AIJA Q&A: How to effectively manage a legal business (of tomorrow)
24 May 2018
US lawyers work on average 2,3 hours each day on billable work according to the 2017 Legal Trends Report by Clio. This leaves them with around six hours each day of non-billable work. According to the report, half of this time focused on non-billable work is spent on administration and a third on new business generation. This is what law firms struggle with the most.
But with the latest technology tools and improved project management capabilities, legal practitioners can easily overcome these challenges. Today, Legal project management (LPM) is firmly established in the legal market and continues to grow as law firms and in-house counsel see its value in helping them to solve their constant “more for less” dilemma: providing more services and better tailored legal advice for less costs.
The AIJA Seminar “How to effectively manage a legal business (of tomorrow)?” will seek to offer further insights into legal project management and the necessary tools to effectively manage a business from 28-30 June in Sofia, Bulgaria. Ahead of the Seminar, we asked the Chair of the AIJA Organising Committee - Dr. Orsolya GÖRGÉNYI, Partner at Szecskay Attorneys at Law, and the Seminar trainer – Marion Ehmann, ICF-cert. coach (PCC), IILPM-cert. Legal Project Practitioner, about the importance of legal project management tools in a legal business.
Q1: What are the challenges of the legal profession? How can LPM tools help?
Orsolya GÖRGÉNYI: We often tend to focus on LegalTech, specifically Artificial Intelligence (AI), and lose sight of the bigger picture. Law firms face more basic challenges than that as we all can imagine. As lawyers, we seem to believe that we are special, and the rules of business, marketing, or the rules of gravity for that matter do not apply to us. Ethical standards differentiate lawyers from other businesses, and lawyers have a duty to the overall society and the administration of justice, but after all, law is a business -...and should be run as a business!
In any business, project management is key. Clients want Quick Solutions (possibly upon pushing a button on their smartphones!) - at Predictable Prices, Communicated in a Client-Centred way! They will drive law firms to achieve this. This can be done by adopting new technologies or simply by adopting new processes and skills, becoming better at managing legal projects. Project management and the use of efficiency tools that focus on billing, time management and customer relations have been a reasonable business practice in other industries for decades. However - while we are busy discussing about the potential use of AI in legal services, most law firms have not even solved their most basic software needs.
Q2: What are the main challenges in adopting LPM tools?
Marion EHMANN: Getting lawyers to change the way they work. Way too many lawyers cling to “the way we have always done things”, even the younger ones. But the old ways are no longer working under changed market conditions – what got you here will not get you there. The antidote to this problem is to start with a few small changes that create early wins in efficiency or profitability. Those early wins will make you curious and hungry to add some more tools.
Q3: How can LPM be an effective tool for legal businesses?
Marion EHMANN: LPM helps lawyers to increase client value and establish close client relationships and thereby achieve their business goals. LPM provides a toolbox to successfully scope projects, engage stakeholders, lead successful teams, plan tasks, draft budgets or fixed fee proposals and manage the work within such budget, track progress and manage risks.
If the atmosphere at a firm is change-averse, it is in my experience a good idea to start training some ambassadors or a pilot group and let them then showcase their results to their colleagues. Soon ears will perk up. I remember for example a series of trainings I did at a law firm where the CFO casually remarked “I know which projects are staffed by people who did the LPM training, because there the write-offs are lower”. That certainly got people´s attention.
Orsolya GÖRGÉNYI: Soft skills, "the Human Factor" is essential now, when smart and intelligent software can perform the "commodity work" of - not only junior – but all lawyers. In the future, lexical knowledge will no longer be important, and soft skills will gain importance. Clients will always value a "trusted board room advisor". Therefore, it is very important to develop soft skills for lawyers. The AIJA SCILL (Skills, Career, Innovation, Leadership &Learning) Commission is organising its next law practice management seminar in Sofia at the end of June entirely dedicated to Legal Project Management. It is a toolbox of practical and soft skills for managing legal matters, which helps lawyers to increase client value (“more for less”) and establish close client relationships.
Q4: What does an effective legal business look like in the future?
