In-house counsel are not just legal experts, but are also equipped with extensive knowledge of their industry sectors. General counsel also possess expertise in team management and communication. Here we glean the opinions of three elite GCs from different industries, who share their observations and strategies
VP, General Counsel and Chief Compliance Officer of NIO
As China undergoes reform and opens up, industrial upgrades are happening across the real economy. Companies like NIO are exploring new energy sources and emerging from traditional industries. So how can companies secure an advantage during this transition? In-house counsel need to understand their industry, look beyond to the world, and quickly identify future trends.
Q: Can you tell us about the legal trends and challenges within the electric vehicle (EV) industry?
Liu Fang: I think the trends are good and bad. The good thing is, the electric vehicle sector is in the country’s 13th Five-Year Plan, so it is definitely a new thriving industry. But the bad thing is, we see the economy right now is still slowing down. Even though in the past several years, from 2011-2017, we saw a big expansion in the auto industry, we now see consecutively 15 months of a slowing down or decrease in the sales volume.
So right now, actually this year, I personally feel it is quite challenging, especially for electric vehicles, because of the slowing down of the economy.
As the decrease of sales volume impacts the sales of electric cars, the country has implemented some new regulations restricting new entries or new companies into this sector. It is also going to phase out the subsidies to customers purchasing the cars.
In terms of a regulatory change, I think there were two new laws implemented last year, which are, in some sense, helping this sector to grow. One of the regulations is called “The policy on investment of new electric vehicle industry”.
The other one is the guidelines on how to regulate this industry. In those two big regulations, I would say, are the guidelines for private investors looking into this sector. When they want to do certain investment activities in China, I think these two, policy and regulation, need to be looked at.
I personally know, and I did a little study on, these two regulations. What I can say is the regulation, or policy itself, tightened the investment for private sector investors to invest in the automotive sector, but it opened some doors, or added some flexibilities, for private investors to invest in new electric vehicle sectors.
In the past, in China, you can see that a lot of local capacities, we call it manufacturing capacity, was fully occupied, or there were some extra capacities that were not used.
So the government does not want people to keep investing without anything to do with the current capacity of traditional automotive. They want to restrict investment in the traditional automotive sector, but they want to add new investments into the new electrical vehicle sector.
Q: What’s your view and outlook for the autonomous driving sector globally?
Liu Fang: Autonomous driving will definitely be the big trend, and the most important trend, for new vehicles, electric vehicle companies, or for the whole industry. This is what I see.
It is very important for everyone in the automotive industry, and electric vehicle manufacturers. This is just the future. Technology changes, so you need to pay attention.
The challenge the company is facing right now is, globally, the industrial auto sector is really at the beginning of R&D activities and IP applications.
It is really at a very early stage for the automotive companies, and the new energy companies, to look at these sectors. So you need to, on the one hand, look at the regulations. But on the other hand, you also need to look at what kind of technologies you have.
Autonomous driving definitely will be a very important technology for this (electric vehicles) sector, and for each country, from data protection and countries’ security perspectives.
I can see different countries right now are implementing or enacting some regulations to regulate autonomous driving-related, to deal with technology, cross-border IP sharing and cross-border data sharing.
To me or the company, the challenge we are facing right now is we have our R&D teams located in Silicon Valley, the top researchers we have are in there, and we also partly have our resource teams here. There are certain data you need to get from here, and foreign teams need data here to do the research.
Some other business partners need the data and technologies here to help them in doing research. So you really need to have a lot of technology, IP, and ideas exchanged. But to what extent you cross the wall and touch the red line – you need to be really careful.
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VP and General Counsel, Greater China, Schneider Electric (China)
Globalization has allowed trade to cross borders, and legal affairs have expanded to different fronts across jurisdictions. As an established multinational that entered China early, Schneider Electric’s management of legal matters serves as an important reference for both Chinese companies that are planning to expand their business landscape and overseas companies that want to enter the Chinese market.
Q: What are the emerging legal trends in your industry?
Shawn Zhao: I have actually worked at two manufacturing companies in the past few years, and I have observed there is a transformation from the brick-and-mortar products to connected products, because the companies are all trying to make sure their products are actually connected – smart products that can actually be managed by a software platform that will be able to manage the input, and incoming and outgoing data. The consumer products will be able to do things much more than they used to do.
