HANDY HINTS...... FOR IN-HOUSE COUNSEL. Law Society of New South Wales Corporate Lawyers Committee



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HANDY HINTS...... FOR IN-HOUSE COUNSEL Law Society of New South Wales Corporate Lawyers Committee

AIM In-house lawyers are subject to the same ethical rules as private practitioners. However, in-house lawyers face challenges that do not apply to private practitioners. The Corporate Lawyers Committee of the Law Society of New South Wales has prepared this document to assist in-house lawyers in dealing with these challenges. This document should be read in conjunction with the Legal Profession Act 2004 (NSW) and the Legal Profession Regulations 2005. This document is not part of the Revised Professional Conduct and Practice Rules 1995 (Solicitors Rules) under the Legal Profession Act 2004. The contents are not binding on the practice of in-house lawyers and are provided to be instructive only. Under some headings, the relevant Solicitors Rule has been included in square brackets for easy cross reference. Acknowledgment The Law Society of New South Wales Corporate Lawyers Committee wishes to acknowledge Councillor Coralie Kenny for initiating the production of this document and to thank its 2011 committee members for their valuable and practical input. Disclaimer This document has been produced solely for use by in-house lawyers to provide general assistance in relation to some aspects of in-house practice. It is not exhaustive of issues which in-house lawyers may encounter, nor does it constitute legal advice. It is a general guide only and practitioners must take care to fully consider the circumstances and laws applicable to their circumstances. While every care has been taken in the production of this document, no legal responsibility or liability is accepted, warranted or implied by the authors or The Law Society of New South Wales and any liability is hereby expressly disclaimed. Ethics Unit If you need more information about your professional and ethical obligations, you can contact the Ethics Unit. T: (02) 9926 0114 F: (02) 9221 5804 E: ethics@lawsociety.com.au 2012. The Law Society of New South Wales Except as permitted under the Copyright Act 1968 (Cth), no part of this publication may be reproduced without the specific written permission of The Law Society of New South Wales.

HANDY HINTS FOR IN-HOUSE COUNSEL 1: The same professional obligations apply As a lawyer who practises in-house in New South Wales (often referred to as a corporate lawyer), you have the same professional and ethical obligations as any other legal practitioner in New South Wales. First and foremost, you are an officer of the court. Further, you must comply with the Legal Profession Act 2004 (NSW) and the Legal Profession Regulations 2005. You must also comply with the Solicitors Rules and you should be familiar with the legislation that governs the conduct and obligations of your profession. [Rule 4] 2: Your client As an in-house lawyer, you are employed by your client, which is generally a corporation, and you owe your professional obligations as a lawyer to your client. You do not owe your professional obligations to the persons who manage your client, whether the Chief Executive Officer or Managing Director, individuals in senior management positions, or directors of the Board of your client. 3: Your priorities Your ethical obligation priorities are the same as for any other lawyer. Your first priority obligation is as an officer of the court, like any other lawyer. Like any other lawyer, your next priority obligation is to act in the interests of your client. These obligations may at times appear to conflict with the obligations imposed on you as an employee, although, as with an inhouse lawyer, employees have obligations to their employer. If, for example, an individual in a senior management position is seeking legal advice to support an agenda that is not in the interests of the employer company, then as an in-house lawyer your obligation is to the company, not to the senior executive. It is prudent when establishing the terms of your employment as an in-house lawyer to ensure your employment contract clearly recognises these obligation priorities. 4: What are in-house lawyers there for As an in-house lawyer you are there to help your client achieve its business objectives whilst being aware of opportunities and constraints within its relevant legal environment. Your role in your client s organisation is therefore primarily to recognise and provide pro-active input into the management of legal risks. You also have an opportunity to ensure your client complies with the law and has in place good corporate governance practices. The in-house lawyer is often thought of as the organisation s conscience or its protector. Although the Board and senior management of your client also have legal obligations to do the right thing, it is often the role of in-house lawyers to constantly and vigilantly assist those persons to determine what the right thing is. It may be, however, that your organisation predominantly maintains an in-house legal function for other reasons, for example to save on external legal spend. Whatever the reason, your professional obligations remain the same. Handy hints for in-house counsel 1

As an in-house lawyer you are there to help your client achieve its business objectives whilst being aware of opportunities and constraints within its relevant legal environment. 5: Your obligation to maintain client confidentiality As with any lawyer, and any employee, you should maintain confidentiality of information given to you by your client both during and after your employment, unless there is an overriding legal obligation to disclose such information, or a legal compulsion to do so. As with other professional obligations, your professional obligation to maintain confidentiality is owed to your client. You do not owe your professional obligation of maintaining confidentiality to the persons who manage your client, whether the Chief Executive Officer or Managing Director, individuals in senior management positions, or directors of the Board of your client. Such confidentiality will be maintained within your client as persons who are employed by, or work for, your client are all your client for the purposes of maintaining confidentiality. Given the nature of in-house practice and your position as a confidant of the business, it is also prudent to apply professional judgment when determining what information (if any) should be disclosed by you, and to whom, by taking into consideration: (a) the nature and content of the information; and (b) the manner in which it was disclosed to you. In addition, you should consider whether your obligation to maintain confidentiality also extends to the manner in which you conduct your in-house practice such as: 1. your work environment; 2. document management practices; and 3. meetings and conversations. Should you be requested to provide confidential information to a third party, as with any other legal client, you would need to obtain your client s permission or be compelled by law to do so. [Rules 2 and 3] 2 Handy hints for in-house counsel

