27/09/2007

Eu ruling prompts urgent review for in-house legal teams

The European Court has confirmed that communication between a company and its in-house general counsel is not privileged and has to be disclosed in proceedings. This principle extends to in-house lawyers even if they are barristers.

The potential significance of this decision for all in-house lawyers and their clients is huge. Many organisations will need to conduct an urgent review of all communication procedures between their officers and employees and general counsel. This could affect the way in which companies deal with the management of all competition compliance, health and safety and other regulatory matters, the management of sensitive or confidential problems which might in the future become the subject of formal investigations or legal proceedings, and of course all HR related matters.

By way of example, if a breach of warranty claim was ever made against a vendor company by a purchaser of a business, that purchaser would be entitled to obtain disclosure of all communications between the officers of the vendor company and its general counsel during the course of the transaction. If this revealed that the company had privately taken advice on problems which were not disclosed to the purchaser this could be very damaging.

Many in-house lawyers and company directors will feel extremely uncomfortable at this EU decision, and will need to consider how best to respond to it internally. Many UK companies are adopting practices of ensuring that certain communications and advice are taken from or passed through external legal advisors in an attempt to ensure that the confidentiality of that communication can be protected and its disclosure prevented.

If you would like to discuss your concerns or ask for our thoughts on how you can review your internal communications strategies please call Rob Cowling at Gordons on 0113 2270100 and he will ensure that you are put in touch with the appropriate partner.