14 November 2019

Dutch court ruling: no legal privilege for in-house counsel unless independence guaranteed

As a general principle of law, legal privilege can be invoked by attorneys to protect client information, communication and work. In-house counsel can invoke legal privilege under Dutch law only if they can exercise their legal practice independently from their employer. This independence is considered to be guaranteed if in-house counsel and the company sign a specific agreement. In recent criminal proceedings, the Rotterdam District Court held that foreign in-house counsel could not invoke legal privilege because independence was not guaranteed.

This ruling may be appealed and is not final. As long as it is unclear what happens on appeal, it is important for foreign in-house counsel who want to invoke legal privilege in the Netherlands to consider its implications.

Privilege for in-house counsel: legal framework

In-house counsel registered as attorneys are the employees of their “only” client: their employer. Because of the inherently hierarchical employment relationship with their “employer”, in-house counsel are not considered independent. As a result, they are not entitled to legal professional privilege (LP). An exception to this rule is available for in-house counsel registered at the Netherlands Bar, provided they and their employer sign an agreement which protects the independent professional practice of the in-house counsel against undesired influence by the company. A template for this “Professional Charter for In-House Counsel” is provided by the Netherlands Bar. In addition, the in-house counsel’s work must be focused mainly on legal practice. Under these conditions, in-house counsel can invoke LP.

According to the Rotterdam District Court, in-house counsel registered at a foreign bar and working in the Netherlands as visiting attorneys must observe the Dutch standards if they want to invoke LP.

When it comes to in-house counsel registered at a foreign bar and working outside the Netherlands, Dutch law recognises LP if it is so granted under the law of the country of residence. Some of these countries include Belgium, England and Wales, Ireland and the United States. In some countries, LP is limited to external counsel admitted to the bar only, such as France, Germany and Switzerland. The European Commission in principle also only recognises the LP of external counsel in competition matters (as confirmed by the European Court of Justice in the competition law case against Akzo Nobel Chemicals).

The ruling

The case decided by the Rotterdam District Court in criminal proceedings on 7 October 2019 concerned in-house counsel registered at foreign bars, both employed by a company in the Netherlands and by group companies residing outside the Netherlands. The question put before the court was whether these in-house counsel were entitled to invoke LP in the Dutch criminal proceedings.

The court made a distinction between foreign in-house counsel working in the Netherlands and those that are working outside the Netherlands.

With regard to foreign in-house counsel working in the Netherlands, the court held that no signed copy of the Charter was submitted and that the company also failed to show that the independent professional practice by these in-house counsel was otherwise guaranteed. Rather, it noted that there were indications suggesting the contrary, because the head of the legal department was part of the executive committee. According to the judge, he was therefore partly responsible for the general course of affairs within the company. This would jeopardise the independent position of the legal department, including that of foreign in-house counsel working within that department. Referring to the latter consideration, the court held that foreign in-house counsel working outside the Netherlands too could not invoke LP in the Netherlands, even though the court also noted that Dutch law in principle recognises LP if it is granted under the law of the country of residence.

The court added that this does not exclude the possibility that the information for which LP was invoked, falls under a derived right of non-disclosure, because the foreign in-house counsel may have communicated with attorneys who can invoke LP.

Consequences for foreign in-house attorneys

This judgment may be appealed and, for now, it is not final. As long as it is unclear whether the judgment will be overturned, it is important for foreign in-house counsel who want to invoke LP in the Netherlands to consider its implications. The judgment underlines the importance of an explicit guarantee of independence which needs to be supported by evidence, regardless of the jurisdiction in which the in-house counsel is registered and employed.

A signed Charter seems to be a straightforward way to guarantee and provide evidence of independence. The court suggests that there may be other ways to guarantee independence, but the judgment does not clarify what would be sufficient.

In the absence of a signed Charter or of any other evidence guaranteeing independence, the court looked at the structure of the legal department. In the end, this is what was decisive for the court in denying LP to foreign in-house counsel. This ruling shows that this court attaches great weight to the role of the head of the legal department, which can have far-reaching consequences on the LP of individual foreign in-house counsel. As legal departments are often structured in a similar way, this underlines the need for clear guarantees of the independence of foreign in-house counsel.

Developing strategies to safeguard legal privilege roundtable –

Monday, 2 December 2019

We invite you to attend a roundtable discussion to address the main principles of legal privilege and the strategies to safeguard this privilege, paying particular attention to the position of in-house counsel and the conclusions that can be drawn from this recent case. The roundtable will be held on Monday, 2 December 2019 from 16:00 to 18:00. To attend, please send an email to Liselotte Wilde (Liselotte.Wilde@debrauw.com).

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