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Koen De Puydt

News Article by Leaders in Law Member – Koen De Puydt

Professional Liability of Intellectual professions in the Construction Sector 

Following the ten-year liability insurance for real estate projects for architects, engineering firms and contractors, which was made mandatory by the “Peeters-Borsus Law” since 1 July 2018, another insurance obligation has been introduced within the construction sector by the “Peeters-Ducarme Law” effective 1 July 2019. 

The title of this law is self-explanatory. It introduces “a professional liability insurance for architects, surveyor experts, safety and health coordinators and other service providers in the construction sector relating to construction works and amends various legal provisions regarding civil liability insurance in the construction sector”, as mentioned earlier also called the Peeters-Ducarme Law. 

peeters-law_buildings_2.jpg

This title shows that this law has in principle a larger scope than the Peeters-Borsus Law. Where the latter applies primarily to contractors and architects in the context of housing projects and for works that require the intervention of an architect, the Peeters-Ducarme Law introduces a professional liability insurance for all intellectual professions within the construction sector, with regard to all construction work. 

Consequently, the Peeters-Ducarme Law does not apply to contractors, but it applies to all kind of real estate work (and therefore not only with regard to housing projects). Thus, as a result of the execution of all real estate works, the principal will enjoy this protection regardless of the final destination of the property or the possible intervention of an architect. 

Compulsory insurance coverage cannot be lower, per claim, than:

  • € 1,500,000 for damage resulting from physical injuries;
  • € 500,000 for the total material and immaterial damage;
  • € 10,000 for the objects entrusted to the insured by the principal.

The law also provides for a posterior coverage on the basis of which the liability for claims must be covered if the claim is filed within three years after the cessation of the activities of the insured service provider . 

Although it could be expected that the Peeters-Ducarme Law has a larger scope than the Peeters-Borsus Law, we must conclude that it is largely eroded by the exceptions that are provided for in respect of the damage that the insurance must cover. 

For example, Article 5 of the Peeters-Ducarme Law states that damages are not covered if it is the consequence of a failure to comply with one or more contractual obligations or if damages resulting from environmental degradation, claims relating to an inadequate budget, or disputes in relation to fees and expenses.

These exceptions erode the potentially extensive coverage provided by the Peeters-Ducarme Law significantly and therefore the latter offers less protection than might be expected at first sight. 

The Peeters-Ducarme law has been published yesterday (26 June 2019) in the Belgian Official Gazette and will enter into force on 1 July 2019. 

Peeters Law (to be soon Seeds of Law) will be happy to provide you with the necessary advice or assistance in this matter. Please contact us via info@seeds.law or by telephone on +32 (0)2 747 40 07.

Koen De Puydt – Toon Delie

Real Estate and Construction Law    Professional Liability     Professional Liability insurance     Intellectual professions     construction sector     architect surveyor expert    safety and health coordinator

What’s A Lawyer Now? Law’s Shift From Practice To Skill

During a recent visit to the National University of Singapore Law School (NUS), I asked a first-year student what being a lawyer meant to him. His response was thoughtful and prescient: “I regard law as a skill. I plan to leverage my legal training and meld it with my passion for business, technology, and policy. For me, law is not about practice.” Out of the mouths of babes!

Why The Practice/Skill Distinction Matters

The distinction between practicing law and engaging in the delivery of legal services—the business of law–is critically important to a wide range of existing and prospective legal industry stakeholders. That list includes: those contemplating a legal career (not necessarily licensure); law students; the legal Academy; allied professional programs (e.g. business, engineering, computer science); practicing lawyers; legal providers; legal consumers; and the broader society.

Why does this distinction matter? Because law—like so many industries—is undergoing a tectonic shift. It is morphing from a lawyer dominated, practice-centric, labor-intensive guild to a tech-enabled, process and data-driven, multi-disciplinary global industry. The career paths, skills, and expectations of lawyers are changing. So too are how, when, and on what financial terms they are engaged; with whom and from what delivery models they work; their performance metrics, and the resources—human and machine—they collaborate with.  Legal practice is shrinking and the business of delivering legal services is expanding rapidly.

Law is no longer the exclusive province of lawyers. Legal knowledge is not the sole element of legal delivery—business and technological competencies are equally important. It’s a new ballgame—one that most lawyers are unprepared for. Law schools continue to focus on doctrinal law even as traditional practice positions are harder to come by—especially for newly-minted grads.

Law firms have yet to materially change  hiring criteria or to accord equal status and compensation to allied legal professionals. Several large firms have recently announced the launch of ancillary business of law offerings. That requires different workforces, processes, technology platforms, reward systems, organizational structures, capital and capabilities from traditional law firms. It also requires client-centricity and an alignment with business that is generally lacking among law firms.  Translation: it’s easier announced than delivered, especially when the law companies are led by law firm partners whose careers have been forged in different structural and economic models.

