On September 14, 2010, the European Court of Justice (ECJ) issued its judgment in the case of Akzo Nobel and Akcros Chemicals on the question whether communication with in-house lawyers is protected by legal professional privilege. The case involved an investigation by European Commission authorities of possible anti-competitive practices wherein officials took copies of a number of documents. The companies involved claimed legal privilege over certain documents, such as “two e-mails, exchanged between Akcros’ … general manager and Mr. S., Akzo’s … coordinator for competition law. The latter is enrolled as an Advocaat of the Netherlands Bar and, at the material time, was a member of Akzo’s … legal department and was therefore employed by that undertaking on a permanent basis.”
The ECJ rejected the claim of legal privilege relying on its previous judgment in AM & S Europe v. Commission [1982] ECR 1575. The following extracts from the Akzo judgment are self-explanatory as to the reasoning adopted by the court:
40. … in AM & S Europe v Commission, … 41. the Court stated that the protection [of legal privilege] was subject to two cumulative conditions. … first, that the exchange with the lawyer must be connected to ‘the client’s rights of defence’ and, second, that the exchange must emanate from ‘independent lawyers’, that is to say ‘lawyers who are not bound to the client by a relationship of employment’.
42. … the requirement as to the position and status as an independent lawyer, which must be fulfilled by the legal adviser from whom the written communications which may be protected emanate, is based on a conception of the lawyer’s role as collaborating in the administration of justice and as being required to provide, in full independence and in the overriding interests of that cause, such legal assistance as the client needs. The counterpart to that protection lies in the rules of professional ethics and discipline which are laid down and enforced in the general interest.
…44. It follows that the requirement of independence means the absence of any employment relationship between the lawyer and his client, so that legal professional privilege does not cover exchanges within a company or group with in-house lawyers.
45. … An in-house lawyer, despite his enrolment with a Bar or Law Society and the professional ethical obligations to which he is, as a result, subject, does not enjoy the same degree of independence from his employer as a lawyer working in an external law firm does in relation to his client. Consequently, an in-house lawyer is less able to deal effectively with any conflicts between his professional obligations and the aims of his client.
…47. Notwithstanding the professional regime applicable in the present case in accordance with the specific provisions of Dutch law, an in-house lawyer cannot, whatever guarantees he has in the exercise of his profession, be treated in the same way as an external lawyer, because he occupies the position of an employee which, by its very nature, does not allow him to ignore the commercial strategies pursued by his employer, and thereby affects his ability to exercise professional independence.
…49 It follows, both from the in-house lawyer’s economic dependence and the close ties with his employer, that he does not enjoy a level of professional independence comparable to that of an external lawyer.
50 Therefore, the General Court correctly applied the second condition for legal professional privilege laid down in the judgment in AM & S Europe v Commission.
In deciding the question of legal privilege, the ECJ has taken up the opportunity to expound on the role of an in-house lawyer and distinguish it from the role of an external lawyer.
The direct effect of the ruling in Akzo Nobel is likely to felt by companies operating in the EU and it is unlikely to affect the law in jurisdictions where domestic law confers legal privilege on in-house lawyers. However, in jurisdictions where such privilege is not conferred expressly by domestic law on in-house lawyers, the Akzo Nobel judgment could have some persuasive value.
Under Indian law, the Bar Council of India Rules require any lawyer taking up full-time salaried employment to “intimate the fact to the Bar Council on whose roll his name appears and shall thereupon cease to practise as an advocate so long as he continues in such employment” (Rule 49, Section VII, Chapter II, Part VI). Hence, the reasoning of ECJ in the Akzo Nobel judgment ought to apply with greater force in such circumstances, ceteris paribus (i.e. without taking into consideration other procedural and evidentiary aspects of domestic Indian law, if any, that may operate to the contrary).
In India, in terms of the BCI Rules, an exception has been made for counsels employed by government and corporate bodies to plead in courts. Some of the High Courts – Bombay, J&K have, in certain cases, accepted the application of both Section 126 as well as 129.
The question is why do the privilege sections in the evidence act, especially 126 still contain terms such as barristers, attorneys, pleaders, vakils etc. when it is clear under the advocates act that the only class that is allowed to practice are 'advocates'. In certain places in British India, only barristers and not attorneys were allowed to practice, so does that mean that attorneys can be equated with in-huose lawyers in terms of 126?
However, I think, rather than the nature of the counsel, courts in India have been more inclined to consider the nature of the communication
The question came up for consideration before the Bombay High Court in Vijay Metal Works, AIR 1982 Bom 6, wherein the considering the comparable roles of in-house counsels the court held that communications with them were covered under the scope of Section 126 of the Evidence Act.
In my view, Akzo Nobel ignores the "rule of law" of consideration that forms a basis for recognition of client attorney privilege. A corporation is entitled to consult qualified lawyers for better legal compliance, and this can be better achieved through in house counsels because not only are they aware of the law but also have a commercial understanding of the business of the company. Of course, this should be scrupulously restricted to legal advice and not to other general/commercial advise that an in-house counsel may render. Legal privilege promotes complete disclosure by the 'client' to a lawyer, to receive an informed advice. Of course, its a matter of argument as to in a corporation who is the "client" – directors, employees, in-house counsels, clerks.
Juxtaposed with Akzo Nobel, salaried advocates who do not appear before the courts are not "advocates" as understood under the Advocates Act. This would mean that they would not be subject to disciplinary control of BCI.
However, in view of the practical reality, there is a reason to extend the scope of BCI's disciplinary control to in house counsels and not to restrict the scope of privilege, "a fundamentak condition on which the administration of justice rests".
The foreign court cases discussed, as understood, have adjudicated on the proposition whether or not an in-house lawyer, being in ‘employment’ , hence ethically not being ‘independent’, can claim theb legal privilege; that is, simply by virtue of his being an enrolled member of the Bar. It does not seem to bear out the basic requirement that though an enrolled lawyer , he cannot continue to ‘practice’ as a lawyer, but is required to intimate to the Bar about ceasing to practice, before accepting any ‘employment’. I believe that is so in India, but not aware in case it is different in the countries of origin of the cited court cases.
Can anyone clarify!
To continue
The foreign court cases discussed, as understood, have adjudicated on the proposition whether or not an in-house lawyer, being in ‘employment’, hence ethically not being ‘independent’, can claim legal / professional privilege; that is, simply by virtue of his being an enrolled member of the Bar. As observed, the basic requirement is that though an enrolled lawyer , he cannot continue to ‘practice’ as a lawyer, but is required to intimate to the Bar Council about ceasing to practice, before accepting any ‘employment’. Theoretically, rather ideally may be so. However, the concept of ‘employment’,i.e. 'employer-employee relationship' has always been a matter of divergent views and controversies. In fact, one finds any number of income-tax cases in which courts have been required to adjudicate, despite the distinction between the two types of contracts – ‘of employment’ and ‘of service’ being subtle and the demarcating line being thin, if not imaginary. It is anybody’s guess as to what extent strict compliance with the said requirement is any longer possible or amenable to being effectively monitored, so as to prevent any violation or breach of it.
Further, in recent times, ‘outsourcing’, in comparison, having been found more lucrative, has increasingly caught up and become almost the order of the day or most preferred choice; notably so in the field of professionals. For that matter,the olden idea of 'practice'has perforce yielded to ‘service’; as such,the latter has come to dominate over ‘practice, be it in legal, accounting, secretarial , or any other.
In this changed scenario, in one’s perceptive conviction, it is high time that the concept of ‘legal privilege’ itself calls for a rethinking, new definition, and a drastically dramatic change.