ACC conference gets to grips with professional privilege bombshell
7 June 2010 | By James Swift
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The Association of Corporate Counsel (ACC) Europe’s seventeenth annual conference was held in Vienna last week - and it rained. A lot. But even on the few occasions when the downpours gave way to sunshine, a faint gloom seemed to hang around.
Said gloom was cast by the opinion of EU Advocate General Juliane Kokott given late last month in the case of Akzo Nobel Chemicals Ltd And Akcros Chemicals Ltd V European Commission.
Kokott opined that confidential communications between companies and their in-house lawyers should not, at least in Commission investigations, attract the same professional privilege as communications between companies and outside counsel - not a popular view among the crowd gathered in Vienna.
“This opinion runs counter to the role of better compliance,” said Axel Viaene, president of ACC Europe and Europe, Middle East and Africa legal director for Starbucks.
It will drive up costs, because if you can’t confer with your in-house counsel then you’ll have to use outside counsel, and the level of advice won’t be as good because outside lawyers won’t know the companies like the in-house counsel do.”
That said, the opinion is not binding on the European Court of Justice, which is yet to make its decision (although judgments rarely contradict the Attorney General), and the subject by no means dominated discussions at the conference.
Chief among the concerns of the general counsel in attendance was compliance - a germane topic given the position taken in Germany that general counsel can be criminally liable for company breaches.
Siemens CEE compliance head Walter Soelle described how his company had to completely restructure its leadership and compliance systems after being fined $1.6bn (£1.09bn) for paying more than $1.4bn in bribes between 2002 and 2006.
Risk and a counsel’s role in its management was an equally hot topic, with ongoing situations experienced by BP and Toyota throwing light on the issues faced by companies in crises.
“Companies can’t control their reputations anymore,” said Cheryl Solomon, general counsel at Gucci Group. “Before the internet they could, but not anymore. And now people care more about who they’re buying from and where those they’re buying from buy from.”
With Vienna the host city for the conference it seemed only natural that the ACC should devote time to the legal landscape of CEE. Speakers shared horror stories about extortion and directors having their businesses essentially expropriated after getting involved with the Russian mafia, and advised that connected ’fixers’, although necessary, should never occupy a dual role as local counsel.
But CEE remains an essential market for Western businesses and as such still needs to be navigated.
Denise Hamer, head of international corporates legal at Austrian bank Bawag, finished her talk with a sobering anecdote: “In 1998 in Russia, when banking and capital markets imploded, we found that they wouldn’t enforce derivative contracts in the country because they said these were gambling contracts. We sent lobbyists in there and complained, saying, ’what’s wrong with you?’
“Ten years later we found out that derivatives were gambling contracts. So not everything they do in CEE is off the wall.”
Like their private practice peers, in-house lawyers have come under pressure since the downturn and are expected to do more with less at a company.
“There’s an increased interest in return on investment for legal advice,” said ACC president Fred Krebs. “And that’s not just for law firms, it goes the same for within companies too.”
Speculating on the future of businesses and the role of in-house counsel, most believed that in the future the majority of multinationals would not be US or UK companies and that China would no longer be a low-cost jurisdiction. It was also largely agreed that there would be more cross-functional risk, meaning an issue that affects one section of a company will be more likely to spill over to another area, and that counsel will have to become generalists, meaning lawyers who are focused too narrowly will be in danger of redundancy.
The conclusion reached was that counsel must expand their positions within companies: they need to become business partners, not just lawyers; they must provide value for companies and communicate that value well; they need to utilise the unique position that lawyers hold within organisations, touching on every department, to be a connector; and most of all they need to become leaders.
As ACC Europe vice-president Ruth Steinholtz stated: “Leadership is the most low-hanging fruit and where the most gains are to be made”.