Jusletter IT

It has been recognised for a long time that failures, disputes and legal uncertainty cost too much. They cost too much for citizens, organizations, regulatory bodies, governments, and the society as a whole. For businesses, disputes endanger the success of relationships and consume time and resources that could be put to a better and more productive use.

While we have known this for a long time, what have we done? What do law schools and business schools teach? Do they give their students what future lawyers and managers require to operate in today’s and tomorrow’s environment?

The truth is that we have done very little so far. When it comes to learning law, even the best law and business schools still teach cases where things have gone wrong, so wrong that those involved were unable to solve the matters among themselves. When law students learn legal writing and are advised to write for their audience, the ‘audience’ refers to judges, arbitrators and opposing lawyers in a dispute. Many business school law classes address legal topics in much the same way law schools do. While what went wrong may be a good starting point for learning, why do we stop there? Shouldn’t we use those cases in order to learn how to prevent similar disasters in the future? Wouldn’t business and law students benefit even more from learning how to use legal knowledge to increase the likelihood of success?

How, then, do organisations use their legal skills and resources? Let’s take the example of corporate contracting. When crafting contracts, lawyers tend to focus on threats, risks and failure much more than on opportunities and success. Some say this is what lawyers are supposed to do – others say this is not right. Continuing to do so, they argue, causes delay, complicates negotiations, and increases the likelihood of claims and disputes.

In the ‘Top Negotiated Terms’, the yearly survey of the International Association for Contract and Commercial Management, participants are asked to highlight the terms they negotiate with the greatest frequency. Not surprisingly,limitation of liability has retained its number one status each year. In the review results, people negotiating contracts both on the sell-side and on the buy-side say that the current focus is wrong. It concentrates on assumed failure and does little to establish a framework for success. We’ve got the wrong agenda!¹

The time has come to change the ways in which we approach, practice, use, and teach law. We must think in terms other than court victories, winners and losers. Hindsight is no longer the way to look at things. We must look forward, too, and spend more time and thought on how our skills and knowledge can be used to build a better future. While responding to and resolving problems remain important, promoting success and preventing causes of problems is vital. In the corporate arena, legal skills and resources should be used for reaching desired objectives, advancing business, and facilitating good collaboration. The focus in legal writing – especially in contracting – should be on the real audience, people involved in commerce, rather than judges, arbitrators, or opposing lawyers. A paradigm shift is required. This is where the proactive approach enters the picture.

Traditionally, the steps in providing legal care have resembled those of medical care: diagnosis, treatment, and referral – all steps that happen after a client or a patient has a problem. Care has been reactive. You become sick, you seek treatment. You encounter a dispute, you turn to a lawyer.

In the practice of medicine, the emphasis is increasingly on preventing illnesses before they occur. Even in other professions, such as quality management, prevention has long been known to be more effective than control and reactive corrective action. The old proverb «an ounce of prevention is worth a pound of cure» is true even when it comes to the legal field.

The idea of prevention in the practice of law – or legal foresight – is not new in itself. It has been known for years that the earlier a dispute or a potential dispute is addressed, the better the chances of a fair and prompt solution. The proactive approach to law has its origins in and is greatly inspired bypreventive law , an approach that emerged in the United States as early as in the 1950s. Preventive law has many similarities with preventive medicine, the branch of medical science dealing with methods of preventing the occurrence of disease. Preventive law seeks to anticipate and prevent legal problems and litigation in a broad scope of areas, such as environmental law, sex discrimination, computer law, estate planning, corporate compliance, business planning, and property transactions. Lawyers who practice preventive law may offer services in mediation, alternative dispute resolution, governmental affairs, and many other areas.²

In the context of practicing law, the idea of prevention was first introduced by Louis M. Brown, a US attorney and law professor. His philosophy of law is summarized by his statement, «The time to see an attorney is when you're legally healthy -- certainly before the advent of litigation, and prior to the time legal trouble occurs.» In his ground-laying treatisePreventive Law published in 1950, he notes a simple but profound truth that has not lost any of its value: «It usually costs less to avoid getting into trouble than to pay for getting out of trouble»³ . His legacy is carried on through the National Center for Preventive Law at the California Western School of Law in San Diego.

Using the analogy of health care, the proactive approach to law can be said to combine aspects of health promotion with those of disease prevention. The goal is to help clients, both individuals and businesses, stay in good legal health and avoid the disease of legal uncertainties, disputes and litigation – in other words: build a protective system or defense mechanism that makes people and organisations strong and resistant, immune to legal risks. This cannot be done by legal professionals alone. Both in healthcare and in proactive legal care, clients’ self-care efforts and cross-professional collaboration are required.

