Two people can competently read the same regulatory development and reach conclusions of quite different commercial value. Measuring the readings on analytical ability misses the point. The readings are different because they start from a difference in expertise.
We examine the difference in this piece so that our readers, practicing lawyers, can tell the value they are taking away through encountering each type.
A law firm with a corporate practice and a regulatory practice can assemble almost any cross-border legal picture it needs within a day. The corporate partner knows how a funding round is negotiated and what gets rechecked at a later stage. The regulatory partner knows the exchange control condition that was cleared at the first round and has not been looked at since. One phone call joins them.
So where is it that the constraint sits in how how firms find new work?
Doctrine tells you who is bound, not who pays
Legal training locates consequence in the instrument: Read the rule, identify the obligation, identify the person on whom it falls. That is the correct discipline.
There is another discipline that answers a different commercial question.
The party bound by a rule and the party who bears its cost are frequently different, and in cross-border structures they are different as a matter of course. The obligation attaches to whoever the regulator can reach, which is generally the entity inside the regulating jurisdiction. The cost lands on whoever is holding the asset when the position is discovered, which may be an investor several layers away in a country the regulator has no interest in.
Reading the rule carefully helps arrive at who is bound. It ends there.
Beyond doctrinal implications
Take a specific instance. India’s amended Press Note 3 requires that land-border beneficial ownership in an investment remain non-controlling, and control is defined broadly enough to reach rights conferred by shareholders agreements.
Two funding rounds later a company agrees an ordinary governance package, for example, with a board observer seat, an affirmative vote list and a veto on new borrowing. Whether those rights change the characterisation is a real question with commercial consequences.
Every element of that is known inside a full-service firm. The corporate partner would recognise the governance package as entirely standard. The regulatory partner would recognise the definition immediately. Neither is uninformed and neither has done anything wrong.
What is absent is the person whose job it was to put the two together and ask whether it produced work.
Why the question does not get asked
Practice groups are organised around delivering instructions, and instructions arrive already framed. A client rings about a governance package or about an exchange control condition. The law firm answers the question it was asked and closes the file.
Many a times that process misses out on the observation that a development in one area has created unclaimed work in another. It is not a research task, because the research would only be commissioned once somebody suspected the answer. It is not a business development task as usually constituted, because business development is directed at converting relationships that already exist. And it is not any individual partner’s responsibility, because it does not arise within any single practice.
So the observation waits. Frequently it waits until a client raises it, which is to say until the work has already gone somewhere else.
What this looks like from outside
Openings of this kind sit in the open for months. They are not secret, they do not require privileged information, and any of several law firms, or consulting firms, could have identified them by asking one question about a development everybody had already read.
The reason they stay unclaimed is not that the analysis is difficult. It is that the analysis is not on anyone’s job description (JD). There is no moment in a firm’s operating rhythm at which someone is expected to look at a regulatory change and ask what commercial position it creates for the practice.
Directory season has a date. Conference season has a date. Client alerts have a trigger, which is the publication of the instrument. Noticing that an instrument has produced an opening two practice areas away has no date and no trigger, and work without a date does not get done.
The consequence for how firms grow
The practical effect is that firms acquire new categories of work almost entirely reactively. A client asks for something the firm has not done before, the firm does it, and a practice line is born.
That is a perfectly serviceable mechanism and it is also entirely dependent on someone else having noticed first. The client noticed. The client’s counterparty’s adviser noticed. Someone identified the opening and the firm was the beneficiary of it rather than the author.
For most work that is fine. For a practice trying to establish a position in a corridor it is not, because in a corridor the firm is not yet the obvious call, and the reactive route requires being the obvious call.
What would change it
Not more research capability, and not a better content programme. Both of those improve the output of a process that has already decided what it is looking at.
What is missing sits earlier: A professional advisor whose function is to read developments against the firm’s actual practice and ask whether a viable opening exists, with enough standing to raise it and enough distance from any practice group to see across them.
That is a small, unglamorous function that not only does not produce any billable time, but it will also literally discard many unviable thesis before finally finding a monetisable opportunity. Which is precisely why it does not exist in most firms, and why the openings keep sitting there.
Outside the comfort zone
A practice that concludes its analysis is insufficiently sharp will respond by thinking harder about the same material, which produces a more elaborate version of the same conclusion. The event that would actually change the output is a conversation with a non-practicing lawyer or a non-lawyer, about something that is not the law, conducted well before the development that makes it relevant has occurred.
That is an uncomfortable finding for a profession that is trained to believe the answer is in the text, and it is uncomfortable in a particular way: the useful conversation cannot be scheduled against a specific piece, because you do not know which piece it will turn out to be for.
Lawfinity Solutions advises international law firms on cross-border legal market positioning. If the India corridor is a live question for your firm, we would be interested in a conversation. Lawfinity works with one firm per jurisdiction. Engagements begin with a single conversation about your firm’s current position and where the corridor question is live for you. Write to Prachi Shrivastava
