Attorney-Client Privilege For In-House Counsel Is Not Absolute In Foreign Jurisdictions

Monday, October 1, 2007 - 01:00

Generally in the United States, communications between in-house counsel of a corporation and the employees of the corporation in which the in-house counsel renders legal advice will be privileged. See Upjohn Co. v. United States. 1 The privilege is intended to encourage the corporate client to be candid with the in-house counsel so that the in-house counsel can render sound legal advice. However, the concept of attorney-client privilege for in-house counsel as known in the United States may not exist in foreign jurisdictions. This may present a problem for in-house counsel doing business in foreign jurisdictions or when conferring with corporate offices outside the U.S.

Even the term "attorney-client privilege" is not necessarily used outside the United States. In civil law countries there exists the principle of "professional secrecy" while in common law countries you will find the concept of "legal privilege." The scope of the professional secrecy privilege varies from jurisdiction to jurisdiction, even amongst European Union countries.2 There is also a concept of "confidentiality" which generally applies to lawyers as a rule of professional conduct.

Concerns About Assertion Of Privilege

There are several reasons why some countries do not extend the attorney-client privilege to in-house counsel. As an in-house lawyer works exclusively for one client, there is a line of thought that the in-house lawyer in such a situation cannot maintain independence and therefore any legal advice to the corporation is somehow "tainted."

Foreign courts have focused on this theme of "independence" when studying whether to extend professional privilege to in-house counsel, and specifically whether independence is really consistent with an employment relationship, leading to much debate over whether communications between in-house counsel (even if legal in nature) are somehow compromised or biased simply because of the employment relationship of the "client" it is advising.

The European struggle in particular to extend professional privilege to in-house counsel appears to stem not only from the "lack of independence" of an employed lawyer, but also because some Member States' in-house counsel are not part of the State's Bar, and some believe this autonomy does not obligate the attorney to the same legal and professional ethics as an "independent" outside counsel. Some fear that the legal professional privilege might be abused or used to hide internal indiscretions. Moreover, there has been concern regarding in-house counsel who hold senior management positions, subjecting the attorney to criticism that their interests mirror that of the commercial interests of their client/employer. Proponents of professional privilege for in-house counsel retort that the nature of their employment by their client does not hinder their duty to independently counsel their client. Furthermore, the reasons for justification of the privilege is the fundamental policy of encouraging full and frank communications with an independent lawyer. The dilemma is aptly described by Carl Belding, IBM counsel, who stated:

"As matters stand, a lawyer who does a thorough job of analyzing the facts and risks, so that he can better advise his business client, runs a significant risk that his work will be used against his client. The current policy frustrates the lawyer's fundamental professional obligation of counseling clients to comply with the law."3

U.S. in-house counsel who are dealing with their counterparts in Europe and elsewhere, or U.S. companies with subsidiaries in other countries, should be mindful of the distinction between the privilege extended in the U.S. and the privilege limited in these other jurisdictions. This will not only affect corporate policies, including board meetings, and day-to-day correspondence between the corporation's employees and the corporation's legal department in-house, but also it will likely play a role in litigation.

European Union

Historically, the decision by the European Court of Justice in AM&S Europe Ltd. v. Commission, 4 set the stage for the discrepancy of application of privileged communications by in-house counsel in Europe and the United States. In AM&S the European Commission declined to extend legal privilege to in-house counsel. In that case the European Commission started an investigation of AM&S, an English company, for possible antitrust violations under the EC Treaty. The Commission sought documents from AM&S. AM&S refused to produce some of the documents which they believed were protected by the attorney-client privilege including legal memoranda from in-house counsel to company employees. Eventually AM&S sought an injunction against the Commission. The European Court of Justice held that in EC proceedings the communications with in-house lawyers were not protected, reasoning that in-house counsel were too dependent on the company - who was also their employer - to assist with the administration of justice.

The AM&S case is the source of much discussion in Europe, particularly as it goes against many of the Member States which allow for an in-house counsel privilege of some sort. Many papers have been written about this decision, and there is hint of a change towards reinstatement of a privilege at the EU level recognizing the need for unification of the confidentiality standards for EU lawyers.5

Following AM&S , the European Court of First Instance was faced with the issue of whether to extend legal privilege to in-house counsel communications with its employees. In Akzo Nobel Chemicals Ltd and Akros Chemicals Ltd. v. Commission of the European Communities, 6 EC competition inspectors raided Azko's Manchester offices in an attempt to seize "evidence of suspected price-fixing and exchange of confidential commercial information." Documents were obtained, but Azko asserted that the documents were protected by legal professional privilege as they were addressed to or from their in-house legal team. Commission officials carried out the investigation of anti-competitive practices.