The approach specifically calledproactive law emerged in the late 1990s. The pioneers were a group of Finnish academics, legal practitioners and quality-driven business clients. The first applications, tools, and training were developed for quality managers and project managers who wanted to merge quality and risk management principles with forward-looking legal skills to improve their contracting processes in cross-border dealings. Proactive law was thus first applied inproactive contracting , where the focus was more on business and on quality than on legal issues.⁴

Many contract lawyers and in-house counsel actually practise future-oriented law. Most do so intuitively, as a natural part of good lawyering. They help clients plan and structure transactions and manage risk. Here, the purpose of a contract is truly proactive: to provide a reliable platform and a good roadmap for the parties to follow to reach their objectives, and, at the same time, to minimize the potential for problems, differences of opinion, disputes, and litigation. Designing and crafting such contracts requires cross-professional collaboration. So proactive legal professionals must become team members, prepared to look beyond the topics taught at law school.

In response to a need to further develop the theoretical foundation and practical methods of the proactive approach, the Nordic School of Proactive Law (www.proactivelaw.org ) was established in 2004. To raise business leaders’, managers’ and lawyers’ awareness, the ProActive ThinkTank was established in 2007 (www.proactivethinktank.org ).

Apart from contracting, the proactive law approach can be applied in many other areas,⁵ such as intellectual property, health and safety, environmental law, employment law, evenlawmaking. In its recently published Opinion, the European Economic and Social Committee (EESC) argues that the application of the proactive law approach should be considered systematically in all lawmaking and implementation within the EU, concluding: «The EESC strongly believes that by making this approach not only part of the Better Regulation agenda, but also a priority for legislators and administrators at the EU, national and regional levels, it would be possible to build a strong legal foundation for individuals and businesses to prosper.»⁶

The word ‘proactive’ implies action and a forward-looking,ex ante focus. Being proactive is the opposite of being reactive or passive. This involves acting in anticipation, taking control, and self-initiation. These elements are all part of the proactive law approach, which differentiates two further aspects of proactivity: thepromotive (or positive, constructive) dimension (promoting what is desirable; encouraging good behaviour) and thepreventive dimension (preventing what is not desirable, keeping problems and risks from materialising).

The proactive approach to law is still very much a work in progress. The approach encourages – even mandates – cross-professional collaboration. Business and legal professionals, especially those of us educating future professionals in these fields, must join forces to take the initiative and make the paradigm shift happen. Working together, we can develop a strong theoretical and practical foundation, spread the word, and create a market – both supply and demand – for the proactive approach to law.⁷

When the proactive approach takes over, we can take our legal skills and resources to a new level. We can then shift our focus from the centuries-old reactive ways to a truly proactive, promotive and positive use of the law. The benefits will be great for both lawyers and clients.

Barton, T.D., Preventive Law and Problem Solving. Lawyering for the Future. Vandeplas Publishing. Lake Mary (2009)
Brown, L.M., Preventive Law. Prentice-Hall, Inc, New York (1950)
European Economic and Social Committee, Opinion on ‘The proactive law approach: a further step towards better regulation at EU level’, 2009/C 175/05. Official Journal of the European Union, C175, Vol. 52, 28 July, 2009,http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:175:0026:0033:EN:PDF accessed 17 January 2010 - in German: Stellungnahme des Europäischen Wirtschafts- und Sozialausschusses zum Thema «Proaktives Recht: ein weiterer Schritt zu einer besseren Rechtsetzung auf EU-Ebene»,http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2009:175:0026:0033:DE:PDF accessed 17 January 2010. (2009)
Haapio, H., A Proactive Approach to Contracting and Law, International Association for Contract and Commercial Management (IACCM) and Turku University of Applied Sciences, Turku (2008)
Haapio, H., Introduction to Proactive Law: A Business Lawyer’s View. In: Wahlgren 2006
Haapio, H., Business Success and Problem Prevention through Proactive Contracting. In: Wahlgren 2006
IACCM, The Top Negotiated Terms: Negotiators Admit They Are On Wrong Agenda. Contracting Excellence, July 2009. International Association for Contract and Commercial Management (IACCM),http://www.iaccm.com/contractingexcellence.php?storyid=923 accessed 17 January 2010. (2009)
Siedel, G. & Haapio, H., Proactive Law for Managers: A Hidden Source of Competitive Advantage, Gower / Ashgate (2010, forthcoming)
Wahlgren, P., A Proactive Approach, Scandinavian Studies in Law, Volume 49, Stockholm Institute for Scandinavian Law, Stockholm (2006)

Helena Haapio, International Contract Counsel, PhD Candidate
Lexpert Ltd, University of Vaasa, Pohjoisranta 20, 00170 Helsinki FI
Helena.Haapio@lexpert.com ;www.lexpert.com