Top in-house lawyers believe the recent Akzo Nobel judgment on privilege for corporate counsel has had a negative impact on their professional status, but corporate counsel concede that employed status limits independence. Michelle Madsen reports

One in four in-house lawyers feel like 'second-class citizens' as a result of a key European ruling on privilege for corporate counsel, according to a new poll.

Twenty-six percent of respondents to the latest The Verdict survey, conducted in association with Davies Arnold Cooper, said the recent Akzo Nobel ruling made them feel like 'second-class citizens' compared with lawyers in private practice.

More than half (52%) of those polled said the ruling had had a negative impact on their professional status.

The judgment, which was passed by the European Court of First Instance (CFI) last month, was delivered in response to a complaint by chemicals company Akzo Nobel against the European Commission (EC) for breaching lawyer-client confidentiality in a 2003 investigation into price-fixing.

The ruling put paid to hopes by in-house representatives that the court would support the concept of handing corporate counsel legal professional privilege in EC investigations. While the result provoked heated responses from a raft of members of the legal community, a substantial body of in-house counsel said they understood the decision.

Jonathan Pearl, Sony Ericsson general counsel, said: "I do not assume I will get privilege. It is better to assume that you will not be covered and to start out from a blank sheet of paper."

Canary Wharf group legal counsel Martin Potter said the decision made by the courts accords with the general view of in-house lawyers on the Continent, where many jurisdictions do not regard in-house lawyers as being part of the same profession as their private practice counterparts.

"They do not think we are independent," he said. "The UK is a special case. We treat our lawyers as being independent, with the right to privilege."

The poll found a considerable number agreed with Potter. Asked how independent in-house counsel are of their employer, 44% said they were only 'somewhat independent', while a further 11% said they were 'not at all independent'. Only 7% said that they felt as if they had 'complete independence', while 37% felt they were largely independent.

Pearl commented: "Outside counsel are there for the more difficult situations that arise. Sending things which might not be covered by privilege to them is the best way to do it. It is effective, if not necessarily efficient."

When asked if they had ever instructed outside counsel or avoided written communication to avoid getting into precarious territory with privilege, nearly eight out of 10 (77%) respondents said that they had, although only 4% said that they did this on a frequent basis.

Despite the risk-benefits that turning to outside counsel guarantees, the bulk of corporate counsel are still handling potentially tricky pieces of work in-house. Forty percent said they only consulted external advisers occasionally, with nearly a fifth (19%) saying they never turned to outside counsel due to privilege concerns. Warning that to assume privilege was a mistake for in-house lawyers, one senior lawyer at a leading investment bank said the ruling was unlikely to have much of an impact on the way most in-house counsel went about their business.

"I do not see it as a problem," she said. "So much of what in-house lawyers do is not about privileged documents, it is about advice and it is only sensible to assume that you do not have privilege. You know when you are on sticky ground and you should not leave a paper trail in such cases – do not create problematic documents."

She added that corporate counsel should not need to depend on privilege to define their role as a lawyer: "Independence is a state of mind up to a point. If you cease to be objective you have lost your value as a lawyer."

Pearl argued that the CFI's stance on privilege could have a positive impact on relationships between in-house lawyers and their clients.

"If this ruling leads to more actual conversations being held that would not be such a bad thing," he said. "If you are giving advice you need to be clear on what you are doing – never assume. The contract has to be carefully written – I say to my clients to give me a call first to discuss something, instead of writing."

While this sentiment is echoed by a significant proportion (30%) of general counsel, who claim that limits on privilege will not have a great impact on them, the majority (56%) say that the ruling will have some impact on the way they do their jobs and a further 7% said that it would make a real difference to their working lives.

As the UK is one of the few jurisdictions in Europe where the in-house community expect rights to privilege, Potter said the ruling's full impact would only be felt when a test case like Akzo Nobel is applied nationally. "The devil will be how the English courts will interpret the decision," he said. "I sincerely hope they will stick to their guns."

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