The disruptive effects of the pandemic have prompted in-house counsel to evolve or be rendered irrelevant, writes Nitin Mittal
There is a tide in the affairs of men, which, taken at the flood, leads on to fortune; Omitted, all the voyage of their life is bound in shallows and in miseries. On such a full sea are now afloat; and we must take the current when it serves, or lose our ventures” – Julius Caesar, Shakespeare
Taking a cue from the wise words of Shakespeare, we find parallels in the unprecedented circumstances that continue to affect the world on account of covid-19. The outbreak unexpectedly and rapidly altered the business landscape of the country. A complete lockdown was imposed for citizens and businesses (except essential services) and a constant stream of notifications was issued by the central and state governments to companies.
Some were in sync with the situation, and others were contradictory in nature. For companies, this put pressure on resources and budgets, and put key litigations on hold. There was also dwindling employee morale and looming uncertainties to deal with. General counsel (GCs) had to immediately advise on business continuity by deciphering the various regulations on the safety and health of employees, and also advise on various directions for ensuring the payment of wages/salaries to employees and non-flexibility to terminate certain employment contracts. The challenges of managing ambiguity in a crisis were never greater.
GCs can either grab the opportunities that have been presented in these difficult times to transform themselves, or be rendered irrelevant. The effects of the pandemic can be viewed either constructively or negatively. Every crisis does present an opportunity for those who are adept at change management, are resilient and demonstrate perseverance.
Nations, businesses, individuals, nature – all have been impacted by the pandemic. Economic cycles have been disrupted in almost all countries, with companies experiencing degrowth, a hit on profitability and a cash crunch. With strict lockdowns enforced across the country from the end of March until the end of June, companies faced disruptions to manufacturing, supply chain and demand, as well as a cash crunch in meeting obligations including payments to workers and employees.
The government was also faced with a gargantuan challenge to manage the pandemic, as well as ensuring that human life, safety and livelihoods were protected. The central government issued numerous notifications at the federal level under the Disaster Management Act and the Epidemic Diseases Act. This was compounded by notifications and guidelines at both state and local level.
There was a constant dilemma over whether to comply or risk prosecution and, in parallel, challenge these notifications. These decisions depend on the nature of the company, its culture, its risk appetite and other complex factors, and advice to management will vary accordingly while considering short and long-term scenarios.
This peculiar and difficult situation was also a cry out to the government to protect the livelihoods of workers/employees. The government did react, but with somewhat contentious notifications under the Disaster Management Act, directing companies not to terminate employment or take measures to reduce wages and salaries until the lockdown was in effect.
This executive action opened up several contentious legal issues on whether the government had exceeded its executive powers, as well as its constitutional responsibilities. There was much pressure on all organizations (including the government) to rationalize operations, specifically headcount and salary structures.
In the middle of these economic and legal challenges, GCs had to navigate businesses through the uncertain times, but also keep themselves more relevant than ever. Broadly, the GC had to lead transformation in the following areas:
With businesses inundated with numerous and constantly changing regulatory updates to manage the lockdown, the need of the hour was to reallocate resources and handle challenges in the enforcement of contracts due to invocation of force majeure, as well as concomitantly claiming relief under this provision. The crisis presented an opportune moment for GCs to demonstrate leadership by deciphering the regulatory puzzle and guiding businesses with practical approaches, walking the thin line between compliance and prosecution.
They had to prudently advise whether to enforce force majeure or negotiate a middle ground that would be beneficial to both sides. Having an eye on the entire legal ecosystem, from contract execution, enforcement, court adjudication and finally court award, gives the GC a holistic perspective to render a balanced judgement. The expectation from GCs was not to render legalistic opinion, but business advice that balances conflicting interests using vast legal, regulatory, litigation, commercial and business acumen.
The GC also had to rethink the role of the legal department in a slowing economy – leaner but agile and productive, improving focus on what is important and directing resources on things that enable business and add value. GCs had to reflect deeply on how to reduce activities that were not productive and did not add value to the legal function, or to the organization. What Marcus Aurelius wrote in Meditations – “one should prompt oneself, ‘Is this, or is it now, something necessary?’” – was very apt in these times.
