What is Proactive Law?
The Merriam-Webster dictionary defines “proactive” as, “Acting in anticipation of future problems, needs, or changes.” As applied to business law, proactive law focuses on using both legal knowledge and tools to control outcomes, increase present and future value, and evolve to the ever-changing business climate. Lawyers who adopt the proactive law approach to practicing business law become not only a tool but an asset to the businesses they serve; acting as a counselor rather than just a hired gun.
Where did Proactive Law Come From?
The Proactive Law movement was first introduced in Finland in the early 90s by the lawyer and scholar Helena Haapio. Haapio's work drew the attention of scholars all over Europe including Denmark, Iceland, Norway, and Sweden. Following development in the Nordic countries, the proactive law approach spread around the world including the United States.
A major draw of the proactive law approach is that it builds on pre-established theories, combining both preventative law and traditional legal views of risk management with a more progressive approach to legal services that utilize attorneys as both consultants and value creators.
How Can the Proactive Approach Benefit Businesses?
1. Benefit: A partner-like relationship between your business and your legal team.
Business owners/management teams often view legal counsel as a “hired gun.” Someone they call when they run into an issue that feels “legal.” Oftentimes in these situations, the client has already attempted to resolve the problem on their own and is using their legal team as a kind of clean-up crew. This unfortunate reality is caused by several factors: first, the client may be attempting to reduce cost. This is especially true for small business owners who fear legal services are cost-prohibitive. The client may feel bringing in legal counsel will escalate the situation, or maybe the client doesn't even realize their attorney can assist them prior to conflict arising.
Part of the proactive business law approach is building a partner-like relationship with the client. The goal of this being that the client knows their legal team is invested in their best interest. This often means advising owners and management teams regarding established policies and procedures to prevent potential legal problems in the future, engaging in legal risk and benefit analyses, and most importantly establishing and maintaining an open line of communication between client and lawyer. To foster this type of relationship, we give honest evaluations and upfront costs where possible.
2. Benefit: Foster positive relationships with the people and businesses you work with.
Traditional business attorneys act to both prevent legal disputes and react to conflict. Attorneys that have adopted the proactive business law approach combine preventative and reactive measures with proactive law principles in order to create value. An example of this would be in drafting agreements. A preventive and reactive lawyer is focused on possible conflict and the rights of their client should one arise.
Proactive law firms are doing the same while also considering how the terms of the agreement may affect their client's business relationships. A proactive lawyer is more likely to draft an agreement that sets forth a roadmap for performance, that promotes positive behavior, and is amenable to ever-evolving business relationships. This approach not only fosters business relationships but acts to prevent conflict as both parties are less likely to breach an agreement they fully comprehend.
3. Benefit: Increase legal literacy and overall “legal well-being.”
Proactive lawyers take advantage of cross-professional collaboration. This involves lawyers, business owners, and managers coming together to combine their respective expertise to navigate the unknown and combat common growing pains for businesses. The intended result of this collaboration is managers and owners that are equipped with basic legal literacy and are both capable of avoiding litigation but prepared to use the law to their advantage. While on the same note through this collaboration, the lawyers become knowledgeable of the client's business processes, goals, and comfortability with risk in order to better advise.
4. Benefit: Manage risk and achieve goals.
It is no secret that attorneys tend to be risk-averse, while business owners tend to have a higher level of comfortability with risk. Business owners as entrepreneurs, by their very nature, equate risk with reward. Starting and/or running your own business takes a willingness to assume risk. While attorneys are accustomed to responding to conflict and therefore as a response, they are more likely to advise against risk as they are aware of the negative consequences. This all-or-nothing approach does not work for business leaders. Risk will always exist, and an effective business lawyer knows how to manage it. A proactive business law firm will assess the level of risk in each business decision, combined with its ability to mitigate it. Once they have determined the extent and nature of the risk, they assess the business's goals, its overall health, and ability to sustain potential loss, to determine how best to advise their client and enact the best course of legal risk management. This type of cross-professional collaboration not only best serves the client but continues to foster a productive relationship between attorney and client.
5. Benefit: Eliminate surprise by being prepared for conflict.
Conflict happens, even to those businesses invested in preventing it. When facing potential conflict, it is important to have an attorney that can work to resolve issues both swiftly and cost-efficiently. Though non-proactive lawyers may be equipped to handle conflict on your behalf, they likely don't have all the tools of a proactive lawyer. A proactive lawyer ensures they are equipped with the knowledge necessary to effectively navigate your business through conflict. This knowledge includes your businesses goals, your overall health, company culture, and reputation. A proactive lawyer caters to business needs and advises based on what they know to be best for the business.
The attorneys at DZ Law have studied the proactive business law approach and utilize its concepts in their practice. Our attorneys work with businesses at all stages of growth, from start-ups to companies looking to expand. Reach out to the attorneys at DZ Law and let us join your team.