Plea for understanding as conference shines a light on ‘third legal community’

For years they were the poor relations of the legal world, earning less and working fewer hours than their illustrious counterparts in City firms.

For years they were the poor relations of the legal world, earning less and working fewer hours than their illustrious counterparts in City firms.

But now in-house lawyers are demanding greater recognition and understanding of what has been called the ‘third legal community’.

Some of the sector’s biggest hitters were at the Managing Your Relationship With Outside Counsel conference, organised by The Lawyer.

One speaker went so far as to call for a joint commission on in-house legal departments to be carried out by the Law Society and the Bar Council.

Michael Butcher, general counsel at Veolia Water, told the audience at London’s Kingsway Hall Hotel: “There has evolved a third legal community that has developed unheralded and that needs to be properly understood.” Shortly after finishing his speech, he told The Lawyer: “What are the different dynamics that operate within the third legal community?”In-house lawyers are going to be regulated, but if you don’t know anything about them, how can you regulate them?”If you’re assuming that all they do is what barristers in chambers and solicitors in firms do, you’re making a mistake.”

Other speakers argued that in-house law should be treated more like a business than a profession – including the suggestion that larger companies could consider appointing legal CEOs.

One theme echoed by all the speakers at the conference was that the legal landscape occupied by in-house lawyers has changed beyond recognition in the past 20 years.

While legal departments grow in size, there is greater pressure to keep costs down, with companies keeping an even tighter hold of the purse-strings as the credit crunch hits.

The debate on fee arrangements and billable hours dominated the first day. Many felt there was little alternative to hourly rates, despite their unpopularity.

Orange director of property legal services Michael Ralston said: “It all comes back to billable hours in the end. What I expect [law firms] to do is to be aware of what our concerns are. It benefits them if they try to keep the fees down to a reasonable level.”

But Alliance & Leicester head of legal services Joshua Box said more companies should consider alternative arrangements – from fixed fees to value-based billing.

“I don’t think hourly rates are wrong,” he added. “There are lots of other fee arrangements you can get into. Ultimately, there is a result out there to what everyone is trying to achieve.”

Another key development of the past 20 years has been the rise of the panel. The companies represented at the conference put forward a surprising range of models for managing a panel of external lawyers. From the highly structured (Belgian Post uses project management techniques to monitor spending) to the minimalist (Carlsberg does not operate a panel, preferring to use relationships with a small number of firms), each company had blazed its own trail.

Box said Alliance & Leicester had formed five discrete panels to focus on specific business requirements. It also has a robust policy on the retention of business. The company does not hold beauty parades, instead choosing firms based on their performances. At the end of 2008 it will shed a number of the firms currently representing Alliance & Leicester.

Box added: “We expect the firms that really want to work for us to shine out.”

Andy Webster, legal manager at Legal & General, chaired the third and final day of the conference.

He was surprised by the range of models outlined at the event, saying: “There’s no set procedure for instructing firms. What works for one organisation doesn’t necessarily work well for another.

“We’ve got a complete contrast and everyone seems happy with their lot.”

It was left to Geoffrey Timms, group head of legal at Legal & General, to offer a rather gloomy assessment of in-house law in 2008.

Timms, who chaired the first day of the conference, said: “Everybody seems to lose at the moment. Fees inexorably rise. They rise in part because salary levels have to rise to remain competitive.

“The lawyers have to work longer and longer hours. The majority of lawyers are less satisfied than before and most clients are less satisfied with the level of fees they get.

“People feel they’re on a treadmill. There are no easy answers, but it’s one of the questions that will continually face us.”