Investment bank JP Morgan's in-house legal team has suffered three high-profile departures in five months.
Barbara Jones is quitting her post as regional counsel for capital markets in Europe, Middle East and Africa. Allen Hanen, once the US investment bank's head of legal for the same region, has also gone. And Jim Wickenden has left the post of head of legal for asset management services in Europe.
Jones is going to the London office of US firm Kirkland & Ellis and the other two have moved to Herbert Smith.
It would be tempting to put the departures down to an internal problem at the bank. But, in fact, the three say that they enjoyed working there and the real reasons for their departures highlight an issue at the heart of modern in-house work.
While all three have plenty of praise for the quality of the lawyers at JP Morgan and believe that the high standard of legal work carried out in the department made them highly desirable targets for poaching, they all still wanted to return to being lawyers at the proverbial coalface.
“I wanted to go back to doing deals,” says Wickenden. “In the head of legal job there was a lot of admin content and general management and I was a member of just about every committee.
“I didn't get to do many deals and one of the things I love about being a lawyer is doing deals.”
“Doing deals is not the orientation of the department here,” admits Jones, who is serving her notice at JP Morgan after two years with the bank. “Most of the deal work is farmed out to external counsel and that is the exciting part of the work.
“There are execution groups within the bank, but to be honest, for me, being in the execution group is not close enough to the deal.”
Which begs the question – do large City institutions like JP Morgan really need lawyers to head their in-house legal departments, or could a professional manager, without legal training, do the job just as effectively?
Wickenden says that the current trend within large institutions may lend itself to non-lawyers filling the role.
“In respect of all support services there is a trend towards externalising service contracts, such as for human resources work.
“For example, JP Morgan outsources all of its technology work through an alliance with AT&T to provide technology support.
“This is applicable to legal support. While there are some things that you only want to do internally, they are not the sort of things that interest me as a lawyer.”
Wickenden says he tried to do as many deals as possible, but adds it was very difficult maintaining a hands-on role.
“I tried to do the more structured work that was legal in one way or another. But doing deals as a lawyer is very difficult. We have 110 countries in this region with offices in 15 of them and I sat on every corporate committee,” he says.
If the company moves towards externalising the vast majority of legal services, then there is less need for a lawyer to be in charge of co-ordinating the different external teams.
“Outsourcing all legal work was the model in the States,” says Wickenden. “But then a lot of banks discovered that they could bring in senior people from the likes of Davis Polk & Wardwell and have them devoted to their cases and to their senior management, which led to senior partners moving in-house.”
However, as the lawyers became closer to top management than to the legal work, some of them, says Wickenden, made the final transition away from law.
“A lawyer called Ned Kelly was the relationship manager at Davis Polk for JP Morgan, he says. “He moved in-house for JPM then eventually became a banker.”
Philip Jolowicz, investment bank Merrill Lynch's general counsel for the institutional group for Europe, estimates that about 30 per cent of his job could be done by a non-lawyer. However, he does not believe that a professional manager could step into his shoes.
“The real issue for an organisation is the context in which they are working. There may be elements that could be done by a non-lawyer but those are part of a complicated group of things,” he says. “If you did not have a lawyer heading the department then the overall legal soup would not have the right seasoning.”
However, he concedes that senior colleagues could possibly take on his role.
“There are a lot of tasks that could be carried out by a non-lawyer who, because of their experience, might be very suited to carrying out the lawyer role.
“This experience would combine organising transactional work and knowing what the business wants. Lawyers tend to know that as well as knowing what the regulatory authorities want, but I can think of non-lawyers who would be able to do that.”
As to how much of his time Jolowicz spends being a lawyer rather than a manager, it is difficult for him to specify.
“I can go through a few weeks where I can be dealing with matters concerning the [legal] group or with general corporate matters and independent transactions don't feature on the radar screen.
“But there are usually one or two deals that I am working on and I don't feel that I will have to give that up in the future,” he says.
General counsel at French bank Societe Generale Mark Nimmo argues that management can be just as rewarding as doing deals.
“There is a different kind of adrenalin rush from the ones lawyers think they will get in private practice,” he says.
“In my particular department we cover a whole spectrum of transactions and other work that might be more of an advisory role.
“Therefore if you get involved in a particular transaction then you are doing so at the expense of other clients. So I spend a lot of my time on management.”
But what about the other side of the argument? Would private practice banking lawyers be willing to work with non-lawyers holding in-house positions?
Robert Elliott, banking partner at Linklaters, says: “I was debating this point only this week with someone from one of the US banks. The bank has just merged and I was asking one of the lawyers how much law her head of legal was doing. The answer was none at all, he was occupied trying to merge departments.”
Elliott is sceptical, however, as to whether a non-lawyer could fill the role because the areas in-house departments cover have become so legally complicated.
“It is difficult to see how someone without the [legal] training could know about the legal aspects of various types of derivative contracts,” he says. “Heads of legal positions are now heavily involved in management, but the people who hold those positions still need to know about legal frameworks.”
Elliott adds that, historically, it is not unknown for the head of legal post to be filled by a non-lawyer.
“Ten to 15 years ago, Barclays had a law section and the head was a non-lawyer. But he had been with Barclays for years and had a lot of collected wisdom and experience. Also, at that time, change was much slower in the legal world.”
Now Barclays' head of legal is a lawyer – Howard Trust – and Elliott believes that the introduction of the Financial Services Act has made the area too complicated for those who do not have a legal background.
Personally, though, he says he would have no objections to working with a head of legal who was, for example, trained as banker.
“Sometimes on a deal you are reporting to an in-house lawyer, sometimes to the financial director, but the success of the relationship depends on how good they are at communicating, how demanding they are or whether they have unrealistic demands.
“If they are a non-lawyer then they need to know how lawyers operate,” he says.
Clifford Chance partner Mark Campbell agrees: “There is no reason why a head of legal needs to be a lawyer. But they need to understand how lawyers operate. It is no good having someone who says 'do this' if you do not understand what 'this' is.”
Wickenden and Hanen both believe that they will not be the last in-house lawyers to leave the more comfortable lifestyle of the in-house lawyer for private practice.
“At the moment it is a bit novel to go from in-house to private practice,” admits Wickenden. “But I have many friends who are with in-house counsel at investment banks and they have all been very curious about the move. I predict that there will be many more moves like ours in the next few months.”
Hanen adds: “I would imagine that the in-house job at investment banks will continue to appeal to people a few years from retirement who have never worked for a bank”
As Wickenden concludes: “If you are a good in-house lawyer, then your reward is to be moved into management.”