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In-House Counsel Should be Aware of Foreign Laws on Attorney-Client Privilege Before Crisis Hits
As multinational business transactions become more common and faster than ever, many attorneys are grappling with fundamental differences in the laws of the United States versus those of other countries. One major difference lies in the way that other countries recognize the attorney-client privilege for in-house counsel.
“When a crisis strikes, the impact can be vast, it can be global and it can be instantaneous. And when this happens, it’s really not the time to learn precisely in which jurisdictions your company operates that the attorney-client privilege is recognized or in which your company’s internal policies protect that privilege. Especially since your legal teams are going to be scrambling to contain the damage at that point,” said Gonzalo S. Zeballos of Baker & Hostetler LLP speaking at a LexisNexis® Webinar, entitled “The Shrinking Attorney Client Privilege for International In-House Counsel.”
Zeballos said that various countries worldwide view this privilege in “vastly different ways.”
Michael C. Miller, of Steptoe & Johnson LLP, also speaking at the conference, gave an overview of the status of the in-house counsel privilege around the world. He noted that, for most countries outside of the U.S., the applicability of the attorney-client privilege to in-house counsel is a matter of national law. He described research that reflects that 13 of the 39 European Union countries unambiguously recognize the attorney-client privilege for in-house counsel, including the UK, Ireland, Spain, the Netherlands and Germany. Some other countries—such as Argentina, Australia, Canada, Egypt, Israel and Venezuela—recognize the privilege, but not as unambiguously.
However, a number of countries that are major trading partners of the United States do not recognize the privilege. These include: Austria, Bahrain, Bulgaria, the Czech Republic, Belgium, Finland, France, Italy, Kazakhstan, Latvia, Lithuania, Luxemburg, Switzerland, United Arab Emirates and others.
“Many of the countries that do not recognize the privilege are so adamant about that view that they actually prohibit in-house lawyers from obtaining or retaining membership in the bar association,” said Miller.
Miller cited France as an example. He said that French law recognizes two categories of lawyers: “avocats,” who are lawyers that practice in courts and “juristes,” who are in-house counsel.
“They are viewed as members of different professions,” he said. Avocats are required to be professionally independent of their clients, and their communications are covered by the French equivalent of the attorney-client privilege. Juristes, in sharp contrast, are viewed as employees of the company where they work and their communications are not protected by any attorney-client privilege.
Miller also cited the 2010 decision of the EU Court of Justice in Akzo Nobel Chemicals Ltd. et al. v. European Commission, which held that, for purposes of EU anti-trust investigations, communications with in-house counsel are not subject to the attorney-client privilege. Although the case involved a company from the Netherlands, where the attorney-client privilege is unambiguously recognized, the court said that, for its purposes, it does not view such communications as privileged.
“Clearly the law on the scope of the attorney-client privilege outside the United States in two very significant trading counterparties is markedly different from the law inside the United States and that disparity carries with it the potential for some major, major ramifications,” said Miller.
Zeballos noted that under Rule 44.1 of the Federal Rules of Civil Procedure, foreign law is an issue of law and that the court may do its own research into whether foreign law applies and may come to a different conclusion than that asserted by the parties, even if the point of view is not rebutted. He also said that the party claiming protection of the privilege has the burden of establishing those facts that are essential elements of the privileged relationship.
“Showing that there is a privilege is not enough. You have to show that the communications you’re seeking to protect are the kinds that the privilege attaches to,” he said.
He also said that U.S. Courts would defer to the law of the jurisdiction that has the most compelling interest in the confidentiality of the communications, unless the foreign law is contrary to the public policy of the forum.
“However, even if the communications at issue took place abroad, if the communications are undertaken in connection with preparations for U.S. legal proceedings … then the U.S. Court is likely to find that the communications ‘touch base’ with the United States and that the attorney-client privilege should apply,” said Zeballos.
“When you have the issue arise the first thing you have to do is determine whether attorney-client privilege applies in the local jurisdiction … the law varies,” said Zeballos. He also advised in-house lawyers to assert the attorney-client privilege “right away” if a foreign subsidiary becomes the target of a regulatory investigation.
“You need to at least make that argument and make sure the production is compelled. Because if you don’t make the ‘touching base’ argument and you give those documents up, it’s the functional equivalent of waiving the U.S. attorney client privilege. And once you’ve waived it you can’t un-waive it and you’ll be stuck with those documents being out in the public arena,” Zeballos said.
Echoing these observations, Yun G. Lee, Associate General Counsel of AIG, added that “[a]s in-house lawyers I think that the first step before picking up the phone and calling any of your colleagues abroad is to be familiar with the different laws from different jurisdictions,” and emphasized the importance of “thinking about reducing risk for your company [by] sensitiz[ing] your colleagues, both in-house counsel and your clients, with respect to the risk of disclosure.”
Lee suggested that one of the ways that in-house counsel may mitigate the risk of waiving privilege is to engage outside counsel at the very beginning of a crisis involving international law in order to create a “record that you have had every intent of creating . . . communication that you believe to be privileged.”
Another way to potentially mitigate risk is to “rely more on oral communication so at least what you can do is reduce the risk of any kind of eventuality with respect to production of documents that would disclose those communications,” Lee said.
“Obviously that means training in-house counsel and personnel so that they understand exactly the jurisdictions they are dealing with. And again, part of that training should include differentiating between non-legal advice and business advice from in-house counsel versus actual communications and discussions regarding potential exposures regarding litigation and investigations,” said Lee.
Disclaimer: The views and opinions expressed in this article are those of the individual sources referenced and do not reflect the views, opinions or policies of the organizations the sources represent.