The question of attorney-client privilege (herein "the
privilege") for in-house counsel can be a vexing one, yet one that has
significant implications for investigations and enforcement actions under the
Foreign Corrupt Practices Act (FCPA) or other anti-corruption legislation.
There is a split decision between the US and countries in the European Union
(EU) on whether in-house counsel may engage in privileged communications with
corporate employers. In a recent article, entitled "In-House Counsel and
Corporate Client Communications: Can EU Law after Akzo Noble and U.S. Law after
Gucci be Harmonized? Critiques and a Proposal"; published in Volume 45,
Number 3 of the International Lawyer, author John Gergacz explored this
dichotomy and proposed a simple, yet clear rule to put in place to foster ease
of determination of the privilege and promote the goals behind the existence of
This question of whether the privilege exists for
communications will certainly increase due to the increase in international
enforcement actions in the area of anti-corruption and anti-bribery under laws
such as the FCPA and UK Bribery Act. It will also arise in investigations
involving any other activities which might be subject to both EU and US laws,
such as EU competition law and US anti-trust law.
European Union Countries - Status of counsel
In EU countries, the primary test involves what is the
status of the lawyer making the communication. Following a 1982 decision,
styled "AM&S Europe v. Commission of European Communities", the
privilege is limited to communications conducted with independent lawyers.
Initially, a determination must be made if an attorney is independent, this
being defined as to whether or not an attorney was "bound to his client by
reason of employment" for example an employee. However, the court decision did
not use the term "in-house" counsel but broader formulation of "independent
counsel." While recognizing that this may have left room for interpretation the
practice seems to be to deny the privilege when the advice emanates from in-house
counsel. Gergacz says that to apply the privilege in the EU is determined by
following a two-step process. If this initial threshold of independence is met
the analysis turns to the substance of the communication. That is, whether the
"communications concerned legal advice and related to the client's right of
United States - Type of communication
In all reported jurisdictions in the United States, both
in-house counsel and outside counsel communications are eligible for privilege
protection. However, within certain states in the US, the analysis is largely
centered on the substance of the communication, whether it involves legal
advice or more general business advice. This analysis recognizes that in-house
counsel may have several "corporate capacities" all of which do not necessarily
involve providing legal advice. Gergacz notes that "in practice, in-house
counsel may communicate about a number of activities, even though his formal
corporate position is to provide legal advice." He believes that such sentiment
has led to a greater scrutiny of in-house counsel communications than those
made by outside counsel to a client. This has led courts to be "wary of
inadvertently extending privilege confidentiality too far," when business
advice is provided or there are mixed business-legal services delivered.
Gergacz concludes his article with a proposal to
harmonize these two rules for privilege. He believes that both views have
merit, with the US recognizing the "equivalence of in-house and outside
counsel" and the EU "the concept of counsel independence is noteworthy."
Gergacz's proposal is that communications with in-house counsel would be
privileged if the attorney involved is (1) admitted to a relevant Bar; and (2)
has Bar membership status intact that allows him to practice law at the time of
the relevant communication.
Gergacz listed three general reasons for his proposal.
First, he believes that the proposal is easy to administer as there should not
be either court intervention to determine privilege or court review of the
communications involved. Simply put, does the lawyer have a license and is it
up to date to allow him or her to practice law? Second, he believes that the
privilege should be broad enough to encourage candor in communications between
attorney and client in the corporate setting, but not so broad as to expand the
cloak of confidentiality to "thwart just decisions from being rendered." Third,
and finally, Gergacz writes that in-house counsel often has two roles to
fulfill. One is certainly as a lawyer providing legal services, however, it may
be that a person who has graduated from a law school or holds a law degree may
not be licensed to practice law and may have other roles inside of a
corporation. As a practicing lawyer is held to ethical and disciplinary
standards whether they are in-house or in private practice, the requirement for
Bar membership should satisfy the AM&S line of cases which speak
toward 'independence' as the key concept for privilege.
I would commend Gergacz's article to you for a more
complete review of the US case law and other issues related to attorney-client
privilege. His proposal is certainly an intriguing one and one which deserves
rich consideration to simplify this knotty area. In this era of
multi-jurisdictional enforcement of laws such as the FCPA and UK Bribery Act,
the certainty of whether a communication is privileged or not is an important
point for businesses.
Visit the FCPA Compliance and Ethics Blog,
hosted by Thomas Fox, for more commentary on FCPA compliance, indemnities and
other forms of risk management for a worldwide energy practice, tax issues
faced by multi-national US companies, insurance coverage issues and protection
of trade secrets.
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© Thomas R. Fox, 2012
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