October 25, 2017

If your company conducts business in the European Union (E.U.), it’s important to keep this in mind: In-house attorney-client privilege does not automatically apply to international communications when the issue at hand is governed by E.U. law.

The Heart of the Matter

The opinion in the Akzo case handed down by the E.U.’s Court of Justice is not binding and the full court must still hear the chemical company’s appeal. But the advocate general’s opinion often gives an indication of how the court will rule.

At the heart of the case is a precedent set nearly 30 years ago in the E.U. Court of First Instance. In that case, the court found that, under E.U. law, communications between business clients and their in-house attorneys in the context of an investigation by the European Commission are not covered by legal privilege. This policy has been justified on the basis that the “bond of employment” does not make in-house lawyers sufficiently independent from the client to warrant the same protection as outside counsel. (AM&S Europe Limited v. Commission of the European Communities)

In the Akzo case, the advocate general upheld that precedent, notwithstanding the fact that communications involved an attorney admitted to the Dutch bar and that Dutch law recognizes in-house privilege.

After an investigation by the European Commission under E.U. law, Akzo’s and its Akcros Chemical Ltd. unit was found guilty of cartel activity and price fixing and fined $53.6 million. (Akzo Nobel Chemicals and Akcros Chemicals v. Commission of European Communities)

If the probe had been conducted under national law in a jurisdiction that recognizes in-house attorney-client privilege, certain documents introduced as evidence might have been classified as privileged.

While you may consider that opinion inequitable because U.S. courts do not emphatically exclude foreign-based or licensed attorneys from claiming privilege, companies must abide by it.This position held by the E.U.’s Court of Justice, and reaffirmed in a case against the manufacturer Akzo by the court’s advocate general, is a potent reminder for U.S. based companies that the protection for communications provided by in-house attorney-client privilege in the U.S. does not automatically work overseas. (See right-hand box.)

Here are some steps that can help a business cope with the differences between E.U. and domestic rights of privilege:

  1. Assume privilege does not apply.Unless your company’s legal counsel has been explicitly informed that privilege applies in a particular instance, act under the assumption it is not valid in your international communications. Forgetting this or making the wrong assumption can put your organization at significant legal risk. This may require a shift in mindset, especially for attorneys who have practiced exclusively in the U.S.
  2. Teach in-house attorneys best practices.A company’s legal team, particularly those based abroad, may be aware of the E.U. court’s opinion. It cannot hurt, however, to provide frequent reminders of the ways that the potential lack of privilege can affect the business, especially if members of the legal team interact with both domestic and international personnel.

Outside counsel can share the best practices of multinationals when dealing with international differences in expectations of privilege.

  1. Touch base often.Many multinationals send all communications from their European headquarters to U.S. management through the U.S. legal department. Often called touching base, this principle may boost the likelihood that the communications are granted protection in U.S. courts. Depending on the issue, consider including your company’s U.S. based legal team and — when appropriate — its U.S. or European-based outside counsel, in communiques between management in Europe and the U.S. The approach can be cumbersome and lead to some confusion, but it can help protect sensitive information from being classified as non-privileged.
  2. Revisit your firm’s communications policy.In certain cases, verbal communications may be preferable to written missives. As e-discovery technology continues to improve and its costs decline, building a case against a company increasingly focuses on communications. An email or memorandum taken out of context can destroy a company’s defense. The types of information staff members put in emails, letters and other written communications are crucial to the success of most businesses, but in the hands of an opposing party, they can obviously be a powerful legal weapon.

© 2017