Over the past several years, businesses have shifted their operations from regional-based to a global matrix model, establishing global reporting matrixes, global policies, global operational teams and global decision-making. Such changes have created many unique challenges for U.S. attorneys who work in-house at U.S. business operations.
U.S. attorneys who work in the multinational organization need to consciously identify and understand who the “client” is in the attorney-client relationship, and ensure that they maintain confidence with the client and protect the attorney-client privilege. They need to plan for the possibility that these entities may be sold, become adversaries in the future or become engaged in litigation or government inquires where documents containing their legal counsel may be the subject of discovery requests.
Many times smaller entities or global teams within a corporate family rely on the legal department within the parent or affiliate for advice, especially on legal matters that have global impact. U.S. legal departments are particularly relied upon because of extensive experience in managing substantial and complex U.S. litigation and governmental enforcement actions. Complicating this are global business teams within a corporate family who seek advice from a legal department from one entity and think they can apply that advice to all regions even though laws and regulations may significantly differ.
It has been understood that the client in the attorney-client relationship for U.S. in-house attorneys is the corporation for which they work. The ABA Model Rule on Professional Conduct states in Rule 1.13 on Organization as Client that “a lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.” This is consistent with most state ethics codes. However, the ethics codes don’t provide definitive guidance for determining who the client is for the in-house attorney working for multinational organizations. This is a challenging question for U.S. in-house attorneys.
Beyond the question of who is the client, U.S. in-house attorneys also need to familiarize themselves with the rules on privilege in the jurisdictions of ex-U.S. affiliates. Not all jurisdictions recognize attorney-client privilege. Some have limited recognition. How the privilege applies varies as well. For some jurisdictions, the privilege attaches to documents held by lawyers who are licensed to appear before the court. For other jurisdictions, the privilege attaches to documents that are in the client’s possession.
The European Union’s Court of Justice has said that privilege did not apply for advice given by in-house attorneys because they are not “independent” from their client. This ruling applies only to the EU Court of Justice system and not necessarily to the local court systems of member states.
How legal functions are staffed varies from jurisdiction to jurisdiction. In some countries, it is common for non-lawyers to make up the majority of legal departments, creating additional privilege problems.
It is at times necessary to share certain legal counsel with ex-U.S. affiliates, but attorneys need to keep in mind their ethical requirements and duty to their client. U.S. in-house attorneys working in multinational organizations should consider the following tips to help them fulfill their ethical obligations in maintaining attorney-client privilege over their communications:
1. Develop intercompany agreements: Develop intercompany agreements, engagement letters or joint defense agreements with other entities in the corporate family that set out the understanding on ownership of privilege, waiver, etc.
2. Develop a company policy on providing legal counsel: Develop a company policy outlining who at the company may provide legal counsel to the organization, who may engage outside counsel (i.e., licensed attorneys working or hired by the legal department), that in-house attorneys are responsible for maintaining confidentiality and privilege, that attorney communications may not be re-transmitted, etc. The policy should also be clear that the attorneys at the company represent the company and do not represent the individual and personal interests of any officer, director, employee or contracted personnel.
3. Provide counsel to those who need to know: Legal counsel should only be directed toward specific representatives of your corporate client or clients. If officers or employees of ex-U.S. affiliates are included, attorneys need to think through whether they are the appropriate recipients of legal counsel. If legal counsel needs to go to others outside the U.S., the counsel should go directly from the U.S. attorney to the business person responsible at the affiliate. Passing legal counsel through various channels, including other legal functions, may be problematic for privilege purposes.
4. Be clear in legal communications: If legal counsel must be shared with others outside the U.S., include specific language in the documents explaining that legal counsel is being provided, that documents are subject to protection under the attorney-client privilege doctrine, who exactly the legal counsel is being provided to and that the documents may not be shared without the consent of the U.S. attorney. A separate conversation with the recipients about the documents may be appropriate. This will help avoid privilege being waived inadvertently by those outside the U.S. who may not know the law on U.S. privileges.
5. Train on legal privilege: Provide training to legal functions at ex-U.S. affiliates and business managers on the rules around the U.S. privileges. This will set out an understanding for them when legal advice is provided.
6. Assess whether to represent an affiliate: If there is a real potential of future adverse interests with a corporate affiliate, assess whether to represent this entity. It may be best not to represent a subsidiary or affiliate and advise that they obtain their own legal counsel.
7. Don’t mark every document “privileged”: Clearly mark documents and email as protected by attorney-client privilege if legal counsel is being communicated. Attorneys should not mark every communication as privileged, because some communications only convey business advice and therefore are not protected by privilege. The best practice is to consciously determine communication by communicating which ones are privileged and should be marked as such.
8. Segregate communications for legal counsel from business advice: To the extent possible.
9. Memorialize in writing: Verbal counsel to clients should be memorialized in writing. This could be done by a variety of ways, including simply making handwritten notes to the file. In-house attorneys are extremely busy, but this practice is important.
10. Keep good records: Records or files of privileged communication and work product should be stored in a secure place, preferably separate from the records not protected by privilege. Some electronic filing systems can be configured this way.
U.S. attorneys working across entities in the same corporate families need to consciously think about whom their client is when providing legal counsel and take all reasonable steps to ensure privilege is maintained. Entities may be sold, become adversaries or become engaged in litigation or government inquires where documents containing their legal counsel may be the subject of discovery requests. Although there may be a business need for U.S. in-house attorneys to share legal counsel with ex-U.S. affiliates, the best practice is to limit sharing to situations when it is absolutely necessary.