A new era for law firm GCs

Sophie CameronFriday 2 June 2023

The law firm general counsel role has transformed substantially over the past decade or so. In-House Perspective reports on the role’s evolution and the trends and challenges facing in-house general counsel within major law firms.

On a given day, the typical law firm general counsel (GC) is likely to be dealing with a host of topical issues similar to those faced by other in-house counsel in other organisations – managing economic uncertainty, dealing with the implications of post-pandemic working practices and responding to the implications of the war in Ukraine. But beyond this, law firm GCs must attempt to future-proof their firms and innovate from within, given that lawyer mobility is ever-increasing, and both regulation and technology are ever-changing. Technology, in particular, is altering the way the legal profession operates and legal services are delivered. Meanwhile, the GC’s role is also necessarily tied to the strategic development of the firm, which could explain the rapid increase in the number of law firms appointing GCs.

A decade of change

The GC’s office within a major law firm functions very much like other corporate legal departments. The full range of legal issues facing the firm is handled by its in-house team, and this includes compliance with laws and regulatory requirements, employment issues, the review of contracts and agreements, questions on firm structure, conflicts of interest, sanctions, conduct issues and litigation affecting the firm. In addition, law firm GCs draft and implement firm policies, address complaints from clients and third parties, and advise internal teams on legal matters associated with new business in-take and recruitment.

This has not always been the case. Most commentators take the view that a shift began a decade or so ago, when law firms began to formalise the role of firm GC. Prior to this, firms in general didn’t look at their risk and in-house counsel in the way they do now. As such, it was unusual to have even one lawyer working full-time on a firm’s legal issues. In most cases, groups or committees of partners were responsible for various issues such as compliance, insurance and real estate. In some cases, a partner would work part-time on the firm’s legal issues, while maintaining a billable practice. Now it’s common for big firms to have in-house teams comparable to those of other similarly sized companies, and which usually include several full-time lawyers dedicated to handling the firm’s own legal work.

At the organisational level there’s no single model and different firms scope the role in different ways. Most GCs in large law firms enjoy that the role provides good visibility across the whole of the organisation’s business and operations, and that every day in the role is different and often issues need to be dealt with immediately as they arise. For firms regulated by the Solicitors Regulation Authority (SRA) in England and Wales, GCs are often also the firm’s Compliance Officer for Legal Practice (COLP) and as such are responsible for taking all reasonable steps to ensure compliance by the firm with the SRA’s regulatory requirements.

Jonathan Kembery, General Counsel and a partner at Freshfields Bruckhaus Deringer, who’s based in London, says that ‘there is still a degree of variation between firms given that the role is not as mature as it is in, say, listed companies. Some firms will have a general counsel who acts as a senior advisor and is separate from the risk and compliance team that deals with conflicts, client due diligence and so forth. Others will see the role as being the leader of a significant in-house legal department.’

At its core, though, the role will incorporate degrees of each of the three attributes that Ben Heineman, the former General Counsel at GE, identified, says Kembery. Specifically, these are being ‘the leader and manager of a team of lawyers, being an accepted expert and “go-to” person in particular areas (such as legal ethics or the constitutional framework of the firm) and working with others to articulate the moral sense of the firm’, he explains.

Nick Hazell, General Counsel at Taylor Wessing, who’s also based in London, is of the view that the evolution of law firms and legal practice over time has resulted in ‘many firms growing to the extent where the risk issues they experience throughout the business are so complex and pervasive that not having an experienced and dedicated person with responsibility for managing those risk has become a false economy’.

In addition to this, the role of the law firm GC has also broadened and its remit continues to grow and evolve as new challenges arise. There are also differences between law firms in regard to how certain responsibilities are split and functions are organised. ‘In the past, the general counsel role was probably more focused on dealing with claims and complaints, regulatory risk and compliance and insurance renewal, the firm’s general risk function. That in itself is a significant role and is sometimes even discharged by a separate director of risk’, says Hazell. ‘In those instances, the general counsel’s role can focus away from those areas and more on supporting and advising on more strategic projects and the legal risks relevant to the business. Splitting the role in that way won’t work for everyone and is very much dependent on the people involved but makes sense for some firms.’

