The General Counsel as a business partner in a rapidly changing world

Developments in EU law are unfolding rapidly. These developments can be seen as annoying obstacles or as an invitation to creatively find solutions and implementations. The General Counsel acts as a linking pin between business demands and this evolving legal landscape and can play a vital role in realizing new opportunities.

European developments: legal complexity is increasing
Trade and commerce are increasingly subject to legal rules and requirements. The EU legislator also plays a big role in this trend. EU law increasingly dominates the legal landscape throughout various areas. This e.g. includes rules on product liability (new PLD), sustainability reporting (CSRD/CSDDD), AI (AI Act), consumer protection (Omnibus II, Right to Repair), data protection (GDPR, Data Act), platform services (Digital Markets Act), cybersecurity (NIS-2, DORA), green goals (CRMA, Net-Zero Industry Act), and more. Companies must remain well informed about developments in EU law to understand e.g. what they can or must contractually agree with their customers and suppliers, how they should structure their corporate processes, how their employees should be trained, and how they can or must document their activities. This is especially important as regulators have been granted more powers and are increasingly exercising these powers in practice, which could also lead to PR exposure.

Implications for the Dutch business climate?
A commonly heard opinion is that this complex and ever evolving web of laws and regulations negatively impacts the business climate in the Netherlands. This sentiment was, for example, voiced by the Dutch Cabinet, which, at the end of 2022, in response to voices from the business community, presented a package of measures to improve the business climate in The Netherlands. Part of this package, alongside measures in the fiscal sphere, was to consider 'how the Dutch translation of EU rules relates to similar policies in other (European) countries and what the effect of this is on our competitive position'. The idea here was that where EU directives provide for an obligation of minimum harmonisation, Dutch law, should not be 'stricter' than the national law of other member states. This is in addition to the fact that judges in legal proceedings are obligated to interpret national law in accordance with directives. Obviously, it helps in this respect if parties to legal proceedings can inform judges about the contents of EU law in an accurate and comprehensive manner.

The pivotal role of the General Counsel
Also, within companies, a high regulatory burden can sometimes be perceived as an inhibiting factor. In this respect, the General Counsel performs a delicate balancing act. On the one hand, the General Counsel needs to ensure that (material) legal risks are promptly and adequately identified and - to the extent necessary - addressed. This presupposes at least (1) knowledge of the exact business activities (and thus a General Counsel that is sufficiently informed), (2) insight into the laws and regulations applicable to these business activities or - at least - the recognition that one or both are lacking ("To know that we know what we know, and to know that we do not know what we do not know, that is true knowledge" (quote attributed to Confucius)) and (3) persuasiveness and a certain degree of independence from other stakeholders. On the other hand, in practice, of course, not every (theoretical) risk warrants attention from those other stakeholders, and the General Counsel who pays attention to every minor detail quickly risks losing his or her role as a sparring partner for the business. In other words, responding to (new) laws and regulations is a practically oriented rather than an academic exercise, in the context of which creating and maintaining support from key stakeholders is crucial.

Opportunities for the General Counsel and the legal department
Whether certain (new) legal rules ultimately have a negative impact obviously cannot be concluded in general terms. Research from the Harvard Business Review in 2019 ('Why Constraints Are Good For Innovation') demonstrates that, under the right conditions constraints can lead to focus and create an environment where creativity can flourish. This is partly because a lack of constraints can lead to decisions and actions that rely too heavily on intuition and lead to taking the path of least resistance. Musicians, painters, and poets often impose constraints on themselves to stimulate their creative output, and e.g. Google also embraces the principle 'creativity loves constraints'. This means there is opportunity for the modern General Counsel to add value by highlighting opportunities. In this respect, laws and regulations should first of all be clearly understood, after which a concrete translation into solutions and opportunities can be made and executed in collaboration with other stakeholders in accordance with an action plan.

This article was previously published on the website of GCN General Counsel Netherlands