Ethics must underpin the work of the in-house lawyer, but this can sometimes be difficult to reconcile with business needs. Tracey Calvert provides a guide to the SRA Principles and Code of Conduct and the ethical values which must be displayed in the in-house environment
It has long been acknowledged that the SRA Handbook does not fit the bill in terms of proportionate regulation of the in-house legal sector, and that what we currently have in terms of conduct requirements is a stopgap position. In a speech delivered in March 2015, Enid Rowlands, the chair of the Solicitors Regulation Authority (SRA) board, announced that a review of in-house regulation was firmly in the regulator’s sight. In a powerful sound bite, she referred to ’the conversation that we never had’ with the in-house community and said that the time had come to review the SRA Handbook and to reflect on proportionate regulation in a sector of the profession which is growing in both size and significance.
The review will be conducted over a period of 18 months and will unquestionably examine and deliberate on the essential behaviours which must be exhibited by in-house lawyers if they are not to pose a threat to risk-based regulation. For example, Rowlands was keen to put an examination of the meaning of independence on the project agenda saying, ‘Some of the questions that occur to me are: could we make it clear what a statement of independence is? That is absolutely key. What does independence mean? Can we in some way enshrine that notion and protect in-house lawyers better as regulator?’.
The SRA focus on in-house practice is long overdue, and in many ways the SRA is playing catch-up with lawyers in the field. Many in-house lawyers are already having such discussions about the compatibility, or sometimes tensions, between their own ethics and the business’s expectations of them. The inevitable conclusion which must be reached with such soul-searching, is that the lawyer has some non-negotiable ethical qualities which they must demonstrate personally and which they must promote within their business. Where these cannot be reconciled, the lawyer needs to be able to challenge the business’s expectations of them and change the corporate mind-set.
Working in this sector is not for the faint-hearted
Being an in-house solicitor does not mean that the individual can put to one side their professional values, and this means that working in this sector is not for the faint-hearted. After all, many in-house solicitors are the only regulated person within their organisation, or at the very most in a minority, and are working with others for a common business goal but with the added behavioural pressures imposed on them by their professional status. Under the circumstances, it is essential for every in-house lawyer to have a clear idea about the ethical framework, the boundaries, the ‘no go’ areas, and the behaviours which must be challenged.
Ethics must underpin the work of the in-house lawyer. An ethically trained mind and response mechanism is the characteristic of a good lawyer, but this can sometimes be a difficult concept for an employer/client to reconcile with business or other aspirations. It is no wonder that in-house lawyers are sometimes seen as the business prevention unit; perhaps a more positive interpretation would be to regard the legal hub as the ethical conscience of the entity.
Sometimes this ethical backdrop means that the lawyer will not be able to carry out the client’s instructions (as would equally be the case if an outside law firm was instructed). The in-house lawyer has to comply with the same set of SRA Principles as their private practice counterparts and must always bear in mind such duties as integrity, independence, maintaining the trust the public places in the profession, and upholding the rule of law and the proper administration of justice. It may be easier for a lawyer in private practice to explain to a client the need to resist instructions which jeopardise their compliance with the Principles on the basis of the personal consequence of breaches. However, where such a conversation is needed in-house, the lawyer ignores it at their peril.
Furthermore, it is sometimes easy to forget that many characteristics of professional conduct, as now expressed in the SRA Code of Conduct (the Code), apply to all lawyers regardless of style of practice. Whilst the Code and appropriate application will be a part of the SRA review, there are many non-negotiable features which will undoubtedly survive such scrutiny, but which are often the cause of misunderstanding.
A very obvious and frequently seen example of misapplication relates to the duties arising in respect of conflicts of interest. The SRA requires that own interest and client interest conflicts are considered and that there are effective systems and controls in place to identify such issues. Whilst own interest conflicts can be covered by a business-wide policy covering the need to declare self interest (a solicitor having an own interest conflict with his client), the connected issue of client conflict is often not considered. Frequently there is no evidence of the exercise of judgement which must be made about whether it is possible to act in the best interests of one or more clients when acting for them in the same or related matter (a client conflict). This is a crucial decision to make and it is not uncommon for an in-house lawyer to have a conduct conundrum in this area because, quite simply, they are asked to act for two or more clients and they cannot act in the best interests of all of them. Consider the dilemma if asked to act for both the business and an employee in a employment-related matter, or two group companies in a commercial situation.
These duties trigger a need to consider many client inception matters in just the same way as a private practitioner would
Similarly, it is often easy to put to one side client care and confidentiality duties when in an internal role, thinking that the outcomes do not apply. This is not the case. It is also not the case that client care is simply about time keeping and client care letters. The SRA’s expectation is that every solicitor will comply with such principles as the duty to act in the best interests of the client and provide a proper standard of service, and many of the client care outcomes in the Code are applied to in-house practice. These require the individual to achieve such behaviours as to provide services to clients in a manner which protects their interests in their matter, subject to the proper administration of justice, to comply with the law and the code when acting or terminating instructions, and to have the resources, skills and procedures to carry out the clients’ instructions. These duties trigger a need to consider many client inception matters in just the same way as a private practitioner would: do we have the ability to act in the matter, do we have complete instructions and authority, is there a record of what is agreed? Lack of documentary evidence of such matters undermines the lawyer’s ability to demonstrate the behaviours have been met.
The specific confidentiality duties which the SRA expects solicitors to meet must also be in evidence. An in-house solicitor is in the same conduct position as a private practice practitioner and must achieve outcomes relating to keeping client information confidential, except in circumstances where the client consents or the law requires disclosure. There is a requirement to have effective systems and controls in place to enable the individual to identify risks to client confidentiality and to mitigate those risks. Often, however, this need for process is overlooked. Whilst a business-wide policy about non-disclosure may deal with certain concerns such as IT threats and the like, a policy and understanding about the risks presented by the nature of the solicitor/employee relationship with the client/employer is a sensible precaution.
Consider also the extent to which ownership of legal risks is entrusted to the in-house lawyer. Observers often describe these individuals as the ethical gatekeeper or ethical champions in such an environment. With the growing amount of legislation aimed at promoting organisational ethical behavior - anti-money laundering, bribery and corruption, data protection legislation and so on - it is important that there are no misunderstandings about the lawyer’s role in keeping the business safe and legal.
It is important that there are no misunderstandings about the lawyer’s role in keeping the business safe and legal
In respect of such legislation it is essential that a consensus is reached about who has responsibility for or ownership of internal policies supporting compliance. If it is the legal team, do they have the proper skills and resources to protect their employer, and the support and authority to ensure adequate monitoring of the effectiveness of systems and controls? If it is not the legal team’s responsibility, then is it clear where ownership lies and the role that the lawyers have in supporting the risk owners? Equally important is a consideration of whether there are any gaps in coverage.
In-house lawyers are living in interesting times. With the regulatory spotlight moving into their arena there is the possibility for positive changes to be made to ensure proportionate regulation of them and their particular risk profile, and the development of a mutually beneficial relationship with the SRA. The sector should be preparing for this by reflecting on such issues as those discussed in this article and by considering the ethical values which must be displayed in the in-house environment.I