship with them and we always come to an agreement.
Are there developments in the legal market that are of direct interest to you at the moment?
Not really, not in the way that law firms provide their services to us. I have been in a similar role for more than ten years now and my experience has not dramatically changed in the past couple of years. Although I must say that local firms’ willingness to discuss flexible fee structures is certainly something that has become more common and I am pretty sure that this is due to international exposure.
How could law firms better develop to meet your needs?
I sometimes get the feeling that lawyers who have practiced in private practice for most of their careers have no idea of the types of pressures and environment that in-house counsel are practicing in. If I was a law firm that wanted to establish itself in certain sector, say the power sector, I would go to a company like Mitsubishi Hitachi and say: “I can second one of my junior or mid-level associates to your legal department for six months, just to shadow you and see how you do your business, what kinds of legal problems you are exposed to and to understand your needs and your business better”. As in-house counsel I would certainly appreciate this a lot as it would give me the comfort of knowing, when I deal with that firm, that they exactly know what I am facing. To give you a practical example: our management asks their questions in a very particular way and they need a response in a very particular way. If I ask any law firm to give me an opinion on a particular matter one usually expects at least a five page opinion with lots of references to case law and even academics. A construction manager is not remotely interested in those. He needs a three paragraph executive summary where you tell him: this is the problem, this is how you would deal with it and here are two or three options to solve it. That is all he/she is interested in. I am obviously not saying that they should not include references as to how they came to a solution. However the opinion should be in a format so that I do not have to rewrite it to be digestible to my management. If that is the case and it takes me another hour and a half to rewrite it, the value add is limited.
Are there other elements that external counsel should consider and are important to you?
The willingness to express an opinion, even if it is a qualified opinion, and do so immediately. I cannot tell you the number of times I have been called into a meeting where construction related legal matters are being discussed and been put on the spot with questions such as: How would you interpret this clause in the contract? Or what is the legal solution to this particular issue? It does not help at all to tell management ok, I hear your question, I am going to consider it for a day or two and then give you an answer. It just is not acceptable. You must be willing and brave enough to give an on the spot opinion, even if it is qualified by saying that it needs to be firmed up. It is inevitable that external counsel will attend meetings together with in-house counsel and management. Frustration levels rise rapidly when external counsel runs in circles and avoids giving an opinion.
Are there any bits of South African legislation that you have your eye on at the moment?
There are continuous changes in legislation, which is improved on a daily basis. We just had an overhaul of our Companies Act, which played a major role in the way that companies are structured. It was brought more in line with international company law. We also have had some recent and fairly important revisions to the Occupational Health and Safety Act, together with the promulgation of new construction regulations. There is however nothing at the moment, which I can see or that I know of in the pipeline, that will dramatically impact on the way we do business in South Africa.
Mitsubishi Hitachi Power Systems Africa
Legal manager at Mitsubishi Hitachi Power Systems Africa. Practiced briefly as an attorney but mostly as in-house counsel in various industries, such as mining and minerals, engineering and manufacturing, telecoms, mineral processing and power and generation at various multinational companies since 1997.