The electronic data that are coming back and forth will make sure the consumer will understand, for example, what food needs to be replenished, and whether their diet is healthy or not in daily life. For industrial customers, they will be able to remotely diagnose some of the problems they have in their products and systems, and send it to the manufacturer so they can actually provide solutions via the internet of things (IoT). This is really the big trend that I have been observing, and this has created some interesting consequences.
For example, for people at the in-house legal team, they will have to think about, “Okay, we have this data, how do we manage it? How do we make sure it’s compliant with the local laws and regulations?”
And if you are running a multinational operation, how do you make sure the data protection is compliant internationally, or with the laws of another country governing data privacy or cybersecurity? This will add another dimension to in-house legal work, and, therefore, we have to make sure that we have the expertise. We have people who are basically digital-savvy and we want our employees, not only our legal team, but also everyone in the company, to be the digital citizen. That is the trend that is emerging in the manufacturing industry.
That also kind of impacts the legal team functions, and how we, as legal managers, manage our teams. You will have this if you are running a multinational operation. Obviously, the employee data and also the customer data may be transferred cross-border. And how do you do that? How do you make sure that the transfer is compliant with the laws of the home country versus the country where the data are flowing to? There will be a difference in the sophistication of the legal systems between the two countries. What do you do? Normally, for companies like ours, our approach is to set a higher standard to stick with, instead of settling for the less.
This also leads to another interesting phenomenon. Our lawyers will have to work with different functional groups, with IT, business, government relations and public relations. And therefore, these groups will eventually be involved if something happens. We need to learn how to collaborate with them, and how to deal with ambiguity, because the differences in the laws of different jurisdictions creates ambiguity.
Working with other teams that you are not used to working with also creates some ambiguity in terms of roles and responsibilities. I always encourage my team members to take a step forward rather than take a step back.
Q: How do you structure and manage your team?
Shawn Zhao: My core team basically takes care of commercial contracts, supporting our business lines, we call it the BUs (business units). My approach is usually to assign a dedicated support to each BU so there is a sense of ownership on the part of the in-house counsel because they know where their client is.
The client also does not have to really figure out this issue: “Who do I go to? Which lawyer is in the team?” There is a sense of team as well on their side. Other than that, we have someone who takes care of compliance, and we have a litigation team, and we have a merger and acquisition team.
I think we are actually doing a lot of work to make sure that there is collaboration amongst our own team, as well as between our team and teams of other jurisdictions, in-house teams. We have built sort of an online platform, called a collaboration site, through which we will be able to do that, where you want to discuss something of common interest, or where you are sharing some experiences or templates amongst the teams.
Outside of the legal team, we leverage apps like WeChat, because for millennials, they are very much carrying the app with them and flipping through all the pages while they are on the go. So, if we want to get their attention, if we want to be part of their day, then we have to reach out to them. We actually have a WeChat enterprise account so that we can put out a lot of our guidelines, templates and also very short, snappy, good, interesting articles to tell them about certain legal issues, and kind of inform them on the latest legal developments in a form that will be very interesting to them. Not only just the dry legalese, but also with the artwork, graphics, very vivid artwork, so that we will be able to get their attention. And we have seen the clicks on such articles climbing significantly.
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Deputy General Counsel of Alibaba Group
For the internet industry, technology evolves rapidly and many legal issues arise. These problems are often strange and fresh, even to the world. How does Alibaba see and manage “data”? At this point, an in-house counsel becomes a thinker to explore the unknown and find possibilities for the enterprise.
Q: In the era of the internet, communication goes beyond language, and is based on data. Alibaba is a very big platform. Who do you think the data belong to?
Sara Yu: What makes data different from other assets? Why do many people panic when they mention data? In fact, we are facing the panic of the unknown, not the data itself.
Data, by nature, has many differences from other assets, which cannot be defined by the traditional concept of assets. For traditional assets, say, you give me your mobile phone, and then you won’t have it, right? So, there is a kind of exclusivity to traditional assets.
But data are different, if you copy one data collection to me, then it will become two portions. Your bestowal does not mean that you no longer have it. You still have one portion. Data are renewable and reproducible. The more people use data, the greater the value. There are attribute differences between data and the exclusivity of assets.