6: The advice which you provide You should provide legal advice independently, honestly, competently and fairly, even where it incurs the displeasure of the persons who manage your client. Remember that your client is the corporation and it is for the interests of your client that you provide your legal advice, without fear or favour. In your role as an in-house lawyer, you may find you provide commercial advice as well as legal advice to your client. Where commercial advice (as opposed to legal advice) is provided, you must be mindful not to blur the two so as not to jeopardise any claim your client may have for legal professional privilege over legal advice. 7: Your client s ability to claim legal professional privilege Your client is able to claim legal professional privilege over legal advice provided by you as an in-house lawyer so long as the circumstances surrounding the providing of that advice meet the requirements for such privilege. Aside from meeting the requirements for legal professional privilege as to the purpose for which the legal advice is given, there is a requirement that the in-house lawyer must be independent. [Rules 10 and 19] Extensive academic information and case law is available on the ability of clients of in-house lawyers to be able to claim legal professional privilege for legal advice from in-house lawyers. 8: Holding a current practising certificate In order to be able to provide certain legal services, you must hold a current practising certificate. Holding a current practising certificate supports your independence as an in-house lawyer. This may assist in meeting one of the requirements of your client to be able to claim legal professional privilege over legal advice you provide to it. In addition, by holding a current practising certificate as an in-house lawyer you can administer oaths if required. Subject to holding an unrestricted practising certificate and completing a Practice Management Course you can also be the solicitor on the record in court proceedings and claim costs in court proceedings. Whilst these functions may not be required in your role as an in-house lawyer, it is generally preferable to hold a practising certificate as you are providing legal advice to your client organisation and are therefore holding yourself out as a person entitled to practise as a lawyer. Additionally, to practise in a federal court or a court exercising federal jurisdiction in New South Wales, you will also need to be registered on the High Court Register of Practitioners. In-house counsel usually hold an unrestricted corporate and NLE (nonlawyer entity) certificate or a restricted corporate and NLE certificate. A corporate and NLE certificate holder in New South Wales is not required to take out the approved professional indemnity insurance cover in New South Wales. The differences between the two corporate certificates are: RESTRICTED The holder is entitled to engage in supervised legal practice as a solicitor in the course of employment by a corporation (other than an incorporated legal practice) or a non-lawyer entity. This is known as supervised legal practice. UNRESTRICTED The holder is entitled to engage in legal practice as a solicitor in the course of employment by a corporation (other than an incorporated legal practice) or a non-lawyer entity. In a corporation, this would enable a solicitor to provide supervision to other solicitors at the corporation. To attain an unrestricted practising certificate, a period of supervised legal practice must be completed in accordance with the Supervised Legal Practice Guidelines. See the following link for more information http://www.lawsociety.com.au/ ForSolictors/practisinglawinnsw/ formsdirectory/index.htm If you wish to provide legal services to clients or third parties, in addition to your in-house role, you need to hold a private practice certificate with the approved professional indemnity insurance cover in New South Wales in place. Handy hints for in-house counsel 3

