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The attorney-client privilege is a critical tool in fostering a full and frank dialogue between attorneys and their clients, which allows for better understanding of the client's factual issues, and a greater opportunity for high-quality representation. The U.S. Supreme Court recognized that this privilege is just as important for in-house attorneys as it is for outside firms in Upjohn Co. v. United States, when the Court extended the privilege to communications between an in-house attorney and any employee within that company for the purpose of receiving legal advice, subject to certain limitations. But the same cannot be said for the rest of the world.

This QuickCounsel examines the differences in attorney-client privilege between the United States and the European Union (EU), individual European countries, Canada, Brazil, Russia, India and China. It will also discuss the potential for greater privilege protection around the world, how in-house attorneys might adapt to the changing landscape, and protective measures an attorney may take in order to prevent the discovery of communication between an in-house lawyer and his or her corporate client.

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Privilege in the United States

The attorney-client privilege protects the disclosure of certain confidential information conveyed between a client and his or her attorney. This is one of common law's oldest privileges, but courts have struggled in applying it to situations where the client is a corporation. The Supreme Court's landmark Upjohn decision in 1981 eschewed the so-called "Control Group Test," whereby the attorney-client privilege applied to communications between in-house attorneys and only those employees "in a position to control" the corporation. The Upjohn "subject matter test" considered the lawyer's primary responsibility: to provide legal advice based on a full understanding of the facts of the matter - facts of which those in a position to "control" may not even be aware. As a result, the Court held that a communication that is made for the purpose of obtaining legal advice should be privileged so long as the employee providing the information did so within the scope of his or her employment.

In determining which country's laws apply to cross-border disputes, U.S. courts will determine which country has the most compelling interest in maintaining the confidentiality of the communication. American federal courts will follow a foreign country's privilege rules if the communication in question "touches base" with that country and if it qualifies as privileged under local laws. Therefore, American privilege laws will govern any communication "touching base" with the United States. However, the "touch base test" is highly fact-intensive and difficult to predict - even communications directly concerning foreign litigation, made between two parties located outside the U.S. have been found to touch base with the U.S. because they were part of the company's "global litigation strategy."

The uncertainty of which law will apply to any particular case is compounded by the drastic differences in privilege that different countries afford corporate attorneys. Communications that cross borders may be protected in some countries and not in others, and it is imperative to know how inconsistent laws can affect different correspondences.

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International Privilege

A. European Law

Nearly every country in the world recognizes some form of attorney-client privilege, but the extent to which that applies to in-house attorneys varies greatly. In 1982, the European Court of Justice (ECJ) held that the rules of legal privilege are restricted to legal advice given by an "independent" attorney, i.e. outside counsel. The court has repeatedly held that in cases involving investigations by the European Commission (EC), communications between salaried, in-house counsel and their corporate clients are not privileged. The ECJ reaffirmed that decision in Akzo Nobel Chemicals Ltd. v. Commission, stating unequivocally that an in-house lawyer cannot overcome the inherent conflicts in his or her employment relationship with a company, despite the professional ethical obligations each bar member holds.

The Akzo case also involved an investigatory procedure commonly used by the EC: dawn raids. The Commission is granted broad powers of investigation, particularly in antitrust and competition law cases. In those cases, the EC may enter a business premise and examine, copy, take or seal any business records, and to ask any representative or staff member for an explanation of facts or documents relating to the raid. A recent EC guidance emphasizes the strong penalties any company faces for interfering or obstructing such inspections. As the in-house attorneys at Akzo Nobel Chemicals found out, documents recovered during dawn raids are not privileged, even if they are communications directly between company executives and in-house attorneys specifically for the purpose of seeking and providing legal advice.

Another important takeaway from the Akzo decision is how the recovery of internal documents during a dawn raid may affect communications made by non-EU lawyers as well. Attorney-client privilege is waived once a communication is no longer confidential. It is likely that a communication between an in-house attorney in the United States and a corporate executive in Europe that is disclosed in European court after a dawn raid will not be privileged because the confidentiality will have been waived. The best protection against such exposure is establishing local outside counsel and limiting all legal communication to that outside attorney.

While the Akzo decision reaffirmed a question of EU law, companies with operations in Europe must also consider the variety of privilege laws in the 27 EU member nations. As such, determining what is protected depends on the investigating authority. If EC authorities, or state authorities on behalf of the EC, conduct the investigation, then EU laws will apply, and in-house attorney communications to corporate clients will not be protected. However, if state authorities inquire into a company's activities, and that state recognizes the privilege for in-house counsel, then the communications may be protected.

