Thursday, December 20, 2012

Delaware Ruling on Indian In-house Counsel and Legal Privilege

A couple of years ago, we had discussed the European Court of Justice (ECJ) decision in the Akzo Nobel and Ackros Chemicals case where in-house legal counsel was denied legal professional privilege even though such counsel was enrolled as an advocate in the relevant bar at the time. Although that case involved European companies, we had made some guesses as to what might be the position in India as follows:

Under Indian law, the Bar Council of India Rules require any lawyer taking up full-time salaried employment to “intimate the fact to the Bar Council on whose roll his name appears and shall thereupon cease to practise as an advocate so long as he continues in such employment” (Rule 49, Section VII, Chapter II, Part VI). Hence, the reasoning of ECJ in the Akzo Nobel judgment ought to apply with greater force in such circumstances, ceteris paribus (i.e. without taking into consideration other procedural and evidentiary aspects of domestic Indian law, if any, that may operate to the contrary).

A recent post on Spicy IP discusses a Delaware District Court opinion involving Cadila Healthcare Limited where the issue was raised squarely, and answered on similar lines surmised above. The Court found that the in-house counsel of an Indian company is not entitled to protections of confidentiality and legal privilege given the prevailing law in India. The Court was persuaded by the opinion of Justice B.N. Srikrishna, who was appointed as a neutral expert. The Delaware Court opinion, Justice Srikrishna’s opinion and Cadila’s response are contained in the Spicy IP link above.

The Delaware Court’s opinion is not informative as it simply refers to Justice Srikrishna’s opinion, which requires us to consider some of its key reasoning. The opinion analyzes sections 126 and 129 of the Indian Evidence Act, 1972 that deal with confidentiality of professional communication and legal privilege. The opinion finds that while these sections refer to various types of professionals such as “barrister, pleader, attorney or vakil”, all of these positions have been aggregated by the Advocates Act, 1961 within the single concept of an “advocate”. Despite the Bombay High Court’s finding to the contrary in Municipal Corporation of Greater Bombay v. Vijay Metal Works, AIR 1982 Bom 6, Justice Srikrishna’s analysis of the Advocates Act, the Bar Council Rules and recent decisions including Lawyers Collective v. Bar Council of India, (2010) 2 Comp LJ 108 (Bom), and A.K. Balaji v. Government of India, AIR 2012 Mad 124, leads to his conclusion that in-house legal counsel are not “advocates” or “professional legal advisors” who are entitled to the protection of confidentiality and legal privilege under the Indian Evidence Act.

Cadila’s response that Vijay Metal Works, which is the only Indian decision squarely on the point, supports legal privilege to in-house counsel and also that the Advocates Act and Bar Council Rules must not be used to interpret sections 126 and 129 of the Indian Evidence Act did not hold sway with the Delaware court.

Although this is only a ruling of a district court in a foreign jurisdiction, it has potentially negative consequences on the roles and responsibilities of in-house counsel in Indian companies. The in-house counsel movement has been building up quite strongly in India, with in-house counsel taking on a more proactive role in Indian corporates. This is consistent with the global phenomenon being witnessed in emerging economies generally, as Professor David Wilkins notes in a recent paper.

While it is possible to deliberate on the merits of specific court decisions that interpret an assortment of Indian laws in this regard, including Evidence Act, the Advocates Act and the Bar Council Rules, it may perhaps be time to revisit some of the concepts in these legislation and their applicability to in-house counsel whose roles were not nearly as relevant when these laws were enacted as they are now.

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