The involvement of a lawyer in-house at senior management or Board level provides your client with many benefits. 9: Reporting lines It is preferable that the senior in-house lawyer of an organisation report either to the Board or to the Chief Executive Officer or Managing Director. This is important in that the protection of legal professional privilege can be lost by your client if its legal advisors are not considered to be sufficiently independent. If, however, the senior in-house lawyer does not report either to the Board or to the Chief Executive Officer or Managing Director, your professional obligations as a lawyer do not change, albeit your client may not be able to claim legal professional privilege over legal advice you provide to it. In such circumstances the challenge is then to ensure that the person to whom the senior in-house lawyer reports appreciates and respects the nature of your professional obligations as a lawyer and supports those obligations, as should the Chief Executive Officer or Managing Director, the Board and others in senior management positions. Ultimately it is in the interest of your client to receive the best legal advice, and independence along with respect for legal professional obligations help to create the right environment for such advice to be delivered. Interference in the process of giving legal advice can lead to poorer advice being obtained, and advice made to satisfy the demands of other managers in the organisation may ultimately run against the interests of the client. 10: Managing external lawyers It is preferable that the in-house legal function manages the engagement of external lawyers. In addition to its sound technical legal knowledge, the in-house legal function should have a good understanding of its client s business affairs and activities, and is therefore the most appropriate intermediary between your client and external lawyers. Engagement of external lawyers by nonlawyers adds to the challenge of illustrating to your client the value of the in-house legal function. The in-house legal function is better placed than non-lawyers not only to determine whether, and if so what, legal work should go out to external lawyers but also to ensure that the instructions provided to the external lawyers are clear and on point, and that the advice provided by the external lawyers is focussed, provides value for the client and is not overcharged. Demonstrating the value of an in-house legal function may primarily be based on the better understanding of the business and its requirements that the in-house legal function will have when compared with external lawyers. There is also further discussion of this challenge in Hints 12 and 13. Deciding on the appropriate external lawyers can also be a challenge. There are a number of factors that should be taken into account for example, reputation, industry expertise, cost effectiveness, prior knowledge of the business, flexible billing arrangements and personnel. There are also a number of different ways that the engagement of external lawyers can be structured, including selecting a panel of firms, choosing one full service firm or engaging several firms at the same time with each being engaged in their area of expertise. Both the choice of external lawyers and the structure of the engagement should be determined by what is the best fit for both your client and the in-house legal function. 11: Dealing with regulators It is preferable that the in-house legal function is the primary contact point for dealing with your client s regulators, other than for standard interaction which might ordinarily be undertaken by the in-house compliance function. As an in-house lawyer you will have a considerably better understanding than either the in-house compliance function or any external lawyers of your client s regulatory obligations, the authoritative constraints of the relevant regulator, any obligations of confidentiality that your client may owe its customers and any opportunities that your client may wish to avail itself of to claim legal professional privilege. Of course, the instructing of external lawyers to assist in a regulatory exercise should always be considered as a prudent option. 4 Handy hints for in-house counsel

12: Illustrate value As an in-house lawyer it is important that you seek to illustrate to the persons who manage your client, whether the Chief Executive Officer or Managing Director, individuals in senior management positions, or directors of the Board, the benefits to the business of maintaining and engaging with in-house legal. If possible, maintain records of circumstances that may have turned out differently if the correct legal position had been recognised and your practical commercial legal advice had been appropriately considered. Also keep records of what type of legal work the in-house legal function undertakes and compare the value of that to what it would have cost if the same work had been done by an external law firm. There are of course many other ways to illustrate value: accessibility, pro-activity, commerciality, user-friendliness, internal feedback. 13: Understand your client s objectives, report against them and speak the client s language As a member of a team that assists the executives of your client to achieve their business objectives in line with the organisation s strategies, the in-house legal function needs to understand what those organisational strategies and business objectives are. To engage effectively with the executives of your client, whether providing legal advice, or articulating concerns about legal risks, it is useful to try to speak to them in their language. When reporting on the achievements of in-house legal, it may also be useful to align your report to demonstrate how in-house legal has supported the business objectives and thereby demonstrate the value add of in-house legal. 14: As lines blur As an in-house lawyer the opportunity to be involved in commercial decisions of your client often provides a welcome opportunity to provide valued input from a legal perspective into the business operations or strategic decision making processes of your client. The challenge for you is to ensure you are able to conduct your legal practice in accordance with your professional obligations, whilst potentially taking on the legal obligations of an officer of the client under the provisions of the Corporations Act 2001. In addition, your client could find it loses the opportunity to claim legal professional privilege over advice you provide that is objectively considered to be commercial advice, rather than legal advice. The involvement of a lawyer in-house at senior management or Board level provides your client with many benefits, particularly with regard to ethics and risk management. However, if you find yourself in this position it may be prudent to have a separate in-house legal function reporting into you so that lawyers in that function can meet the tests required to enable your client to maintain its opportunities to claim legal professional privilege. [Rule 10] 15: Finally: be confident in what s right One of the biggest challenges in the practice of an in-house lawyer is dealing with nonlawyers. A common problem is a non-lawyer telling you how he/she thinks things should be done. It is of paramount importance to advise as to the legal position and the best interests of the client at the same time as maintaining legal and ethical independence as an officer of the court and a lawyer. For example: - it is common for a non-lawyer to think it is acceptable for a person signing a document as a witness not to have been present to see the person whose signature they are witnessing sign the document. To a non-lawyer, it is seen as being inefficient to have the witness present, or, worse still, as obstructionist to have the document re-signed if the in-house lawyer refuses to accept its validity; - non-lawyers who have not been educated in the obligations of a trustee may not know that a trustee must at all times act in the best interests of its beneficiaries, or that a trustee cannot profit from its office unless authorised to do so; - non-lawyers will often not appreciate that admitting liability to another party, even if the facts are such that your client may not be liable, is not in the interests of the client and may invalidate any potential insurance claim; - with limited knowledge and understanding of the law, some business people may believe that if an advice that they have drafted is sent from a lawyer s email address, it is privileged and provides protection from discovery. As an in-house lawyer one of your roles should be to educate non-lawyers as to what is right. Have confidence in yourself as a lawyer and remember that the support and resources provided by the Law Society of New South Wales are available to you. Handy hints for in-house counsel 5