Who says it's time to pull the plug on in-house practice?

Their pay is less lucrative than their private practice counterparts and merger mania has sparked a period of market insecurity. So how come in-house lawyers in the energy sector are reluctant to go private? asks Claire Smith.

When the European head of legal at Marathon Oil and Gas jumped ship last month to head Nabarro Nathanson's oil and gas practice, he was the latest of a number of top in-house energy lawyers to head for private practice.

John Southworth joined Nabarros to get back to the law: “Developing my career further at Marathon would mean leaving the law behind,” he told The Lawyer when he made his move. “I love the law and at Nabarros I am looking forward to being exposed to more deals and more clients.”

The strong legal teams of the major oil companies are ideal recruiting grounds for the big law firms and the pace of merger activity in the sector has made the stability of private practice more attractive for many in-house lawyers.

Like Southworth, Geoff Hewitt is another who has jumped ship; he left as director and legal manager at Saga Petroleum UK to join the energy practice at Morgan Cole last month. He also cites instability at the oil company as a reason for making the switch.

“Mergers among the energy companies undoubtedly lead to redundancies,” says recruitment consultant Julian Stone, manager of Garfield Robbins' in-house legal department. “Talks of mergers at the big oil companies mean in-house lawyers explore other alternatives. They start to feel worried about the future.” And since a Garfield Robbins survey shows that energy departments are the lowest paid of in-house teams, when lawyers start to look for other work they can be sure to find more lucrative salaries on offer from private practice.

However, an in-house exodus has not happened. “In-house salaries are struggling to keep up,” says Richard Wiseman, legal director at Shell UK. “But only a few people seem to move back to private practice, despite the financial incentive.”

BP-Amoco also reports that it is still rare for members of the legal team to head for private practice. The u67.5bn merger of BP and Amoco last year, which was the world's largest, prompted a downsizing of the legal team from 320 to 270 members worldwide, but most headed for other in-house positions. One leading team member, Anna Soroko, headed for Eastern Electricity after turning her back on the opportunity to join private practice. She had been asked by BP-Amoco to relocate from London to Aberdeen but chose to change her job instead.

At the time of her move, she explained that she didn't want to go to Aberdeen and added: “There is going to be a lot of movement with mergers and takeovers, and all law firms are looking at hiring at senior level.”

However, Soroko decided against moving to private practice. “I was in the middle of several interview processes when I decided I wanted to continue practising in-house,” she said.

The instability in the sector has also hit moves into the oil companies, which most commonly take place between three and five years after qualifying. At this stage in-house teams can be attractive propositions for lawyers wanting to become more involved in the commercial side of the business.

“Partners are too expensive,” says Edward Lean, senior vice-president and general counsel at Eastern Electricity. “So when we get people in from private practice we tend to look for quality people we can grow.

“To train people as much in finance and business as we do in law, we need to get them reasonably young.”

Adam Dann switched from the energy practice at Nabarro Nathanson two years ago to join Hardy Oil and Gas, which last year became British Borneo Oil and Gas.

His reasons for moving in-house are typical of assistant solicitors in the energy sector. “I had spent a year on secondment with Elf,” he says. “Then after returning to Nabarros, Hardy Oil and Gas made me an offer that was hard to refuse given the quality of the work on offer.”

The move brought him greater responsibility and involvement in overseas work. Now legal manager at the firm, Dann says: “I am much closer to decision-making and have a mixture of work, which is hard to come by in private practice.”

Many private practice lawyers cite this desire to be more involved in the business as their reason for moving, as well as the greater autonomy and challenge which in-house work can offer. In turn, the energy companies do not demand experience in the sector when recruiting assistant solicitors from private practice, but instead seek the broad corporate and commercial background that is gained at the big City firms.

Nevertheless, the number of moves in-house has dried up in the last nine months because of the wave of merger activity. Some in-house teams are still recruiting, but most are taking stock before deciding what vacancies will be available.

“Our team is fairly stable at the moment,” says Colin Saunders, associate general counsel at BP-Amoco. “But we will shortly be absorbing the Arco business and we won't be taking on all those lawyers. We need to wait and see what the situation is.”

The range of experience private practice energy experts pick up also makes them attractive to in-house teams in other sectors. “They gain excellent experience, which is welcomed by many other practice areas,” says Garfield Robbins' Stone. “Many are looking to go in-house but not necessarily into the oil and gas industry – banks like them for project work.”

Those who make the jump in either direction will find themselves at the heart of a very different culture. “The work ethic is different,” says Lean. “We are very supportive and people have more responsibility and opportunity to make use of their skills. There is the opportunity for them to do as much as their capabilities allow, whereas in private practice there is more competition.”

Above all there is the chance to get a lot more involved in the work being done. “We are one team with one objective,” Lean explains, “as opposed to lots of individuals competing with each other.”

Moving in-house can also mean a lot more in terms of bonuses, with most companies offering company cars and many giving share options. While these are rarely a reason for making the switch in themselves, they can make an attractive part of a package for lawyers joining successful companies.

And in the long-term, a period spent in-house can be a good career move, making lawyers even more attractive to private practice should they decide to return. “Almost all our partners have worked in-house at some point,” says Michael Doble, head of the energy practice at Denton Hall. “It gives them an excellent understanding of the commercial aspects of the business.”

And as Wiseman points out, this range of experience is invaluable. He says: “People move around more now and don't take jobs for life anymore – they want their careers to progress. They often feel they have to make the move.”