In terms of the nuances between firms, Maggie Hedges, who’s based in Washington, DC, and is General Counsel at Hogan Lovells US, explains that, within her firm, considerable effort is placed on proactive risk management activities, such as training sessions, office visits and a regular monthly email from the GC’s team ‘because we want to help our partners and employees spot and avoid future problems’. Hedges adds that ‘at least one member of our team is available every day as needed to answer questions and provide advice about specific issues as they arise’.

Noting the difference between in-house counsel in a company and those within a law firm, Robin Abraham, General Counsel at Clifford Chance in London, explains that ‘an in-house lawyer at a company would likely know more about the law and legal issues than their internal client. It’s a very different dynamic being in-house in a law firm. That said, large law firms are multimillion dollar businesses with international footprints and so do face a lot of the same challenges as major corporates some of which will be reflected in the work of in-house legal teams.’

“An in-house lawyer at a company would likely know more about the law and legal issues than their internal client. It’s a very different dynamic being in-house in a law firm

Robin Abraham, General Counsel, Clifford Chance

Not just ‘business as usual’

Many in-house counsel within large law firms highlighted their view that the challenges faced reflect the rapid growth of firms not just in size, but, more importantly, in the nature and complexity of their activities. In addition, there’s an increasing focus on regulation and ensuring that the firm’s policies and processes reflect the regular guidance issued by the local regulatory body.

Liam Kennedy, General Counsel at A&L Goodbody, in Dublin, says it’s ‘not just “business as usual”, as many firms are pioneering new service delivery models and technologies and are recruiting rapidly’. This, ‘coupled with dramatically increasing regulatory requirements, present risk, reputational and regulatory challenges’, he explains.

“It’s not just ‘business as usual’, as many firms are pioneering new service delivery models and technologies and are recruiting rapidly

Liam Kennedy, General Counsel, A&L Goodbody

A constant key issue for law firms is financial crime. Debbie Jukes, General Counsel at Eversheds Sutherland in London, explains that ‘anti-money laundering remains absolutely fundamental to law firms with increasing and rapidly changing regulation across all the jurisdictions we operate in and in the UK, it remains at the top of the list for our regulator’.

The ever-increasing sanctions designations – particularly in response to Russia’s invasion of Ukraine – continue apace. For example, all SRA-regulated firms are obliged to comply with sanctions legislation and, in particular, law firms must ensure that they’re not receiving fees for work from a designated person, unless the firm has been granted a licence from the Office of Financial Sanctions Implementation (OFSI). The UK government announced another round of sanctions in mid-April, targeting those who have knowingly assisted sanctioned Russia oligarchs to hide their assets through complex financial networks.

In this regard, Jukes adds that ethical decisions around client and work intake are increasingly high profile – a consideration that saw many law firms shut their offices in Russia before sanctions were actually implemented. ‘Most large law firms have had processes around this for a good while, but these are increasingly being formalised’, she explains. ‘In 2022, Eversheds Sutherland, as part of the firm’s wider commitment to being a responsible business, created an Ethics Committee to provide greater transparency and accountability in its decisions around client and work undertaken’.

Maggie Hedges explains that as a global firm with offices in more than 20 countries, much of the Hogan Lovells’ work is cross-border and multi-jurisdictional. ‘So, one of the biggest challenges for my office is managing risk across borders. For example, as one firm worldwide, we need to be sure that a client matter opened in one office doesn’t cause an ethical problem for a different team of lawyers working on a separate client matter in another office’, she says. ‘The rules of professional conduct and conflicts of interest are different in each jurisdiction, so we need to take them all into account’.

Additional examples of cross-border challenges include varying privacy laws, competing rules and regulations around environmental, social and governance (ESG) matters and geopolitical tensions.

Another challenge involves the working environment and the legal professionals themselves, as Kennedy explains. ‘There are very different challenges on the people front for many reasons. These include the ever-increasing demands placed on partners and staff in a fast-paced environment [and] the move into a hybrid working environment with reduced opportunities for mentoring and mutual support. Also, with the greater recourse to laterals and less time in the office it is harder to ensure a common ethos [and] similar standards, to maintain consistent approaches across offices and practice areas and to ensure that all staff are fully trained on all relevant issues.’

