Foreign Relations

With the emergence of the global economy, foreign corporations increasingly have been either acquiring U.S. companies or establishing U.S. subsidiaries. As a result, many in-house counsel are now working for subsidiaries of a foreign-controlled corporation, and they face unique challenges. By taking some basic steps to confront these challenges, the experience of working for a U.S. subsidiary can become a rewarding one for both the client and the in-house attorney. Here are three ways to start building a productive relationship:


Emphasize the benefits of attorney-client privilege.

The CEO and some of the key players in the U.S. subsidiary of a foreign corporation frequently are expatriates. Many of these executives--particularly those coming from a civil law country--have never been exposed to the attorney-client privilege.

Certainly the attorney-client privilege has many obvious advantages for any client. For the general counsel, a natural by-product is that the chief executive will treat you as a sounding board--someone with whom he or she can engage in an open dialogue regarding both business and legal issues confronted by the U.S. subsidiary.

In-house counsel should explain the value attached to the attorney-client privilege. Once the expatriate executive understands the privilege, he or she will be more willing to reach out to the general counsel in a fruitful exchange of ideas.


Report directly to the CEO.

In corporations based outside the U.S., particularly in Europe, the general counsel usually reports to the chief financial officer. His or her legal advice is filtered through the CFO. This reporting structure compartmentalizes the role of the in-house counsel and the value that he or she provides to the client. Some U.S. subsidiaries follow the foreign model.

For the general counsel of a U.S. subsidiary, reporting to the CEO should be a condition of employment. A direct reporting line to the chief executive officer will reinforce the significance of the attorney-client privilege and provide the general counsel with direct access to the U.S. subsidiary's chief decision-maker as he or she formulates business decisions.

Just as importantly, the general counsel should request that he or she become a member of the company's executive committee. In this role, the general counsel will be able to participate with the other key executives in the development of the business' strategic decisions. This will permit the general counsel to practice preventative law--guiding the business people so as to avoid legal issues before they erupt into controversy or litigation.


Instruct expatriate executives on the U.S. legal system.

Most business people struggle to understand the U.S. legal system and its impact on their business. This is especially so for the foreign expatriate in charge of the U.S. operations. You should devote sufficient time to educating your expatriate executives about how U.S. laws and regulations affect the conduct of their particular business. You should also instruct them on the U.S. litigation process and the open discovery rules. This will help your clients to anticipate issues and seek out your advice prior to making business decisions.

Keep in mind that this is a continuous process--not just one that you engage in when an expatriate executive first joins your company. The education process should be casual in nature; this will encourage dialogue with the executive. Once again, this will permit in-house counsel to focus on preventative counseling, rather than dealing with legal issues after they become contentious.

Remember that you add the most value when you combine your knowledge of your client's business with your legal expertise. In this way you become an equal player.

Contributing Author

Thomas Lalla

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