In-house lawyers warned of dangers of third-party advice

IN-HOUSE lawyers are giving legal opinions to third parties such as lenders and buyers despite uncertainty over personal liability.

Stephan Hutter of Shearman & Sterling in Frankfurt, who chaired an IBA seminar on legal opinions of in-house counsel, says: "In reality they are asked for [opinions] frequently. Legal advice in the form of opinions is given."

Francis Neate, J Henry Schroder's group legal adviser in London, spoke out against the growing pressure from third parties for in-house counsel to give such opinions.

He says: "To have me give an opinion to a third party dealing with my employer is to put me in a position of incurring a personal liability." Neate says he has been asked twice for opinions since joining Schroders three years ago. He refused on both occasions, opting instead to supply third parties or external advisers with the relevant documents so that they can make their own judgements.

Yves Brissy, general counsel for French chemical company Rhodia, voiced similar concerns over the liability risks faced by in-house lawyers involved in cross-border transactions. Brissy says he is unsure of the risk of court action in the US if an opinion he had given was later called into question.

Neate also raised concerns over conflicts of interest faced by in-house lawyers.

He says: "We must remember that this practice of taking opinion from the other party's lawyer comes from the US. European practice is different. What is fundamentally wrong with the US practice is that it introduces a conflict between the lawyer and the client. My job is not to tell anybody whether Schroders has got it right or not, except Schroders itself."