Royal Bank of Scotland Group

It is a strange but exhilarating time to be working at the Royal Bank of Scotland due to various merger rumours involving Barclays Bank.

But whether the Royal Bank of Scotland’s chief executive Sir George Mathewson will put his money where his mouth is remains to be seen.

However, the Royal Bank of Scotland’s results for the year ending 31 March show a 19 per cent surge in profits, putting it in a strong position to make good on the merger speculation.

And nowhere reflects this current atmosphere of change better than the legal department.

Derek Arnott, chief legal officer at the Royal Bank of Scotland, says: “There’s no doubt that two or three years ago we would be only looking after the Royal Bank full stop. Now we have a huge range of joint ventures and subsidiary companies.”

Since 1996 these have included working with retailer bankers Virgin and Tesco Bank, a venture in which the Royal Bank of Scotland holds a 51 per cent stake.

The legal department has long been restructuring itself to cope with the increased workload.

The head office in Edinburgh houses seven of the banking group’s lawyers, while the group legal department in London is made up of six legal staff.

The remaining 17 lawyers are dotted around a number of the bank’s departments, for example its mortgage centre in Greenock.

All lawyers ultimately report to Arnott, but the departments decentralise the bank’s various legal facets.

“Compared to 1981 when the bank was very centralised and controlled, the individual business units have a lot more control over their own destiny,” he says.

This decentralisation and autonomy continues to progress.

Arnott says that over the past four months the group legal department has taken a strategic review and introduced a company-wide legal policy.

“It would be madness to say that lawyers working in private trusts and taxation should operate in the same way as others,” he says.

But Arnott explains that the company-wide legal policy ensures that all the different practice areas operate from the same template, irrespective of area.

The differing departments reflect the Royal Bank of Scotland’s external legal requirements.

Arnott says the bank has a number of small panels for each division, stating: “We are heavy consumers of legal services.”

He says the bank uses “literally hundreds” of firms for mortgage work, with a smaller number which advise on basic debt recovery and insolvency work.

At group level, however, Arnott says the company uses both Scottish and English firms.

The bank relies on Freshfields to advise on corporate and transactional matters and Stephenson Harwood for banking work.

In Scotland, much of the corporate work is taken care of by Dundas & Wilson, while litigation is handled by McGrigor Donald and Brodies.

At the moment, however, the bank is focusing its attention on its IT capabilities, an area which Dundas & Wilson advises on.

Year 2000 compliance and the introduction of the euro has in-evitably meant a larger reliance on outside firms.

“Over the last couple of years there has been unprecedented levels of investment in technology,” says Arnott.

It is clearly an area Arnott holds enthusiasm for and is likely to consume much of the legal department’s time.

He says: “It has actually allowed us to take part in interesting projects.”

Derek Arnott
Head of legal
Royal Bank of Scotland

Organisation Royal Bank of Scotland
Sector Banking
FTSE 100 ranking 24
Market capitalisation £12bn
Employees 21,000
Legal function 30 lawyers
Head of legal Derek Arnott
Reporting to Miller McLean
Main location for lawyers St Andrew’s Square, Endinburgh
Main law firms Dundas & Wilson CS, McGrigor Donald, Brodies, MacRoberts, Freshfields, Stephenson Harwood, Allen & Overy, Addleshaw Booth & Co, Norton Rose, Cobbetts, Halliwell Landau, Herbert Smith and Simmons & Simmons