Lawyers in the early and middle-stages of their careers are caught in the shifting currents of law’s transformation. Legal knowledge is becoming a skill to be leveraged with new competencies. It is no longer, by itself, sufficient to forge a successful legal career. Most mid-career lawyers  tend to be resistant to change even as the necessity to do so becomes more acute by the day. Older lawyers are riding out the change storm and banking they will make it until retirement.

How did we get here and are legal careers  for most a dead end? Spoiler alert: there’s tremendous opportunity in the legal industry. The caveat: all lawyers must have basic business and technological competency whether they pursue practice careers or leverage their legal knowledge as a skill in legal delivery and/or allied professional careers.

Legal Practice: Back To Basics

What is legal practice? It is rendering service to clients competently,  zealously and within legal and ethical boundaries. Lawyers make this compact not only with clients that retain them but also with society for whom they serve as the ultimate defenders of the rule of law. There are three main elements of practice; legal expertise, judgment, and persuasion. Practicing attorneys are in the persuasion business whether they engage in trials or transactions. Persuasion has several elements: emotional intelligence, credibility, command of the legal craft, and earning trust—of  the client, opposing counsel, and the trier of fact in contested matters.

Legal practice was the presumptive career path of most lawyers for generations.  As law firms grew—especially from the 1970’s-the global financial crisis of 2007–fewer lawyers had direct client interaction. Client skills eroded, and the legal zeitgeist turned inward. The attorney’s supervisor(s) became the client proxy. Most lawyers were unaware of the clients’ objectives, risk tolerance, and business challenges. Legal practice, especially for younger lawyers, often involved tedious, repetitious, high-volume/low-value work. Many lawyers became bored, disillusioned, and unaware of what legal practice means from the client perspective.

Generations of lawyers—especially those in large law firms—were high-priced, well-paid cogs in the law firm wheel. Their principal mission was to satisfy billing and realization goals in pursuit of the partnership gold ring. It was not for them to question the materiality of their work or to assess its value relative to cost or outcome. High salaries created a false positive measure of their client value. They were far removed from the client and worked on discrete slivers of matters. This was their “practice.” The firm—not the client—was the entity to serve and to satisfy. Firms focused on profit-per-partner (PPP), not net-promoter score (NPS).

Legal practice for many lawyers has been diluted. That’s not an indictment of attorneys or a slight to their intelligence, diligence, and ability to make better use of their licenses. Susan Hackett and Karl Chapman describe this underutilization as working “at the bottom of the license.” Too many lawyers are doing just that, and that’s one reason why legal buyers are migrating work once performed by law firms to new provider sources. Optimization of value—deploying the right resource to the appropriate task—is a foundational element of business in the digital age. The legal industry is lagging.

Clients continue to pay a premium for those lawyers—and a handful of firms– with differentiated practice skills. This is a narrow band of practitioners that work “at the top of their license” on the highest-value client matters. Legal buyers are increasingly balking at paying such a premium to others. The universe of high-value, “bet the company” work is a small fraction of legal work. This diverges from law’s go-go decades when lawyers and firms perpetuated the myth that all work they performed was “bespoke.”

Regulators in the UK and a handful of other jurisdictions have opened the door to other professionals (“non-lawyers” in legal parlance) handling many tasks once performed exclusively by lawyers. The Solicitors Regulatory Authority (SRA) has  winnowed down the list of “regulated activities” –those requiring licensed attorneys– from a far broader range of lawyer/law firm activities. In the U.S., corporate clients are narrowing that list on their own. The myth of legal exceptionalism has been debunked.

The Business of Law Is a Response to Practice Inflation and The Need For New Skills

Corporate clients, not lawyers, now determine what’s “legal” and when licensed attorneys are required (it’s a different but changing story in the retail legal segment). That’s why legal practice is compressing and the business of delivering legal services—the business of law—is expanding. It’s also why so much capital is being pumped into “alternative legal service providers” and why their market share is increasingly briskly. The 2019 Georgetown/Thomson Reuters Report on the State of the Legal Market (The Georgetown Report) chronicles the migration of work from firms and highlights several of its causes. The Report calls for “rebuilding the law firm model.”  Law firms continue to be practice-centric and inward-focused (to maximize PPP) in a marketplace that is becoming customer-centric, digital, data-based, tech-enabled, diverse, agile, multidisciplinary, and cost-effective.

Where does this leave lawyers? We are, paradoxically, returning to what it meant to be a lawyer before the ranks of the profession swelled and law firms became highly profitable, undifferentiated big box stores. Practice is once again becoming the province of those lawyers best equipped to engage in it. For the larger universe of the profession, their careers will take a different turn. Most practice careers will morph into delivering legal services—the business of law– and/or to allied professions and businesses. For most lawyers, legal expertise will become a skill, not a practice.

