In-house counsel hold a unique and critical role within any organisation, balancing the dual responsibilities of ensuring legal compliance and upholding ethical standards. Unlike advocates governed by the Advocates Act of India, in-house counsel operate in an unregulated space when it comes to legal practice. The Advocates Act, while providing some direction for advocates, does not extend to the in-house legal profession, leaving these professionals to figure out the boundaries of their duties on their own. This lack of a statutory framework complicates the task of balancing legal and ethical obligations in a corporate setting.

The primary responsibility of in-house counsel is ensuring that their organisation complies with all applicable laws—local, national, and international. Failing to comply with legal obligations can result in severe consequences, such as fines, penalties, litigation, or even the loss of business licenses. 

Ethical responsibilities extend beyond mere legal compliance and involve ensuring that the company operates in a way that upholds moral values, fairness, and responsibility toward stakeholders. Ethical behaviour is not just about avoiding legal penalties; it is about maintaining trust, preserving the company’s reputation, and contributing to a positive corporate culture. 

WHERE TENSIONS ARISE

One of the most challenging aspects of the role is managing the tension between legal and ethical responsibilities. While legal obligations are clear-cut and defined by statutes, ethical responsibilities are more subjective and may vary depending on the industry, the context, or stakeholder expectations.

A common dilemma for in-house counsel is when a course of action is legally permissible but raises ethical concerns. For instance, a company may exploit legal loopholes to reduce costs. While such actions may be legal, they could be seen as unethical. 

Consider a scenario where a company discovers a legal loophole in environmental regulations that allows it to reduce compliance costs by lowering its environmental safeguards. Although this action complies with the law, it could lead to environmental harm, prompting public backlash, reputational damage, and potentially a decline in customer loyalty. In such cases, in-house counsel must advise the company not only on the legal permissibility of the action but also on the potential long-term ethical consequences.

Conversely, there are instances where the ethical course of action may conflict with legal obligations. In such situations, in-house counsel faces the difficult task of advising whether to comply with the letter of the law or act according to higher ethical standards. Ethical breaches of the law, however well-intentioned, can still result in legal consequences such as fines or sanctions.

Imagine a company operating in a country with lax labour regulations. The company could legally underpay its workers or refuse to offer benefits that employees in other countries receive. However, from an ethical standpoint, the company may wish to offer fair wages and benefits, even though it isn’t legally required to do so. In such scenarios, in-house counsel must guide the organisation through this ethical dilemma, weighing the short-term legal benefits against potential long-term ethical damage.

THE ROLE OF CORPORATE CULTURE

The ability of in-house counsel to strike the right balance often depends on the company's overall culture of integrity. While counsel can certainly take steps to foster such a culture, their efforts may be limited if ethical behaviour is not already prioritised at the leadership level.

A company with a strong ethical foundation will make it easier for in-house counsel to align legal strategies with moral values. However, if the corporate culture prioritises profits over ethics, in-house counsel may face an uphill battle in maintaining this balance.

In-house counsel have a responsibility to go beyond legal compliance and act as ethical stewards within their organisations. Their role in maintaining both legal and ethical standards is key to fostering a successful, responsible, and resilient organisation.

About the Author: Saumya serves as the associate vice president of Cube Highways and Transportation Assets Advisors Private Limited, where she leads a legal team handling diverse aspects of corporate, commercial, and infrastructure law. With expertise in managing large-scale M&A transactions, contract negotiations, and regulatory compliance, she oversees legal affairs related to national highway investments. Saumya also has expertise in arbitration, litigation management, and advising on complex financial and legal frameworks, ensuring the company’s operations remain legally sound.