Despite the President of the Court of First Instance's recognition in his Findings that "confidentiality of written communications between lawyer and client is an essential corollary to the full exercise of the rights of the defence"7 and that "professional privilege is intimately linked to the conception of the lawyer's role as collaborating in the administration of justice by the courts and as being required to provide, in full independence, and in the overriding interests of that cause, such legal assistance as the client needs,"8 the extension of professional privilege was ultimately rejected by the EC, which defended its position that in-house lawyers could not provide independent legal service as they are employed by the company to which they are advising. The Court ultimately held that the communications by a member of Akzo's legal team should not be covered by the privilege.9

Overview Of Various Jurisdictions

It may be useful to provide a sampling of how other jurisdictions within and without the EU view the concept of attorney-client privilege for in-house counsel. A synopsis of multiple jurisdictions can be found at www.lexmundi.com.

France

French law provides for "professional secrecy" as a matter of public policy and is included in the Criminal Code. French lawyers or "avocats" may not disclose confidential information received from their clients - the privilege is absolute. This does not include communications of in-house counsel in France, as in-house counsel are not considered to be avocats or lawyers. In-house lawyers are not members of the French bar. There is much debate in France now over this distinction.

United Kingdom

England distinguishes between "legal advice privilege" and "litigation privilege." Legal advice privilege pertains to communications between a lawyer and the client that were for the purpose of obtaining or receiving legal advice.10 Confidential communications by in-house lawyers in the United Kingdom have some protection.

Germany

German law recognizes a limited attorney-client privilege.11 In-house counsel in Germany may qualify for a privilege under certain conditions including: "(1) the in-house attorney must maintain separate offices to which he or she has sole access; and (2) the general counsel must be acting in his or her capacity as an attorney."12 This certainly encompasses the requirement that the communication contain legal, rather than business advice.13 The privilege also extends to personnel assisting in-house counsel.14 Attorneys in Germany are required to observe confidentiality with respect to information received from their clients or they can be charged with a criminal offense. This applies to in-house counsel as well.15

India

In-house counsel are not recognized as attorneys under Indian law, and therefore communications between in-house counsel and employees of a company are not considered privileged.

China

The law in China does not distinguish between in-house counsel and external attorneys but essentially does not recognize an attorney-client privilege for communications between attorneys and clients.

Practical Considerations

It is highly recommended that before conducting business in other jurisdictions, the company should determine the scope of the professional privilege laws in those jurisdictions to understand what communications are privileged and how to effectively protect and assert the attorney-client privilege. Keep in mind that if the application of attorney-client privilege becomes an issue in litigation you may have to jump the hurdle first of choice of law issues.16

1 449 U.S. 383, 389 (1981).

2 Confidentiality of advice provided by in-house counsel in France, Italy and Sweden does not exist, while it is acknowledged in most of the other older EU states.

3 Josephine Carr, "Should In-House Lawyers Have Lawyer/Client Privilege?", Int'l Bus. Lawyer 1, December 1996.

4 Case No. 155/79, [1982] E.C.R. 1575.

5 See Darius Davainis, "Are European In-House Counsel Covered by the Attorney-Client Privilege?" 1 Int'l. J. Baltic Law 1, 16 note 38. (December 2004).

6 Joined Cases T-125/03 and T-253/03 R (Court of First Instance, 30 Oct. 2003).

7 Id. 100.

8 Id. 101.

9 The Court did hold that the manner in which the Commission undertook the investigation was improper. Even though the Court did not overturn the AM&S ruling (despite political pressure), it held that the Commission is not entitled to read documents of concern before it has adopted its decision regarding its protection. See Joined Cases T-125/03 and T-253/03 (Judgment, Court of First Instance, 17 Sept. 2007).

10 See lines of cases arising out of "Three Rivers" case where the privilege was limited (Three Rivers District Council and Others v. The Governor and Company of the Bank of England [2003] EWCA Civ 474; Three Rivers District Council and Others v. The Governor and Company of the Bank of England [2004] EWCA Civ 218.

11 Christopher Dugan, Foreign Privileges in United States Litigation, 5 D.C.L. Int'l L. & Prac. 33, *41 (1996) citing German Code of Civil Procedure 383.

12 Joseph Pratt, The Parameters of the Attorney-Client Privilege for In-House Counsel at the International Level: Protecting the Company's Confidential Information," 20 N.W. J. Int'l L. & Bus. 145, 169 (1999); see also Davainis, supra.

13 Noerr Stiefenhofer Lutz, Germany, In-House Counsel and the Attorney-Client Privilege, p.33, (Lex Mundi 2004).

14 Id. citing German Code of Civil Procedure 383 (1) (6) ZPO.

15 Lex Mundi p. 33 citing 43(a) BRAO (Federal Regulation concerning Attorneys) and 2 BORA (Regulations concerning the Legal Profession).

16 See Restatement of Foreign Relations Law of the United States (Revised)(Third), Sec. 442 (1987).

Lisa J. Savitt is Of Counsel in the Washington, D.C. office of Akerman Senterfitt and Felicia Leborgne Nowels is an Associate in the Tallahassee office of Akerman Senterfitt.

Please email the authors at lisa.savitt@akerman.com or felicia.nowels@akerman.com with questions about this article.