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Daniel Hochstrasser discusses arbitration, medicine, and becoming a leader in ESG
Member of the Board of Directors at Novartis and Swiss leader in dispute resolution, Mr. Hochstrasser speaks to Leaders League about his new role at one of the largest pharmaceutical companies in the world, upcoming innovations and new technologies in medicine, the company’s ESG initiatives to maximize its social impact, as well as important litigation and arbitration developments in the market.
Leaders League: You are a Swiss dispute resolution specialist with more than 35 years of experience in international arbitration and litigation. You also worked for almost 30 years at one of the largest Swiss law firms, Bär & Karrer, and now have your own independent firm, Daniel Hochstrasser. In March 2022 you were elected as a Member of the Board of Directors at Novartis. How has your previous law firm experience served you in your new position?
Daniel Hochstrasser: As a practicing attorney, you have to be intimately familiar with all aspects of the relevant procedural laws. In addition, a solid background in substantive law is required. Finally, language skills are important; you must be able to write clear and convincing briefs and present oral arguments in a way that captures your audience. Moreover, I believe that you must enjoy arguing legal matters, and possess a strong fighting spirit, combined with the ability to develop a sound strategy for the proceedings, to achieve a favorable outcome. It takes a sharp mind to react to anything the other side throws at you, and quite often the courage to incur calculated risks.
When advising business clients, particularly in dispute situations, you acquire a lot of knowledge about potential pitfalls and legal challenges facing global companies in the 21st century. By dealing with situations that could be described as pathological, you get an increased awareness of things that can go wrong when dealing with contract partners, competitors, customers, authorities, or employees.
Dealing with such risks is one of the fundamental tasks of the board of directors of a company, and in order to do this diligently, diversity of knowledge, experience, and professional background is necessary – the composition of the Board of Novartis takes this into account. Legal is one of the areas that is crucial for the audit and risk committee functions in addition to ESG matters, and this is my current role on the board.
You have also been a member of the ICC Court of Arbitration in Paris, France since July 2015, and Vice President since July 2021. How does this leadership position and experience play a role when advising Novartis on legal matters?
As a Vice President of the ICC Court of Arbitration, I supervise the conduct of ICC arbitrations, dealing with appointments of arbitrators, challenges against arbitrators, and, most importantly, reviewing drafts of arbitral decisions (the so-called scrutiny of awards), which is an essential feature of ICC arbitration. This insight into a large variety of cases from all over the world is not only a valuable experience for my practice as an arbitrator or counsel, but also increases the knowledge that I can bring to the Board of Novartis.
What are some challenges and opportunities when working on behalf of a corporation vs. outside counsel?
As a litigation or arbitration lawyer, you primarily deal with the analysis of situations that have already arisen, and this is primarily a backward-looking handling of the fall-out from situations that can, as such, no longer be influenced. While there are, from time to time, difficult situations of that type on a board, a board member’s responsibility is focused in the opposite direction. Our duty is to anticipate and avoid potential legal issues so that the company doesn’t end up in litigious or otherwise pathological situations. For me, this is an opportunity to apply my experience from the last 35 years to avoid these risks from materializing and damaging the company.
Substantial litigation is now more of a team effort by different specialists than before when lawyers basically ran the case for their clients
What are upcoming trends and developments in the Swiss market and abroad in terms of litigation and arbitration?
Clients with a sophisticated legal department, which also includes litigation specialists, tend to be more involved in the running of the case – not just on a strategic level, but also on the day-to-day management of the litigation. This also extends to the actual submission drafting process. Moreover, clients involve third parties, such as damage consultants and/or technical or commercial experts, to prepare the file. As a result, substantial litigation is now more of a team effort by different specialists than before when lawyers basically ran the case for their clients.
Swiss courts are rather technology averse. Developments like electronic filing are still at an early stage, both in regard to submissions and exhibits. Therefore, contrary to arbitration, the proceedings and hearings are still conducted very similarly to 20 years ago.
The types of disputes become more diverse, so it is essential that a firm has litigators who have the broad experience necessary to be able to handle all of them. Some of the smaller cases might be dealt with more quickly and efficiently, whereas "bet the company" disputes will continue to be fought with a lot of effort and investment.
