In Part IV of this series I offer the next of my guiding observations as you consider consultations with legal counsel:
3. Be aware of which legal systems might be used to seek access to information that you want protected. Application of the attorney-client privilege — or its non-U.S. counterparts — can vary in a big way from jurisdiction to jurisdiction.
Consider this hypothetical:
- A U.S.-headquartered corporation has a subsidiary in the Netherlands — and in-house legal counsel at both places.
- During an investigation of alleged anti-competitive conduct the EU Competition Commissioner seizes e-mail messages between in-house counsel of the Dutch subsidiary and non-legal, business personnel.
- The U.S. parent and its Dutch subsidiary assert a “legal privilege” to preclude use of those e-mails against them.
Where you have employed in-house legal counsel who communicates with client company employees on a matter of legal concern, the rules governing the attorney-client privilege (or a foreign law counterpart) might well be different in — for instance — the European Union’s legal system as compared with the U.S.
In Akzo Nobel Chemicals Ltd. & Akros Chemicals Ltd. v. European Commission the EU’s Commissioner for Competition had seized two e-mails relating to alleged anti-competitive activity. The European Court of Justice ruled that — because in-house counsel are employees — they lacked the professional independence required for the “legal privilege” to apply:
“ … When an undertaking seeks advice from its in-house lawyer, it is not dealing with an independent third party, but with one of its employees, notwithstanding any professional obligations resulting from enrollment at a Bar or Law Society.”
The Azko decision raises a big red flag for any business that might otherwise assume communications between its in-house lawyers and business people in this hypothetical were protected (here, here, here, and here).
A major cautionary example.
But don’t draw the wrong conclusion from the cautionary example.
Let’s say the question was not about EU competition law — but instead about simple breach of contract under the law of the Netherlands.
You’d want to consider that the Supreme Court of the Netherlands ruled (see here and here) — after the Akzos case — that legal privilege does in fact generally exist for in-house counsel under Dutch law.
Or consider this hypothetical:
- Client company personnel believe that specified past client company activities might possibly become the subject of an English prosecutor’s (Serious Fraud Office) future investigation of the client company.
- But — apart from that mere belief about a possible future investigation — client company personnel at this point have no substantial basis to expect that client company will be prosecuted.
- With a better-safe-than-sorry outlook, client company proactively hires lawyers to conduct an internal investigation to learn for itself if wrongdoing took place.
- Subsequently, prosecutor seeks documents — including witness statements — generated by the internal investigation.
- Client company asserts “litigation privilege” under English law to resist disclosure.
In the U.S. this internal investigation — regardless of what the prosecutor has or has not started by way of investigation or prosecution — enjoys broad attorney-client privilege protections. In fact, there’s a major practice area based on this sort of thing.
But in Director of the Serious Fraud Office v. Eurasian Natural Resources Corporation Ltd the English High Court struck down these claims (case still working its way through the English court system).
OK, but that’s England. Not the U.S.
“Companies based in the U.S., particularly those with overseas operations and subsidiaries, are increasingly subject to cross-border government investigations and enforcement activities. The types of alleged conduct that often lead to cross-border investigations and enforcement are broad, ranging from corruption and money laundering to securities and environmental fraud.”
Legal systems — not just those domestic to the U.S. — have a hearty and (un)healthy appetite for proprietary information about your business.
And among these systems the rules are a patchwork.
So … as I said in Part I:
You need skilled legal advice on how a judge might exercise that discretion in your situation. So protecting confidential information is no place for do-it-yourself lawyering.
Please bear in mind my DISCLAIMER for this publication. Nothing in my blog — including this three-part series — is intended as legal advice or to be the start of an attorney-client relationship.