Alongside the oft-spouted rhetoric of ‘more for less’, in-house lawyers are more frequently bringing work in-house and trying to wean themselves off external advisers and panels. In our survey, 85% said their company has a policy of retaining more matters in-house to reduce legal spend. When asked the same question in 2015, only 70% of GCs responded the same way.
Matt Wilson, Uber’s associate GC for the EMEA region, says that when he joined the ride-hailing app in 2017 around 75% of the company’s legal budget was being spent externally. For 2018, Wilson estimates that figure is around 58%. ‘We’re working through next year’s budget at the moment; I would love to get it to around 50%.’
A majority (44%) of survey respondents indicated they were most likely to go external on specialist matters, and this was born out in our in-depth interviews with GCs. Dan Toner, GC of healthcare provider Spire, insists he only goes direct to counsel when he needs to, typically ‘something techie around GDPR for example’. Likewise, GC of food giant Nestlé, Mark Maurice-Jones, says he will use external counsel if they have specialist expertise or ‘in a particularly risky area’.
Carol Hui sought to overhaul the spending strategy of Heathrow Airport when she joined as GC in 2009. At the time, the company had a greater tendency to outsource work. ‘I strengthened up the in-house team and now we do a lot more in-house.’ However, she admits: ‘Because the company is so complex, and we can’t staff up like a full law firm, we need to find a balance.’ As a result, Hui also finds herself seeking specialist counsel: ‘We wouldn’t recruit somebody for a very niche area.’
‘We only go to external firms for ad hoc queries or something that’s very jurisdictional, some kind of peculiarity.’
Carolyn Jameson, Skyscanner
For Skyscanner’s GC Carolyn Jameson, her reluctance to operate a formal panel and to outsource more generally is a matter of received wisdom. ‘You build up specialist knowledge over time of the issues that arise. We only go to external firms for ad hoc queries or something that’s very jurisdictional, some kind of peculiarity.’
Not everyone is following this internal trend, however. Some GCs reported an inclination to outsource commoditised work where possible and leave the in-house team to take over what Standard Life Aberdeen GC Rushad Abadan calls ‘the interesting stuff’. Perhaps the most striking example of a major outsourcing shift comes from Catherine Johnson, GC of the London Stock Exchange Group. She operates her own managed legal service that sees entire high-volume aspects of the legal function outsourced to alternative providers (for more on this, see ‘Assault on the alt’).
But overall, external counsel is just the first to fall when it comes to cost-cutting. Clare Wardle, GC of Coca-Cola European Partners, concludes: ‘Every corporate department, not just legal, is told they have to keep their budgets flat. It’s difficult to say “I want 15 more lawyers” unless your external spend is going to be cut by doing that. External counsel is the low-hanging fruit on that one.’
The need for value for money and specialist advice is best indicated by the most recommended law firms for external advice from our survey. As was the case three years ago, all of the Magic Circle firms were recommended overall and Allen & Overy, Clifford Chance, Freshfields Bruckhaus Deringer and Linklaters were cited as among the top-ten firms for value for money, as well as for strategic, high-quality legal advice. This all underlines the fact that if advice is good, it adds value – regardless of price. Three other firms that performed well across both categories are Baker McKenzie, Eversheds Sutherland and Pinsent Masons – proof that high-impact legal advice is not necessarily the preserve of the City elite.