The concept of legal privilege varies greatly across the world, and while in-house privilege is afforded to corporate counsel across Latin America, there remains uncertainty as to whether it is always guaranteed under the law. LACCA speaks to GCs about the challenges created by the different interpretations of legal privilege around the region.
The scope and application of legal professional privilege – the protection of communication between a lawyer and their client – varies widely depending on a particular country and legal system. Possibly one of the oldest confidentiality clauses attached to the legal profession, legal privilege has historically been a clause subject to dispute, particularly when it comes to criminal investigations or litigation proceedings and in-house counsel are often left in limbo with regards to what is and isn’t protected by the right to confidentiality.
Indeed, uncertainty surrounding legal privilege for in-house counsel isn’t just an issue for Latin American GCs and the matter of defining legal privilege has been getting attention around the globe over the past few years. Most recently in France, The Gauvain Report, published in June, describes the vulnerability of local companies to foreign prosecution – due to the fact that France is one of the few countries that does not protect confidentiality between GCs and their clients – and calls for the creation of clearer guidelines and rules for corporate legal privilege, which would provide French companies with the same level of protection as international competitors.
With common law systems, such as in the US, privilege is attached to confidential, and specifically legal, documents and communications between clients and lawyer, with the right to waive belonging to the client. Civil law jurisdictions, such as those in the EU and the majority of Latin America, approach the question of privilege from a very different angle, however, and the obligation amounts to no more than a duty on a party to disclose the documents which support its case and upon which it wishes to rely. As the client is not legally obliged to disclose documents, prosecuting parties must apply to the courts for disclosure. As company investigative proceedings often involve a number of different jurisdictions, variances in the application of legal privilege can throw up challenges for in-house counsel looking to defend their corporate clients, with advice privileged in one country not protected in another.
A question of independence
The notion that an in-house counsel might not be afforded the same rights as a lawyer working at a firm might seem strange, but it’s down to the fact that in-house counsel are considered employees of a company, rather than independent lawyers like their private practice counterparts. “There’s a very staunch notion of independence even when you’re working in a firm, but if you’re an employee, you don’t have a right to say no to the courts when they ask you for evidence,” says Joseph Smallhoover, partner at Bryan Cave Leighton Paisner in Paris. “The Gauvain Report addresses issues that have been kicking around for a long time.”
Contrary to France, in Latin America there appears to be no distinction drawn between private practitioners and in-house counsel when it comes to privilege and it is generally accepted among in-house counsel that there is an inherent right to confidentiality when it comes to exchanges with their internal clients. While there is a lack of distinction between in-house counsel and law firm lawyers, there are also no specific rules in place to define or enshrine this in law when it comes to in-house lawyers, meaning that often it can be open to interpretation depending on the situation. “There’s no single standardised regulation when it comes to legal privilege in Latin America,” says Abel López Campo, VP of legal affairs and corporate secretary at Viva Airlines. “Legal privilege in general is not a concept applicable to the in-house community, and is more commonly recognised, predicable and accepted in the case of external counsel.”
For example, in Colombia, while the concept of legal privilege is recognised under the constitution (“professional secrecy is inviolable”) and is generally applied to both private practitioners and in-house counsel, certain government agencies have questioned whether corporate counsel should be afforded the same rights. Colombia’s antitrust watchdog the Superintendence of Industry and Commerce (SIC), has stated that as the role of in-house lawyers is not totally limited to just legal work (but also activities related to the daily activities of a business), communications between lawyer and client aren’t protected by privilege unless specifically related to a legal opinion. “Disagreement on what privilege means for in-house counsel has affected us,” says Ana María Sarria, legal VP at Equion Energia Limited. “During a recent arbitration case, the tribunal ordered the disclosure of information, which included communications from the legal department. Although privilege was alleged, the tribunal ordered the extraction anyway. In the end, the information wasn’t used, but there was a total disregard for privilege in the first place.”
The thought of independent regulatory bodies rather than the government weighing in on what does and does not constitute legal privilege is, for many in the legal community, unsettling. In Mexico, legal privilege is framed under the law as the responsibility of the professional to maintain confidentiality with their client, with professionals liable for prosecution if they reveal confidential information obtained through the course of their employment, but earlier this month on 5 September, the panel of the Mexican Economic Competition Commission (Cofece) met to decide whether to approve new regulations on client-attorney rights and in-house counsel privilege in antitrust proceedings. The new rules would allow Cofece to exercise its right to obtain attorney-client communications from a defendant and use it during legal proceedings, which many in the legal community argue would adversely affect the quality of legal advice provided by GCs and their in-house teams. “In-house counsel have a deep knowledge of their companies, so without guaranteed legal privilege they can’t provide the best legal advice in circumstances where there exists a threat of disclosure,” explains María González Calvet, partner at Ropes & Gray LLP, previously executive counsel for global investigations at US multinational General Electric. “It is critical for companies to be able to receive honest and straightforward legal advice from both in-house and outside counsel.”
