The inquiry becomes increasingly complicated when corporate employees fail to understand, and in-house attorneys fail to clarify, that their trusted legal advisor on business matters does not represent the employees’ personal interests but those of the organization. The myth that copying in-house counsel on an email or inviting in-house counsel to a business meeting is enough to keep a communication privileged continues to prevail in organizations. Continued confusion around the privilege and how it is invoked in various jurisdictions requires in-house attorneys to be vigilant and to help businesspeople to delineate between communications that are likely covered by the privilege and those that are not.
Although the applicability of the privilege is circumstantial, at least in the United States, there is no question that privileged communications can exist between in-house attorneys and their clients. This is not the case in other countries. In the European Union (EU) for instance, the attorney-client privilege, referred to as “legal professional privilege” (legal privilege), has traditionally been solely reserved for outside counsel. This position stems from a 1982 case in which the European Court of Justice articulated a two-pronged test for legal privilege: (1) the communications must have a connection to the client’s right of defense, and (2) the exchange must be between a client and an “independent” lawyer. Case C-155/79, AM&S Europe Ltd. v. Comm’n of the European Communities, 1982 E.C.R. 1575. According to the European Court of Justice, in-house attorneys do not meet the second prong because they are unable to exercise adequate professional independence from their clients. In the court’s view, the ties of employment do not allow in-house attorneys to ignore commercial strategies pursued by their employers. Thus, communications with in-house counsel were deemed privileged only when prepared for the exclusive purpose of seeking external legal advice.
In 2010, to the chagrin of the European legal and business communities, the European Court of Justice upheld its decision that attorney-client privilege did not apply to advice or communications involving in-house counsel in EU competition investigations. Case C-550/07 P, Akzo Nobel Chems. Ltd v. Comm’n, 2010 E.C.R. I-8360. With regard to the independence requirement, the court held that due to the inherent conflict between professional obligations and the client’s goals, an in-house lawyer’s ability to use professional independence may be impaired. Since the 2010 ruling, attorney-client privilege has been the subject of much debate in some EU countries, and some EU member states, like the Netherlands, have clarified that the 2010 ruling is limited to EU competition law cases.
In-House Privilege
Despite the fact that internal company communications with in-house attorneys remain excluded from attorney-client privilege in the EU competition law context, in March 2013 the Dutch Supreme Court recognized that legal privilege for in-house counsel generally does exist. HR 15 maart 2013, NJB 2013, 670 (Delta) (Neth.). In variance with the European Court of Justice’s decision, the court determined that lawyers can be independent even if they are employed by corporate legal departments.
Under Dutch law, legal privilege is granted to certain professionals, including attorneys, who have a duty of confidentiality. As in the United States, legal privilege grants lawyers the right to refuse to provide evidence or testimony obtained in their professional capacity from a client. In the Netherlands, unlike the United States, legal privilege belongs to the professional and not to the client. Accordingly, attorneys in the Netherlands decide whether or not to invoke legal privilege, even against the wishes of their client. While legal professional privilege can be waived by the client or the lawyer, the lawyer is ultimately accountable for any waiver. Thus, when a client decides to waive legal privilege, the attorney must conduct an independent assessment to determine whether waiver is appropriate because the attorney will be held responsible for that waiver decision.
As in the United States, certain third parties engaged by attorneys may be protected by legal privilege and may refuse to submit privileged documents or information in civil proceedings. Similar to attorney-client privilege in the United States, legal privilege in the Netherlands applies only to client communications with lawyers who are members of the Dutch bar. Whereas most in-house counsel positions in the United States require an attorney to be licensed in one or more jurisdictions, a law license is not required to serve as in-house counsel in the Netherlands. However, to preserve the independence of in-house counsel, the Dutch require the employers of in-house counsel to sign a professional charter in which they commit to honor counsel’s independence.
The history and the nature of legal privilege in the Netherlands require attorneys with Dutch clients or operations to use very specific safeguards. For instance, to protect attorney-client privilege in the Netherlands, companies and the attorneys advising them should ensure that they know which members of the corporate legal department are admitted to the Dutch bar. Only those in-house attorneys should be entrusted with certain sensitive information. Similarly, clients who wish to preserve privilege in the Netherlands should ensure that they execute any necessary charters.
Additional Precautions
In the context of competition law, where the European Union recognizes privilege only for outside counsel, in-house counsel and employees should be cautioned to limit the distribution of written legal communications from outside counsel. If circulated, advice from outside counsel should not contain annotations or comments because doing so may mean that the advice is no longer protected by legal privilege; rather, written advice from outside counsel should be presented in the form in which it was received. Investigatory records should be maintained solely by outside counsel. Additional precautions may be warranted to protect privilege in the Netherlands, such as instructing in-house counsel to deliver legal advice orally, thereby creating no written records. Another option may be to keep sensitive documents in a location away from the company’s operations and perhaps in a jurisdiction more likely to recognize the documents as privileged.
Despite the differences between the two countries in how they view and treat attorney-client privilege, U.S. conventional wisdom does apply in the Netherlands when a company is trying to protect communications with in-house counsel as privileged. In-house counsel at a corporation with operations in the Netherlands can take steps to improve the corporation’s chances of prevailing on a challenge to an assertion of privilege, such as creating a written record memorializing the legal nature of the communication, as well as carefully segregating business and legal communications. Legal communications should be selectively distributed to employees with a “need to know,” and care should be taken to avoid large email distribution lists. Further, in-house counsel at a corporation with Dutch operations should be encouraged to provide training to company managers and employees regarding the scope of legal privilege and how to maintain it. Finally, clients should be encouraged to implement policies regarding the creation and distribution of privileged information. Compliance with those policies should then be revisited on a regular basis.
As laws on attorney-client privilege continue to develop both in the Netherlands and in the European Union, attorneys who have clients with operations in these locations should support their clients in adapting their policies and practices accordingly. Partnering with a local Dutch firm may assist in navigating various inevitable privilege hurdles. Regardless, the protection of attorney-client privilege is an indispensable factor in any legal risk assessment in the Netherlands, in the European Union, or in multijurisdictional litigation.