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CCCA_V4No4_Privilege-FIN.qxd:CCCA_V1No1_DriversSeat-FIN.qxd 10/27/10 3:28 PM Page 36 Feature Several bar associations and member states voluntarily inter- in-house counsel; he was a member of the Dutch bar and thus vened in support of Akzo Nobel’s position after the commission bound to strict ethical provisions and his employment contract in 2003 rejected the company’s claim that the documents at issue even had specific provisions guaranteeing his freedom to per- should be covered by privilege. form his functions independently.” The court found the employment relationship to be incom- And the court would not acknowledge any clear trend among patible with the level of independence required to recognize EU member states toward recognizing legal privilege for legal privilege.Yet, as Savouré points out:“The in-house counsel in-house counsel. Still, there may be a positive takeaway from involved was Dutch and the Netherlands recognize privilege for this position, Savouré says: As more member states legally An unsettling decision Down Under Even in Australia, where client-solicitor privilege largely mirrors that of other Commonwealth jurisdictions, the notion is unsettled with respect to advice given by in-house counsel. In the 2007 case, Telstra v. Minister for Communications, Information Technology and the Arts, Australia’s Federal Court considered whether e-mails and draft documents prepared by the company’s in-house legal advisers were subject to client legal privilege. The court held that the advice of an in-house lawyer — as an employee lacking independ- ence vis-à-vis his or her client — is at risk of being compromised. But the decision did not out- line any criteria for determining the independence of the in-house lawyer from his or her employer. The decision sent ripples of concern throughout the legal community regarding the protection of confidentiality of in-house legal advice. Sue Laver, general counsel at Telstra Corporation Limited, described privilege as the single most important issue facing in-house lawyers in Australia. Judges don’t always fully understand the role of corporate counsel, she says, so they focus on the question of their independence. In the wake of the decision, Telstra's legal department reviewed everything from lawyers’ employment contracts to their remuneration. “We amended the employment contracts of each of our 150 lawyers to make it crystal clear that each lawyer’s ethical obligations and duties to court prevailed over our duties to our employer,” says Laver. They also introduced a new company-wide policy spelling out that lawyers must give independent advice. It was forbidden for inter- nal clients to insist that members of the legal team formulate opinions in order to achieve particular outcomes. Significantly, the company developed new incentive and remuneration arrangements for its lawyers, no longer tied to the stock per- formance of the company. Among best practices for in-house counsel to consider, Laver insists on the importance of clear reporting lines and performance review. “Ideally lawyers should report to lawyers, with the most senior lawyer reporting to the CEO.” Another matter to consider is who has authority to terminate the general counsel. The board, rather than management, is best suited to make the call, making it more difficult to send the general counsel packing after an unpop- ular decision. Organizational charts should also reflect that lawyers are acting as lawyers — not commercial managers; at Telstra, the title of managing counsel was changed to supervising counsel to draw a clear distinction from issue management responsibilities. A more complicated matter is remuneration. “All lawyers, whether inter- Sue Laver nal or external expect to be paid for their services,” says Laver. “For in- General counsel house counsel, incentives and remuneration tied to the stock price of the telstra Corporation Limited company, or paid in company stock can cloud the independence issue.” CARLOS AMAT Australia Instead she favours an incentive structure that places a premium on corporate counsel's performance as a lawyer. 36 CCCA Canadian Corporate Counsel Association WINTER 2010