VALUE-BASED BILLING ARRANGEMENTS AGUSTIN LOJO Founding partner Summa 4 Asesores Legales y Tributarios (Madrid) ACC Conference, Munchen, June 1 st, 2015

I.- Introduction V-BB stands for approaches to billing systems within external-in house lawyers relations, improving both parties satisfaction in the sense of adding value and efficiency. More than billing systems, setting the focus in how to structurate the relationship Are there differences to this approach depending on the external firm´s size?

II.- Preliminary considerations Size of the firm may lead to a different offering, different “go to market”, different type of clients. But the in house counsel´s aim is the same: cost savings, costs predictability, value, efficiency and fairness. External lawyer should not a cost, but an asset. How can we improve external-in house lawyers relationship by means of the latter feeling it can take the upmost advantage to its budget?

III.1.- ASPECTS TO CONSIDER Good choice of the numerus apertus billing system. Focus would be in the nature of the requested advice. Fee focus on value added advice or in issues where client is concerned vs “commodity advice/retainers”. Long term and continued relationships lead to better knowledge, understanding and personal vis a vis of the parties and of the business of the client. Are panels a must?

III.2.- ASPECTS TO CONSIDER Good definition and staffing of internal Counsel leads to outsource in a rational way. Rotation of lawyers in the external counsel is a loss of knowledge and a synthom of a bad management and staff policies. Leading advisor really engaged in overall advice, not only at a junior level but also at a partner´s level. Active, non reactive role of the Advisor The Firm should always be willing to “invest”.

IV.1.- Short comments to common invoicing systems Hourly rate system (with or without bonus rates/blended rates) Old cost-based method, realization rate concept. Rejection at first sight (even more in small clients and “price sensible” ones). Client is not accurately aware of the impact on its budget and can not accurately compare (apart from applicable rates ) if he demands quoting from different firms. Strict control of the billable hours and involved advisors. Demands full confidence Advisable for: projects where time invested can not be predicted for involving meetings with third parties (contract negotiations, tax or labour inspections, etc)

IV.2.- Short comments to common invoicing systems Fixed (flat) fee Predictability on the client´s budget; accurate comparisson if different quotiations. Advisor will have to design procedure to match invested hours and involved advisors to the firm´s rates in order to be efficient for internal purposes (more and more internally demanded –and, therefore, rewarded- for the Firm´s management ). Key: Needs a clear definition of the scope of work and staff involved. Advisable for: well defined projects where time invested can be advanced (court proceedings, drafting of contracts with no (or not long) negotiations involved, legal opinions, reports, tax and corporate operations with no third parties, DD, M&A?)

IV.3.- Short comments to common invoicing systems Fixed fee with a collar Mixed system, different alternatives. Fixed fee and if deviations based on hourly rates happen the agreed terms will apply. Client is relatively aware of the impact on its budget and can relatively compare if he demands quoting from different firms. Strict control of the billable hours and involved advisors. Demands full confidence. Advisable for: similar to fixed fee, for less defined projects subject to unforeseeable situations (court proceedings, legal opinions to be confronted with third parties or internal people, M&A)

IV.4.- Short comments to common invoicing systems Success fee/Contingent fees/reverse contingent fees Full quota litis system not allowed in Spain. A fixed fee with a success well defined bonus can be very attractive for the client and for the advisor. Can be unefficient for advisor. It facilitates the achievement of advice for the client and rewards a successful advice. Procedural costs can be considered within this system. In Spain they belong to the client. Performance-based agreements can also be considered here. Advisable for: projects where recuperation (contingent fee) or saving (reverse contingent fee) of money is involved, mainly, litigation advise, tax and labour inspections, etc. Projects where a well defined goal can be stated (i.e, a settlement, termination of a project on a certain date, etc). Also, for completion of a deal, but this can involve a conflict of interest.