Embracing tools and trends

The Law Society of England and Wales published its guidance on the impact of the climate crisis on solicitors in mid-April. This guidance places emphasis on the importance of solicitors being aware of the effects of the climate crisis, including on legal practices and the advice they provide.

Hazell of Taylor Wessing says that the impact of ESG issues – which would include the effects of the climate crisis through the ‘E’ strand – is a general trend within law firms, be that from the perspective of procurement, where businesses need to understand supplier credentials before dealing with them, through to the day-to-day provision of advice by the firm’s lawyers. ‘In particular, as the recent Law Society guidance on climate change has emphasised, legal teams are going to increasingly be expected, as part of their regulatory duties, to understand and be able to discuss climate related issues with clients in a way which may not be central to a given set of instructions’, he explains. ‘General counsels therefore need to ensure those lawyers are equipped to identify where those sorts of risks might be relevant to the advice they give and are competent in giving that advice’.

“Legal teams are going to increasingly be expected, as part of their regulatory duties, to understand and be able to discuss climate related issues with clients

Nick Hazell, General Counsel, Taylor Wessing

Another trend relates to firms’ use of innovative tools and products, whether through the development of new product lines or understanding the risks around the increasing desire to use artificial intelligence (AI) in the delivery of legal advice. Law firms want to ensure they’re continuing to provide their clients with the highest quality legal services in the most efficient manner: helping to reduce costs and increase efficiency in the provision of legal services is where new technologies come in. Although AI has developed rapidly, there are many issues that remain around confidentiality, reliability and rights over the end product that mean the ability to utilise it in a business is not without its challenges. The role of the law firm GC is to keep up with the available tools as they evolve, which includes ensuring that any organisation-wide guidelines on the use of AI are in line with the latest developments.

David E Woollcombe, General Counsel at McCarthy Tétrault, Canada, adds that the rapid development of generative AI tools is an emerging topic that is receiving a great deal of attention internationally. ‘In addition to the issues that all business enterprises face with the use of AI, law firms need to be particularly sensitive to client confidentiality and privacy issues’, he says. ‘AI has the potential to drive cost efficiencies for clients, but from a risk management perspective the work product that is generated requires thoughtful review and the application of human judgment’. For law firm GCs, he adds, there’s the challenge of ensuring professional responsibilities are fully satisfied as the technology used to assist in the development of client work product is evolving rapidly.

At Hogan Lovells, Eltemate, the firm’s legal technology brand, is working to deliver practical solutions to everyday problems, explains Hedges. ‘The Eltemate team is already exploring the various ways that AI can be used to build or improve the legal technology tools that we offer’, she says, ‘but it is important to make sure that we have the appropriate governance structure in place to adopt new tools in an ethical and thoughtful fashion’.

Working without a playbook

Being in the rare position of having worked as an in-house lawyer within a law firm, a private practice lawyer and an in-house lawyer working for a company other than a law firm, Kembery is keen to point out the similarities to other in-house roles in offering the chance for a satisfyingly close and long-term connection to the heart of the business – the principal difference being that most of the people one deals with on a daily basis are also lawyers. ‘By comparison to most in-house roles, it is rarely necessary to explain why legal or regulatory issues matter or need to be considered by the business,’ explains Kembery. ‘Conversely an in-house lawyer in a law firm can expect to have to have their legal advice and recommendations subjected to pretty sophisticated review by their clients’.

“An in-house lawyer in a law firm can expect to have to have their legal advice and recommendations subjected to pretty sophisticated review by their clients

Jonathan Kembery, General Counsel, Freshfields Bruckhaus Deringer

Kembery is keen to highlight the range and complexity of the work carried out by GCs in law firms. ‘I have been working in-house at Freshfields for over 20 years and I have never arrived at the point where I felt things had become routine. To a large part that is due to the global nature of the firm and to the range of interesting and talented colleagues I work with, but external forces also play a part. Whether it is the global financial crisis, Brexit or the pandemic, there is always something to tackle for which there is no existing playbook’, he says.

In terms of what success looks like for the in-house team within law firms, Hedges explains that ‘my goal is to be well-known personally by my partners and the employees of the firm. A twin goal is for most people not to know what the general counsel’s team is working on. In many cases, I consider it a victory if we head off a crisis or solve a problem known only to our senior management team.’