The perception of the general public needs to be updated on many concepts. For example, “data collection”; our concept for data collection might be deliberately recording data. Here, the word “record” is more accurate, whereas I have some doubts about the word “collection”. The biggest difference between the digital economy era and the traditional physical environment is that the internet can reduce the cost of data recording to almost zero.
It’s like when we walk in this room today, we actually leave footprints, but why don’t we collect and analyze them? Because it cannot produce economic value. The cost of collection is too high. Only when a criminal offence is encountered may the footprints be collected.
In the future of online communications, all actions are actually recorded in real time. The emergence of the internet has only greatly reduced the cost of recording behaviour, which I think is a particularly important feature. Hence, we may not use the word “collection” to describe it, but “record”. The tools you use will naturally record your behaviour, such as devices and networks you are using.
There is also a misunderstanding about “data flow”. Many people believe that “I gave you” is data flow, however, now there is a term called “open data”. For example, “government information disclosure”. Once the information is made public, in fact, you do not have to make it “flow”, it naturally becomes reproducible, and the replication itself is a kind of flow.
What is the idea behind the government’s “one run at most” policy in terms of receiving filing materials? It’s that people don’t have to run. Let data run. Connect the systems. The idea behind it is that data are a bridge across different groups of people, different professions and different service providers. The flow of data can be achieved, which will definitely be the trend of the future, and this is something we are more than willing to see.
When all objective facts are recorded, they actually turn into computer code 0101. When we record them in computer language, each description itself is also data. Data are actually a set of symbols and symbol systems that we use to describe the objective world. For example, when introducing myself, I will read my name, age, birth date, gender, and where I work to my mobile phone. These fields are data themselves.
Any individual is ultimately a collection of data. After this kind of information accumulates into mass data, it is not a matter of one person who peeps with his/her naked eye, but more of an issue that we use algorithms to grasp and calculate. So, in my opinion, as long as we are conducting a lawful collection and taking care of security protection, the rest of the problem of usage is managed and presented through algorithms.
Q: Can privacy be equated with data?
Sara Yu: Nowadays, there are a lot of concepts like these. Some called “data”, some called “personal information”, and some called “privacy”. As long as the others can deduct from these data fields to a specific person, then these fields might be seen as sensitive information.
Based on the level of sensitivity, people may use the word “privacy” to describe it. For example, “I” and “like eating chocolate”: the combination of the two is personal information. However, preferences themselves are fluctuant. I might have liked it three years ago, but not anymore. The data field of “like eating chocolate” circles out a group of people, not necessarily meaningful to all the individuals. Hence, privacy is a relative concept.
We tend to worry about privacy issues that big data bring. When doing something, we fear that someone will be watching us. As a matter of fact, we need to look into the future, and then look at the present. For the concerns that we have, are they part of a process, or a result? If we can all realize that in the future, technologies like cloud computing, the IoT and blockchains can connect all of us in different ways, not only connecting people together, but also connecting home appliances. Lights in my home are on from what time to what time, the energy consumption situation, etc. You will find that as long as it is relatively a public service, in order to improve the services and maintain the necessary quality and capability, imperative analysis on usage data of our users is a must. This is the inevitable trend.
The emergence of new things makes our life more convenient, whether we want it or not. It will come inexorably, at this time we can only accept it, and try to balance out the risks it brings. In the process, we will feel worried, and fear for getting hurt. In my opinion, these concerns will not come into reality, because we still have a lot of unknowns today, and we cannot stop simply because of worrying about the unknown itself. We must try to address these concerns during the process.
In the future, all enterprises will be driven by big data. High digitalization is becoming the basic feature for individual dwellings. If it is a common problem faced by the whole industry, the society and all individuals, first, we should not focus it only on internet companies, and second, the experiences from internet companies in solving these problems with technology may become the new rules of the whole market, and the new approach to solving these problems.
For full interview, please visit here:
The interviews with Liu Fang and Shawn Zhao were conducted during the CBLJ Forum at Grand Hyatt Hotel, Shanghai, on 12 November 2019, with the theme “Seizing Cross-Border Opportunities – Managing Global Risks”.
The interview with Sara Yu was conducted during the 2019 Legal Tech Innovation Summit in Hangzhou on 24 November 2019.