An interview with an in-house lawyer from British American Tobacco (BAT) is an interesting exercise.

In most companies these days smokers are forced out into the street if they want to light up. But at BAT's in-house department ashtrays are spread liberally around the office and staff are perfectly free to smoke at their desks.

It is the kind of defiance that you would expect from an industry that is regarded as a pariah by so many people.
Martin Gilbey, litigation lawyer at BAT, acknowledges this as he nonchalantly lights a cigarette. "It is a hostile environment – it is not a popular industry," he says.

There is, however, no doubt that working within the industry would tax the brightest legal mind. BAT is one of only three UK-based tobacco companies.

The largest company worldwide is the state-owned Chinese National Tobacco which, while it controls a massive 30% of the global market, caters purely for the domestic population.

The US company Philip Morris, producer of Marlboro, is next with a 17% share and, until recently, dominated the rest of the market. This is set to change.

BAT is currently in the process of merging with rival tobacco company Rothmans. This will give BAT 16% of the market and will set it head-to-head with its US rivals.
Gilbey has been with BAT for three years, having come across from Eagle Star when BAT Industries demerged, hiving off the tobacco subsidiary to become an independent entity.

"It is the most exciting in-house job I have done. It is an interesting industry and the issues are very social, political and very high-profile. I think that all the lawyers here enjoy what they do," Gilbey says.

The in-house legal team, now based at the new BAT headquarters in Temple Gardens, is the largest department in the company. It has a total of 100 staff including 30 practising lawyers in the UK.

"With the coming together of BAT plc we brought together what was quite a disparate set of lawyers. We had three buildings doing different things for effectively three different companies: BAT as it was."
As the largest department in the company, the in-house team plays a key role in management decisions – Stuart Chalfen, head of the in-house team, sits on the management board.

"I have worked for a number of major companies and there is greater involvement here. This is the most involved I have been," Gilbey says.
The in-house department in the UK is divided into six teams. The 'BAT Marks' team, dealing with the trademark area, accounts for half of the total staff.

"They are extremely well-regarded among their peers. It is a fascinating area. They have worldwide responsibility to protect one of our primary assets – the brand name," Gilbey says.

There is also a corporate team which is currently "heavily involved" in the Rothmans deal, plus new business, product liability, litigation and company secretarial teams.

There are an additional 60 lawyers worldwide. A regional counsel heads each of the five regions – the US, South America, Africa, the Middle East and Europe and Asia Pacific – and each counsel has their own in-house team of lawyers and is ultimately responsible to the regional management committee.
Gilbey is part of the UK litigation team of four, responsible for strategy for worldwide litigation. "Our responsibilities include budgeting IT human resources – I am a point of contact for the lawyers here and to some extent globally as well." There is much to keep them occupied.

BAT is currently involved in two major pieces of litigation in this country. The company is party to an action challenging the EEC directive banning cigarette advertising, which is due to be implemented in July 2001.

In separate proceedings, BAT, Gallaher, Imperial and Rothmans have won the right to seek judicial review of a government report calling for restrictions on tobacco advertising and smoking in public.

Gilbey believes that both pieces of litigation illustrate the need for tobacco companies to fight for their legal rights in an increasingly hostile environment.

"Whatever you think about tobacco, there are certain principles that flow through all these things. Basic freedoms, the right to be heard, the right to be heard fairly, which is the principle behind both applications," he says.

BATs subsidiary in the US was party to the massive £360bn settlement in the US and there are threats of further action by the US Government for reimbursement of health care costs.

If the UK follows the US, the merged BAT Rothmans will potentially be involved in similar suits in this country.
"The focus for the last few years has been the US. It is shifting more to other parts of the world. What happens in the US affects the rest of the world.

If there is a settlement in the US people prick their ears up and decide they want a share," Gilbey says.
Predictably, Gilbey attributes the flood of litigation to the ingenuity of plaintiff lawyers and the litigation culture that is creeping in from the US.

There is already a multi-party claim in the UK bought by 54 lung cancer victims against tobacco firms Gallaher and Imperial. It is the first of its kind to be brought in this country.

"We haven't been brought into the litigation because we don't sell cigarettes in the UK and those two companies have the larger share of the market."

What then of the merger with Rothmans, which does have a share of the British market? "It is unlikely from BAT's point of view. Because the whole issue behind tobacco litigation is 'I started smoking 30 years ago and I didn't know the risks involved and I have become addicted'. All those sorts of things.

The fact that we sell cigarettes for a year in the UK is not going to generate litigation."
With all this activity, the in-house team inevitably relies heavily on outside lawyers. In the UK, the company instructs Lovell White Durrant for the major litigation and Herbert Smith, Linklaters & Alliance and Simmons & Simmons on corporate work.

Gilbey said that they make a point of working closely with the firms. "Our central role is to be the mouthpiece of the board and make sure that the job is done. It is not a passive role. It is a very hands on role. We conduct the orchestra."

There is no doubt that legal costs in this industry are considerable and the in-house team see it as one of their primary objectives to keep costs down as far as possible.

"We are talking about substantial amounts of money. We want to make sure that we have the right firms at the right price doing the right things," Gilbey says.
"We have regular dialogues with the big firms – we monitor budgets very closely month by month, quarter by quarter.

Increasingly it is a primary part of my role within the company."
There have been claims that tobacco companies have tried to keep scientific reports confidential by channelling them through their lawyers so they could claim legal professional privilege.

Gilbey says lawyers and scientists have simply been working very closely together to ensure the "correct" and "accurate" messages are delivered. This view has been accepted by the Law Society, which has said that there is nothing unethical about acting in a client's best interests.

What does Gilbey predict for the future? For BAT there is the Rothmans merger. "It is extremely exiting," he says.

"I am looking forward to it, but it is very early days – there are a lot of regulation issues around it. So the current position is that it is business as usual without any thought of Rothmans.

They remain our competitor."
What of the future for the in-house team? Will the merger mean loss of jobs? "We cannot project what is going to happen at this point.

There will be integration teams working over the next few months," Gilbey says.
In the challenging world of the tobacco industry, it would seem, a mere merger is hardly a daunting prospect.