The 3 Biggest E.U. Challenges for General Counsel

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Originally Published in by Paul Mandell | April 7, 2012

In-house lawyers in Europe and the United States face many similar challenges. However, there are issues unique to Europe—and specifically the European Union—that demand particular attention from the general counsel of multinational businesses. Several of these concerns were addressed at the 2012 European General Counsel Forum, held in London and hosted by Consero Group, a Bethesda-based senior-level executive event company I co-founded in 2010. Among the most pressing issues were the following trio of challenges:

1. The Deferred Prosecution Agreement

Long a major source of revenue for the U.S. from fines that replace criminal prosecution, and a relatively new addition to the U.K. regulatory landscape, deferred prosecution agreements are on the way to the rest of Europe. General counsel should be focused on the looming arrival of these costly alternatives to corporate criminal prosecution, devoting time and effort to educating their colleagues on the latest reason to prevent wrongdoing, and preparing senior leadership within and outside of Europe for the potential of severe financial impact if improprieties occur.

2. The Unofficial Staff of European Regulators

The U.K. Bribery Act has added a new dimension to the compliance landscape in Europe, providing a powerful European ally to the U.S. Foreign Corrupt Practices Act. But one fascinating phenomenon keeping global GCs awake is the broadened reach of anticorruption regulators—courtesy of corporate competitors operating in Europe.

In a challenging economy, companies are desperate to find any edge that will help them outperform their competition. And thanks to the increased focus on anticorruption in Europe, companies have found a great way to leverage the dirty laundry of their competitors that comes to light through competitive research. With a quick anonymous tip to the regulators, corporations can do in their industry peers. The result is a millions-strong informal investigative staff.

This means that once a GC becomes aware of potential wrongdoing, there is probably very little time for internal investigation before word gets to the regulators. A multinational company’s GC must have enough sufficiently trained European staff for a swift corrective effort. Moreover, it is more important than ever that corporations operating in Europe invest in internal preventative activities, including compliance training and monitoring. The risk of neglecting compliance has never been greater.

3. Being Trivialized

GCs based in the U.S. have fought hard for a seat at the table with the company’s top businesspeople over the years, and most global corporations now count on their GCs as critical members of the business team. The benefits are obvious, including faster transactions, reduced risk, and countless others.

However, likely due to a combination of factors—including different privilege rules, varying legal systems, and comparatively lax regulation—GCs of companies with heavier presences in Europe are somewhat less integrated into the business than at similar entities operating entirely or primarily in the U.S. As the role of the GC increases throughout Europe, the time is now for GCs to demand a seat at the table. Chief legal officers must aggressively advocate for their involvement in critical decisions regarding the business, and they need only point to News Corp.’s recent troubles to demonstrate the GC’s value.

To serve their corporations well, general counsel of global businesses should give thought to each of these issues, and work aggressively with the C-suite leadership to ensure that their businesses are prepared for the intense international legal challenges on the horizon.

Paul Mandell is a founder and the chief executive officer of Consero. Prior to entering the business world, Mr. Mandell practiced law at Arnold & Porter LLP, in Washington, D.C., and Sullivan & Cromwell LLP in New York City, where he focused primarily on antitrust and pharmaceutical litigation.