The Diesel-gate scandal has now affected attorney-client privilege in Germany. Several German courts approved a search of international law firm Jones Day's premises in Germany and the seizure of attorney-client communication and attorney-work products. While the courts confirmed the longstanding fact that there is no absolute protection of attorney-client communication under German law, the decisions also provide guidance on how to maximize protection of attorney-client privilege under German law, especially in cross-border internal investigations.
I. How to Maximize Attorney-Client Privilege Under German law
In principle, German law has no equivalent to the attorney-client privilege as known in the United States. In criminal and regulatory cases, German authorities may seize a broad range of documents relating to their investigation as long as
- the authorities conducting the search have a search warrant that principally needs to be issued by a judge,
- the search warrant is proportionate in light of constitutional rights of the client and, if applicable and affected, also the attorneys and law firm involved, and
- no files and records that relate to the criminal defense of a client are concerned. Those are fully protected also under German law.
In fact, the attorney-client privilege in Germany is basically limited to communication concerning criminal defense. Therefore, special care must be taken to preserve privilege to the extent possible. The recent judgment gives some guidance (between the lines) on how privilege can be maximized:
- The specific entity targeted by the internal investigation needs to engage the law firm, even if a parent entity has already retained the same firm.
- Update the scope of the engagement regularly to reflect the Public Prosecutor's investigations, in order to document the nature of the engagement, i.e., (also) advice and criminal defense if one or more group entities are or could quickly become formally accused.
- If possible, specify a maximum of three attorneys as responsible, as a maximum of three counsels for criminal defense are allowed under German law.
- Document a relationship of trust with these attorneys to demonstrate the quality of the attorney-client relationship (as opposed to mere general counseling or an external investigation context).
II. Background: German Federal Constitutional Court's Rulings on the Diesel-Gate Document Seizures
The German Federal Constitutional Court ("Constitutional Court") was the last German court to decide on several appeals against the search and document seizures in Jones Day's offices.
What led to the public prosecutors searching Jones Day's offices?
In September 2015, Volkswagen AG ("VW") instructed the law firm Jones Day with an investigation and legal advice based on a Plea Agreement with the U.S. prosecution authorities. Jones Day reviewed documents at Audi AG ("Audi"), a subsidiary of VW, and lawyers from Jones Day's Munich office conducted interviews with Audi employees.
The Munich Public Prosecutor's Office investigated Audi's involvement in the "Diesel-gate" scandal and searched the Munich offices of Jones Day. During the search, numerous documents and files (some from servers in Belgium) were seized.
The appeals filed against the search warrant before the German courts were ultimately unsuccessful, except for the appeal against the seizure of data obtained from Belgian servers as no prior administrative assistance of Belgian authorities had been obtained.
What did the German Constitutional Court decide?
The Constitutional Court dismissed all three constitutional complaints, either on the merits (VW's complaint) or for procedural reasons (Jones Day's and the individual attorneys' complaints).
1. Constitutional rights of Volkswagen affected, but seizure deemed justified because of severity of charges
The Constitutional Court ruled that VW's constitutional rights were indeed affected by the seizure of documents from the internal investigation at Audi. According to the court, the search of VW's law firm and seizure of attorney-work products endangered the trust in the protected attorney-client relationship (Art. 2 German Constitution – Grundgesetz).
However, the court held that the seizure was justified because of
- the gravity of the accusations against Audi,
- the large number of potential fraud cases concerning consumers, and
- the existence of guilty pleas in the U.S. proceedings proving that there was probable cause for the search of evidence.
Based on that, the Constitutional Court considered the interests of the prosecution in searching Jones Day's premises to be weightier than VW's interest in a privileged attorney-client relationship. The court also held that, given the specifics of the case, the constitutional complaints filed by Jones Day and three individual attorneys were not admissible. Neither had sufficiently demonstrated that constitutional rights were affected or at stake.
2. Attorney-client communication only protected if client is formally accused
In addition to that, privilege under German law aims to protect attorney-client communication for purposes of criminal defense. As a matter of fact, however, VW was not accused by the Munich prosecutor's office. Audi became the accused following the search but had not instructed Jones Day. The Constitutional Court held that the engagement of Jones Day by Volkswagen would not also qualify as an (extended) engagement to act on behalf of its subsidiary Audi.
That, and the specifics of the investigation, led the Constitutional Court to the conclusion that the attorney-client relationship between Audi and Jones Day was tenuous at best. It was not considered the equivalent of the usual relationship of trust that is protected by constitutional law.
3. Data storage in the cloud likely to delay its seizure, at least
The only appeal initiated by Volkswagen and Jones Day that was successful was their objection against the seizure of data stored on servers in Belgium. The public prosecutor's office had not followed the required formal procedure of administrative assistance in law enforcement. The data seized outside the German territory therefore had to be returned and any copies had to be destroyed.
While it cannot be considered as a means to entirely prevent investigation authorities from getting access to data obtained from internal investigations, storage of such data in the cloud on servers outside of Germany would make it more difficult for the authorities to take hold of such files. Procedures under mutual judicial assistance programs usually take a substantive amount of time, so the location of the files may have a relevant impact on the extent, or at least the overall timeline, of a search.
III. What's Next – Will the German Government Step In?
The German government had already announced plans to regulate internal investigations in order to protect them as a private addition to authority investigations. The government seeks to create incentives for internal investigations and cooperation with the law enforcement authorities, also by strengthening the protection of attorney-client communication against seizures by public prosecutors. The decisions by the Constitutional Court and the media attention generated may speed this process up. We will do our best to bring the complexities of multijurisdictional investigations to the government's attention.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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