What’s swerving round the next global corner at legal teams in-house?
Two leading international legal experts make predictions. Are they right? You be the judge…..
Geoff Creighton is the volunteer CEO of InHouse Counsel Worldwide, a global affiliation of national associations representing in-house counsel. A highly experienced former general counsel, with significant independent private practice background on board, Toronto-based Geoff offers true insights and wry, expansive observations.
First of all, he cautions, his predictions must be seen within the framework of a developed democratic country with a robust common law and business system. In other words – if you’re outside of this, none of his keen analysis may apply.
Then he plucks some of the huge business and economic changes sweeping the world, and shows how they’ll ping not just countries, but in-house legal too – and private law firms (in case you thought they were immune).
There are massive political and economic forces, he says, bearing down on countries. Three of those include: government debt and increasingly interventionist governments; the retreat from globalisation; and the heavy hand of regulation.
“On government debt – my general thinking is: do not assume that any of this is going to go away soon,” he says.
Concurrently, he says: “There’s a partial pull back from globalisation, a greater stress on domestic self-sufficiency, and domestic capacity – and generally the erecting of trade barriers that had previously been torn down.
“These are not legal trends, but what do they lead to? They lead to the heavy hand of regulation generally, a heavier hand in taxation to fund the debt, and a consequent greater need for expertise on the legal and compliance front to deal with increased regulation.”
He sits back and reflects. “There’s a greater acquiescence – if not acceptance – of government intervention in a lot of areas. One subset of that is trade barriers. There’s going to be a growing need for navigation of those, which again suggests the need for specialised legal expertise.”
The need to navigate regulatory thickets, which most of the world thought it had cast off decades ago, will mean, he says, a greater market for the expertise and focus of in-house counsel.
“It’s often been the case that you’d be accessing your external counsel on a trade issue, to answer a question, when trade barriers weren’t a daily thing,” he says. They are now, and that in his view will justify the hiring of advice in house.
“Any time you lay on greater industry-specific regulation, you’re going to be increasing the opportunities for organisations to realise it’s cheaper to hire someone, than it is to go outside.”
Demand for in-house will be catalysed too, he speculates, by more M&A activity, which is already evident.
“Driven by regulation and compliance, there will be a lot more merger and acquisition activity in the next few years,” ventures Geoff.
DLA Piper’s Global Co-Chair and sponsor of the firm’s comprehensive, free in-house legal resource and network WIN (What In-House Lawyers Need), Andrew Darwin concurs.
“On the in-house agenda, we’re seeing more opportunities for supporting business growth, expanding to new territories, more positive developments,” says London-based Andrew. “It’s no longer just crisis management or retrenchments. This means more corporate restructuring not related to battening down in the pandemic.”
Both Geoff and Andrew, agree these changes (galvanised by Covid-19) have prompted a ‘movement online’. This is more than just ‘technology’. It’s the widening of a whole new sector.
“Asset tokenisation,” says Andrew, “is hard for many lawyers to understand because we’re not crypto natives. But you’re seeing the increasing adoption by mainstream banks and others of asset tokenisation. Potentially, that will revolutionise a lot of the ways assets are bought, sold and traded. And that will have a big impact on the legal industry as crypto contracts start to become the norm.”
Geoff says that the pandemic caused an explosion of people trading in crypto assets and non fungible tokens, and people talking about Web 3:0 which allows all sorts of trading in crypto assets.
“There are huge movements of money and people working on these platforms and trading in these esoteric assets. So more businesses will be jumping into the area, because they see it’s awash with money. For certain lawyers in-house, it’s how to seize those opportunities and the speed and the scope of a new unregulated market,” he says. “More and more will have to deal with crypto assets.”
Andrew says that a key driver for the legal industry, including in-house legal, is the financial services sector.
“When the financial services sector moves, our sector will often follow,” he concludes. “As financial services start to move into Blockchain, so the legal industry goes as well. In-house legal teams will be asked to respond.”
