Corporate Alert Amendment of German Code of Criminal Professional Privilege

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Corporate Alert
02 February 2011
Author:
Dr. Wilhelm Hartung
[email protected]
+49.30.22.00.29.220
K&L Gates includes lawyers practicing out
of 37 offices located in North America,
Europe, Asia and the Middle East, and
represents numerous GLOBAL 500,
FORTUNE 100, and FTSE 100
corporations, in addition to growth and
middle market companies, entrepreneurs,
capital market participants and public
sector entities. For more information,
visit www.klgates.com.
Amendment of German Code of Criminal
Procedure broadens Scope of Legal
Professional Privilege
Recent developments have created a forceful additional reason for German
companies conducting internal investigations of potential wrongdoing to consider
engaging private, external counsel for these matters.
Beginning 1 February 2011, German law will afford attorneys (Rechtsanwälten)
significantly enhanced confidentiality protections for information and findings
deriving from the relationship with their clients, due to an amendment of section
160a German Code of Criminal Procedure (Strafprozessordnung, StPO).
These newly expanded privileges do not extend to certified public accountants
(Wirtschaftsprüfer) or tax advisors (Steuerberater), and there is no firm legal basis
for in-house attorneys (Syndikusanwälte) to claim the same kind of privilege as
attorneys in private practice.
To ensure benefiting from the enhanced privilege, it is advisable in any internal
corporate investigation to clearly mark privileged and confidential (paper and
electronic) documents as such, and to ensure that only attorneys and clients have
access. Caution is advised for correspondence with executives or employees of the
corporation concerning the findings of the investigation, as these persons – should
they have to be considered as third parties outside of the attorney-client
relationship – may not fall within the ambit of the confidentiality protection by the
legal privilege. In a client relationship with a corporation (as opposed to a natural
person), the only individuals qualifying as “the client” would be the legal representatives of the body corporate, e.g., members of the board of management
(Vorstand) of a stock corporation (Aktiengesellschaft) or, under special
circumstances, members of the supervisory board (Aufsichtsrat).
1. Amendment of Statute
On 27 December 2010, the “Act to Strengthen Confidential Relationships with
Attorneys in the Law of Criminal Procedure” was published in the German gazette.
The Act, which enters into effect on 1 February 2011, amends section 160a StPO,
and enhances the protection afforded to attorneys by the legal privilege in criminal
investigations. Under the law as amended, attorneys may no longer be subject to
any investigatory measures concerning criminal matters in which they are
providing advice. The amendment also prohibits the monitoring (e.g., wiretaps) of
such attorneys and their offices can no longer be searched for files of clients under
criminal investigation.
Corporate Alert
The new law increases the protection of
confidentiality of client communications with
their external counsel. Previously, section 160a
StPO offered attorneys only relative protection
against criminal investigations. The statute
required a proportionality test to consider
whether the interests in favour of
investigating/prosecuting outweighed the interest
in maintaining confidentiality and stated that, if
the matter did not concern a criminal offense of
relatively high importance, investigatory interests
generally could not be considered to outweigh the
interests in confidentiality (Section 160a StPO
para. 2 sentence 1, second half sentence). Under
the amended law, such a proportionality exercise
will no longer be required.
2. Practical Relevance for Legal Privilege in
Corporate Investigations
The amendment is of particular relevance for
internal corporate investigations of potential
criminal matters. Oftentimes, external advisors
are retained to conduct these investigations to
maximize the ability to maintain confidentiality
for the investigation and its findings.
As amended, section 160a StPO raises the
protection for attorneys to the highest level –
one that that previously applied only to priests,
criminal defense attorneys and members of
parliament.
In the U.S., attorneys have always enjoyed
significantly greater confidentiality protections.
For this reason, it has been of critical importance
that in U.S. investigations, accountants be
retained to assist the attorneys conducting the
investigations, in order to bring their work within
the scope of the attorneys’ privileges.
Otherwise, the information obtained and
analyzed by the accountants would not be
protected.
The amendment of section 160a StPO provides
significant advantages to the retention of external
attorneys for corporate investigations in
Germany. The retention of accountants or tax
advisors to conduct investigations will now leave
confidential information more exposed to
investigation by public prosecutors than it would
be if attorneys were conducting the investigation.
Just as the previous version of section 160a StPO
had been criticized for the differentiation
between different groups of persons who all have
a statutory right to remain silent when questioned
as witnesses, the new formulation has also not
remained without objection. Particularly the
professional bodies of accountants and tax
advisors in Germany have not seen any
justification in their different treatment under the
new law. Nevertheless, the act has been passed
into law in this form.
3. Issues for In-house Attorneys
The protections applicable to certified public
accountants and tax advisors remain unchanged.
For them, there continues to be a proportionality
requirement, i.e., they enjoy only relative
protection of confidentiality.
Prior to the amendment of section 160a, attorneys
had the same limited protections as CPAs and tax
advisors – i.e., they had the same right to remain
silent when questioned as a witness pursuant to
section 53 para. 1 no. 3 StPO. For that reason,
when deciding whether to retain accountants or
attorneys to conduct an investigations, the degree
of confidentiality protection did not play a role in
the decision.
Since the decision of the Court of Justice of the
European Union (“ECJ”) in the Akzo Nobel case
(Akzo Nobel Chemicals Ltd et. al. v
Commission, Case C-550/07 P), clients facing
investigations by the European Commission can
no longer rely on the protection of confidentiality
by legal professional privilege for their in-house
lawyers. In Germany, the legal difficulties
distinguishing between legal advice and general
business activities of in-house attorneys make it
imprudent to assume that in-house lawyers
admitted as attorneys can benefit from the newly
extended protection of section 160a StPO in the
same fashion as attorneys in private practice.
02 February 2011
2
Corporate Alert
In any case, it is recommended in any
investigation for attorney documents, files and
correspondence at the corporation to be clearly
marked as such and to ensure that only (external)
attorneys can access them. Caution is advised
when corresponding with directors, officers or
employees of the corporation concerning the
findings of the investigation, as these persons –
should they have to be considered as third parties
outside of the attorney-client relationship – may
not fall within the ambit of the confidentiality
protection by the legal privilege. In a client
relationship with a corporation (as opposed to a
natural person), the only individuals qualifying
as “the client” would be the legal representatives
of the body corporate, e.g., members of the board
of management (Vorstand) of a stock corporation
(Aktiengesellschaft) or, under special
circumstances, members of the supervisory
board (Aufsichtsrat).
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GLOBAL 500, FORTUNE 100, and FTSE 100 corporations, in addition to growth and middle market companies, entrepreneurs, capital market
participants and public sector entities. For more information, visit www.klgates.com.
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This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied
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©2011 K&L Gates LLP. All Rights Reserved.
02 February 2011
3
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