In Conversation With John Thaliath, General Counsel, ZETWERK

How do you maintain a balance between providing sound legal counsel and supporting the strategic vision of the business leaders?

Let us examine the way in which this question is posed. There is an implication that “sound legal counsel” and “strategic vision of business leaders” are in different directions, if not in opposite directions. This premise itself is not true. We as lawyers/in-house counsels have to comprehend business and commerce, both in a general sense and the nuances of our specific industry/sector in order to ensure Legal Advice enables and forwards the end goal of the Company. Let me address this in a bit more depth, albeit at the risk of being too simplistic.

The ultimate goal of every business is – Sell (Product or Service), Earn Revenue, Earn Profits out of that revenue, give it to shareholders.

There is a way to calculate the Total Available Market for all businesses. It may be easier in some sectors to calculate TAM than in others. Sometimes it will be based on your competitors and their published financials and in other instances based on other market research. If your business has to increase revenue and profit, it has to eat into existing competitors' market share, or it has to go after new customers which is often a new market itself.

So, all that business leaders are trying to do with their strategic vision is “eat into someone’s market share” or “create a new market”.

It is on this fundamental premise that the law and lawyers’ step in and play a role. How the business goes about doing what is mentioned above is where law and business intersects.

If you are eating into someone else’s market share, depending on how you do it, many regulations may get triggered (e.g. Competition Law and abuse of dominance) and may require fine risk-based judgement on the part of lawyers. If you are creating a new market, there may not be any existing regulatory framework thereby opening up another type of risk, and requiring a different type of approach to risk.

In either of these circumstances, I do not intend to suggest any way that the Counsel should ignore the law. The objective should be to interpret and apply the law contextually and with sufficient cognizance given to the risk context of the issue, the industry one operates in, the legal regime, the enforcement regime, the cost and various other factors. Just like a doctor customises a long-term treatment based on how a patient's body in responding, and just like how a chef customises to each customers palate, and how a bespoke tailor customises to each client's body, lawyers ought to take the effort to customise solution to one’s context, industry and other relevant factors. If an effort is made to do this, there will be no conflict between “Legal Advice” and the “Approach of the Business”.

Of course, the above-mentioned approach has its exceptions. If there is a rogue top management who wants to do something abjectly illegal, this premise does not apply. But we make general principles/rules to aid our judgement based on what is usually normal. Exceptional circumstances require a similar exceptional approach and it is the in-house lawyers duty to the company, to spot such exceptional circumstances early.

What is the array of work you handle in your current role as General Counsel, ZETWERK? What is the team size of your in-house legal department?

Let me take this as an opportunity to start a discussion what is the definition of a “General Counsel” itself. As the title itself makes evident, the General Counsel is a generalist. If you go to a law firm, you will find that one partner is usually specialised in one thing. The General Counsel is not expected to be a specialist. This poses the question as to how much knowledge should a General Counsel should have about the various specialisations. And the simple answer is, enough to nudge a specialist in a direction which is solution oriented. And to be able to do this, one should be grounded in the way some major specialisations in law jurisprudentially proceed.

This brings us back to your original question on the array of work. All general counsel including me should have some knowledge in areas like Labor, M&A, Litigation Management, Commercial Contracting, Enforcement Authorities like local police and Enforcement Directorate and their powers and limits.

My team size is 15, at its peak. With some attrition and backfills, it usually is in the range of 13 to 14 people at any point in time.

You’ve successfully built the legal team at ZETWERK from the ground up, covering areas such as disputes, M&A, compliance, and corporate functions. What were the key challenges you faced in this process, and how did you align the legal function with the rapid growth of a unicorn start-up?

The first step while building the legal department is understanding the risks that are most important to the Company. One needs to wear a business lens while doing this. Once this is done, the logical progression is to categorise these risks. Some of these will be one-time risks and others will be ongoing at any point in time. Based on these categories of risk, one needs to apply their mind on solutions to these risks, be it one time risk or the ongoing ones.

The starting point in building a legal organisation of this type is to ensure that if risks can be addressed through an external relationship ( especially with one time risks), that is the approach to consider. Ongoing risks usually require getting a person on your rolls. For eg – if you are a startup and have a funding round every six months, you are better off if you resource you team with a lawyer who is familiar with Venture Capital funds and how they operate. If you are a company with a lot of factories, it helps to have a labour and employment lawyer in your team.