“Some banks are already starting to adopt Blockchain as a way of clearing trades. Rather than the shadowy world of crypto coin, clearly there are very good, very efficient applications around crypto assets. They are nascent – but they are potentially quite game changing for a lot of things that lawyers do.”
Right behind the crypto opportunists, though, breathe the regulators, uneasy with the lack of domicile of crypto assets and their lack of underlying asset base. Where the regulators go, the in-house lawyers follow.
“The reality is that, at some point, governments are going to work it out and find ways to regulate them,” says Geoff. “In Canada, the securities regulators have decided that they’ll license crypto exchanges. But that’s reliant on those exchanges wanting to be regulated, being willing to submit to such jurisdiction.”
Arguably, say both Andrew and Geoff, the psychology of in-house legal is also facing headwinds of change. They’ve identified this too, as a trend.
Each expert expresses it differently, but they note similar transformations underway in how in-house lawyers think and act, and indeed what they act upon.
The first part of this movement relates to the shape of the in-house legal team.
“Legal departments used to be mini-law firms. If you were big enough as a business, you’d hire a lawyer. Then you’d say ‘I need a junior’. So you’d hire a junior. You’d build a little law firm within your company,” says Geoff. “But now, you’re not just a law firm. You have to be part of the business.”
This has expanded to disciplining in-house lawyers to expect the same rules as other departments. “I’m thinking of things like budgets,” he says. “When pushed for firm budgets, general counsel used to say, ‘we can’t do that. What if we have a big unbudgeted lawsuit? What if we have an unexpected transaction?’. There’s always been pressure to put the numbers in. But now there’s this thing called ‘legal operations’. The whole idea is to have people whose job is operating efficiency. Now, even if you’re general counsel, you’re expected to make your department run with the kind of efficiency that’s expected of other departments. So it’s ‘how do we start acting like other business units to be efficient and make sure our operations don’t have lost time or money?’.”
Not only are organisations pushing for more efficiency, they’re pushing for more than law from in-house lawyers. They’re pushing for lawyers to be business decision makers and wise business advisers.
“The legal answer is less likely to be the right answer any more,” says Geoff. “It’s the goalposts you have to stay within. But I’m thinking of the whole world of social media, for instance. Any allegation of anything on social media. It could be an ideologically driven hatchet job or a single disgruntled former employee. The legally correct answers to this may not be the business answer the company should necessarily end up taking.”
Every legal decision requires a wider perspective and greater media savvy than ever before.
“In-house lawyers are now being treated as part of the business, and if they want to be treated as part of the business they’re going to have to have answers that are more perceptive than ‘we should sue them’.” says Geoff. “None of these are skills that are taught to you in law school.”
Andrew points to the caretaking by in-house teams of ‘good governance and better corporate values’, which has arrived even faster in the wake of Covid-19.
The surveying that WIN has done has shown that ESG – Environmental, Social and Governance – are now top of mind for teams in-house. Those values are no longer delegated to the PR department but an area in which the in-house team supports the board. They’re no longer ‘softer’ values, either.
“Green washing will be called out legally,” he says. “It will expose boards, and as boards become more focused on that area, legal teams see their priorities moving.”
When lawyers look at themselves, there’s a change too.
“The whole idea of flexible working is seen as a means of retaining and motivating staff,” he says. “It comes across strongly.”
An equally important trend is the demand by in-house lawyers for health and wellbeing. “It’s got to be an ongoing priority for employers.”
And embedding diversity is no longer simply words in the in-house legal world. “How can it be actions?” says Andrew. “There’s recognition that the legal profession has a long way to go. That’s a constant theme – and it’s part of ESG. All of these elements are linked.”
Some of the trends are huge, and some are more subtle. Some of them are about the way business is changing, and its effect on in-house legal; others are about the way in-house legal is seeing itself.
But one thing’s for certain: all of them are easily observed, say both Andrew and Geoff.
Beyond the crisis of the pandemic – from which most countries are now emerging – only time will tell how sustained these changes are. As Geoff puts it: “Never waste a good crisis.”
Note: this story was developed prior to the invasion of Ukraine.
