Getting what’s rightfully due

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As important members of the legal profession, general counsel should be recognised by reviewing The Advocates Act and be supported by a regulatory body, write Akhil Prasad and Sanjeev Gemawat

The legal profession has traditionally been associated with litigation. When we think of legal professional, the first image that comes to mind may be that of a lawyer in his robes arguing in court. Seldom do we think about a person sitting with the management of a company tailoring business within the parameters of law, or advising on the risks involved. Unfortunately, this facet of the legal profession i.e., the role of a general counsel, has gone unnoticed and been given very less importance.

Simply speaking, the role of a general counsel can be defined as the first legal adviser available to an organisation who provides support to litigious services, and performs non-litigious duties including rendering legal assistance in the areas of documentation, compliance, regulatory issues and policies, legal structuring and day-to-day advisory. Striking a balance between law and business is the most important aspect of this role.

In the recent past, the role of a general counsel has seen a shift, and with it there is a growing realisation of their importance. Yet the due recognition and acknowledgement has not yet been given. There has been a transformation in the role of a general counsel from a support function to a pivotal role in strategising business, facilitating its performance in consonance with law, and hedging business risk.

Akhil Prasad
Akhil Prasad

The general counsel has become a strategist, enabler and protector of business. They provide all services that are expected of a legal person including advisory, documentation, compliance, training other departments, communicating with authorities, and providing litigation support.

The difference between a practising lawyer and a general counsel needs to be understood, and the gap between the two needs to be bridged. The gap arises due to a lack of recognition of the in-house counsel’s profession, as there is no regulatory framework governing them, while practising lawyers are governed by the Advocates Act.

Lack of recognition

In India, the Advocates Act, 1961, recognises only advocates as a class of persons who are entitled to practise law. An advocate is defined as a person “entered in any roll under the provisions of the Advocates Act”. The Bar Council of India (BCI) is a statutory body established under section 4 of the Advocates Act that regulates the legal practice in India. It prescribes standards of professional conduct and etiquette, and exercises disciplinary jurisdiction over the bar. It also sets standards for legal education and grants recognition to universities where degrees in law will serve as a qualification for students to enrol themselves as advocates.

Unfortunately, neither the act nor the bar council rules regulate the rendering of non-litigious services as performed by in-house counsel. Rule 49 of the BCI rules provides that an advocate cannot be a full-time salaried employee, and if an advocate takes up such employment, he ceases to be an advocate. On the other hand, chapter II, part IV of the BCI rules prescribes the “standards for professional conduct and etiquette” for advocates, and on the face of it these standards govern litigious services, and not the services typically performed by general counsel.

Sanjeev-Gemawat
Sanjeev Gemawat

Surprisingly, the Advocates Act – or any other statute for that matter – does not recognise a legal professional who is providing all other legal services except appearing in courts. The major difference between a general counsel and a practising lawyer is that a general counsel provides services to one client whereas a practising lawyer provides services to multiple clients. There is no reason why the profession of a practising lawyer is regulated, and that of an in-house counsel is not even acknowledged by a statute or governing body.

Better elsewhere

Such treatment of general counsel is in contrast to many other common law countries. For instance, the legislative framework in the UK, as set out in the Legal Services Act and its regulations, applies to in-house lawyers, and they are subject to a number of regulatory duties to their clients that arise out of the principles and the code of conduct.

The regulatory regime of various jurisdictions suggest that the profession of in-house counsel is recognised and regulated in one form or the other. For instance, in the US, rules recognise in-house counsel as lawyers, with rules relating to confidentiality, independence and conflict of interest applicable on them. Similarly, in the UK rules exist for guidance to in-house counsel in relation to conflict of interest. In both the UK and US, in-house counsel are not restricted from carrying out any legal function.

Even in our country, there are other professions that recognise the practising and non-practising professionals, but do not exclude the non-practising professionals from their regulation. A chartered accountant who is in employment is still a member of the Institute of Chartered Accountants of India, and gets governed under the code of conduct applicable to non-practising members. Similarly, company secretaries and cost accountants continue to be members of their respective institutes even if they are in employment.

Review needed

Undeniably, the demand for general counsel is growing rapidly, with the trend of many global companies investing in India, and Indian companies becoming global. In all jurisdictions, and in all industries, at every stage, one or the other legal and regulatory mechanism impacts businesses. Besides, general commercial, industrial and labour laws, industry-specific legal frameworks create various governance and compliance issues.

Industry needs to comply with all these laws and regulations and deal with all issues arising out of them, which is not only restricted to dealing with the government machinery for requisite compliance, approvals and licences, but also day-to-day compliance and documentation, and dealing with disputes arising out of regulatory/commercial issues.

Obviously, organisations and their boards are relying on the skills and professional competence of general counsel. Current economic growth, and the advent of the fourth industrial revolution, would lead to corporates impacting the lives of people and society at large. These factors are likely to give further prominence and add to the relevance of the role of a general counsel.

Against this backdrop, the current legislative framework under the Advocates Act needs to be reviewed. The prohibition on salaried employment for lawyers has no place in the regulatory regime for lawyers in any modern society. In order to promote a compliance culture and respect for rule of law, it is high time that the in-house counsel profession is regulated, and the professional standards and code of conduct be devised that address ethical behaviour of in-house counsel and include that they: Act in a fair, honest and objective manner; act impartially and independently; avoid conflict of interest, financial interest and self interest in the discharge of their duty; and abide by a duty to provide sound legal advice.

It is time for the role of GC to receive its due recognition. The role performed by them should be recognised as a part of legal services, and thus backed by some regulatory body. In this direction, the words of the former chief justice of India, Ranjan Gogoi, are laudable and provide a vision for a solution to the ills of the current judicial system. The government should formulate a code of conduct for non-litigious services, which can prescribe rules relating to competence, independence, integrity, conflict of interest and confidentiality.

Akhil Prasad and Sanjeev Gemawat are founding members of GCAI. Prasad is director, country counsel India and company secretary at Boeing India and Gemawat is the executive director – legal, and group company secretary at Dalmia Bharat Group

Assets to judicial system

The following is an extract from a speech by former chief justice of India, and member of parliament in the Rajya Sabha, Ranjan Gogoi, on the role of general counsel, which he made at the recent launch of the General Counsels’ Association of India

A general counsel is a qualified legal professional, well-versed with all laws of general application, and a specialist in the laws governing the industry that he or she is associated with.

Yet a general counsel has no recognition in the practice of the legal profession, or as a part of a legal system currently in force in India. General counsel, by virtue of their high specialisation, are assets to the judicial system, and their capacity to directly assist the courts in decision making can hardly be underplayed.

The days ahead will see specialist judges working in specific areas of laws. In fact, such a situation, namely the specialist judge, in my comprehension is a part solution to the several ills that presently plague our current judicial system.

If specialist judges are a reality and a solution to the ills of the judicial process, and the role of specialised professionals like general counsel are underplayed, therefore consequently fine tuning the laws and regulating the legal profession are an imminent legal reform that would be required to be addressed by the legal fraternity in conjunction with the legislature of which today I am a part.

In my view, such a course correction is imperative if we are to successfully meet the challenges of the coming times. Industry and corporates will have a distinct and a sufficiently strong role to play in the daily life of the citizens. To meet the challenges ahead, we have to be prepared to make the laws according to the needs ahead of us.