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Walking the wire

Walking the wire

THE DEBATE surrounding in-house lawyers and their ability to act in the best interests of the law and their client, while effectively maintaining their independence and ethics, is still…

THE DEBATE surrounding in-house lawyers and their ability to act in the best interests of the law and their client, while effectively maintaining their independence and ethics, is still ongoing.

The nature of the employment relationship, the blurring of commercial and legal roles and the added position of moral guardian are all issues faced by in-house lawyers.

Contract of employment

Peter Turner, president of The Australian Corporate Lawyers Association (ACLA), says an in-house lawyer can often face great pressure by having to balance three competing duties, one to uphold the law, one to ensure the administration of justice as an officer of the court and one in a duty to their client.

"In the everyday scheme of things, the in-house counsel is very often faced with a conflict between the duty of being a good employee and following the instructions they get from management and doing those things that the boss expects, and, on the other hand, maintaining sufficient independence as a lawyer to observe those three duties ..." he says.

Sue Laver, general counsel for dispute resolution at Telstra, says some people have accused in-house lawyers of not giving frank and fearless advice because of the difference in the client relationship.

"If a client does not agree with the advice of an external lawyer, the client may withdraw their instructions. If a client does not agree with the advice on an internal lawyer, it is considerably more difficult to 'sack' that lawyer, due to their contract of employment."

Turner says this is exactly why in-house counsel is "probably even more independent" than external lawyers, because they are protected by an employment agreement and can't be simply fired if they don't give the right answer. "Whereas external counsel is dependent for their bread and butter on being able to maintain their solicitor-client relationship with a corporation," he says.

"Particularly, big law firms might have millions of dollars swinging on their success as external counsel for corporations, so their independence is at threat very much, we believe."

Legal professional privilege

Back in 1982, precedent was set in Europe that prevented in-house counsel claiming privilege on behalf of their client. Locally, however, the Australian Law Reform Commission recently recommended that there should be no distinction between in-house lawyers and external lawyers when a claim for privilege is made.

Linda Baxter, director of continuing professional development at the Leo Cussen Institute, says the conflict lies in the fact that many in-house counsel are expected to give commercial advice in the context of legal advice.

"That is no different to private practice lawyers who are asked to do the same for their clients and often form strong business relationships with them," she says.

"The challenge is to minimise the risk of legal advice merging with commercial advice which can then taint LPP [legal professional privilege] attaching to the legal advice."

Laver agrees that in-house counsel can perform more than one role - such as general counsel and company secretary or head of media relations.

"This can make it more difficult when making a claim of privilege - was the person acting as a lawyer, or in their commercial capacity? Again, being very clear about the role being played is important for maintaining independence," she says.

Moral actions

In-house counsel are increasingly being called upon to be the keeper of the corporate conscience by looking beyond the formal legalities of a possible decision and also trying to understand the social and ethical consequences.

Baxter contends that lawyers are not their clients' moral guardians and that it can place an unreasonable burden to try to live up to expectations of community morality.

"It is unfair to expect in-house counsel to take responsibility should their client fall short of community or media expectations, as long as the in-house counsel has acted ethically," she says.

However, Claire Valtwies, general counsel for LG Electronics, says she has conducted important discussions about the value of ethical actions for the business, after the company made compensation payouts for problems with a product.

"I hope that we've learned over time and I hope that I've been able to convince the business that, if there is something wrong let's get it out there ... Let's be clear about the fact that we're on the front foot and we want this to be resolved," she says.

"We're prepared to report it rather than wait because the damage will always be greater if someone else reveals an issue to the public [and] not the business themselves."

Kirsten Mander, company secretary for Sigma Pharmaceuticals, says that an in-house lawyer is placed in a better position than external lawyers to have an ethical influence on a corporation.

"...They get an opportunity in advance to consider circumstances and make recommendations before something has become set in stone and they are far more involved in establishing policies and systems and guidelines that help entrench ethical practice in how a company operates," she says.

>> For the latest news, views and analysis of issues affecting in-house lawyers, check out Lawyers Weekly's dedicated in-house site

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