Marion EHMANN: Legal businesses that want to survive and thrive under today´s and tomorrow`s market conditions need to become more client-centred. We have been operating as experts in an ivory tower for far too long, when in fact being a lawyer means working in a service profession. Our clients come to us with a certain need and they want us to take care of it. The need usually boils down to ‘peace of mind’, whether it is a business transaction, family law issues, tax disputes or a social insurance case or what have you. Giving clients that peace of mind requires certain professional skills on top of legal skills – skills that we sometimes call “soft”, which is a misnomer since they can be hard to muster. Besides, the legal businesses of tomorrow will have to adjust to the fact that AI-based tools will take over part of our work (e.g. research, review of documents), so lawyers need to focus on the client-serving aspects of our profession to stay in business. Tools sets such as Legal Project Management and Legal Design Thinking can help us with that.
To register, please visit the dedicated event web page. See you in Sofia!
General terms and conditions: when are they effective in contracts concluded by email?
23 May 2018
by Alessandro Paci, LS LexJus Sinacta, Bologna, Italy
Under Italian law, general conditions prepared by one of the parties are effective as to the other, if at the time of formation of the contract the latter knew of them or should have known of them by using ordinary diligence. Businesses usually conclude agreements by exchange of emails and in the purchase order or the order confirmation each party refers to its general conditions of sale or purchase. Under Italian law when are such standard conditions effectively known by the other party?
Recently, the Italian Supreme Court, in decision no. 21622 of 19 September 2017, offered an interesting point of view on this matter.
An Italian company brought an action against a German company before the Tribunal of Milan seeking damages as a result of failure to comply with an agreement concluded between the parties by email. The German defendant contended that the Tribunal lacked jurisdiction and that the Tribunal of Berlin had jurisdiction under a jurisdiction clause included in its general conditions of contract. These conditions were expressly referred to in the order issued by the Italian company and were available on a website indicated in the order. The Italian company claimed, among other things, that the jurisdiction clause was invalid since the parties did not agree on it and it did not comply with the requirements provided in the Regulation CE no. 44/2001 (now replaced by Regulation (UE) no. 1215/2012) on jurisdiction in civil matters.
The Italian Supreme Court stated that the jurisdiction clause was valid pursuant to Regulation no. 44/2001 as it constituted a communication by electronic means which provides a durable record of the jurisdiction agreement. The decision by the Italian Supreme Court confirmed what was stated by the European Court of Justice in a recent judgement (Judgment of 21 May 2015 – C-322/14). The Court stated that a jurisdiction agreement included in general terms and conditions accepted by “click-wrapping”, constituted a communication by electronic means which provide a durable record of the agreement where that method makes it possible to print and save the text of those terms and conditions before the conclusion of the contract.
The Italian Supreme Court also pointed out that the general conditions, in which the jurisdiction agreement was included, were also accepted because the purchase order referred to them, and as a result became an integral part of the agreement. According to the Italian Supreme Court, knowledgeability was not precluded by the fact that the company’s website indicated in the purchase order was not a hyperlink, but the buyer had to copy and paste it.
The Court ruled that the exclusive jurisdiction clause was valid and therefore the Italian Courts lacked jurisdiction.
The decision is relevant because it confirmed the Court of Justice case-law on the prorogation of jurisdiction. More interestingly, it poses new questions on when general conditions are deemed knowledgeable under Italian law. According to the Italian Supreme Court, this requirement is fulfilled when they are available on the seller’s website, and the website is indicated in the purchase order issued by the buyer by email.
As a result, to make sure that a commercial partner may know the terms and conditions, a company should include a copy of them on the company’s website so that they are easily accessible, and always refer to them in the purchase order or the order confirmation.
New provision for international authority
23 May 2018
By Hendrikje Herrmann, Ahlers & Vogel, Germany
The validity and effect of an authority are not subject to the law of the contract concluded by the authorised person but to be determined autonomously in case a dispute arises out of a transaction in which an agent was involved. This generally results in uncertainties for those who conclude contracts with an authorised person e.g. a commercial agent and respectively those who authorise an agent to conclude contracts. The autonomous determination of the authority thus constitutes a risk for the international trade. Therefore, the German legislator found it necessary to codify the existing case law and principles as established by the scholars in terms of the law applicable to international authorities.
