Let's take this inside

So you have an in-house legal department, but are you making intelligent use of this resource?

Or do you rely instead on expensive external lawyers who may be unaware of your internal processes?

Six months ago I moved jobs to head the legal department at Costain Group. I was immediately struck by how important this role can be for any business that is legally complex, fast moving and innovative. A good in-house legal department can advise without being briefed and has a day-to-day working knowledge of the company's culture, business operations and industry-wide concerns, as well as its legal requirements.

An in-house legal department will, however, only obtain this knowledge if it is actively involved in the business. Its lawyers must work hard to show that they can add value.

Often, lawyers are risk averse and overcautious when giving advice. One of the advantages of instructing an in-house lawyer is that we are not constrained by the terms of our professional indemnity policy (we don't have one) so we are willing to take a more active role and provide innovative advice consistent with the commercial objective.

Since moving in-house, I have had to embrace the complexities of the balance sheet and understand the intricacies of project managers' reports. I attend all the commercial review meetings. I also intend to acquire the Construction Skills Certification Scheme's black card for senior managers. These skills have put me in a better position to understand the business needs of my internal client and could only have been obtained from working in-house.

A further important function of the legal department is to help the business control its legal spend. This is important whether you operate a strict legal panel or take a more ad-hoc approach to appointing external advisers.

A good in-house legal department is able to advise without being briefed and has a working knowledge of the corporate culture

However good your in-house department is, you will need at some stage to appoint external lawyers. A business will do this for a number of reasons.

For example, to represent joint-venture and special-purpose vehicles where funding requirements will not allow the work to be brought entirely in-house or to provide specialist advice not available in-house.

The relationship between the external lawyer, the in-house legal department and the business should always be tripartite. Often, however, external lawyers try to cultivate relationships directly with commercial directors and cut out the in-house legal department. This should be resisted: it is important that the external lawyer build up a good relationship with the in-house legal department as well. If the in-house department is as actively involved in the business as it should be, the risk of internal politicking should be removed and the external lawyer will receive consistent instructions.

In addition, an in-house lawyer fully conversant with the business will be able to work closely alongside the external lawyer. For example, in-house lawyers can produce first mark-ups of documents or help produce witness statements. This saves costs by reducing the time that the external lawyer has to spend on these documents.

Another important function is for the in-house lawyer to negotiate fees and agree retainer letters directly with external lawyers. We know what the market rate is and what is acceptable in terms of limitation of liability.

Often people question the need to have an in-house law department at all. But I hope I have persuaded you that a cost-effective, commercially minded in-house legal resource can offer real benefits. However, this can only happen if you actively involve us in the business.