Jordan W. Cowman and Ausra Laurusaite-Kromelis
Akin Gump Strauss Hauer & Feld LLP
“Never write what you can speak; never speak what you can wink,” as the sage expression goes. “And never put anything in an e-mail,” Eliot Spitzer added recently. These admonishments will ring true to in-house counsel advising multinational companies doing business in the European Union, in light of recent developments regarding privilege in EU-level regulatory cases.
Imagine that you are an in-house counsel for a large transnational company, which conducts an extensive internal analysis to improve its global antitrust compliance program. You are asked to follow up on some reports from your European and U.S. operations that there may be some antitrust issues in both Europe and the U.S. that need to be reviewed, and the client needs your legal advice. In-house counsel based in several countries are involved. Memoranda and e-mails containing sensitive data and self-critical analysis are exchanged between lawyers and company executives.
All of these communications are made between in-house lawyers and the client for the purpose of giving legal advice; none of it is disclosed to third parties. Thus, you can rest assured that attorney-client privilege will protect them from seizure and use as evidence against your client by, say, the European Commission conducting an antitrust probe, right? Think again.
Erosion of Attorney-Client Privilege?
Domestically, the erosion of attorney-client privilege has been noted in the past several years. Back in April of 2005, the Association of Corporate Counsel (ACC) set out to investigate the view that in the post-Enron world the assertion of an attorney-client privilege was somehow less appropriate, and noted “an increasing concern in recent years that prosecutors, regulators, civil litigation opponents and courts seem to be inappropriately mixing up the long-standing recognition and respect for a client’s right to confidential counsel with the current focus on corporate transparency (and a related belief that anything kept secret is somehow a red flag to inappropriate activity).”[1]
Nevertheless, the principle that attorney-client privilege, as a part of due process afforded by the Constitution, protects attorney-client communications of both outside and in-house counsel are privileged remains intact in the United States, even though diminishing in recent years. Doing business in foreign jurisdictions, however, often under conflicting regulations, subjects a company to special challenges regarding disclosure and confidentiality matters, especially when an American company expands to a jurisdiction whose legal system is not based on English common law and whose attorney-client privilege rules are very different from those in the U.S. It is particularly important that in-house counsel are aware of these rules in every jurisdiction in which their company operates.
Akin Gump Strauss Hauer & Feld LLP
“Never write what you can speak; never speak what you can wink,” as the sage expression goes. “And never put anything in an e-mail,” Eliot Spitzer added recently. These admonishments will ring true to in-house counsel advising multinational companies doing business in the European Union, in light of recent developments regarding privilege in EU-level regulatory cases.
Imagine that you are an in-house counsel for a large transnational company, which conducts an extensive internal analysis to improve its global antitrust compliance program. You are asked to follow up on some reports from your European and U.S. operations that there may be some antitrust issues in both Europe and the U.S. that need to be reviewed, and the client needs your legal advice. In-house counsel based in several countries are involved. Memoranda and e-mails containing sensitive data and self-critical analysis are exchanged between lawyers and company executives.
All of these communications are made between in-house lawyers and the client for the purpose of giving legal advice; none of it is disclosed to third parties. Thus, you can rest assured that attorney-client privilege will protect them from seizure and use as evidence against your client by, say, the European Commission conducting an antitrust probe, right? Think again.
Erosion of Attorney-Client Privilege?
Domestically, the erosion of attorney-client privilege has been noted in the past several years. Back in April of 2005, the Association of Corporate Counsel (ACC) set out to investigate the view that in the post-Enron world the assertion of an attorney-client privilege was somehow less appropriate, and noted “an increasing concern in recent years that prosecutors, regulators, civil litigation opponents and courts seem to be inappropriately mixing up the long-standing recognition and respect for a client’s right to confidential counsel with the current focus on corporate transparency (and a related belief that anything kept secret is somehow a red flag to inappropriate activity).”[1]
Nevertheless, the principle that attorney-client privilege, as a part of due process afforded by the Constitution, protects attorney-client communications of both outside and in-house counsel are privileged remains intact in the United States, even though diminishing in recent years. Doing business in foreign jurisdictions, however, often under conflicting regulations, subjects a company to special challenges regarding disclosure and confidentiality matters, especially when an American company expands to a jurisdiction whose legal system is not based on English common law and whose attorney-client privilege rules are very different from those in the U.S. It is particularly important that in-house counsel are aware of these rules in every jurisdiction in which their company operates.