There was a cry for greater collaboration among internal stakeholders, but also with customers and suppliers. There was a need for balancing interest and demonstrating empathy in exercising legal options, and this is where the GC needs to play a key role in first marshalling internal stakeholders like human resources, real estate, finance, supply chain and management to come out stronger while demonstrating empathy by keeping customers and suppliers’ perspectives in mind.
Data privacy became a major contentious issue, especially for multinational companies that had to also comply with the EU’s General Data Protection Regulation and local laws. To regulate employees who needed to attend factories and offices, it was necessary to monitor their health and ask/retain and process their medical data – which raised questions under the GDPR and Indian laws.
One had to navigate the European legislation in an Indian context by conducting privacy assessments and setting up risk mitigation measures to protect the privacy rights of employees as well. GCs had to enhance their networking with peers by sharing knowledge and best practices, and resolving dilemmas in this highly complex situation. GCs also had to ensure accelerated learning to keep pace with external changes.
Become agile in action
The GCs that respond with required alacrity in advising business on restructuring, most importantly supporting new business models, go-to-markets and product launches, are the ones adept at change management. The emphasis on health, safety and security has necessitated experimentation and the rollout of new products and services. Being innovative and solution-oriented is the mindset that needs to be demonstrated.
Health and safety being paramount, organizations raced to launch products and services that addressed this need, or to enter new markets. For example, our organization launched products and services for consumers and businesses using UVC light, which make covid-19 and other germs inactive. Legal aspects on go-to-market, claims, disclaimers, advertisements and contracting required thorough analysis by our legal department before launch.
One way to improve agility is to digitalize all areas of legal operations – whether it is prompt advice, litigation, contract review and management, learning and training opportunities, or in areas of compliance.
Be a moral compass
GCs also need to play the role of protecting the board by fine-tuning their radars. It is important for the board to be constantly updated and monitoring and advising the business on strategic imperatives, and this is where GCs lend their hand. Identifying regulatory changes, improving processes for continual compliance, reiterating the duties of the board (especially grey areas where deep analysis is required to make a sound decision), advising on how to adopt or align strategic decisions to legal changes, and finally to act as the north star – to show what is the legally and ethically correct direction.
The times ahead warrant timely intervention by the board in navigating an uncertain economic climate, a changing regulatory environment and in ensuring the organization’s culture stays the course when revenue is under distress. GCs can act as the board’s radar to identify risks, opportunities and ethical dilemmas, and bring them to the board for their guidance and intervention.
Drive tech adoption
The need for entrenching legal operations in technology has never been greater, along with managing remote working. Technological tools for faster collaboration within teams in a manner that is open, and transparent, along with transitioning litigation and arbitration to a virtual environment.
This saves time and cost, allowing greater investment in contract management and regulatory compliance platforms and an overall increase in the digital presence of legal functions. It is now a cliché to think that technology is an enabler to communicate or to do business; it is now sine qua non (an absolute necessity) to connect with customers, suppliers, board members, shareholders, employees and the public. Businesses that neglect this will either perish or become irrelevant.
GCs need to be at the forefront of advising and ultimately enabling the launch of digital products/service propositions and digital platforms, and ensuring compliance with privacy and compliance issues when the data of customers and other third parties are collected and processed in this environment.
Our higher judiciary has risen to the challenge by adopting technology as a tool for delivering unfettered justice, although as a rule of nature, every change has its own set of challenges and uncertainties.
This evolution is not less than “judicial e-activism” and has espoused the confidence of the industry at large that if any wrong is perpetrated on them, there is a judicial forum for adrressing grievances. No doubt there are challenges, but the courts have been, and are, trying to convert such challenges into an opportunity to deal with the ongoing crisis.
GCs must also grab the opportunity by gradually initiating virtual arbitration and resolving disputes through e-mediation, and also resisting the earlier mindset of having disputes resolved only through physical courts. The tracking of all legal cases was also brought fully online.
Other areas of digitalization that were embarked on were digitizing all land and litigation records so that they are available anywhere and at any time. Contract management and execution were made more seamless by entrenching the usage of digital signatures across the board.
The current experience has transformed the professional landscape not only by adding newer perspectives, but by making GCs more agile, digitally savvy and much more collaborative. GCs need to be prepared for the uncertain and tough times ahead. To quote Shakespeare again, this time from Macbeth, “Come what may come, time and hour runs through the roughest day.”
Nitin Mittal is the general counsel of Signify India. The author’s views are personal.