Tag: corporate lawyers

PARIS – On July 10, 2023, the French Government presented an amendment to Article 19 of Rule 99 of the Rules of Procedure, making significant changes to the role and responsibilities of in-house lawyers in France. The amendment fundamentally reshapes legal advice confidentiality in the corporate sector and improves France’s attractiveness in the global market.

Under this amendment, legal advice drawn up by an in-house lawyer or, at their request and under their supervision, by a member of their legal department, which is done for the benefit of their employer, is considered confidential. In other words, French legal departments providing legal advice to their employers enjoy confidentiality rules when providing said advice.

“This amendment highlights decades of persistence,” said Jonathan Marsh, President of ECLA. “This has been at the forefront for French legal departments, and we are excited to see the French Government agree with our positions to such a large extent. The changes will bring a new era for French businesses – one in which they can globalise their unparalleled competitiveness, unhindered by the evident restrictions that the current regime imposed.”

The amendment introduces rules concerning the confidentiality of legal advice drawn up by in-house lawyers or their team members that, if appropriately labelled and identifiable, cannot be seized or required to be handed over in civil, commercial, or administrative proceedings or litigation. This confidentiality is not applicable in criminal or tax proceedings.

Two key conditions must be met for confidentiality to apply for French in-house counsel. The lawyer, or the member of their team that reports to them, must hold a master’s degree in law (or an equivalent diploma) and must provide proof of initial and continuing training in ethics.

Legal advice under confidentiality rules must be appropriately labelled – confidentiel – consultation juridique juriste d’entreprise, translated as confidential – legal consultation with in-house counsel.

Moreover, new procedures have been established for courts to challenge the alleged confidentiality of documents in case of a dispute. The company employing the in-house lawyer is required to be assisted or represented by an attorney in these proceedings. Penalties have been outlined for fraudulently affixing the confidentiality label on documents not covered by the new regime.

The reasoning behind this amendment is both practical and economical. There have been decades of discussions (and several international court proceedings highlighting the discrepancy) by which French companies have been at a disadvantage when dealing with foreign-based companies where in-house counsel do enjoy legal privilege. The French government acknowledges this “paradoxical situation”, in which French in-house lawyers must implement and uphold compliance obligations while avoiding the risk of self-incrimination by their companies. As the representatives put it: “The stakes are too high…  – It’s about jobs and the attractiveness of our nation. Our aim is to encourage more companies to establish their legal departments within France and to recruit French in-house lawyers.”

Marcus M. Schmitt, General Manager of ECLA, expressed strong support for the change: “This is a great development in France, and I extend my heartfelt congratulations to our colleagues at AFJE and Cercle Montesquieu there. I am delighted to see the arguments we have been advocating for such a long time have finally been adopted. This change significantly reflects the job description that in-house lawyers have in practice. We hope more countries will soon follow in France’s footsteps, bolstering legal protections for in-house counsel.”

The French Government hopes this new amendment will help French companies meet their increasing compliance obligations in fields like governance, human rights, due diligence, data protection, ethical rules, and environmental responsibility. It is also expected to increase France’s appeal to legal departments, many of whom had been choosing to establish in countries offering such protection.

ECLA views this development as natural progress towards our ultimate goal – to have a EU-wide regime for in-house counsel (either on a national or a supranational level) that adequately reflects the work that in-house counsel do. The development of the profession has been hindered by misunderstood legal rulings that have shaped the dynamics of the role and of businesses at large for too long – it is reencouraging to see that France is the latest EU Member State that has realised the importance and value that a well-regulated legal department produces.

The amendment can be viewed in French at https://ecla.martenmannis.eu.online/wp-content/uploads/2023/07/FRANCE-LPP-Amendment.pdf

ECLA is also proud to announce that, as part of its 40^th Anniversary Celebration on 18-19 September in Frankfurt, Germany, it will hold an enhanced panel discussion to dissect and deliberate on the current confidentiality regimes in Europe and on the impact that these developments have in practical terms for businesses. For more information, please visit https://ecla.martenmannis.eu.online/events/anniversary/

Enhancing the protection of internal legal advice: A key step to bolster France’s and Europe’s global attractiveness and competitiveness

As a leading industrialised nation, France must address its current lack of protection for in-house legal advice. This deficiency has put French companies in a challenging position, making them less effective in addressing potential corruption and, furthermore, has put French companies at a disadvantage in the face of international economic competition. It has exposed them to extraterritorial standards and has brought a risk of having their strategic information exploited during litigation, in particular where the legal departments of their international counterparts enjoy broader protection.

This issue has been criticised, at home and abroad, for making French companies more vulnerable and subjecting them to a less favourable legal environment compared to their global competitors. Consequently, many businesses are considering relocating their legal departments to countries with stronger protections in place. Such relocations threaten the influence and attractiveness of French law, potentially leading to the displacement of legal decision-making centres and a loss of influence for the French legal community in Europe and beyond. Companies cannot fully integrate with the local legal system while knowing that relocation can become a potentially reasonable decision for the business. Similarly, it becomes harder to convince expanding businesses to choose countries like France as a potential option for opening new branches.

The French Ministry of Justice has realised the necessity of having a globally competitive system in this scope. It currently is developing a proposal supported by AFJE, Cercle Montesquieu, and Paris Place de Droit. The proposal aims to protect legal opinions by attaching the confidentiality to the document itself, rather than the author’s status. This would enable companies to maintain confidentiality, subject to judicial discretion during seizure, or opt to waive it as needed.

The proposed protection potentially brings numerous benefits, including:

1. Levelling the playing field for French companies against their international competitors.
2. Safeguarding the influence and attractiveness of the French legal community.
3. Enhancing corporate anti-corruption efforts, ultimately improving France’s position in international rankings.
4. Providing effective protection against extraterritorial investigations by foreign authorities, which often target large French companies.

 

ECLA has long stood for the right of protection of legal advice given by in-house lawyers – it stands as the foundation on which the Association is built and supports our core goals – to lessen the functional differences between external and internal counsel, and to bring legal clarity to Europe that would effectively increase the competitiveness of the Internal Market, especially when concerned with litigation with international counterparts. We commend AFJE Cercle Montesquieu, and Paris Place de Droit in supporting this initiative and are willing to provide any support necessary.

To download the press release, please click here.