Are You a Privileged In-House Counsel…or Not?

August 02, 2017  | Tobias Steinemann

Did you know that there is an active debate in Switzerland about legal professional privilege (LPP) for in-house counsels?

This debate is not new. It was a motion in the National Council by Christa Markwalder that brought the topic back to the radar last year. Ms. Markwalder is not only a member of the National Council but also a former in-house counsel herself. Her initiative is supported by different organizations like Swissholdings, the Federation of Swiss-based multinational enterprises, and the Association of Corporate Counsel (ACC). The latter held a panel discussion recently with Ms. Markwalder in Zurich.

Here’s an excellent scholarly article on the topic (it is in German).

It is a known fact that in certain jurisdictions in-house lawyers do not benefit from the same professional privilege as their external counsels. Now, the spectrum of answers to the question of whether in-house counsels should be awarded the same sort of protection, is obviously answered in different ways. In Switzerland and many other European countries, a lawyer practicing in a law firm can refuse to testify about matters concerning his or her clients, while we in-house lawyers cannot offer the same protection to our clients. When we get called to court, we must answer the questions and produce the required documents without the opportunity to call on LPP.

On the other hand, in the US, it is perfectly normal that in-house corporate counsels are also exempted from the duty to produce documents in legal proceedings. While US courts grant this right to US-based in-house counsels, foreign colleagues are only treated the same way if the company abroad can rely on a similar privilege. It is no surprise that US courts therefore in general conclude that corporates have to produce evidence from their internal advisory in Switzerland.

In a global world, the correspondence between management and Swiss based in-house counsels can therefore represent a risk for companies in case of litigation in a jurisdiction such as the US. It is argued by Christa Markwalder and the supporters of in-house LPP that this risk creates a serious disadvantage for Switzerland as a business location in an international context. The introduction of the same professional privilege for corporate counsels would solve this issue. It would help companies with Swiss-based legal departments as they would no longer have to produce the documents and correspondence related to the advisory work of their in-house counsel. At least this is the assumption on which Ms. Markwalder’s motion is based. And there is certainly a very high likelihood that this scenario would become reality.

However, there are other good arguments for introducing legal professional privilege for corporate counsel. One very strong point, in my view, is that LPP would create trust. Trust of managers and employees in their internal counsels. Employees would relate to their internally accessible counsels with delicate questions or grey-area matters much quickly and more often if they would know that their conversations are protected by LPP. And clearly, if such questions are brought forward or important business decisions are discussed with a lawyer present, it will help the company to achieve better compliance and avoid issues and risk. All the big scandals of the past should have told us one thing: corporate counsels need to be more involved in the proceedings of the business. They need to be part of the decision-making processes. If they are left out, things can go badly wrong – even if it only happens a few years down the line.

As an in-house counsel in Switzerland, I appreciate Ms. Markwalder’s initiative. For now, in-house LPP is discussed for civil matters only. The National Council will debate on this issue together with the revision of the Swiss Code of Civil Proceedings. It is certainly a necessary and important step in the right direction.

If you’re interested in learning more about this and other important issues to in-house legal professionals, consider attending Yerra Conference Europe in London on 11 October. Click here for more details.

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Tags: Corporate Law In-House Counsel