The Association of Corporate Counsel announced this week that it would support an initiative to overturn a German court ruling that it says would treat the country’s in-house counsel as “second-class citizens.”
As part of its advocacy efforts, the ACC is calling on German citizens and legal professionals to sign a petition that would reinstate an exemption for in-house counsel from compulsory enrollment in the country’s government-run pension system. The petition, which is set to expire on June 19, as of Friday afternoon had received more than 12,000 out of the 50,000 signatures needed in order to receive a parliamentary hearing.
The petition was launched in May after the Federal Social Court in Germany had ruled in April that the country’s in-house counsel—unlike their counterparts in law firms —were not exempt from the German state pension system, citing a lack of independence from their employer. The ruling sparked outrage by many in the legal community.
While most German employees are required to pay state pension insurance, the law exempts various professionals, such as lawyers and physicians, from joining the government program if they join a pension fund for their professional group.
However, the exemption is only accorded to professionals who are acting independently—that is, not at the direction of a superior—in the performance of their duties.
Amar Sarwal, vice president and chief legal strategist for the ACC, said the ruling rests on a premise that in-house counsel are essentially employees who report to higher-ranking officials and lack the same level of independence as their law firm counterparts.
He added that the ACC believes this premise misrepresents the relationship between a client and attorney, which he said does not differ between in-house and outside counsel.
“All attorneys are instructed by their clients,” he said. “Clients control the actions, not their attorneys.
“What makes an attorney independent are rules of ethics, and in-house counsel don’t leave their ethical duties at the door,” he said, adding that in-house counsel represent their organizations and not merely the company’s employees or leaders.
One reason for the petition and the ACC’s attention to the ruling is a concern that mobility for in-house counsel would be inhibited. The ruling does not affect in-house counsel who are currently receiving pensions from bar associations, but Sarwal said that they would lose their exemption if they were to take an in-house position at a different company.
In the ACC’s statement, the group drew a sharp distinction between the choice of government or bar association pension plans. But Sarwal softened that position and said that the ruling does not necessarily prevent bar associations from offering pension plans to in-house counsel, and that it was possible that bar associations may choose to offer pension plans to their employees.
However, he said he was doubtful that in-house counsel would want to pay for three pensions—corporate, governmental and associational.
The concern over a differing degree of independence for in-house counsel is not limited to pension matters. Sarwal noted that a whole host of concerns can arise, including the existence of attorney-client privilege.
Any ruling undermining the independence of in-house counsel, he added, could be cited in unrelated cases and different jurisdictions. He pointed to a European Court of Justice ruling in 2010 that denied the existence of an attorney-client privilege in correspondence with in-house counsel for competition cases because of their lack of independence.
This ruling, he said, had been cited in noncompetition cases and in courts not subject to the ECJ’s jurisdiction, such as the U.S.
“A threat to in-house counsel in Germany is a threat anywhere,” he said. “It really hurts in-house counsel everywhere around the world.”