Bluechips continue to grow legal teams as buyside lawyers shift from external counsel
In-house departments are expanding rapidly and overshadowing private practice growth as corporates plan to further bolster their internal legal capability.
Both recent statistics and developments on the ground indicate that corporates are increasingly addressing issues such as regulatory and compliance pressures, as well as budgetary restraints, by expanding their internal capabilities.
Ernst & Young (E&Y) has become the latest in-house department to indicate that it is growing, with general counsel (GC) Lisa Cameron in the process of hiring lawyers to expand its legal team. Currently the accountancy giant has 11,000 staff in the UK alone, and Cameron points out that with 9.5 full-time equivalent lawyers, that equates to only one lawyer for every 1,000 staff.
Cameron – a litigator by background who worked at RPC and joined E&Y in 1998 – argues that the role of the in-house lawyer is evolving. ‘You get one in-house lawyer in and recognise the value you get, and also the financial benefit in having in-house teams rather than external teams,’ she observes. The hires come ahead of a global strategy review expected to be announced in July.
Cameron, who assumed the role of GC on becoming partner in 2006 and sits on the UK board, uses a handful of external law firms, including Bird & Bird, Farrer & Co, Freshfields Bruckhaus Deringer, Hogan Lovells, Linklaters, Orrick, Herrington & Sutcliffe, Olswang and RPC.
Cameron observes: ‘We are particularly lucky to have the support of senior management who recognise the value of the in-house team.’
Another legal team with a clear mandate is Royal Dutch Shell, where legal director Peter Rees QC has swelled the global energy giant’s legal team by 112 since his arrival in 2011.
The hires at Shell combined with Rees’ restructuring of the 750-lawyer global department have led to a sharp decrease in external legal spend, with the company’s budget running at around half the level it did in 2007, despite remaining one of the world’s largest corporate users of legal services and spending over £100m annually.
Rees told Legal Business that major companies were increasingly moving to forge a credible career path for ambitious lawyers. ‘The whole purpose of in-house legal is to know the business of the company inside out,’ he said.
These examples of growth are backed up by The Law Society’s Legal Services Industry report for 2012, which revealed that between 2001 and 2011, the number of solicitors with practising certificates working in commerce and industry increased by 137% – an average annual growth rate of 9%. This compares with just 28.5% growth in private practice, or an annual rate of 2.5%.
There are now 23,577 solicitors working in-house, including 14,691 in the private sector.
The trend for growth comes partly as in-house departments find improved ways of dealing with the regulatory and compliance challenges they face.
In an EMEA Legal Department Benchmarking Survey 2013 conducted in May by legal recruitment consultancy Laurence Simons, 40% of legal departments interviewed said they expect to add to their team over the next year and 51% said they would bring finance and regulatory issues in-house rather than using external law firms – a 20% increase on last year.