In-house lawyers are way too commercial and act more like their Master’s voices, according to Judge Rackoff, apparently a highly distinguished district court judge in the US, dealing with commercial law. He’s interviewed in IBA’s Global Insight in February/March edition http://www.ibanet.org/Article/Detail.aspx?ArticleUid=99762921-4134-4421-8baf-9cb62ec51ee5, scroll down to blue section “the commercialization of the legal profession”). Also, in his opinion, attorneys cannot keep their back straight against the onerous demands of in-house counsel because of the increasing competition between law firms.
If you were to ask the internal client of an in-house lawyer what he or she thinks of the commercial qualities of their legal colleague then you would probably hear something completely different: they will say their in-house counsel should think less legally and be more business oriented, more proactive, creative, adding more value etc.
Two perspectives on the performance of in-house lawyers, the lawyer’s perspective and the business perspective. This is the in-house lawyers challenge. They do not see this as a problem and they should not. It is the reality in our society that economics and law may concur in certain respects but in-house lawyers are happy to mix economics with their legal work. Attorneys do the same, from a more distant position.
In-house lawyers choose sides; they will go for the optimal position of their company. This is what they are assigned to do, they should be focused on the company interest. And this may have as a consequence that they do not interpret a rule in the way a judge would do. The law is not always clear, society is changing and thus the interpretation of a rule. And also, much of the in-house legal work relates to new products or services or new markets for which there are no rules yet. The judge I referred to in the beginning of this blog suggests the in-house lawyers advise is suspicious. Of course the private sector is not perfect – nor is the public sector for that matter – but we live in a market-oriented economy and companies may go for profit optimization. And they may choose to hire internal lawyers to help them address the legal risks involved or to engage outside counsel to help them.
It is a pity the judge apparently feels some distrust against in-house lawyers. Dutch in-house lawyers encountered the same sort of distrust when the legal privilege of an in-house counsel who was registered at the Dutch Bar was refused, because, according to the European Court of justice in a competition case “an in-house lawyer could not be regarded as acting independent from his client (his employer).”
My point is: An in-house counsel ’s goal is not to cover up breaches of the law; an in-house lawyer’s goal is to let the company reach its commercial objectives in a legal way. Bridging the gap between economic reality and the law requires a sound judgment on legal issues and on many related issues. In many cases in which the in-house lawyer is involved there are no clear rules yet. No lawyer would come to the conclusion in such cases that everything is allowed: the point is what aspects or eventualities does he then take into consideration; and even if the law allows a certain transaction, the lawyers will ask whether it is right to let the company enter into such transaction (is it legal, is it right?).
In-house lawyers are indispensable for managing legal risk within their organizations. They have added value because of their business and organization insight. But don’t expect in-house lawyers to endorse what business people do if it’s legally flawed. Nor will in-house lawyers assert positions which they feel are untenable. This is understood by in-house lawyers: they have a professional duty to uphold their integrity and will refrain from engaging too intensely with business.
(This Blog was published in 2013 in Dutch; I thank Mark Prebble, of Lawyers-in-Business.co.uk for his comments on this English version)