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For the past two decades, corporate counsel in the European Union have had to do without the protections of the lawyer-client privilege. Despite repeated challenges to this state of affairs — even the European Parliament doesn’t like it much — the European Commission has not been inclined to make any changes. But with the prospect of E.C. antitrust law modernization, the privilege issue is becoming more pressing. The commission’s antitrust proposals, outlined in a white paper published last September, would decentralize current procedures, ending the need for automatic notification to the commission in the event of a merger. Most welcome the plan. But the white paper also seeks to augment the commission’s already broad investigative powers. Dawn raids on the homes of employees, oral examinations on pain of heavy fines, and wide document request power would all become part of the commission’s enhanced arsenal. Critics say that if the E.C. moves toward quasi-criminal proceedings in antitrust matters, in-house lawyers will need an explicit grant of privilege even more. The changes would affect U.S. companies operating in Europe: Outside counsel would not have the same assurance of confidentiality they have in the U.S. And matters disclosed in European proceedings could become public worldwide. The rule denying attorney-client privilege stems from the European Court of Justice’s 1982 judgment in Australian Mining and Smelting Europe Ltd v. Commission. Reformers argue that at the time of the AM&S decision, both competition law and in-house practice were in their infancies in Europe. But the E.C. opposes expanding attorney privilege on a number of grounds: It contends that in some jurisdictions, corporate counsel remain outside the ambit of the professional ethics guidelines that apply to outside counsel. Because they’re employed by the company, the thinking goes, they are less likely to give independent legal advice. Besides, communications between executives and their in-house colleagues could constitute evidence of possible antitrust violations. The European Company Lawyers Association, a 30,000-strong body with members in 14 European jurisdictions, finds this stance insulting and wrong. In response to the charge that company lawyers aren’t bound by the professional rules of conduct, it counters that in almost all the E.U.’s member states, in-house attorneys have the same status and duties as other legal professionals. Belgian company counsel have recently been accorded their own professional organization and are able to claim privilege under national law, for example. Maurits Dolmans, a Brussels-based partner with New York’s Cleary Gottlieb Steen & Hamilton, is preparing an amicus brief on behalf of the ECLA in Senator Lines Gmbh v. 15 Member States of the EU, currently being heard before the European Court of Human Rights in Strasbourg. Says Dolmans: “Our objective is to establish the right of in-house counsel to invoke their company’s right against self-incrimination in case of oral examination during raids; and recognition that the rules of due process and the company’s right to choose its counsel involves recognition of in-house counsel’s right to privilege.” The ECJ has argued that there is no right against self-incrimination in civil matters such as antitrust, and that it has no jurisdiction over criminal matters. But, Dolmans insists, the magnitude of the fines the ECJ has the power to impose suggests that antitrust violations are very much “of the nature of criminal law offenses.” The whole debate might seem parochial. But its ramifications extend beyond the borders of the European Union. The AM&S decision denied privilege not only to in-house counsel, but to U.S.-licensed outside counsel doing business in Europe. While this rule has never been tested, Dolmans notes that were it to be, the results would be “outrageous.” There are more potential pitfalls for U.S. companies. Jettie Van Caenegem of the lawyers association ECLA points out that as European and U.S. antitrust authorities coordinate their efforts, “U.S. counsel should understand that if they are advising their company’s European subsidiaries, they are not protected by privilege within the E.U., and the information that they would otherwise consider to be privileged could easily filter back to the U.S.” The chairman of the ECLA, Colm Mannin, has darker words for the whole situation: “Sadly, one has to conclude that [the commission] does not give a damn about antitrust compliance. They appear to be more interested in targeting corporate legal departments in dawn raids” in an effort to show results. So if you’re doing business in Europe, your company might want to consider banning overnight stays.

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