Cost pressure has been a topic for quite some time, in disputes as in any other areas of the law. Complex engagement conditions are frequently negotiated at the outset. However, it is my impression that more complexity of the arrangement is not always more advantageous for the client. Sometimes, the detailed involvement of client representatives in the running of the litigation will create more costs than it actually saves. There are still situations where a client would be better off simply handing a case to counsel, letting him or her do the job, and reporting back with the outcome at the end.
Obviously, digitalization is extremely helpful to work efficiently, and to delegate to machines and computers menial tasks that otherwise would have been done by people, constituting rather frustrating and not very satisfactory work. On the other hand, it requires constant investment, and the upgrades of our firm's tools are a considerable part of our expenses. While traditionally, after personnel costs, office space was the second cost item, it is my impression that IT-related expenses have now become more substantial for a law firm and are the second largest cost item.
While traditionally, after personnel costs, office space was the second cost item, it is my impression that IT-related expenses have now become more substantial for a law firm and are the second largest cost item
How is Novartis “reimagining the world of medicine”, as the company has put it? How are you advising one of the largest pharmaceutical companies in the world regarding innovation, new technologies, and possibly the implementation of AI and machine learning? What are the regulatory measures to be respected?
New technologies such as advanced AI are helping Novartis increase patient access, improve customer experience, drive automation, provide predictive analytics, and even detect potential misconduct. It also has the potential to improve the speed and accuracy of diagnosis, and drug discovery, among other applications that will reimagine medicine and improve patients' lives.
These technological developments come both with opportunities and challenges, leading to important questions that Novartis and its Board need to address thoughtfully. For instance, we ensure that the use of AI systems has a clear purpose, that is respectful of human rights, is accurate, truthful, not misleading, and appropriate for the intended context.
What are the company’s environmental, social, and governance (ESG) initiatives and goals?
Novartis has several ESG targets which it pursues as part of its core strategic planning. First and foremost, the company has the ambition to be a pharma industry sector leader in material topics and be recognized for its ESG achievements beyond the industry. Those topics are embedded into our core business model, thus maximizing our social impact in the areas of innovation and access to medicine. Moreover, our aim is to stay ahead of legislative changes to support Novartis' vision to become the most valued and trusted medicines company. Primary goals circle around innovation and access to medicines on a global scale. The environmental sustainability plan provides for a substantial reduction of carbon emissions, with a goal of carbon neutrality by 2025; it also envisages carbon neutrality in our supply chain. Both waste disposal and water consumption shall be reduced by half in 2025 compared to 2016. Finally, we carefully monitor compliance with ethical standards annually.
We continually intensify our efforts to integrate our environmental, social, and governance (ESG) activities into our daily business, which we believe is vital for the success of Novartis. Among a variety of steps aimed at reaching as many patients as possible, we renewed our commitment to continue our R&D efforts in neglected tropical diseases and to work further toward the elimination of malaria. In addition, we are partnering with the American Society of Hematology to deepen our efforts to fight against sickle cell disease in Africa.
The Board of Directors also remains vigilant in its governance oversight efforts by putting added emphasis on values such as integrity. Likewise, the Executive Committee and the Board of Directors are keeping up the intensive dialogue with stakeholder groups and working towards achieving our vision.
As a Member of the Board of Directors, do you have any particular goals in mind for the company this upcoming year and if so, what are they?
Our structural transformation from a diversified healthcare conglomerate into a focused, innovative medicines company will be largely complete after the planned spin-off of Sandoz in 2023. We also begin 2023 with a simplified organizational structure that will spur innovation and give us a stronger foundation for growth in a rapidly changing global business environment.
Our vision is to become the most trusted and valued medicines company in the world - valued not only for our business performance, but also for the difference our innovation makes for patients and society. Our investments in R&D are key to achieving these ambitions.
As we continue innovating for patients, millions around the world are still without proper access to healthcare. Translating the latest science into lasting progress requires us to work with healthcare systems and other stakeholders to advance access for underserved patients in low- and middle-income countries, while also tackling access barriers in some of the wealthiest countries in the world.
Novartis: Our purpose is to reimagine medicine to improve and extend people's lives. We use innovative science and technology to address some of society's most challenging healthcare issues. We discover and develop breakthrough treatments and find new ways to deliver them to as many people as possible. We also aim to reward those who invest their money, time and ideas in our company.
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