France : Legal Privilege for In-House Counsel

On July 10, 2023, the French National Assembly has voted a draft bill recognizing the confidentiality (privilege) of In-House Counsel’s internal legal advice and opinions.  This is a welcome and significant development for French In-House Counsel and anyone who is interacting and exchanging with French legal departments.

As we recorded in the In-House Counsel Commission’s working session at the Annual UIA Congress in Dakar in October, 2022, the status of In-House Counsel around the world is very different from one jurisdiction to another and this is particularly true for matters relating to legal privilege and confidentiality of documents or communications.

Until now, in France, privilege takes the form of professional secrecy attached to the person of a party’s external counsel – a French avocat.  In-house counsel are excluded from professional secrecy, which is limited to the French avocat who is a member of a French bar.

This situation has been the topic of heated discussions for decades and is dividing the legal community. In light of the inflation, the complexity and the evolving character of regulations (soft law, hard law, compliance …), In-House Counsel are assuming an increasingly central role within their organisations as regards the conduct of business, the definition and implementation of its strategy, risk control and litigation management.
Over the years, different government ordered reports have pointed out the vital role of In-House Counsel as partners of the company management and have concluded that it is of public interest that the observance of the law is taken into account early on in strategic decision making without generating a risk of self-incrimination.

This version of the bill, supported by the government and adopted by the National Assembly, creates a French legal privilege granted to In-House Counsel, and allowing companies to protect certain documents from seizure in civile, commercial and administrative matters. Note that the text still needs to pass the joint parliamentary committee (scheduled for October 2023) and go to a final vote and that some members of parliament have announced their intention to refer it to the Constitutional Court.  Furthermore, many details will have to be clarified by implementing decrees.  So this may not be the end of the story.

For the moment, here are the key elements of the draft bill:
The new Article 58-1 inserted into Law No. 71-1130 of December 31, 1971, establishes a general principle of in rem protection, attached to the document itself rather than the person.  It states that : “Legal advice prepared by an in-house counsel, or at their request and under their supervision, by a member of their team placed under their authority, for the benefit of their employer, are confidential”.
Scope: Only civil, commercial, and administrative matters are covered by legal privilege, excluding criminal and tax matters.
Conditions:
- Legal advice must be provided by
o An In-House Counsel, or a member of their team placed under their authority, holding a master’s degree in law or an equivalent French or foreign diploma,
o Who can demonstrate compliance with initial and continuing legal education in professional ethics;

- The advice must be intended for
o The company’s or the group’s legal representatives or directors, or their administrative or supervisory bodies;

- The document must be properly identified and traced :
o The relevant advice must explicitly mention “confidentiel – consultation juridique juriste d’entreprise” (privileged – in-house counsel legal advice).  Note that the fact of wrongly affixing such wording to a document that does not meet the required conditions is punishable by up to three years’ imprisonment and a fine of 45,000 €.
o The document must be subject to a specific identification and traceability in the company’s files.

Legal effect of the privilege:
The documents covered by legal privilege can no longer be seized or subject to an obligation to be handed over to a third party, including a French or foreign administrative authority. The documents cannot be invoked against the company or the group of companies.
The text provides for the possibility to challenge the alleged privilege of certain documents by an interim application before the president of the jurisdiction that ordered the investigative measure, within fifteen days following the implementation of said measure.  In administrative matters, the alleged privilege may be challenged before the liberty and custody judge (Juge des libertés et de la détention).

Practical Implications
The extension of legal privilege to communications or documents from In-House Counsel will have multiple practical implications:
- It will allow In-House Counsel to give written advice on the activity, the strategy and the operations of the company and describe and analyze freely the associated risks;
- This possibility may put an end to self-censorship of lawyers and improve the quality of procedures and compliance policies thereby improving the company’s risk management;
- The French In-House Counsel will have a similar status than his foreign counterparts, facilitating exchanges and communication;
- Lawyers will have a more strategic and cross-cutting position within the company, closely cooperating with executive management.
However, while it is a step in the right direction, the scope of the legal privilege for In-House Counsel remains limited, as it explicitly excludes criminal and tax matters.  Furthermore, the text raises already numerous questions about the exact conditions for its implementation and it remains to be seen how it will be interpreted and implemented.   

The UIA In-House Counsel Commission will be closely following these developments.

By Susanne Margossian
UP INTERNATIONAL
Switzerland