On 17th June 2017 the “Statute for the Amendment of Provisions in the Field of International Private Law und Civil Procedure” has come into force in Germany. By way of this statute i.a. a new Art. 8 was added to the Introductory Act to the Civil Code (IACC). This Article determines for the first time which law applies to an authority when the agent acts abroad on behalf of the person granting the authorisation.
In summary, the authority is to be determined – subject to a choice of law – in accordance with the law of the state in which the agent or the principal has his regular place of residence or usually makes use of the authority. The new provision of Art. 8 IACC thus establishes clear rules for the determination of the law applicable to an international authority and enables the parties to consider the scope of the authority. Nevertheless, for parties involved in international trade it is in the interest of legal certainty still favourable if principals choose a law that shall be applicable to the authority and inform the agent as well as the third party of this choice.
The provision of Art. 8 IACC can be summarised as follows:
Choice of law
As per Art. 8 para. 1 IACC the principal’s choice of law has priority provided that this choice of law was known to the agent as well as to the third party. However, the parties are free to choose a law that is applicable to the authority by way of a tripartite agreement. Such a tripartite agreement can be concluded at any time and without observing any form requirements. A general choice of law clause in a contract (f.e. the one concluded between the agent and the third party) will not automatically determine the law applicable to the authority. The law applicable to the authority is to be determined autonomously. An explicit choice of the law applicable to the international authority is thus desirable.
1. In the absence of a choice of law
In case such a choice of law is missing and the agent is acting as an entrepreneur Art. 8 para. 2 IACC provides that the law of the state in which the agent has his regular place of residence shall be applicable. For example, A is permanently located in Germany and was authorised by the Dutch company B to distribute B’s products as their commercial agent. As per Art. 8 para. 2 IACC German law would be applicable to the authority.
If the agent is an employee of the principal, Art. 8 para. 3 IACC provides that the law of the principal’s regular seat is applicable. Thus, assuming that the employee of a Dutch company purchases office supplies for and on behalf of his employer in a German store, Dutch law will be applicable to the employee’s authority.
The determination of the applicable law as per Art. 8 para. 1-3 IACC always requires that the third party towards whom the authority is exercised is aware of the choice of law or the regular place of residence.
3. Art. 8 para. 4 IACC
Provided the authority was granted for a long-term period and there does not exist a choice of law and the agent neither acted as an entrepreneur nor as an employee of the principal (thus as a private person), the law of the state in which the agent usually makes use of the authority is applicable. This also requires that the third party is aware of the place of regular use of the authority.
Art. 8 para. 5 IACC contains a “fall-back” regulation for cases in which the applicable law cannot be determined according to Art. 8 paras. 1-4 IACC. In this case the provisions of the state in which the agent makes use of the authorisation shall be applicable. If the third party and the agent were aware of a limitation of the authority according to which the authority was only to be used in a specific state then the law of this state is applicable. Should the place of use of the authority be unknown to the third party, the statutory provisions of the state in which the principal has his regular place of residence shall be applied.
However, this new provision solely determines the law applicable to the agent’s authority in the relation to third parties and has no effect on the internal relationship (usually mandate) between the principal and the agent or the law applicable to the transaction concluded by the agent. The provisions stipulated in Art. 8 IACC are limited to the authority granted by legal transactions and have thus no effect on authorities granted by statute.
The German legislator codified in the new provision of Art. 8 IACC which law applies to an international authority. If there is no choice of law the authority is to be determined in accordance with the law of the state in which the agent or the principal has his regular place of residence/seat or usually makes use of the authority.
The new provision of Art. 8 IACC thus provides legal certainty for parties contracting with an authorised person. Nevertheless, for parties involved in international trade it is still favourable if principals choose a law that shall be applicable to the authority and inform the agent as well as the third party of this choice.
Redesigning distribution by terminating distributor agreements: Can dealers claim delivery anyway?
