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With government agencies aggressively investigating wrongdoing at American corporations, attorney-client privilege in the United States has taken a battering. Things are no better in the European Union. Consider this example: the government attempts to seize memos and notes written by in-house lawyers in preparation for obtaining external legal advice. Legal? In the U.S., the answer is no. The documents are protected by privilege. In the E.U., however, the answer is probably yes. This view was confirmed by a groundbreaking decision by the president of the European Court of Justice last September. Attorney-client privilege and, in particular, an in-house counsel’s duty of confidentiality, is one of the areas where U.S. laws diverge most sharply from Europe’s. Most of the 25 E.U. member nations cling to old rules on privilege, some dating back to the days of Napoleon. Standardizing guidelines on privilege has been a vexing and persistent problem in the E.U. legal system. But a key development regarding in-house privilege came in 1982, when the ECJ ruled that communications among in-house lawyers or with outside counsel from non-E.U. member states were not privileged. This ruling applies to all forms of legal advice in all E.U. countries, including the United Kingdom. Some American lawyers, however, did not understand the full extent to which their advice to clients overseas would not be protected. They learned the hard way in 2000, when the European Commission, the executive body of the E.U., decided to crack down on cartels and antitrust violations. Although many industries were affected, the E.C. particularly targeted chemical and pharmaceutical companies, as well as financial institutions. E.C. authorities saw general counsel’s offices as a potential motherlode of evidence. In order to gather this material, they began authorizing “dawn raids” on company offices. The ECJ’s September decision came in response to the seizure of documents in one such raid. In 2003 the E.C. began an investigation of Akzo Noble Chemicals Ltd., a Dutch multinational, and its subsidiary Akcros Chemicals Ltd. for alleged anticompetitive practices. In the course of its investigation, the E.C. seized papers at company offices in the U.K. Akzo and Akcros objected, arguing that certain documents should be protected by attorney-client privilege. In April 2003 they petitioned the E.U.’s lower court to prevent the commission from reviewing the contested material until the question of privilege was answered. They got their answer last fall. There were two significant results of the ECJ’s decision. The most immediate was that the E.C. was allowed to review the seized documents before the question of privilege was resolved. The second and larger result was that in-house lawyers for companies operating in the E.U. are likely to find that if federal authorities ask them to produce records, they will probably have to turn them over. The dawn raid on Akzo and Akcros occurred in February 2003. Investigators copied a number of papers, but company lawyers tried to withhold one file that contained five documents, claiming it was protected by privilege. Upon receiving the file, the E.C. decided to consider its contents in two distinct sets. The first set consisted of two copies of a memo from the general manager of Akcros to a superior. According to the company, the memo discussed getting outside legal advice on Akzo’s competition law (or antitrust) compliance program. On the second copy of this memo were handwritten notes referring to contacts with one of the outside counsel representing Akzo and Akcros. The second set of documents consisted of notes and e-mails. The notes were written by the Akcros general manager while preparing the memo to his superior. The other documents were hard copies of e-mails between the general manager and Akzo’s competition law coordinator, who was registered with the Netherlands bar. The investigating team decided that this second set of documents was not privileged. The companies brought an action at the E.U.’s lower court, the Court of First Instance of the European Communities (commonly known as the CFI), seeking annulment of this decision. They also sought temporary injunctions forbidding the commission to examine the first two documents or to use the information contained in the other three. Acknowledging that these documents might be privileged, the president of the CFI, Bo Vesterdorf, issued an interim order in October 2003 directing the E.C. not to read them. He also said that the commission could neither use the information contained in the notes and e-mails nor disclose them to third parties until a final decision had been reached on whether the documents were privileged. This order was then appealed to the president of the ECJ. The ECJ president, Vassilios Skouris, affirmed the CFI’s decision regarding the second set of documents but said that the first set (the memos about retaining outside counsel) could be reviewed by the commission, as long as it did not actually use the information until a final decision was made on privilege. According to the president of the ECJ, “the mere reading by the commission of the information … is not in itself sufficient to show that the condition of urgency is satisfied.” In other words, Skouris saw no reason to grant an interim injunction as the case was not, in his view, urgent. Moreover, he said, the fact that someone might divulge the information did not provide sufficient basis for an injunction either. ECJ decisions are not, in theory, binding in cases other than those in which they were initially rendered. In reality, however, they are widely respected and observed. Although the order does not discuss whether the documents seized by the E.C. are privileged, it is clear that it weakens the privilege by failing to grant companies any effective means to assert it. The final decision in the Akzo case is eagerly awaited (but not due until January 2006). It should clarify once and for all whether the documents are privileged. If they are, the E.C. will not be allowed to use the information. But nothing will alter the fact that the commission has already examined the documents. What can in-house counsel of U.S. companies with operations in the E.U. do to protect sensitive material? First and foremost, be aware that documents, memos, and e-mails sent between in-house counsel and lawyers not admitted to practice in an E.U. jurisdiction are subject to confiscation — even on private property Some general guidelines: � Keep advice from outside counsel and in-house lawyers in separate files. � Clearly mark all files containing advice from outside counsel “legally privileged.” � Mark each page of privileged material as such. � Label all correspondence between the company and outside counsel with the words: “legally privileged; prepared for the purpose of seeking legal counsel.” � Discuss sensitive issues orally rather than through e-mails or other written means; if it is not possible to address sensitive matters orally, route them through outside counsel. � Do not permit in-house counsel to amend or add to advice written by outside counsel because this will remove the privilege. � Analyze the privilege rules in force in all E.U. jurisdictions where the company does business. Determine the extent to which these rules are consistent with the recent ECJ decisions and whether these rules might provide any effective means of asserting the attorney-client privilege. If a company faces a request to produce records, it should also: � Make sure that copies of sensitive documents are put in sealed envelopes until the question of their privilege is resolved. � Reserve all rights and privileges, and consider taking action to have the attorney-client privilege enforced. � As Akzo and Akcros did, also consider pursuing a decision to prevent the government from using the information in the privileged documents. � If necessary, request a complete suspension of the government’s investigation until there is a final and binding decision on the issue of privilege. � The most audacious litigants may even consider challenging the recent decision by the president of the ECJ and trying to have it overruled. � Other litigants may seek protection of member state jurisdictions that may be more generous on the question of privilege. � Whatever course of action is chosen, act consistently on all fronts. Efforts to get privilege enforced can take several years, during which time the government can subject the company to other investigations. Be sure to invoke privilege in all related investigations. C. Mark Baker is a partner with Fulbright & Jaworski and coheads its international department. Anibal M. Sabater is counsel with the firm’s international arbitration group.

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