Of all the recent public inquiries – including Grenfell and infected blood – the Post Office Horizon Inquiry has done most to put in-house lawyers in the line of fire. And judging by the inquiry performance of former general counsel Ben Foat, it is an uncomfortable spot.

These inquiries have highlighted the need for in-house lawyers to hold the ethical line – a task for which some have the gravitas and experience to succeed while others do not. Whether this failure is wilful, down to a lack of curiosity about what is happening in their organisation or fear for their own position – or all three – is hard to call. What we do know, as a new scandal over Mohamed Al Fayed’s behaviour unfurls, is that behind the NDAs, Grenfell’s supply contracts, NHS blood procurement and the persecution of postmasters, were in-house lawyers.

Anthony Kenny, GSK’s assistant GC, says in-house counsel need to do more than just ask themselves: ‘is it legal?’. ‘An action might be legal but that does not mean it is the right thing to do,’ he points out.

Certain provisions of the Companies Act 2006 and recent UK environmental, social and governance policies make it clear that businesses have a broader range of responsibilities than just duties to shareholders. Human impact is likely to be a driving force of future policy and regulation. Taking a narrow legal view increasingly runs contrary to societal thinking, and is potentially damaging to the reputations of the individuals and businesses involved.

The Gazette spoke to in-house counsel across industry sectors. It is striking how many have had to refuse to act or resigned in their careers due to ethical conflicts. It was not a difficult decision – it had to be done in the circumstances, they said. These are the cases of ethical integrity that the public do not hear about.

‘In private practice, you can decline to act if an ethical conflict arises but continue to work for the client on other matters,’ says one tech-focused GC. ‘But in-house, you have one client. For a GC this can be an existential question.’

Although part of a GC’s job is to stand fast, resistance to the will of the CEO or other board members can be seen as obstructive and insufficiently ‘business-focused’. Former Post Office CEO Paula Vennell’s testimony was revealing. She observed that the then GC Susan Crichton was more loyal to her professional conduct requirements than to the needs of the business. This highlights a common frustration – that business leaders do not understand in-house counsel’s role.

The SRA’s March 2024 draft guidance Understanding in-house solicitors’ professional obligations as an employer was a step forward. However it lacked consequences for employers that fail to respect their in-house counsel’s professional obligations. The SRA points out, not unreasonably, that its remit does not stretch to sanctioning employers.

In-house counsel have fewer protections than company secretaries, which are protected under the Companies Act 2006, and data protection officers. If they are fired, no one externally will ask why.

In-house lawyers say that the SRA does not do enough for them. SRA ‘guidance’ published this week restates their obligations, provides information on the parameters of legal professional privilege, and reminds in-house lawyers to record and report wrongdoing. But it is not a source of support. Instead, in-house counsel have long relied on their own networks and digital communities. ‘Being in-house counsel can be lonely,’ says one senior GC who works in the crypto sector. ‘It is better than when I started out, with the growth of digital groups. It is important to build a network early in one’s career during the good times so that you can call on that when things get difficult.’  

The picture is further complicated because in-house counsel are not always solicitors, so may not fall under the SRA’s jurisdiction.

In the absence of structured support, before accepting a role in-house counsel must do due diligence to minimise the risk of being placed in an untenable position. This self-invigilation must be ongoing, as the nature of the business and their role within it will evolve. Factors to consider include being frank about their own character: are they willing to be unpopular? Also – crucially – does the business understand the role of in-house counsel?

A senior GC says: ‘One question to ask at interview should always be: “What do you see as my role as GC?”. Sometimes the response reveals that the business is unclear as to whether they require a head of legal turning around contracts, or a GC advising the board.’

When junior people are hired as GCs they have not had time to learn the ‘tricks of the trade’ and can be pushed into risk acceptance, I was told.

Culture and reporting lines as well as expectations of the job title are also important. In his testimony, Foat said that at the Post Office the role of GC became ‘more removed’ from the board, which he attended only by invitation. Ideally, a GC will sit on the board in an advisory capacity so they have an oversight of core business strategy and can spot governance risks. Structuring a business so that non-legal staff report ethical and compliance concerns directly to the legal function also makes sense.

Although many GCs will report to the CEO, it is also common for them to report to the CFO or the COO. If the latter, in-house lawyers say there can be tension between the operational focus of the COO and the professional obligations of the GC. Board members need to value the GC’s opinion.

All view the Horizon inquiry as a watershed moment. Unlike the Financial Conduct Authority, the SRA has only recently taken an educative approach towards business leaders. Now the calamitous consequences of the Post Office scandal have supplied a new tool for the in-house counsel’s scarce armoury: an updated equivalent of ‘do you want to see this on the front page of the Daily Mail?’.

‘I hope lessons from the Post Office scandal can be built into legal education at law school and as part of CPD for the legal profession,’ says Kenny. ‘It provides multiple case studies of how not to act as a lawyer.’

 

This is the first article in a series focused on in-house professional and business topics

 

Katharine Freeland is a freelance journalist

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