For U.S. lawyers steeped in a tradition that offers broad protection for communications between lawyers and their corporate clients, including between in-house counsel and the corporations that employ them, it often comes as a surprise to discover that this protection may not be provided in Europe. In fact, legal advice given by in-house counsel in connection with transactional due diligence and internal compliance reviews has been used by the European Commission to impose large fines on European companies. This distinction between U.S. and European practice and law, which dates back to decisions by the European Court of Justice some 20 years ago, has recently been called into question by an interim order by the president of the European Court of First Instance in the cases of Akzo Nobel Chemicals Ltd. (T-125/03 R) and Akcros Chemicals Ltd. (T-253/03 R). Based on years of experience and numerous court decisions, U.S. lawyers routinely expect that legal advice they give their corporate clients will be protected from disclosure unless the corporation waives its right to such protection. Although U.S. lawyers understand business advice given by in-house counsel will not be protected, they nevertheless expect that legal advice by in-house counsel will be protected to the same extent as legal advice from outside counsel. Moreover, U.S. lawyers generally have little concern in today’s world of multijurisdictional transactions and internal compliance reviews that such protection could depend on the jurisdiction in which the lawyer giving the advice is licensed. Often, without thinking, they extend these expectations to legal advice they and others provide to corporate clients or their affiliates in Europe.
The perils of doing so have been well-known to European lawyers since the early 1980s. During this time, two European Court of Justice decisions established that communications generally protected by the attorney-client privilege from discovery in U.S. courts were not protected from review by the European Commission under the commission’s investigative powers [Case 155/79, AM&S Europe Ltd. v. Commission, 1982 E.C.R. 1575; Decision of December 14, 1984, Re John Deere, O.J. 1985 L35/58, [1985]]. In the John Deere case, the company’s in-house lawyers wrote opinions advising their European and U.S. managers that some past actions taken by the company were contrary to European and national laws. These internal opinions were not protected when the European Commission began to investigate the matter, and ultimately, the commission levied a significant fine on John Deere?proving its case in a large part on the basis of the in-house counsel’s opinions. In the AM&S case, the European Court of Justice determined that the privilege applied only to communications made for the purposes of the client’s defense, and only if made to, or by, outside lawyers licensed to practice in one of the EU member states. In addition, the court found that it was the corporation’s burden to prove that even communications meeting these criteria should be protected.
The AM&S case led the European legal profession to reflect on the disparities among European national laws on attorneyclient privilege. The solution adopted by the European Court effectively represented the lowest common denominator among the European Community members. At that time, in all the jurisdictions, the privilege was granted to legal professionals registered with a bar association and practicing in a law firm under a standard title (France and Italy, for example). In addition, some countries extended to members of the bar working as corporate counsel (Denmark, Germany, Spain and Portugal). In a few countries, national courts held that in some circumstances corporate counsel could claim protection of their work product, even though those professionals were not registered with the local bar, but only if they could prove their professional qualifi- cation in another European Union country (England, Finland and Sweden). (For a comparative analysis of professional laws, see the report presented by the Council of the Bars and Law Societies of the European Union during its interven- tion at the Akzo proceedings at www.ccbe.org/doc/En/fish_ report_en.pdf.) This restrictive approach, however, may be about to be eased.
The Akzo/Akcros Order
Late last year, the president of the European Court of First Instance had to decide whether or not to grant the European Commission access to confidential information and advice provided by an in-house counsel to his employer. According to the AM&S precedent in Australian Mining and Smelting Europe Ltd. v. Commission, the president should have denied the documents any confidentiality, and he should have granted authorization to the commission to have access to the documents in connection with an antitrust proceeding. However, he did not. Instead, on October 30, 2003, the president issued an order stating that, due to recent changes, the AM&S restrictive approach must be reconsidered and communications between a company’s management and its in-house counsel can be considered to be confidential if made for the sole purpose of obtaining legal advice. The president decided to leave the ultimate decision to the court having jurisdiction in the main proceedings, thus demonstrating the importance of the issue.
In fact, such a decision was foreseeable. Since the AM&S judgment, numerous organizations in both Europe and the United States have lobbied vigorously to extend the attorney-client privilege to qualified in-house counsel (already the case in Belgium, Germany, Greece, Netherlands, Portugal and Spain). These organizations include the European Company Lawyers Association, established in the wake of the AM&S decision; the Council of the Bars and Law Societies of Europe; the International Bar Association; the American Bar Association; and the American Corporate Counsel Association. They have argued, inter alia, that legal advice given by an in-house counsel who is a member of a bar or equivalent institution, and subject to ethical and disciplinary rules, should be treated as confidential and not used against the company in prosecution or litigation. These organizations have also argued that in-house counselors, like outside counsel, have an obligation to provide advice on how to comply with the law. To be effective, in-house counsel must be able to offer advice freely and without fear that an opinion might later be used to the detriment of the company. In addition, after the AM&S decision, corporate counsel started organizing in national professional bodies. Some of them, for example in Belgium, successfully claimed legal privilege for all of their legal professionals as noted in Parliament Act, March 1, 2000, creating the Institut des Juristes d’Entreprise. Moreover, paradoxically, the in-house counsels of the European institutions obtained the privilege that had been denied to corporate counsel (Order of the President of the Court of First Instance, Hanne Norup Carlsen and Others v. Council of the European Union, Case T-610/97 R, March 3, 1998).
Several professional institutions have also been allowed to intervene in similar proceedings. They have argued that denying legal privilege to in-house counsel could have an adverse effect, given that companies would then cease to require written opinion from their corporate counsel in the process of business decision making, with the consequent risk that infringement of the laws would drastically increase.
Should the interim order in Akzo/Akcros be adopted by the European Court of Justice, then the question would be, who should benefit from an extended legal privilege and under what conditions? This issue is already under examination in the national European jurisdictions where the more restrictive approach has prevailed until now. For example, in France, on June 8, 2004, the Paris Bar officially asked for a reform of the professional laws that would allow registered lawyers to practice as in-house lawyers, under the condition that such lawyers could not plead in court (see www.avocatparis.org/public/actualite/ communiques/2004/0614_avocats_entreprises.pdf/).
It will be important for lawyers functioning in multiple U.S. and European jurisdictions to pay close attention to the developments that certainly will unfold in the near future. Especially in this rapidly evolving environment, loose generalizations of routine expectations, on both sides of the Atlantic, may well lead to regrettable errors in judgment regarding the extent of the attorney-client privilege and its limits.
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