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Akzo Nobel not so clear cut as many argue
Posted 16/10/2007 by Alex Novarese
Law, like all communities, has its accepted truths and prevailing opinion. Take the recent Akzo Nobel judgment, which has been taken up as a cause in the legal community, in the UK at least, for those campaigning for the rights of corporate counsel.
The well-publicised ruling from the Court of First Instance (CFI) dashed hopes that the case would extend legal professional privilege for corporate counsel operating across the European Union.
The reaction in the UK was quick and unambiguous, with the Law Society bandying around words like “foolish” and “outrageous” to describe the decision. Other senior lawyers in private practice and the in-house community have weighed in with similar comments.
But - dare it be suggested - the basis of the ruling hardly seems outlandish. The nub of the judgment is that privilege can only be extended where a registered lawyer is independent. The CFI, following an earlier judgement, concludes that the relationship of corporate counsel to their employer compromises that independence to the extent that privilege can not apply.
Critics contend that this attitude is antiquated and fails to take into account the development of the in-house legal community over the last 25 years.
No-one doubts that corporate counsel as a breed have come on in leaps and bounds over the period, both in terms of influence and calibre of advocate. And yet it is (at best) debateable how that development has gifted in-house lawyers an independence sufficient for the test of privilege.
In what other industry would an employee be honestly considered independent of their employer, who, after all, wields major influence over their career and livelihood? Indeed, regulation of professionals in financial services in recent years has explicitly recognised the differences between internal and external advisers.
Others counter that lawyers are subject to the same professional rules governing standards and integrity as their private practice counterparts and that external advisers charge for their services without anyone questioning their independence. But that line of argument is hard to sustain. External advisers diversify their revenue across a range of clients. No single client can wield anything like the same economic power over external counsel as a company does over its in-house legal team.
Does that mean that in-housers should not get privilege? Not necessarily. There are arguments in favour, largely around promoting good governance. But the bottom line is that the issue is more finally balanced that the reaction so far would suggest. Perhaps the real debate should be focused on a wider discussion of what role we expect in-house lawyers to play as corporate watchdogs and what powers and protections they would need to fulfil that role.
Legal Week is currently conducting some research on in-house independence and privilege, so perhaps we’ll get something to help that discussion along.
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Comments
As a seasoned in-house counsel in my second company, I wholeheartedly endorse the CFI judgment. It is a polite and self-serving fiction that in-house counsel are capable of withstanding the pressure of their company and will nobly go to the wall rather than compromise their integrity. In my last company I was placed in such a situation and when I wouldn't conform was suspended and eventually dismissed on a trumped up charge. The inevitable IT claim and compromise agreement later the company had still gotten its way because the senior lawyer in the team did just what they wanted. It is simply disingenuous for lawyers who take the company shilling to claim to be independent and to seek to enjoy the rights to privilege that other genuinely independent counsel do. The relationship is so different that the assertion of similar rights to external counsel cannot be allowed to go unchallenged.
Posted by brian | 29/11/2007
Differing treatment of in-house and private practice for the purposes of legal privilege doesn’t automatically lead to separate regulation. Regulation is rarely executed with flawless elegance in any sector, so contradictions and exceptions are nothing unusual.
Even in jurisdictions that go out of their way to accord corporate counsel equal status and rights to private practice, there are usually a few regulatory differences in how they are treated.
Likewise, just because a group of professionals do not like being treated in a certain way does not in itself mean that it is not justified.
Posted by Alex | 16/10/2007
If you follow the argument that an employee can never be independent of the acts of their employer and thus should have no special rights due to their role then one might as well start chucking inhouse lawyers out of their local bar organisations - as happens in France where inhouse lawyers are truly treated just as employees no different from anyone else.
However, if you talk to French inhouse lawyers about this they will tell you they hate being treated like second class citizens (compared to other lawyers) and have been fighting for a decade to have the same rights as lawyers in private practice (to little effect).
Although, one could argue that the fact France's legal sector still functions fine like this shows it can be done.
The French situation was possible because of historic and institutional divisions between the different roles of lawyers in France. In the UK where solicitors and inhouse lawyers are the same and with the same regulator, one rule for one group and another rule for another would not be possible. A radical solution would be to give UK inhouse lawyers a different legal position and create a different regulator. But perhaps the profession has enough on its plate already.
Posted by RDT | 16/10/2007