22/01/2020
The role of the General Counsel and in-house lawyer continues to change rapidly. In the past many companies saw their GC as a technical specialist, to be consulted with when there was a specific legal issue.
But no longer. Now they are expected to provide advice, manage risk and ensure legal compliance. Many GCs are also business enablers, a trusted adviser to the Board helping to meet commercial objectives – and have a strong sense of the opportunities in which the organisation can invest.
Meaning GCs need to have a strong sense of the current market conditions facing the business - looking ahead and anticipating problems and issues further down the track.
So, as we start 2020, what are some of the emerging issues and opportunities for in-house legal departments?
Regulation and compliance
The Finance Reporting Council recently criticised companies for only “paying lip service” to sweeping changes to Britain’s corporate governance guidelines that came into effect last year. It accused leading businesses of “concentrating on achieving tick-box compliance at the expense of effective governance and reporting”.
Corporations are undoubtedly now facing compliance issues from a growing body of regulators across many different service sectors, markets and jurisdictions.
New laws on the environment, fraud, money laundering, trade, health, safety and intellectual property mean it can be difficult to keep up with regulatory requirements in all the areas and geographies where a company does business.
Climate change
In the eyes of many, companies and businesses are among the main contributors to global warming. Arguments for companies to embrace sustainability and adapt to the risks of climate change have become more powerful, with pressure from customers, employees, NGOs and investors.
A recent survey found that most company lawyers now expect a significant increase in legal risk. Countries including the US and The Netherlands have already seen a new class of lawsuits amid a rising sense of urgency about the need to tackle climate change.
General Counsel should be prepared for similar litigation to be launched in other countries, including the UK. Lawsuits seeking damages have largely failed to succeed so far because it has been hard to establish that any single company caused specific harm, but that could evolve over time.
In the UK, the Government has promised that a new Environment Bill to tackle waste and air quality will support the existing Climate Change Act (2008).
For companies that have not already done so, it is now important to review their environmental impact. They may also decide to review their supply chains and procurement models, setting best practice rules to ensure all its stakeholders are supportive of sustainability ambitions.
Companies should also be mindful of The ‘Green New Deal’ movement that complains there’s a lack of vision of what transformation to a modern, clean, decarbonised and environmentally rich economy could mean, and wants to position the climate emergency within wider concerns people have about equality of opportunity and the fairness of society.
BREXIT
MPs have now given their final backing to the Bill that will implement the government's withdrawal agreement, which means the UK will leave the EU on January 31.
For in house lawyers, many worries still remain. Although the fog of uncertainty is lifting, and survey evidence shows confidence levels are now rising among UK businesses, the transition period will begin and the start of horse-trading on a new free trade agreement.
EU Commission President Ursula von der Leyen said the UK would no longer benefit economically from the free movement of capital, goods and services. Free movement of people will end for EU nationals, and we’re likely to see the introduction of a new mandatory registration system. This will be followed by the government’s proposed post-Brexit immigration system, ‘a one size fits all’ points based system which will focus on encouraging skilled migrants.
With the gig economy and contingent workers representing fast-moving areas in employment law, businesses will need to ensure related risks are properly mitigated.
Data security
Over 18 months has passed since the General Data Protection Regulation (‘GDPR’) and the Data Protection Act 2018 came into force – and the UK’s Information Commissioner’s Office (‘ICO’) has clearly indicated that it intends to flex its muscles going forward and will use its increased powers of enforcement.
Commissioner Elizabeth Denham said to “expect outcomes soon demonstrating the actions my office is willing and able to take to protect the public”. The ICO has already announced an intention to finetwo companies a combined £282 million for data breaches. The outcomes in relation to the initial fines are awaited as is the decision of the Supreme Court in the Morrisons case, both of which will be of significant interest to all Data Controllers. Reports indicate that the ICO are now starting to look at other “significant cases”.
For businesses that hold customer and employee data, the bar has been set high and indicates just how costly non-compliance with the Data Protection regime can now be. Privacy is a key concern of all consumers and therefore it is vital that ongoing compliance with GDPR remains a priority in order to manage risk and reputation.
Technology
Technology – including blockchain, artificial intelligence and big data - has been one of he biggest disruptors to the legal sector in recent years.
Even if General Counsels aren’t using these technologies in their own departments, it’s likely many of their clients and customers will be.
The algorithms used in AI may not have effective oversight and control. This creates new legal issues and GCs have a role to play in ensuring these are properly considered.
But with continued pressure to do more with less and reduce costs, law department leaders may embrace the need to invest in new technologies, as well as weigh corresponding risks, as a way to enhance their performance, processes and quality of work. Deciding which technology to introduce, and how and when, can be difficult.
Pensions and payroll
Troublesome corporate pension schemes will continue to come under increasing scrutiny from regulators and legislation, as well as cost pressures.
The Government’s long-awaited Pension Schemes Bill has been reintroduced in Parliament after the December General Election. It includes new rules for pension dashboards, collective defined contribution schemes and new powers for The Pensions Regulator.
Legal teams will need to assist both employers and trustees to take practical steps, particularly contingency planning, to mitigate risk and ensure that pension schemes are prepared for the future.
The Government has reaffirmed plans to make changes to off-payroll working (IR35) rules effective from April 6 2020. This will affect any contractors working through a personal service company, recruitment agencies, and all large and medium-sized end clients.
Ethics and behaviour
Oversight of the standards and conduct of most legal professionals is the responsibility of the Solicitors Regulation Authority (‘SRA’). In 2020, its tougher new solicitor code - aimed at “promoting a culture where ethical values and behaviours are embedded” - will gain traction.
Among the key changes is an explicit spelling out of sexual harassment as serious misconduct alongside “abuse of trust, taking unfair advantage of clients or others, and the misuse of client money, dishonesty and criminal behaviour”.
Previously, the focus has been on the individual. Now the SRA’s intention is to also regulate and question the culture of firms or organisations where lawyers are employed.
Helping senior in-house lawyers
The 2020s are likely to see many General Counsel having an increasingly major role in helping the Board to shape strategy and achieve its corporate objectives. With that come fast-changing responsibilities and expectations, and the need to be supported by an in-house legal team and outside advisers that can demonstrate business value.
Bevan Brittan’s GC Exchange is a team of expert lawyers and a knowledge hub that helps senior in-house lawyers navigate the business landscape. We want to support senior legal professionals operating in today’s fast-paced commercial world, by harnessing our strengths, rich collective experience, up-to-date commercial knowledge and strong relationships.
Please sign-up and as a member you will receive the latest knowledge, insights and news to underpin your strategic decision-making and help you stay up to date with the latest legal, risk and compliance issues. By enriching your knowledge, you can more effectively manage risk and take future-focused decisions.
