EU Regulation: inconsistencies between member states 'deeply worrying' to corporations

One of Europe's most senior in-house lawyers last week lashed out at the European Commission's (EC) position on professional privilege, describing the uncertainty surrounding employed lawyers as deeply worrying to international corporations.


Carl Belding, IBM's Paris-based vice-president and general counsel for Europe, the Middle East and Africa, said he hoped 'sanity will prevail and privilege will be protected' when EC regulatory authorities launch investigations. 'We are troubled by the uncertainty around the position of in-house privilege in the EU. We are hoping for [the adoption of] a US-style system,' he said.


Many member states - such as the UK - have accorded full professional status to in-house lawyers. But that is not a universal position across the union, and the EC considers that employed lawyers are not independent and therefore their advice should not be privileged when carrying out its own investigations.


Mr Belding's comments came during the annual overseas meeting of the American Bar Association's international section; several hundred US and European lawyers attended the conference in Brussels.


The European Court of First Instance is currently considering the issue in the Akzo Nobel case. Kirstina Norlander, a lawyer at the Brussels office of US law firm Sidley Austin Brown & Wood, who represented the European Company Lawyers Association as intervener in the case before the court of first instance, said it might result in the EC adopting the view that the concept and scope of privilege may not be prohibited purely because a lawyer is employed in-house.


Ms Norlander said: 'In the EU, documents prepared in-house for the purposes of developing a legal strategy and/or seeking outside legal advice might attract privilege. But that position cannot be guaranteed.'


In contrast, US courts 'will err on the side of maintaining and protecting attorney-client privilege', Jan Handzlik, a partner in the Los Angeles office of US firm Howrey, explained. This is likely to be the case even if a document has already been handed over to a regulator in the EU.


However, he said there can be problems in distinguishing between business-related advice and pure legal advice, and in-house lawyers should ensure that privileged documents are kept separate.


Mr Handzlik also pointed to concerns in the US that general counsel are becoming targets of investigations by regulators for failing to conduct their own proper in-house investigations in relation to allegations of wrongdoing by their companies. He said: 'The Securities and Exchange Commission and the Department of Justice are trying to turn in-house counsel into junior G-men &150; deputies in the war on corporate corruption.'