- Date
- 26 April 2023
Business of Law Firms
SRA in-house counsel report raises eyebrows
SRA in-house counsel report raises eyebrows
By Jake Rickman |
What do you need to know this week?
Welcome to TCLA’s weekly series on the Business of Law Firms.
Last month, the Solicitors Regulation Authority released its “In-house solicitors thematic review”. Its conclusions are… perhaps too optimistic, to say the least. This is because a few dozen in-house solicitors have drafted and published an open letter to the professional regulator stating that the review “understates the severity of the risks present in the in-house environment [and] is inadequate in its conclusions” as to the cause of the risks.
As The Lawyer observes in an article published on Monday, at the core of the backlash against the SRA is the notion that the regulator does not do enough to support in-house counsel from the numerous legal, regulatory, and ethical challenges in-house lawyers face from their own employer. The letter calls on the SRA to implement a “full programme” that mitigates the risks identified in the letter by re-evaluating matters like:
- “Client-employer engagement”;
- Employment contract terms;
- Corporate governance;
- In-house solicitor well-being;
- Annual certification;
- Community discourse; and
- Enforcement.
The report and subsequent response by certain in-house solicitors are relevant for future solicitors for at least two reasons:
- Together, they encapsulate in practical terms the nature of the relationship between the in-house solicitor and their client (i.e., employer); and
- They shed a light onto the challenges facing in-house lawyers practising in England.
To dig a bit deeper, customs, regulations, and certain laws dictate that in-house solicitors treat their employer as their client. This broadly accords with the nature of any regulated legal professional, each of whom in some capacity provides clients with confidential and protected advice on the legal and commercial challenges the client may face.
From a commercial perspective, business clients hire in-house solicitors because it makes operational and financial sense to deal with certain lower-risk, higher-volume matters by an employee rather than a third-party advisor (a salary will almost always be cheaper than paying a lawyer by the hour). Likewise, in-house solicitors, being legal professionals, are best placed to coordinate with external legal advisers when it becomes necessary to instruct them for more complex or higher-value work.
However, there are certain dynamics that arise between in-house lawyers and their employers that are not present between private practice lawyers and their clients.
For one, in-house legal advisers tend to be treated by the business as an expense rather than a source of revenue generation (which is of course the opposite of each lawyer in a private practice). This is because they are rarely core to the actual source of the business’s income. As a result, this can create a situation where they may be on the chopping-block in economic downturns.
This is partially why certain in-house lawyers feel pressure to conform to senior management’s requests and expectations, even when doing so might be in strict violation of regulatory rules. The concern is that, by refusing or obstructing a “commercially-minded” request that in fact runs against the regulatory grain, the resistant in-house lawyer may face sanction or otherwise threaten their future with the employer. In fact, this dynamic has resulted in resignations and terminations, (according to The Lawyer article published on Monday).
Signatories to the open letter are calling on the SRA to take a more proactive approach to regulating in-house solicitors in the way that the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) regulate professionals in the financial services sectors.
