In-house solicitors thematic review – do the findings resonate with you and, if so, what action can you take?

Safeguarding independence

As referred to above, in-house solicitors must comply with the seven SRA Principles, which comprise ‘the fundamental tenets of ethical behaviour’ expected of all solicitors, wherever and however they work. Although in-house solicitors must act in the best interests of their client (i.e. their employer), those Principles that protect the public interest and the reputation and trust of the profession take precedence. Where there is a conflict between the client’s interests and other Principles which take precedence over a client's interests, relationships can be challenging for in-house lawyers and there may be pressure on an individual to do what is asked regardless of their regulatory obligations.

The SRA found that in-house solicitors generally felt that they are in a good position to withstand pressures that could affect their ability to provide objective and impartial advice to the companies for which they worked, and that their independence was highly valued by organisations.

However, the survey carried out by the SRA showed that some in-house solicitors may not have the support and internal controls to maintain their independence; 5% of respondents to the survey indicated that they had been pressured into suppressing information that conflicted with their regulatory obligations. In addition, just over a third of respondents had experience of informing their employers that in certain circumstances the regulatory duties of the solicitor outweighed their duties to their employers. Some senior in-house solicitors also recognised that balancing regulatory responsibilities while maintaining effective working relationships with others within their organisation could be challenging. The SRA found that it can be particularly challenging for in-house working relationships when an in-house solicitor’s advice does not support the business' objectives. 

The SRA survey identified that a significant number of in-house teams had rewards or bonuses linked to the commercial success of the business which the SRA considered could pose risks in terms of maintaining independence and managing ethical pressures. The SRA asked in-house leaders if they had any concerns in this regard but most disagreed, on the basis that this was either because it was not the main way they were remunerated or because bonuses were usually based on performance or other metrics.

Action points

The SRA’s recommendations in this area include that in-house solicitors may wish to:

• Consider whether there are any risks that professional relationships with external advisers could become too co-dependent and whether this is in the best interests of the employer. 
• Develop, review, or improve policies for instructing external firms, setting out responsibilities and approval requirements to identify conflicts and independence risks.
• Identify key employees, current panel members, their specialisms and have an objective and independent process to select them.
• Develop guidance that sets out the purpose and parameters for secondees joining in-house teams or in firms.
• Ensure that employers understand the regulatory obligations of their in-house lawyers and set mutual expectations of roles and regulatory obligations with employers.

Managing risks with policies and controls

The SRA noted that whilst in-house solicitors are not required to have specific controls or procedures, they must be able to demonstrate compliance with their regulatory obligations and to justify their decisions and actions. In addition, a lack of controls around instructions could put the legal function at risk of being unfairly pressured by colleagues who may not have authority to instruct it and/ or to take on matters that are outside their competence. 

The SRA review indicated that some in-house solicitors had experienced challenges in managing instructions and that 16% of senior leaders had experienced difficulty managing pressures to act in the interests of someone other than their employer, such as associated joint venture companies, international subsidiaries and senior shareholders. A small minority of respondents reported experiencing pressure from colleagues not to disclose information that was not in the best interests of the client.

The SRA found that most in-house teams did not have any specific policies and procedures to identify regulatory or ethical risks and that almost all in-house teams did not keep central records of any regulatory or ethical risks. There was often an over reliance on what was ‘common practice’ to manage their regulatory issues. The SRA found that this could mean some teams are not adequately prepared to spot risks and manage pressures.

Action points

The SRA’s recommendations in this area include that in-house solicitors may wish to:

• Agree formal terms of engagement so that employees or other parties understand how to instruct and work with the legal team.
• Keep central records to provide oversight of issues, track any patterns and trends, and provide a focus to consider ethical risks at an early stage.
• Formally identify who the client is and manage organisational expectations which could help alleviate pressures on in-house teams.
• Maintain oversight with capacity trackers and case management systems.
• Implement clear reporting lines and regularly review work.
• Review whether the employer’s current systems and procedures safeguard confidentiality, and adequately covers regulatory, ethical, or legal risks.
• Train staff how to manage and identify conflicts and confidentiality risks.

Managing pressures and meeting regulatory obligations

The SRA noted that most in-house solicitors had indicated in responding to the survey that they often had to navigate a range of political and commercial pressures, including those from executive stakeholders, senior leaders in public office, consumers, pressure groups and the press. 

Whilst most respondents to the SRA’s survey felt that their regulatory obligations had not been compromised to meet organisational priorities, a minority of respondents felt that their obligations had been compromised, and highlighted that time constraints and heavy workloads were often the main reason. In addition, one in four in-house leaders reported that they had experienced pressure to change their advice to support commercial interests.

The SRA found that the results of their survey indicated that balancing commercial imperatives, client needs, and ethical obligations can be extremely challenging when working in-house. The SRA noted that the stakes are particularly high for employees and in its review saw evidence of in-house solicitors considering the difficult decision to leave a role.

