UK: In-House Lawyers – Are They Bound By The Code?

In-house solicitors in England and Wales are subject to the same professional conduct standards as those in private practice. By and large, this requires compliance with the Solicitors Regulation Authority 2011 Handbook and Code of Conduct ("the SRA Code") and, where applicable, the Financial Conduct Authority's Code.

While there are some rules that are less relevant to in- house lawyers (the SRA rules on billing clients being an example), for the most part, in-house solicitors are bound by the same professional standards as their private practice colleagues.

This article briefly sets out some of the pitfalls that this may expose in-house lawyers to, in respect of firstly, conceptualising their relationship with their client and, secondly, responding to evolving standards of professional conduct.

Who is the client?

A large number of the principles outlined by the SRA Code concern the solicitor's relationship with their client. Solicitors owe duties of confidentiality and disclosure to their client (i.e. they must keep information shared by the client confidential and they must disclose information that they know to their client if it affects them). In most situations, it will be relatively straightforward to understand who the client of the in-house lawyer is, and therefore to whom these duties are owed. An in-house lawyer advising on a commercial agreement with a supplier, for example, will know they are acting in the interests of their employer as opposed to the supplier.

There may be some situations, however, where the in-house lawyers duties in relation to its client, the business, are less clear cut or are put under pressure by senior management. If the company has entered into a joint venture with another party, for instance, it may be necessary to think about setting limits on the type of advice that should be given to any or all of the parties to the venture and the venture itself. It is important to consider at the start of each task to which of the co-venturers and venture duties are owed and who is being advised.

There may also be situations where the personal interests of employees of a company or members of the board of that company do not align with the interests of the company as a whole such as when there is a regulatory investigation or liability arises. In large companies with complicated corporate structures and interests, and when parts of a business are sold, it may also be unclear to whom exactly an in-house solicitor will owe their professional duties.

The role played by in-house solicitors in board and employment disputes, joint ventures, M&As and in other transactions requires careful consideration. It will be important for the in-house lawyer to keep thorough records of the relationship they have with the parties including the rationale behind any decision to advise a specific party. Where the in-house lawyer is providing advice internally or giving instructions to external advisers, the advice and instructions should be clearly recorded in writing so there is no doubt over who the in-lawyer is advising and taking instructions from.

Evolving standards of professional conduct - NDAs

Most of us will be aware of film mogul Harvey Weinstein's public downfall. The aftershocks of his fall from grace have also spread to his professional advisors. In March last year, the lawyer who drafted the non-disclosure agreement (NDA) between Mr Weinstein and one of his alleged victims was questioned by Women and Equalities Committee and is now facing prosecution before the Solicitor's Disciplinary Tribunal.

Sections of the Weinstein NDA were disclosed to the Parliamentary Committee and, while the agreement was a relatively generic commercial compromise agreement with confidentiality provisions, at its crux, it prevented the individual from reporting allegations of sexual misconduct to the authorities. The NDA therefore breached the first mandatory principle of the SRA Code: the duty to "uphold the rule of law and the proper administration of justice".

The use of NDAs in a wide range of harassment and discrimination cases are currently under review by the Committee. It is, therefore, important that in-house lawyers understand some of the associated difficulties with NDAs and why they are proving so controversial. While it may be uncommon to use a settlement agreement in an employment or discrimination dispute that prevents the employee from informing public authorities of criminal conduct, Weinstein highlights the conduct issues surrounding the use of NDAs and that in-house lawyers must not contravene the SRA Code or act in a manner that prevents the proper administration of justice, even if that means the in-house lawyer is placed in the uncomfortable position of being unable to follow his employer's instructions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.