Spat Splits Apart Britain's In-House Legal Association

The Commerce & Industry Group (C&I) has been the voice of all in-house lawyers in the United Kingdom since 1961. But if Anthony Armitage has his way, C&I's 44-year monopoly is about to end.

Amid allegations that C&I had been dishonest about its commercial dealings, Armitage, vice-chair of C&I's commercial arm and chair of C&I's London region, resigned from his positions in October. He then formed a breakaway group called the In-House Lawyers' Association (IHLA).

"We intend to become the trusted trade union for in-house counsel in this country," says Armitage, who is also director of First Law, a consulting company that provides tendering and cost-containment services to law firms and legal departments.

The initial response to IHLA has been impressive. Since late October, IHLA has signed up 170 lawyers from 150 companies, including HSBC, J.P. Morgan, Lloyd's, the BBC, KPMG, Deloitte, media giant British Sky Broadcasting and communications solutions provider BT Group.

But Bill Graydon, C&I's director of operations, seems unconcerned by the idea of a competing group. He notes that the Law Society of England and Wales, the body that governs lawyers in the United Kingdom, recognizes his organization as the official representative of in-house lawyers.

"Our status gives us two representatives on the Law Society Council and therefore important input to decisions regarding the profession," he notes.

Armitage, however, regards C&I's association with the Law Society as the crux of the issue.

"The Law Society is an unprofessional and bureaucratic organization that achieves little," he says. "C&I's association with it has undermined C&I's value to in-house lawyers."

C&I's Mission

C&I was conceived in 1961 as a division of the Law Society representing in-house lawyers. In concept, it was no different from the divisions representing other recognized interest groups, such as female solicitors or disabled solicitors.

In 2000, controversy arose about the Law Society's effectiveness at governing the profession. Anxious to maintain an independent profile, the Law Society sought to distance itself from the divisions, some of which--including C&I--had become involved in commercial activities, including partnerships with CLE vendors.

"What the Law Society wanted to do was discharge the idea that C&I and similar groups were part of the Law Society," Graydon says.

The Law Society's solution was to enter into "registered group agreements" with its former divisions. These agreements made it clear that the groups were no longer part of the Law Society; instead, they were allowed to bill themselves as "recognized by the Law Society"--and indeed, C&I does so in all of its communications.

The hitch in the agreement was they couldn't engage in commercial activities.

"The problem was that we were making a handsome income [currently about $375,000 annually] from the training courses and other programs we were running," Graydon says. "And we were plowing the money back into more programs for our members."

C&I, which was an unincorporated association (UA), decided that the best way to comply with the prohibition was to spin-off a non-profit company. It wouldn't be subject to the Law Society agreement and would shield members from personal liabilities arising from commercial activities.

When the dust settled after C&I signed the agreement in mid-2003, two entities existed: the Commerce & Industry Group, a UA responsible for C&I's representative function relating to Law Society matters; and C&I Group Services Ltd. (GS), an incorporated body formed in 2001 with the mission of carrying out C&I's commercial activities.

Despite the legal separation of the two organizations, they continued as a single brand. Indeed, the company's officers held identical positions in the two branches of the organization and for all practical purposes, C&I and GS were indivisible bodies.

"There is no doubt confusion exists to the respective roles of the two organizations," Graydon admits.

Armitage didn't approve of that confusion.

A Spat Erupts

When Armitage became GS's vice chair in 2003, and next in line for the chair's post, he was the first officer of the incorporated group to decline a place on C&I's board. The relationship between the two bodies, he maintained, created a conflict of interest.

"Without making full disclosure to the public, its members or the Law Society, C&I uses its ties with the Law Society as a device to gain recognition for itself and income for the company," he says.

But Graydon notes that Sir David Clementi, the Prudential chairman who recently authored a government-commissioned report on reforming the legal profession, conferred with C&I when conducting the portion of his research relating to the role of in-house lawyers.

"That's a big deal," Graydon says, "because it means the government recognizes the body sanctioned by the Law Society as the proper representative of in-house solicitors."

Throughout the controversy, the Law Society has remained neutral, offering no public comment on the spat.

"I believe it will continue to remain aloof," Graydon says.

But not absolutely aloof. In early December, Law Society President Ed Nally and chief executive Janet Paraskeva met with Armitage to discuss IHLA's role. Details of the meeting remain confidential.

In any event, Armitage believes in-house lawyers receive few benefits, if any, from C&I's association with the Law Society. By way of example, he cites C&I's failure to persuade the Law Society to reduce professional insurance premiums for in-house lawyers.

"We continue to pay the same premiums as private lawyers, although we have virtually no risk of being sued for negligence," Armitage says. "C&I met with the Law Society once in 2004 and made no other progress during the entire year."

Graydon counters that the issue is a matter of continuing negotiation that will take time to resolve.

Claire Wilkinson, general counsel at Abingworth Management Ltd., a London-based international biotech investment group, sides with Armitage.

"C&I is rather moribund and over-involved in its own internal politics," she says. "In-house counsel are underrepresented at the Law Society and C&I has done nothing about the exorbitant practice fees that we must pay."

Armitage says that the unclear relationship between C&I's national group and its regional divisions is another shortcoming.

"There is no definition of that relationship, not even as to who is entitled to the income or the assets," he says. "As chair of the London region, I had no idea what our relationship was to the national group and which of our members were affiliated with us as opposed to the national body."

Wilkinson sees the issue similarly: "Organizing by geographic region rather than industry sector doesn't make any sense."

Finally, Armitage claims C&I has lost touch with its members. He maintains C&I's CLE courses cost too much and that C&I schedules too many of them during working hours. He also says that the organization has failed to provide a proper networking environment for in-house counsel and failed to take advantage of its purchasing power to provide discounted bulk services for members.

Wilkinson and some other in-house counsel have a similar view. She complains that C&I provides inadequate services to its members, has deprived members of an effective means of communication, and has failed to provide benchmarking or best practices guidelines for in-house departments.

Graydon, who concedes that Armitage did an excellent job in his executive positions before the controversy went public, denies all this. He points out that 2,000 in-house counsel attended 55 GS seminars in 2004.

Armitage's resignation, he maintains, was simply a result of not getting his way.

Filling The Void

To support this contention, Graydon observes that only one member of the

12-person C&I executive committee--Julian Allen, legal manager at Ansbacher Fund Services--sided with Armitage.

"Anthony lost the board's confidence when he tried to implement schemes that weren't acceptable to the board, such as extinction of the unincorporated association," Graydon says.

Indeed, board members say Armitage is not a team player, was reluctant to share the details of his proposals with the board, and his desire to link C&I projects to First Law's business constituted a conflict of interest. Armitage denies the allegations of conflict and responds that no one has ever made that accusation "to my face."

Regardless, Graydon says that the formation of the IHLA will not undermine C&I.

"There is no split in the in-house community," Graydon says. "It is business as usual."

Whether that will continue to be the case remains to be seen.


Julius Melnitzer

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