The biggest challenge for a startup is attracting talent. While I was well adept at understanding financials and other commercial parameters of a company and make a judgement call on the suitability of a company for a career perspective, most lawyers are not great at this. Lawyers make up for this judgement by relying on brand names. For eg, when I was General Counsel for GE, I would never have a candidate have second thoughts once selected. But in the startup world, one comes across this issue often.

The next big challenge in a startup is making the founders/promoters understand what they should expect from a legal function. Most of them are often first-time users of legal services and do not have a reference point to make judgements. All that I mentioned as responses to your questions above, play a role in creating that expectation and winning the trust of founders/promoters. Trust is the secret sauce which makes a legal department play its role and hence it ought to be carefully built.

Given your rich experience in handling M&A, PE/VC, and general corporate functions, what are some key considerations that you believe are often overlooked in high-growth startups?

I have been fortunate to be part of an organisation which had the vision to hire an experienced person as a General Counsel. Often startups do not understand that evaluating risk, understanding law and taking a risk weighted decision in that context is a result of experience. My view is that someone at the scale of a unicorn needs a General Counsel with 15+ years of relevant experience. Startups often fail to factor in the weightage to be given to experience and over estimate the value of a degree in law. It is not uncommon to see a person with 5 years experience as General Counsel/Legal Head at startups. While I have been fortunate in my organisation, when I look around, the importance given to compliance is another big gap at startups. Compliance could mean different to different companies considering their risk context. But the “will” to think about compliance and what definition is appropriate to their organisation is not a common trait in startups.

You’ve mentioned employing a risk-based and business-like approach to legal issues. Could you elaborate on how this approach benefits decision-making in a global corporation, particularly in fast-paced industries like automotive and telecom?

Let me take one example – Imagine you are an airline company and are being sued for not paying for an aircraft you have leased. However, you have in depth knowledge of the company’s business and know that amounts are due to the Company and Company will be able to make that payment in the next 6 months. In this given context, the job of legal is not to win the suit for non-payment, but to buy the company 6 months during which they will stabilise the cash flow. This example is valid both at a global and local level.

Look at another example – your company is a large cement supplier and have huge amounts due from large infrastructure companies. These debts are not being prioritised by the customer. If one approached the commercial court, it would take a couple of years at least. One has to think what is the life line of infrastructure companies (their credit line with banks) and strategise how to strike at this, of course with the four corners of the law.

There are umpteen opportunities, both at a strategic and tactical level where a clear understanding of the business, risk and a solution-based approach can enable outcomes that give the business an edge over competitors.    

Having worked across North America, the Middle East, and Africa, how do you adapt your legal strategies to different regulatory environments while maintaining consistency in compliance and governance?"

It is important to understand that law at the jurisprudential level is similar around the globe. One can categorise countries into Civil Law and Common Law countries. Majority of the countries are Common Law based. Thus if your jurisprudential foundations are strong, then at a first principle level, most countries operate in the same way with some variation to suit their local social and political needs.

A very simplistic way to view this is – can a murder in India be very different from a murder in America at a first principles level?

So, on the question of consistency, laws have consistency built into them, even if it is across jurisdiction. In fact one of the main complaints about laws and legal regimes is that it does not adapt quickly to the contemporary environment which is rapidly advancing because of technology advances.

In your view, what does the future hold for legal teams embracing technology?  How do you see governance and compliance frameworks changing with the emergence of legal tech and AI?

This is a question I have started pondering especially with the evolution of Artificial Intelligence at the levels that we see today.

The last big technology wave at least from an inhouse counsel perspective was Contract Management. Most of these companies selling CLM Software have limitations as their focus was efficiency and not any qualitative approach to “managing risk” for the organisation (which is the primary job of a legal department). But with Chat GPT and other AI driven search, the landscape is fast evolving. Imaging doing a conference with a Senior Counsel in India to understand a position of law. Today, with the right prompts (which again may require some understanding of law) one can get about 75% of the substance of that conference from appropriate and methodical use of AI based search tools. Even contract drafting could change significantly and the old limitations of Contract Managements tools when it comes to drafting could go away with AI. 

Future legal teams could become smaller because of the availability of AI based solutions. If there is a legal organisation with Senior, Mid and Junior level, it is not clear which level will be impacted the most. The senior may see a dip in revenue. The mid may be replaced by a junior who can tap into the power of AI. All this ought to be seen with evidence in the next few years.