7 D. Other approaches to reduce fees
Many corporate legal functions are looking for ways to reduce costs in advance of incurring
legal fees, and are putting as much focus on prevention to reduce the caseload for external advisers
as they are on the fee arrangements with external providers. The next case example shows how one
law department has greatly reduced both skyrocketing litigation costs and outside counsel expense
by introducing structural change and a consistent effort to work with business clients to reduce
litigation through early settlement.
7 E. CASE EXAMPLE
Lowering costs through structural change to reduce litigation
Pietro Galizzi and Francesco del Giudice, corporate law department, Saipem
Saipem is headquartered in Italy with 44,000 employees and revenues of approximately £ 13 billion.
About 92 percent of revenues coming from outside of Italy, with major energy contracts in about 20
jurisdictions worldwide, including Azerbaijan, Croatia, Kazakhstan, Russia, Norway and the UK.
There are six litigators in the head office legal function. From 2002, we concluded that litigation was
far too costly. Arbitration proceedings often continued for years, with inadequate resolution. With
support from our chief executive, we made it a goal to reduce litigation, with a conscious decision to
try to settle every dispute. Making that happen required structural change and a series of efforts over
1. Reduce litigation costs.
2. Settle every dispute to avoid going to court.
3. Reduce the root causes which trigger disputes.
Roles and action steps
•;In 2006, we moved the contract administration function under the legal function (today,
there are about 190 contract administrators). The company liked Legal’s goal to work
more closely to the business through contract administrators, even though this increased
the internal budget of the legal department (but not the one of the company, since
those contract administrators already in the company, reporting to the business units)
•;To settle without litigation, we needed to get info from the business unit as soon as possible,
and then work with the business to agree on an appropriate settlement figure.
•;Previously, contract administrators were decentralized: Part of each project team, they
reported to business unit project managers and were often hired on a project basis. They
had little connection to Saipem. We decided to create a contract administrative team to
move between projects and carry their knowledge of the company and our procedural