Action points

The SRA’s recommendations in this area include that in-house solicitors may wish to:

• Develop a dedicated conflict of interest policy and checklist.
• Consider how organisational expectations can be managed in order to support solicitors who may need to say no in certain circumstances.
• Follow up with further engagement, communications, and training to improve understanding about receiving instructions, roles, responsibilities, obligations, and standards of service.
• Ensure teams are supported with regular one to one’s, supervision, and team meetings to discuss challenges, concerns, and questions.
• Ensure that workloads are not so unreasonable that it affects standards of service or competence.
• Set aside time to reinforce and remind colleagues about their regulatory duties.
• Use metrics and service level frameworks to demonstrate value and manage workflows.
• Consider whether their risk management and oversight is adequate where case management systems are used to manage workloads/ work-streams.

Maintaining continuing competence

A key risk identified by the SRA was that in-house solicitors have the time and support needed to maintain their continuing competence and regulatory obligations, as failure to reflect and undertake suitable learning and development could affect their ability to provide a high standard of service.

The SRA reviewed the learning and development activities that had been undertaken by in-house solicitors and found that whilst there was an even proportion of commercial and legal training, only 35% of training involved ethics, professionalism and judgment, and 25% of junior solicitors had not received any ethical training. The SRA considered that this could mean that these solicitors do not have enough support to recognise ethical issues.

Most survey respondents felt that they had enough time to maintain their competence. However, many also reported that heavy workloads, a lack of training and support and multi-faceted roles made it difficult to find appropriate learning opportunities. One in four junior in-house solicitors felt that they did not have enough support to maintain their competence, and there appeared to be little oversight of learning needs.

Most junior in-house solicitors told the SRA that they self-directed their work and approached their line manager for supervision as and when it was needed. Some of these solicitors reflected that this meant a lack of regular support which may make it difficult to identify when tasks are beyond their competence or when they need to ask for help. The SRA found that a lack of supervision creates a potential risk for both individuals and the supervising solicitor, as those being supervised may act outside their competence or without appropriate authority.  Supervising solicitors are accountable for the actions of those they supervise and should make sure they can demonstrate this is taking place. The SRA issued the Effective Supervision – Guidance on 23 November 2022, which sets out the approach that regulated individuals should take to meet requirements. 

Action points 

The SRA’s recommendations in this area include that in-house solicitors may wish to:

• Use the SRA’s learning and development template or have a training record, and consider keeping records to reflect on learning needs and demonstrate competence requirements are being met.
• Identify learning needs by holding regular surveys.
• Structure training programmes by aligning it to the SRA’s statement of competence.
• Provide universal training for the whole team to raise standards.
• Support teams with regular one to ones, supervision, and team meetings.
• Ensure learning and development is up to date and teams are competent.
• Integrate the SRA’s competence statement into performance management systems or learning and development programmes.

Ethical leadership and ethical risks

The SRA review indicated that few in-house teams had dedicated policies that dealt with ethical behaviour, and there may be circumstances where ethical challenges could arise leaving in-house solicitors without the guidance they need. 

Whilst many senior leaders that responded to the SRA survey commented that ethical issues rarely arose or were not directly relevant because they were dealt with by dedicated compliance teams, the SRA was of the view that ethical concerns, such as confidentiality or conflicts, should always be within the scope of the legal function. It was also pointed out that identifying risks and regulatory challenges could be more difficult for teams under pressure without infrastructure that puts ethics firmly on the agenda.

The survey also indicated that many in-house teams did not have a direct role to play in the Environmental, Social and Governance (ESG) strategy of their employer company, although some senior leaders felt that their governance roles provided an ability to influence ESG agendas.

The SRA noted that in-house teams of large purchasers of legal services are using their influence to demand high ethical and social standards more widely from the legal profession and that 15% of in-house teams surveyed discussed instructing external firms based on their culture and values.

Concluding remarks

The SRA’s Executive Summary of the in-house solicitors thematic review refers to the significant scrutiny currently facing the in-house legal sector. The reference is likely to be to the Independent Review into the Royal Institution of Chartered Surveyors by Alison Levitt QC published in September 2021 and press coverage of other matters critical of in-house lawyers. It is encouraging that the SRA has carried out the thematic review to enhance understanding of the in-house sector so that it can better provide practical support and guidance to help the in-house legal sector comply with professional obligations. Further, the publication of the SRA thematic review should open the door to enable the in-house community to have open conversations about regulatory obligations with employers. 

In-house legal teams should also be aware of the ‘Workplace Environment: risks of failing to protect and support colleagues’ published by the SRA on 4 May 2023, with case studies, following the new Rule 1.5 in the SRA Code of Conduct for Solicitors which requires solicitors to treat colleagues fairly and with respect and not to bully, harass or discriminate them and requires managers to challenge behaviour that does not meet this standard. 

Whilst the existing and promised guidance and support is very welcome, it is expected that the SRA will be more actively involved in monitoring in-house practice in light of the review findings, and some of our clients are already experiencing this interest. Now is the time to carry out a review of working practices and approach to identifying and managing ethical risks. We would be very happy to speak to you should you need advice on your professional obligations and/or in-house ethics training for your legal team – do contact any of the authors directly for further information.

Co-authored with Samantha Churms, Risk & Compliance Counsel