The new legal career paths—and there are many– require new skillsets, mindsets, and a focus on serving clients/customers. Upskilling the legal profession is already a key issue, a requisite for career success. Lawyers must learn new skills like project management, data analytics, deployment of technology, and process design to leverage their legal knowledge. Simply knowing the law will not cut it anymore. The good news is that many lawyers will be liberated from the drudgery of faux practice careers. Armed with new skills, they will be have a plethora of career paths.

Practice in the Age of End-to-End Solutions

The distinction clients draw between high-value legal expertise and everything else in their portfolios explains the marked divide between approximately twenty elite firms and the pack. This small cadre of firms handle a disproportionate percentage of premium “bet-the-company” work and are paid commensurately. It also explains the ascendency of the alternative legal service providers that now handle more and increasingly complex work once sourced solely to law firms. These providers are not yet vying for premium legal work, but they are in the hunt for everything else. They hold a distinct edge over law firms because of their customer-centricity, alignment with business, DNA,  structural organization, economic model, technology platforms, capital, multidisciplinary, agile, diverse workforces, delivery capability, scalability, and cost-predictability and efficiency.

Companies like the Big Four, UnitedLex, Axiom, and Burford Capital  are already home to thousands of attorneys– as well as engineers, data analysts, consultants, technologists, and other allied legal professionals. Their attorney headcount will increase  in the coming years due to client demand and heightening pressure on the non-elite partnership model law firms. For most attorneys that work in these companies, law will be a is skill, not practice. That’s why legal knowledge must be augmented by other competencies to enable lawyers to make the transition from firms. There is also a cultural component to the transformation: success is measured by results and client satisfaction, not by hours billed.

Conclusion

The new legal career is about melding legal knowledge with other competencies to better serve clients and to solve problems. Whether that’s termed practice or delivery, the client is once again the focus. Law is returning to its service roots and that’s a good thing.

What does this mean  to those contemplating becoming a lawyer?  The decision to attend three years of law school, incur six-figure debt (it’s different outside the U.S.), and secure licensure is a personal one that involves many variables. Other paths to a meaningful legal career exist and more will be available in the near future.

London-based law firm Herbert Smith Freehills in China tie-up

London practice is sixth international group to be licensed in Shanghai initiative

London-based law firm Herbert Smith Freehills will affiliate its Chinese business with a local company in a new test for integrating foreign legal services with domestic law practice in China. The tie-up comes after nearly a decade of experimentation by foreign groups seeking to boost their presence in China by partnering local companies. Several affiliations, such as that of China’s King & Wood and Australia’s Mallesons, or global firm Dentons and China’s Dacheng, have formed some of the world’s largest practices but have yielded mixed results. Chinese regulation does not allow full integration of foreign and domestic legal teams. Foreigners are barred from practising Chinese law, as are Chinese nationals who work for foreign law firms.  Instead, some foreign companies, such as King & Wood Mallesons, have established so-called Swiss verein structures, where firms combine under a single brand but maintain separate finances. Others, such as HSF and Ashurst, have received formal licences to set up joint operations under a pilot programme in Shanghai. HSF will become the sixth global law firm to gain approval from Shanghai’s Bureau of Justice to integrate with a Chinese practice, allowing it and its Chinese partner, Kewei, to rebrand the China business as Herbert Smith Freehills Kewei.

The two firms will be able to work closely on individual deals and share the fees from such projects. HSF said the integration with Kewei would focus on cross-border mergers and acquisitions, banking and finance and financial services regulation. Kewei, which has 20 partners and lawyers, was launched in 1995 in Shanghai. HSF, which posted profits of £306m for the year ending in April, has more than 300 lawyers in the region. “When clients come to see us, we [HSF and Kewei] are now under one umbrella and we are both responsible for them,” said May Tai, HSF’s Greater China managing partner, noting that both firms’ reputations will now be formally linked. Such joint operations are still in a pilot phase and do not have full recognition as legal entities. HSF follows firms such as Baker McKenzie, Linklaters and Hogan Lovells to link up with Chinese practices under the Shanghai initiative. King & Wood and Mallesons in 2011 became the first test in which a Chinese firm merged with a large western one. In 2015, Dentons merged with Dacheng, one of China’s biggest practices, to form what was then the largest global law firm by attorney headcount.

Firms are fighting for a share of China’s cross-border legal work, which has grown rapidly over the past decade as Chinese companies invest more overseas. But integration has had a mixed record as global groups, often drawing on more than a century of history, mix with Chinese practices with just a few decades of experience, according to several lawyers with experience in such tie-ups. People close to the partnerships said that integration in overlapping jurisdictions often led to clashes, with firms continuing to compete internally despite attempts to integrate practice. “In some cases, the foreign firm ends up attracting lots of business for the Chinese firm but not the other way around,” said one Beijing-based lawyer familiar with the partnerships.

London City

Another $10m scalp for Kirkland as Freshfields star Maguire quits

Freshfields Bruckhaus Deringer’s Adrian Maguire is understood to be joining his former boss David Higgins at Kirkland & Ellis, over a year after the US firm made a concerted push to expand its corporate credentials in the City.