General counsel and their in-house legal teams are facing new workstreams relating to the Russian invasion of Ukraine. In-House Perspective explores how these have highlighted the importance of collaboration and forward planning, both for this crisis and for how teams will approach their work over the long-term.

Sanctions

Sanctions have formed the backbone of the international response to the Russian invasion of Ukraine, which began in late February. For in-house teams this has meant a significant and rapid influx of work relating to both sanctions and trade controls. General counsel of international businesses have been working with their teams to ensure their organisations comply with sanctions imposed by the European Union, Poland, the United Kingdom and the United States. The extent to which each company is affected will depend on its level of exposure to Russia.

Rosemary Martin is Group General Counsel and Company Secretary at Vodafone Group. She describes a very dynamic situation that requires ongoing dialogue with regulators to gain as much certainty as possible about what the organisation can do as sanctions lists continue to evolve or be added to.

In Vodafone’s case, each of its subsidiaries in the countries it operates in had to consider its position based on the bilateral agreements that applied to it, with support from Martin’s central team.

‘Our sanctions and trade controls and compliance [teams] went into overdrive to make sure they were communicating out to our subsidiaries about what they needed to do and what they needed to be aware of,’ Martin says. 

Harpreet Sidhu is Publications Officer of the IBA Corporate Counsel Forum and General Counsel, Corporate Secretary and Privacy Officer at Pethealth – a Fairfax Company. She agrees that the volume of sanctions and the speed with which they have been imposed has been a challenge for in-house legal teams.

‘It hasn’t been easy,’ she says. ‘This [set of sanctions] came very quickly and we had to roll out [our response] very quickly,’ she adds.

Sidhu acknowledges the benefits of the infrastructure that comes with working in a large organisation when responding to an increase in work on this scale. She argues that the challenge will have been even greater for GCs working in smaller organisations.

Abhijit Mukhopadhyay is Committee Liaison Officer of the IBA Corporate Counsel Forum and President (Legal) and General Counsel at the Hinduja Group in London. He is taking a cautious approach to sanctions.

Mukhopadhyay has advised affected businesses not to deal with organisations or individuals currently under sanctions. ‘We don’t want to take any chance, so the only thing we can do, and what we have done and what I have done as the GC, [is to say,] don’t deal with the sanctioned individuals or entities, anywhere in the world.’

Mukhopadhyay argues this approach is beneficial for a large international organisation such as his that operates across a range of jurisdictions, some of which have issued sanctions and some which have not.

Support and collaboration

In order to manage the significant short-term increase in workload associated with the war in Ukraine, in-house legal teams have relied more heavily on the support of outside counsel. ‘The speed and intensity [of the work] required us to not only delegate in-house more time to it at short notice but also we have had to rely even more on law firms,’ says Graham Wladimiroff, Chair of the IBA Corporate Counsel Forum and Vice President and Associate General Counsel Asia Pacific and RBIS Global at Avery Dennison.

Even outside support has been stretched by the huge uptick in demand for the expertise of a limited number of sanctions and trade controls experts. In some cases, GCs have found themselves effectively waiting in line for outside support. 

For Joss Saunders, General Counsel and Company Secretary at Oxfam, collaboration with external law firms has been particularly valuable as his organisation has needed to set up operations in the affected regions almost from scratch. Saunders describes the support he and his team have received from local partner law firms, highlighting that ‘our counterpart lawyers in Poland, Romania, Moldova and Ukraine have been amazing.’

Saunders notes the quick turnaround of advice from his local partner lawyers and the collaborative way in which they have worked together across firms to ensure that organisations like his have the advice they need, when they need it. This has covered a vast array of legal specialisms, for example, setting up a local branch or subsidiary in the region, employment law, visa requirements, contract law, property law, insurance law and the nuances of each of these in each jurisdiction.

For Saunders this kind of collaboration has also extended to the work carried out by international non-governmental organisations (INGOs) like his, which have worked very closely together on their response to the situation in Ukraine. In order to do this the groups involved have shared what they’ve learnt about local laws. They’ve also pooled the contracts they’ve developed in line with local requirements into a common database, as well as sharing lawyers and recommending local law firms. ‘That kind of intelligence […] is incredibly important,’ says Saunders.

Saunders believes the collaboration between INGO lawyers prompted by the Ukraine crisis will be beneficial for future crises. ‘It’s a step change towards greater harmonisation,’ he says.

For Martin, sanctions and trade controls will now be more significant across all her organisation’s operating companies, which means her team will need to consider how it’ll deal with these areas systemically on a larger scale in the future. For her the situation is comparable to how the approach to privacy law changed after the EU General Data Protection Regulation came into force.

Reputational risk

While sanctions have had a significant impact on companies and their relationship with Russia, many of the decisions that have been made about operations in the region have been driven by moral or ethical factors and the need to manage reputational risk.

An awareness of such risk is one of the drivers behind Mukhopadhyay’s cautious approach to sanctions. ‘We always make sure that we are not breaching not only the letter but also the spirit of the sanctions,’ he says.

There has been pressure on companies to reflect in their own actions and statements the negative response from many governments to Russia’s aggression. A range of stakeholders, including employees, customers, the media and the public, have contributed to this pressure.