Some EU countries currently recognize some form of attorney-client privilege for in-house counsel. In the United Kingdom, courts will distinguish between "legal advice privilege" and "litigation privilege," but the laws clearly recognize that a privilege exists for communications between in-house counsel and their corporate clients. In the Netherlands and Germany, privilege can extend to in-house counsel, although the law requires certain steps to be taken in order to guarantee the impartiality of the employed lawyer's conduct. Belgian law recognizes the privilege for in-house lawyers as well, and a recent decision (see Section IV, below)in the Brussels Court of Appeals may have broader implications for the future of privilege law for other EU member nations.

BRICS (Brazil, Russia, India, China, South Africa)

Some of the fastest-growing countries in the world also recognize the attorney-client privilege for in-house counsel, but to differing degrees.

  • In Brazil, attorneys are guaranteed the right to protect, and not disclose, information received by their clients by federal law. South Africa allows in-house attorneys to claim attorney-client privilege when the communication between the parties satisfies the same requirements for a confidential communication: (a) that the adviser was acting in his or her capacity as a lawyer, (b) that the communication was made in confidence, and (c) that the communication was not made for the purpose of committing a crime or fraud. Chinese law is silent on the confidentiality of communication between an attorney and his or her client. The law does not differentiate between in-house and external attorneys, but the Code of Ethics indicates that an attorney's loyalty is to the government, not the client. The law does, however, require that attorney's keep their clients' trade secrets confidential. In Russia and India, attorney-client privilege is recognized, but not extended to in-house counsel.

Canadian Law

Under Canadian federal law, there is no difference between in-house and outside counsel for the purposes of attorney-client privilege. Where an employee is acting in his or her capacity as an attorney and communicates in order to obtain or provide legal advice, that communication is protected under the privilege. The structure of the attorney-client privilege for in-house counsel in Canada is very similar to that in the United States, including the recognition of the subject matter test outlined in Upjohn, rather than the control group test.

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Changing Landscape

In March 2013, the Brussels Court of Appeals confirmed that, under Belgian law, legal advice provided by in-house counsel is afforded protection equivalent to legal privilege. Like in the Akzo case, Belgian telecommunications giant Belgacom was subject to a dawn raid for potential violations of competition law, during which the Belgian competition authority (BCA) seized dozens of documents originating from or addressed to the company's in-house counsel. But in this case, the court explicitly declined to follow the EU rule from Akzo, holding that the attorney-client privilege does exist for in-house attorneys, that it is not limited antitrust investigations, and that it is applicable to any litigation under Belgian law, including dawn raids conducted by the BCA while assisting the EC.

The implication of this ruling for companies with a presence in Belgium is clear: that privilege laws in Belgium are on par with those in the United States and the United Kingdom. But on a broader European level, the ramifications are less clear. While the Belgacom ruling expressly rejects the applicability of Akzo to national competition proceedings, it also limits legal privilege to in-house counsel that are members of the Belgian Institute for Company Lawyers. But the language used in the Belgacom decision indicates that the legal authority for finding privilege under Belgian law has a counterpart in the EU Charter of Fundamental Rights - an argument that may provide the basis for future challenges to the Akzo ruling.

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Maintaining Privilege

First, encouraging employees to prefer telephone calls or in-person meetings over email and written memoranda will greatly reduce the amount of communication potentially subject to discovery. Furthermore, hiring local outside counsel will provide the company with the highest level of protection afforded in that country. The privilege laws in many countries apply most broadly to communications with outside counsel, so limiting legal communications to outside attorneys will maximize that protection. Having U.S. outside counsel hire the local outside counsel will further protect the privileged communication.

Minimizing the amount of information sent between inside counsel and any foreign office is crucial. Companies may limit a foreign office's access to servers in the United States containing legal data, or to servers located elsewhere containing legal data pertaining to the United States. All efforts should be made with the basic goal of determining exactly who the client is, who the attorney is - if there is one by local standards - and whether privileged information is being exchanged. Simplifying processes and establishing clearly structured channels of communication will provide multinational corporations a safe landscape in which to operate when a problem arises in another country.

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Martin Lomasny's plea to avoid written communication is especially true today, when multinational corporations risk exposure of seemingly confidential communications because of variations in privilege law. Limiting the amount of written legal advice is the best way to protect oneself, and increased education on the particular privilege laws of each country in which a company operates is also essential. A nod or a wink may not suffice to communicate effectively, but more verbal communication across borders will help in-house counsel protect the advice they provide their clients.

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Published on May 10, 2013
Region: Belgium, Brazil, Canada, China, Denmark, European Union, France, Germany, India, Italy, Netherlands, Russia, South Africa, Spain, United Kingdom, United States
The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.