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Corporate counsel to bring more legal work in-house

Plan to decrease external budgets and expand legal departments in EMEA  

14 May 2013

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By Manju Manglani, Editor (@ManjuManglani)

Corporate counsel plan to bring more work in house and reduce their reliance on external counsel in Europe, the Middle East and Africa, a survey has found.

It found that 24 per cent of in-house teams had already made hires in the first quarter of this year and a further 40 per cent expect to add to their teams over the coming year.

A greater emphasis on handling financial and regulatory issues in-house, rather than depending upon law firms, was cited by respondents as a key reason for expanding their legal departments.

The findings are based on responses from 182 EMEA legal departments at companies with average EMEA revenues of €1,116bn and average global revenues of €2,346bn. The survey was conducted by Laurence Simons and the Association of Corporate Counsel (ACC) in spring 2013.

Thirty-six per cent of respondents said they expect their external budgets to decrease over the next year, while 30 per cent predicted their internal budgets will increase. By contrast, 24 per cent expect a decrease in internal spend and 18 per cent think external budgets will rise over the next year.

Just over half of respondents said they will be bringing regulatory issues in-house this year, compared with 31 per cent in 2012. In addition, respondents said they will be bringing work in-house in areas including insurance and reinsurance (30 per cent, up from 14 per cent in 2012), banking and finance (24 per cent, up from 14 per cent) restructuring and insolvency (17 per cent, up from 11 per cent) and tax (17 per cent, up from 8 per cent).

“Legal departments bringing more work in-house reflect a desire for greater control and certainty as a fixed workforce allows for better forecasting of budgets. Many are making the decision that hiring extra permanent staff is more cost effective in the long run than continuing to outsource the work to law firms,” said Naveen Tuli, global managing director at Laurence Simons.

“The new regulatory and financial landscape also places these areas at the core of any corporation, where in-house teams can provide extensive internal knowledge which isn’t gained from placing the work externally.”

Greater internal hiring would continue the trend seen over the past year, with the average size of the EMEA legal department growing from 10.5 lawyers in 2012 to 12 lawyers in 2013 and rising worldwide from 39 lawyers in 2012 to 53 in 2013.

Forty-four per cent of respondents said they plan to increase their in-house expertise in corporate and commercial work, 12 per cent in regulatory and compliance, and six per cent in both contract and finance/insurance. Ten per cent plan to hire lawyers into a general role.

Currently, corporate and commercial dominates in-house activity, with 86 per cent of legal departments managing this work where they can. Bribery, corruption and compliance (64 per cent) and intellectual property (55 per cent) round out the top three areas.

When asked where they would deploy one extra team member, 54 per cent of respondents said they would recruit in Europe, 22 per cent in the UK, 10 per cent in Asia and 8 per cent in America.

"Corporate counsel are increasingly facing an aggressive regulatory and changing business environment. Given the economic pressures facing European companies, however, in-house lawyers in the region report that they must do more with less. These are the kinds of operational issues that keep CLOs up at night,” said Veta T. Richardson, president and chief executive officer of the ACC.

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