In-house lawyers “should add regulatory rules to employment contracts”

---

Swallow: Tension in in-house lawyers’ role

In-house lawyers’ regulatory responsibilities, for example the Solicitors Regulation Authority (SRA) principles, should be written into their employment contracts to ensure their independence, the former head of LawtechUK has argued.

Jenifer Swallow, now a strategic advisor to companies, said recent corporate scandals were “highlighting the tension” between the requirement on in-house lawyers to be independent and their status as an employee.

Ms Swallow, a former City solicitor and general counsel at money transfer company TransferWise (now just Wise), said in-house counsel were bound like any other lawyer by specific regulatory and professional obligations, “which include a duty to act with independence, and to give precedence to their professional obligations over the interests of their client employer.”

Ms Swallow said the SRA was carrying out a thematic review of the in-house legal role, with environmental, social and governance issues “high on the corporate agenda”, encouraging organisations to adopt “ever higher standards” of governance and societal responsibility.

“To respond to these circumstances and get ahead of the risks, a practical step in-house lawyers and business leaders can take, is to acknowledge in writing the regulatory obligations of in-house lawyers via an amendment to their employment contract.

“This is particularly pertinent for the general counsel or chief legal officer but is relevant to all in-house lawyers.”

Ms Swallow has drafted a template contract amendment letter with business leadership consultant Ciarán Fenton, which was published on LinkedIn.

The letter includes the SRA principles in its 2019 code of conduct for solicitors and suggests that the letter could be signed as a deed with witnesses due to the absence of consideration.

The letter is coupled with a sample board paper, which includes a statement on proper resources: “We also highlight to the board that the legal function needs to have adequate budget and resourcing, access to and profile across the organisation, and presence at the leadership table, to enable it to meet its regulatory obligations and to mitigate the risk of our organisation failing to meet its objectives and/or being exposed to serious conduct and other risk events, including exposure to individual directors.”

In some suggested ‘talking points’ to make the case for this, Ms Swallow describes the Post Office scandal as “one of a number of examples illustrating what can go wrong for society, business and for lawyers”.

The idea came out of a workshop arranged by Paul Gilbert, director of LBC Wise Counsel, which advises in-house lawyers, to provide input for a submission by Richard Moorhead, professor of law and professional ethics at Exeter University, to the public inquiry into the Post Office scandal.

A paper looking at the issues of in-house lawyer regulation and practice that then emerged also recommended a reporting line from the general counsel or lead/sole lawyer to the senior non-executive director or chair of the board, not only to the CEO or CFO, and that such a lawyer could only have their employment terminated by the board.

Other recommendations included establishing the role of compliance officer for legal practice within in-house departments as well as law firms, introducing specific authorisation to practise in-house, and a “formal pathway” for lawyers working in a corporate and institutional context to escalate issues and request support from their regulator in the discharge of their duties.

This could include the regulator “formally reiterating to the client the independence requirement for lawyers working in-house, and the application of consequences that impact the client organisation, despite the regulator not having the legal remit to hold them to account”.

These could include loss of legal professional privilege and withdrawal of practising certificates for its lawyers, alongside issuing a public notice to this effect.

In a blog on the scandal earlier this year, Ms Swallow wrote: “Corporate and institutional illegality and misconduct and their real-world consequences are far from uncommon.

“There are many stories that do not make it into the press. Lawyers, and in particular in-house lawyers, play a key role preventing and handling such activity, with duties owed not only to their client, but to society at large.

“The environment in which they operate and the standards to which they are held are of much greater significance than the current regulatory and societal focus attests.”