28 June 2019 | By Michael Thaidigsmann
France moves to protect confidentiality of legal advice by in-house counsel
A report presented by Deputy Raphaël Gauvain of the governing LREM party of President Macron proposes to extend legal privilege to company lawyers. Prime Minister Edouard Philippe cautiously welcomed the report.
In France, the battle over whether or not legal privilege should be granted to company lawyers has been on-going for the past 30 years. In 2015, attempts failed to introduce that principle into the so-called Macron Law to promote economic growth and make French companies more competitive on the international stage.
Four years later, with then Economics and Finance Minister Emmanuel Macron now installed in the Elysée Palace, a new attempt has been launched to better protect legal advice given by in-house counsel to their company executives.
Deputy Raphaël Gauvain of Macron’s governing LREM party on 26 June submitted his report to Prime Minister Edouard Philippe in which he proposes to improve protection of French companies by giving company lawyers (juristes d’entreprise) a status similar to that of independent barristers and solicitors.
US ‘waging economic warfare’ against France
Gauvain’s based his case almost entirely on defending French economic interests on the international stage. He notes that French companies do not enjoy the same level of legal protection than their international competitors and are often at an unfair disadvantage when faced with legal proceedings abroad, costing them billions of dollars.
“The United States of America have drawn the world into the era of legal protectionism. Whereas law has always served as an instrument of regulation, it has today become a destructive weapon in the economic war waged by the United States against the rest of the world, including against their traditional allies in Europe,” Gauvain argues right at the beginning of his report, outlining in stark terms the wider political context.
That situation was due to a large degree to the fact that French law did not protect adequately the confidentiality of legal advice, the LREM lawmaker says.
In his paper, Gauvain proposes to better protect French companies by giving company lawyers (avocats d’entreprise) a status similar to that of external legal counsel, in particular with respect to legal privilege.
“With unilateral economic sanctions, no financial or commercial transaction is today beyond the reach of the American legal apparatus,” Gauvain writes. It was “imperative to elaborate a strategy to contain the extraterritorial legal assault to reaffirm [France’s] sovereignty and protect its enterprises and the millions of jobs that depend on it.”
Reform of French blocking statute
Gauvain also calls for the modernisation of the 1968 French law on the communication of economic, commercial, business, financial or technical information to foreign persons or entities. The so-called “blocking statute” is aimed at limiting cross-border discovery.
It prohibits any person, including French companies, subject to international treaties or agreements, “from requesting, seeking or communicating, in writing, orally or in any other form, documents or information of an economic, commercial, industrial, financial or technical nature with a view to gathering evidence in or in connection with foreign judicial or administrative proceedings.”
The law, which carries financial and other penalties, was originally envisaged to give French companies a legal excuse not to comply with the discovery requests from the United States. These allow the litigant (often a competitor) or the US authorities to request from a company the disclosure of documents, including those that may be of strategic economic value.
However, the statute often presents French companies with a dilemma: either they comply with foreign judicial requests and face sanctions under French law, or they lose market access, notably in the United States.
Moreover, in its current form, the law imposes a duty on companies to inform “the relevant French authorities without delay” when they receive a request for disclosure from foreign judicial authorities. However, it is unclear who is responsible for receiving and processing the declarations made by companies, and in practice, it appears that the French authorities are rarely informed of such requests for communication.
The Gauvain Report recommends a drastic increase in penalties in the event of a violation of the law. They presently stand at €18,000 in fines and six months imprisonment for natural persons and up to €90,000 in fines for legal entities.
In his proposals, Gauvain also suggests the adoption of a new law aimed at better protecting French companies against the transfer of company data by internet service providers. This would mean extending European GDPR rules already in place for natural persons to legal persons and allow French authorities to impose sanctions on internet service providers (mostly US-based companies) who transfer data of French companies to third countries’ authorities without going through the proper legal process applicable in France.
That proposal is aimed at countering the provisions of the US Cloud Act, which requires tech giants such as Google or Facebook to transmit to US judicial authorities, upon their request, all data stored abroad, including information belonging to European companies.
The report also recommends drafting a “national doctrine” for the protection of business secrets and for France to take an initiative with the OECD in order to establish common international rules with respect to laws and measures that have extraterritorial effect.
The French Association of Company Lawyers (AFJE) warmly welcomed the proposals, notably the recognition of legal privilege for in-house counsel. “Raphaël Gauvain’s report is a big step forward towards the protection of confidentiality of legal advice given by in-house lawyers, and the creation of the status of Company Lawyer will facilitate the implementation of this plan. It will not only strengthen French economic competitiveness but also make French and European law more attractive,” said AFJE President Marc Mossé in a statement.
“If this is implemented, it will mark a real revolution in France. We salute the plans,” Jonathan Marsh, president of the European Company Lawyers Association (ECLA), added.
PM ready to act upon proposals
In the past, the French Bar Association (Conseil national des Barreaux), representing independent lawyers, has been strongly opposed to granting legal privilege to company lawyers. “We will do everything so that company lawyers don’t get legal privilege, which would lead to the creation of a new profession governed by law,” Pascal Eydoux, then president of the association, said in 2015.
Gauvain’s proposals will now have to be evaluated first by the government and then presented to the National Assembly and the Senate for approval.
In a first reaction the day after being handed the report, Prime Minister Philippe was positive about the report: “As I have previously said already, I’m ready to work towards the confidentiality of certain company-internal pieces of legal advice.” However, Philippe added a caveat and said that such a measure needed to be accompanied by “reinforced obligations”, which was “to make jurists auxiliaries of justice in the domain of the fight against economic and financial delinquency.”
The prime minister promised to work on the basis of the proposals « in the strict respect of our legal tradition and in the general interest, which implies that we do not weaken our capacities for investigation and prosecution.”
In his statement, ECLA President Marsh pointed out the differences that still exist between different jurisdictions in Europe when it comes to legal privilege for company lawyers. “At a time when European companies are subject to tough competition, it is not a satisfactory situation to have a patchwork of different rules in place from jurisdiction to jurisdiction. We will continue to advocate for the recognition of legal privilege for company lawyers across the EU,” the ECLA president said.