In-house lawyers pick up pace on generative AI and supply chains

The demands on corporate legal departments are increasing like never before. “Geopolitical friction and complexity are at an all-new level,” says Anne Madden, general counsel at technology and engineering company Honeywell.

“We have fast balls being thrown at us at a much faster rate than we’ve seen in a very long time. A sanctions regime can drop overnight, and you have to be nimble enough to react.”

The combination of a faster pace of business, global tensions, increases in regulation and rapid advances in artificial intelligence has made finding new models to handle complex legal work a priority. In-house legal teams are working on a wide range of strategic, sustainability and operational projects. What they have in common is a renewed urgency to innovate and change.

For example, US carmaker General Motors has committed to selling only electric vehicles by 2035, presenting its legal team with many challenges. These range from striking deals for the supply of semiconductors and materials for car batteries to securing partnerships to develop vehicle-charging infrastructure.

“Building this alternative supply chain for electric vehicles is a very, very heavy lift that’s going to require a lot of legal expertise to implement,” says Craig Glidden, general counsel at GM. Tensions between the US and China and new laws such as the US Inflation Reduction Act have wide-reaching implications for supply chains and investment.

“So much of our business is influenced by geopolitics,” adds Glidden. As such, he is attempting to recast how his lawyers think, “to focus on not [just] the case law, but the current events that are actually going to determine the shape of the business in the future”.

Pressure for change is also emerging from within businesses. “There is something different about this moment,” says Damon Hart, chief legal officer at Boston-based insurer Liberty Mutual, winner of the 2023 FT innovative in-house legal team award for North America. “Legal departments have been able to say ‘we’re different’ and escape some of the scrutiny that other departments have been under,” Hart adds. “That’s over. Companies are looking at legal like they look at any other part of the business, with the same kind of rigour and [key performance indicators] and metrics.”

That pressure is driving the growth and rising status of legal operations roles — in data analysis and other specialisms — which help legal departments apply relevant technology and improve how they deliver their work.

This year, the legal operations team at Liberty Mutual launched a programme that pairs its staff with lawyers to improve processes or apply new technologies in specific areas of the business.

The goal is to provide answers and equip lawyers with the skills and tools to solve operational problems themselves. “We take them through steps of design thinking, of agile processes, or what a minimum viable product really means,” says Kiran Mallavarapu, an engineer by training who leads the team.

A cultural shift within the team was one of the most pressing requirements to effect change. “The very first thing we did was create a risk-taking award,” says Mallavarapu, to recognise “individuals who either had an idea, raised their hand and said they would contribute, or at least asked the question that made the rest of us think and enabled us to move forward”.

For others, handling more complex legal work internally is a strategic and budgeting decision. At ride-hailing platform Uber, chief legal officer Tony West has focused on bringing more substantive work in-house, which he says has helped him retain highly skilled lawyers and is “significant for professional development”.

Also this year, the emergence of generative artificial intelligence has presented a big opportunity to improve legal processes and ease pressure on staff. And, because in-house lawyers are tasked with shaping the so-called guardrails for using generative AI safely, they have a front-row seat from which to observe its development and understand its potential in their own departments.

At consumer products group The Clorox Company, associate general counsel Apur Patel is one of two people leading its strategy on generative AI. He describes his approach to using AI as, broadly, “permissive”. He points out that helping to steer AI implementation means “[the legal department] gets the visibility we want and we get our hands on the tools”.

Ultimately, many expect AI to reshape not only in-house legal departments but also their relationships with law firms.

“I thought that Covid would be an enormous disrupter to law firms’ business model, and it really wasn’t,” reflects Hart. “AI could be that next level of disrupter . . . the way we use outside counsel will change.”