Sub Agreements Do Not Override the OCG
Austerus Consultancy | Private Equity | Outside Counsel Guidelines | June 2026
A sub-agreement executed with offshore counsel for fiduciary services does not suspend your outside counsel guidelines. Where a firm has signed your OCG, the umbrella holds — including every provision governing travel and food and beverage expenses.
There is a misconception that surfaces with enough regularity in legal spend advisory work to warrant addressing directly: the belief that a sub-agreement executed between a private equity firm and an offshore counsel — covering board support services, direct trustee services, or similar fiduciary mandates — operates as a standalone commercial arrangement, insulated from the expense governance standards set out in the firm's outside counsel guidelines.
It does not.
Where a private equity or asset management institution has executed outside counsel guidelines with a law firm, those guidelines do not cease to apply at the jurisdictional boundary, nor are they suspended by the existence of a sub-agreement. The OCG is the umbrella. Everything beneath it remains subject to its terms.
The Structure of the Relationship
Sub-agreements entered into with offshore counsel — whether in the Cayman Islands, the British Virgin Islands, Luxembourg, or elsewhere — typically govern the scope of specific mandated services. In the fiduciary context, this most commonly encompasses board support services and direct trustee services: the provision of independent directors, the administration of board governance, and related fund-level fiduciary functions.
These arrangements are not entered into at arm's length with a new, unconflicted counterparty. They are, in the overwhelming majority of cases, executed with a firm that has already signed the institution's outside counsel guidelines. The sub-agreement defines the service scope. It does not redefine the billing relationship.
Any sub-agreement executed by a firm that has signed the outside counsel guidelines is bound by those guidelines as a matter of contract. A subsequent, narrower agreement between the same parties does not displace the controlling terms of the OCG unless the OCG itself expressly permits such carve-outs — and properly drafted outside counsel guidelines do not.
Travel and Food and Beverage: The Non-Negotiable Position
The provisions in outside counsel guidelines governing travel and food and beverage expenses are among the most clearly defined and, in practice, most frequently violated. The standard position across institutional OCGs — and the position that Austerus consistently advises its clients to maintain — is unambiguous:
Travel expenses are subject to pre-approval requirements, economy class mandates for domestic and short-haul travel, defined per diem caps, and prohibition on first- or business-class upgrades absent specific written authorisation. Food and beverage charges are either excluded entirely or subject to strict per-occurrence caps, with working meal charges permissible only in narrowly defined circumstances and never as a matter of course on routine instructions.
If those provisions are in the OCG, they apply to the offshore fiduciary counsel. The sub-agreement for board support services or trustee services does not create an alternate billing framework in which those restrictions fall away. A firm cannot be bound by an OCG for its corporate work and exempt from it for its fiduciary work simply because the fiduciary engagement was documented in a separate instrument.
This is not a technicality. It is the point.
Where This Goes Wrong
The problem, in our experience, is not typically wilful non-compliance. It is structural drift. Sub-agreements for fiduciary services are often negotiated by a different internal team — fund management, operations, or the fiduciary oversight function — rather than the legal operations or outside counsel management team that owns the OCG programme. The result is that the sub-agreement goes to signature without any cross-reference to the governing OCG, and the offshore firm begins invoicing under its standard billing practices rather than under the institutional guidelines it has already agreed to follow.
By the time the discrepancy surfaces — if it surfaces at all — there is an established billing pattern, a relationship dynamic that makes correction feel disproportionate, and sometimes a position from the firm that its fiduciary services were never intended to be in scope of the OCG.
That position is untenable. Scope of services does not equal scope of billing governance.
What Fiduciary Counterparties Should Expect
Institutions that have executed outside counsel guidelines should take the following position plainly and without negotiation:
Sub-agreements for board support services and direct trustee services, executed with firms that are party to the OCG, are subject to the full terms of that OCG as they relate to expenses. Any clause in a sub-agreement that purports to include travel or food and beverage charges on terms inconsistent with the OCG should be identified, flagged, and revised before execution. Where a sub-agreement is silent on expenses, the OCG governs. Where the sub-agreement is inconsistent with the OCG, the OCG controls.
If a firm is unwilling to accept that position, that is a matter for relationship management — not a reason to permit a billing exception.
The Fiduciary Standard Demands No Less
It is worth stating, finally, that this issue carries particular weight on the fiduciary side of the business. Institutions operating as fiduciaries — or engaging service providers to discharge fiduciary functions — are held to a standard of cost consciousness that is not merely contractual but duties-based. Permitting offshore counsel engaged on fiduciary mandates to bill outside the terms of the governing OCG is not a minor administrative oversight. It is an expense governance failure that touches directly on the institution's own fiduciary obligations to its fund investors.
The OCG exists for this reason. It should be enforced accordingly — without exception, and without deference to the structural convenience of how a particular engagement was documented.
Austerus Recommendations
- Treat the OCG as the controlling instrument across all service engagements with a signatory firm, regardless of how the specific engagement was documented.
- Review all sub-agreements for board support and direct trustee services against the governing OCG before execution — identify any expense clauses inconsistent with the OCG and require amendment.
- Where a sub-agreement is silent on expense governance, confirm in writing that the OCG applies in full.
- Ensure that the legal operations or outside counsel management team is involved in the execution of all fiduciary sub-agreements, not only the fund management or operations function.
- Conduct a retrospective review of existing fiduciary sub-agreements and associated invoicing to identify instances of non-compliant travel and food and beverage billing. Recover where appropriate.
Is Your OCG Programme Covering Your Fiduciary Arrangements?
We work exclusively with private equity and asset management institutions on outside counsel guideline reform, legal billing audits, and fiduciary service provider oversight. If your OCG programme does not currently extend expressly to offshore fiduciary counsel and sub-agreement arrangements, we can help you close that gap.
Contact Austerus Consultancy: info@austerusconsultancy.com | www.austerusconsultancy.com
Austerus Consultancy provides operational and commercial advisory services to private equity and asset management firms. We do not provide legal, tax, or regulatory advice. All legal and tax matters should be referred to appropriately qualified professionals.