Development for In-House Lawyers: Akzo Nobel Case
In its highly anticipated September 14, 2010, decision in Akzo Nobel Chemicals Ltd. and Akcros Chemicals Ltd. v. European Commission, the European Court of Justice (ECJ), the highest court in the European Union, definitively ruled that communications between in-house counsel and their clients regarding EU competition matters are not protected by legal professional privilege (LPP), a concept similar to the U.S. attorney-client privilege.
The Akzo case arose from the February 2003 investigation by the European Commission (EC) of the alleged anti-competitive practices by Akzo Nobel N.V., a large multinational company and the world’s largest maker of paints. Over a period of a two-day raid of the UK offices of Akzo Nobel Chemicals Ltd. and its subsidiary Akcros Chemicals Ltd., the Commission, assisted by the UK Office of Fair Trading, seized a large number of documents, including two sets that Akzo argued were protected by attorney-client privilege. The first category included documents that were drafted by the company’s general manager to one of his superiors, for the purpose of obtaining legal advice by outside counsel, and contained handwritten notes regarding contacts with the counsel. The second set of documents included e-mails exchanged between general manager and the company’s in-house competition counsel, the member of the Netherlands’ Bar. Akzo argued that both sets were privileged, and thus not subject to seizure and review by the Commission.
After a series of hearings, the European Court of First Instance (CFI), EU’s second highest court, in its September 2007 decision rejected Akzo’s claims of privilege, pointing out the limits on the protection of confidentiality of communications between in-house lawyers and their clients laid down by the ECJ almost three decades ago. Despite the fact that under UK national law in-house lawyers can claim legal professional privilege on behalf of the client by whom they are employed, and notwithstanding the Netherlands’ scheme where in-house legal advisers and private practice lawyers are subject to the same professional disciplinary code, the court held that privilege did not apply.
The ECJ in its September 2010 ruling affirmed the CFI’s decision. According to the ECJ, LPP does not apply to in-house lawyers because they do not enjoy the same degree of independence as outside lawyers due to their close economic ties to the company. As a result, neither bar membership nor professional ethical obligations associated with it are sufficient to make an in-house lawyer capable of dealing with conflicts of interest between professional obligations and the wishes of the client.
Lessons for Protecting the Privilege
When dealing with the client’s overseas offices, U.S. in-house counsel should be aware that privilege may not attach to attorney-client communications and that correspondence sent to the EU may be seized by the EU competition authorities in a regulatory probe. Additional confusion arises from the fact that LPP under EU law is different from that in many of the 27 EU member states. Not only is the approach of civil law countries significantly different from that of the common law (for example, under UK law LPP applies to in-house lawyers), there is also no uniformity among the EU civil law countries regarding privilege.
Key points, then, are that 1) identical evidence receives different privilege status in parallel proceedings in various countries, and 2) while in-house privilege does not apply on the EU level, it can still be relied upon in matters involving national laws of some EU member states. In order to increase the likelihood that privilege is preserved, you should, among other things:
- Familiarize yourself and your client with privilege laws in all relevant jurisdictions;
- Be mindful regarding what communications are sent overseas;
- Involve outside counsel early upon discovering a potential violation of EU antitrust laws or when developing internal compliance programs;
- Establish protocols and procedures to maximize privilege.
Finally, avoid creating unnecessary documents, and never write what you can speak (or wink)!
[1] Association of Corporate Counsel, Executive Summary: Association of Corporate Counsel Survey: Is the Attorney-Client Privilege Under Attack?, Apr. 6, 2005; available at http://www.abanet.org/buslaw/attorneyclient/publichearing20050421/testimony/hackett1.pdf.