23 May 2018
By Dr. Benedikt Rohrβen, Salary Partner, Taylor Wessing, Munich
In principle, manufacturers can freely design and develop their distribution system according to their marketing strategy and any changing needs. Likewise, they are in principle free to choose the number and name of their sales intermediaries (distributors/dealers, franchisees, agents, etc.). They are in principle also free to switch to selective distribution, with the aim of aligning the distribution of their products with certain criteria (in particular: regarding the quality of distribution), thus possibly also reducing the number of distributors. However, as an exception, distributors may force the manufacturer to supply them anyway – namely if the manufacturer has a significant market power. In such a case, an obligation to contract with a distributor, resulting in an obligation to deliver may follow from the prohibition of discrimination (laid down in sec. 19 para. 1, 2 no. 1, 20 German Act against Restraints of Competition).
This issue becomes especially practically relevant if a manufacturer redesigns its distribution network – just like a well-known German manufacturer of high quality branded cases does now. The manufacturer switched to selective distribution in 2011/2012 (for the advantages of selective distribution and possible restrictions of distribution, see the article here). To redesign its distribution network, the manufacturer terminated the former distributor agreements and offered to conclude new ones – according to which the distributors newly committed themselves to present the goods in a certain way and buy and use the manufacturer’s shop-in-shop system. According to the manufacturer, the appearance of a former distributor did not correspond to the new business concept and the new marketing strategy, which is why the parties could not agree on concluding a new agreement. Thereupon, the distributor filed an action, aiming at the conclusion of a new dealer contract and thus delivery of his shops.
The District Court of Munich denied the claim (decision of 09.09.2014, ref. no. 1 HKO 7249/13), the Higher Regional Court of Munich, however, affirmed such claim (decision of 17.09.2015, ref. no. U 3886/14 Kart) – arguing that the manufacturer had a leading position in the relevant "market for high-priced and high-quality suitcases" or, conversely, that the distributor had a dependency if and because the manufacturer’s suitcases could not be replaced by equivalent others. Such dependency would in particular be indicated through a high distribution rate (i.e. the manufacturer supplied a large number of comparable distributors) as well as the unique design and the associated high recognition value. Now, the Federal Court of Justice overturned the judgment and remanded for a new trial (decision of 12.12.2017, ref. no. KZR 50/15). Reason: the distributor’s assortment-related dependency (“Spitzenstellungsabhängigkeit” as special case of “Sortimentsbedingte Abhängigkeit”) on the the manufacturer was not sufficiently proven. Although a high distribution rate was regularly decisive, it might be less meaningful in qualitative selective distribution systems as the present one. Decisive for redesigning distribution systems:
"If a supplier chooses to switch to a qualitative selective distribution system at a certain point in time, an assortment-related dependency is regularly indicated by a high distribution rate in the period before." (Para. 19)
The manufacturer can especially bring forward two arguments against such alleged assortment-related dependency, namely that
(i) the number of distributors the manufacturer himself supplied with his products is much lower than the total number of distributors that offered his products (i.e. including those buying the products from other sources), and that
(ii) the distribution rate is to be determined on the basis of those distributors who are comparable to the distributor demanding access to the distribution system and delivery (para. 27) – as the German Federal Court previously stated in terms of designer upholstery (decision of 09.05.2000, ref. no. KZR 28/98, p. 12 et seq.).
1. “There is nothing more constant than change”: When redesigning the distribution system, carefully consider if you want / need transitional arrangements – or better leave them out. One very good reason to leave them out: they might make it more difficult to exclude unwanted distributors. Thus, in the above-mentioned case, the Higher Regional Court Munich rejected the manufacturer’s objection that the distributor’s business model "aimed at bargain hunters" – arguing that the manufacturer gave other distributors time of "12 months after conclusion of the agreement" to fulfil the new qualitative criteria.
2. For qualitative criteria (also: requirements / specifications) in Internet sales, please see the other articles on Legalmondo, especially on platform bans and price comparison bans.
International Bar Association (IBA) awards scholarships for their Annual Conference, 7-12 October 2018, Rome
03 May 2018
IBA European Regional Forum is once again awarding scholarships to European young lawyers (under 35 years) for attending the IBA annual conference from 7-12 October 2018, in Rome.
The scholarship covers the attendance to the annual conference and all costs for travel and accommodation. This year's conference will focus on the current critical challenges facing the EU and will discuss different views on how to best meet these challenges. For more information, visit the dedicated website.