It’s all about circumstance
While many in the legal community agree that legal privilege is essential for GCs to be able to provide the best quality advice, the lack of guidelines for in-house teams across Latin America mean that it is often open to interpretation, particularly in the case of investigations. To avoid confusion, lawyers say that in-house privilege should be enshrined in the law for all circumstances, and only waivered in specific circumstances, which must be defined. For example, Brazilian rules on legal privilege, which has long given the same professional rights, duties, and protections to in-house and private practice lawyers, were changed earlier this year and now mean that phone calls between attorneys and their clients should be disclosed in a case where one of the lawyers involved was being criminally investigated. As a result, many local counsel say GCs need clearer guidelines on exactly when and where legal privilege applies. “We’ve seen nowadays with the federal authorities investigating Car Wash, that people forget about attorney-client privilege to investigate crimes – so where do you draw the line?” says Odilon Borges, head of legal, regulatory and compliance at Aeroportos do Sudeste do Brasil.
Of course, there are issues that come alongside removing attorney-client privilege during investigations, namely that authorities must always have clear reasoning to investigate lawyers, which isn’t always the case. In 2017, Chilean prosecutor Ana María Aldana seized all communications at the facilities of the National Petroleum Company (ENAP) in Concón and in Santiago. The legal department alleged the seizure was unlawful on grounds of professional secrecy, and an order was eventually approved by the National Prosecutor and the Supreme Court urging the prosecutor to return the seized records. The case was unprecedented and was the first time an in-house member of the Chilean bar association was given legal privilege during a criminal investigation since the inception of the Code of Professional Ethics in 2011. “When the code of ethics for lawyers was made, they didn’t have different types of lawyers in mind, only private practice,” says Francisco Brotfeld, partner at Pruzzo Ruscica Brotfeld Abogados. Until last month, Brotfeld worked as deputy legal head of negotiations and regulatory at energy company Transelec. “That’s why it’s important to set precedents – privilege has always existed, but the regulations aren’t clear until you apply them.”
While clear rules should be defined across the region as to when legal privilege can be waived for in-house counsel, ethical questions on transparency still remain. Indeed, some lawyers point out that the suggestion legal privilege should only be given to external counsel feeds an unfair misconception that in-house counsel are less independent than lawyers in firms. “It is often wrongly believed that it’s easier for in-house counsel to enter into a conflict of interest because their position is affected by the decisions the company makes, so their independence when it comes to doing the right thing could be questioned,” explains Sandra Monroy, legal director for the Andean region at transport giant Uber. However, those against legal privilege for in-house teams say corporate counsel might be more easily incentivised to make legal decisions that are unlawful or immoral. “A lot of government entities think that as in-house lawyers also take business decisions that companies may have incentives to appoint lawyers for such purposes and take advantage of the attorney-client privilege,” she says.
Indeed, if in-house counsel were always awarded total legal privilege during investigations, huge cases such as Car Wash and 2016’s Panama Papers may have never come to light in the way they did. “In France and other European countries where in-house counsel do not enjoy privilege, there is a perception that it is impossible for them to be as fully independent as outside counsel,” says Nicholas Berg, partner at Ropes & Gray. “Thus, there is a perception that companies may be able to use that privilege to hide sensitive business information or hinder transparency.”
Despite the concerns over whether in-house lawyers can really remain impartial, GCs argue that their ethical obligations as lawyers would prevent them from hiding any evidence during investigations. “There is strong regulation requiring attorneys to act lawfully and ethically regardless of their condition as external or in-house counsel,” says Sarria. In certain jurisdictions such as in Brazil or Nicaragua, in-house lawyers are also subject to criminal liability if they obstruct investigations by withholding evidence. Allowing legal privilege across the board would then, in theory, directly contradict criminal liability frameworks already in place. “Sometimes yes, lawyers ride the attorney-client privilege to hide crimes, but this is the exception, not the rule – generally we work by a code of ethics,” agrees Borges.
Ethical issues aside, however, it seems quite clear that the distinctions about whether or not legal privilege can be applied to corporate legal teams remains an issue in Latin America. Despite the fact that countries in Latin America don’t distinguish between in-house counsel and private practice lawyers when it comes to privilege, the lack of differentiation in legislation and clear guidelines for GCs can lead to different interpretations of privilege by courts and authorities investigating companies. Despite concerns from local lawyers, however, there doesn’t appear to be any clarification on the horizon, which continues to cause uncertainty among in-house counsel as to exactly when and where privilege applies. “In-house counsel are constantly being challenged and required to hand over what should be kept confidential,” says Sarria. “And although legal privilege is being addressed by scholars and courts alike, there is no foreseeable date when this matter will be resolved.”