‘It was very quickly clear that companies were being expected by some people to go beyond what the law required and to take a stance,’ says Martin. Her organisation, as with others, has been carefully considering how far its response should go, she explains.

Vodafone has a reputation steering committee comprising members of the senior executive committee who meet regularly and also when there are particular moral or ethical dilemmas to address, of which the response to the crisis in Ukraine was one.

For Martin, reputational risk management more broadly is challenging. ‘These are multifaceted issues,’ she says, ‘and a company’s reputation is massively important for it, it can’t be underestimated, so you want to get it right,’ she adds.

Sidhu argues that company culture is important when it comes to addressing a crisis, for example when judging what your stakeholders expect from you. For her, a company that values areas such as human rights and equality consistently at all times will be naturally well placed to respond to a crisis.

Forward planning

In many cases companies have decided to cease any operations they may have had in Russia or else break links with Russia. To begin with, many of these decisions were temporary. We’re now starting to see organisations making their decision more permanent or being in a position to fully exit the Russian market.

Some organisations have faced legal challenges in trying to sever ties with Russia, for example in situations where what they wanted to do potentially broke a contractual agreement. There’s reputation at stake here too, in terms of balancing the need to address the public mood with honouring existing legal obligations.

Sidhu says that following the disruption caused by the Covid-19 pandemic, her team reviewed the organisation’s contracts to be fit for a changing world. Part of that process involved updating their termination for convenience clauses, factoring in a small amount of cost to terminate where required. Her team also carefully looked at their partnership clauses, ‘to make sure that if we ever need to exit a relationship, we can do it with minimal disruption to our business’. These clauses were therefore available to the company when it was deciding whether to stop working with certain partners and allowed the decisions it made to be implemented very quickly.

For Sidhu this kind of planning for uncertainty is what good in-house lawyers do and what their external partners should be helping them to think about and plan for.

Saunders also highlights the legal preparedness work his team had carried out before this crisis, which put it in a strong position to respond quickly. ‘A lot of being in an organisation in which the day job is to deal with emergencies […] is preparedness,’ he says.

Saunders explains that his team had created a manual covering how to carry out the legal elements of the organisation’s work, including areas such as how to deliver equipment, dealing with customs, and supply and logistics. He points out that, while the team didn’t know they would be responding to this war in particular, they did know they’d need template contracts ready to be adapted for certain national contexts in case of emergency. Having these elements in place, therefore, aided the organisation’s response to the crisis in Ukraine.

As businesses continue to face uncertainty in so many aspects of their operations, from supply chain disruption, to inflation, to geopolitical fragmentation, this type of forward planning will become increasingly important.

‘We talk about supply chain management at companies’, says Wladimiroff, ‘but I think the bottom line is now that most companies are going to have to think far more seriously and far more broadly and deeply about business continuity.’

The humanitarian response

Many organisations have responded in specific ways to offer support to those affected by the crisis in Ukraine, be they employees, customers or refugees, or a combination of all three. This could be through making a charitable donation, or through the products and services they supply. For example, Vodafone is offering free connectivity to 200,000 refugees arriving in the UK from Ukraine though its charities.connected initiative.

Martin says that ‘one of the things that’s very clear is that people being able to communicate is absolutely fundamental’. Part of her organisation’s work in providing refugees with access to mobile networks has involved providing free SIM cards to those fleeing across Ukraine’s borders, to allow connectivity to be established quickly. Martin’s team was involved in ensuring these SIMs were issued in a way that complied with regulations requiring the identity of the person receiving the SIM to be established to avoid criminal activity. This has been challenging in cases where individuals have left their homes without their passports. 

Martin says the company responded in the way that it did, ‘because we can see the need. It was a humanitarian response’. She says that other mobile operators have responded in a similar way.

Saunders highlights that his organisation is ‘having to do things which we didn’t ever think we’d have to do in Europe again,’ such as water and sanitation programming. He says the main focus of Oxfam’s work is protection and keeping civilians safe from abuse. In particular this involves ensuring refugees know their rights and are able to access support. This includes helping refugees gain access to legal aid, which Saunders stresses is done through working with local lawyers rather than importing lawyers from other countries. Lawyers in his team may get involved if there are novel points of international law to be addressed.

For Saunders one of the most important characteristics of his organisation’s response to the crisis in Ukraine is that is a decolonised, partnership approach, led by local partners. This applies to the provision of legal aid to refugees and to how his legal team has worked with local law firms to address the legal issues associated with Oxfam’s response on the ground.

Martin highlights the human response to this crisis. She describes how concerned the company’s employees have been for those affected as well as a feeling of unease about the direction the world seems to be travelling in.

Saunders is keen to stress that Ukraine is only one of many crises in the world today that are crying out for similar levels of generosity and support to those we’ve seen in response to the Russian invasion of Ukraine. ‘The conflict in Syria is continuing,’ he says, ‘the war in Yemen is entering its eighth year, millions of people in Ethiopia, Somalia, Kenya and South Sudan are facing severe hunger,’ he adds.

For Saunders and his in-house team, it’s fundamental to place their work responding to the crisis in Ukraine in a broader context. ‘Certainly, in terms of our role as in-house lawyers, we of course will be responding […] but that is not at the expense of responding to other crises; it’s both/and, it’s not either/or,’ he says.