By not recognising the crucial role of in-house lawyers, both the Bar and the Bench are ignoring ground realities and are failing to do everything necessary to make India’s legal system more efficient.
The Supreme Court’s recent judgment in Summoning Advocates who give legal opinion or represent parties during investigation of cases and related issues, In Re1, concerning summoning of lawyers by law enforcement agencies, has reignited the debate on extending attorney-client privilege to in-house legal counsel under Section 132, Sakshya Adhiniyam, 2023. The judgment deals with various precedents specifying the role of lawyers and creates a limited protection for advocates. However, it casually states that in-house counsel are not advocates and therefore are not protected by the shield of privilege.
This judgment of the Supreme Court brings to light the long pressing demand of lawyers tackling legal issues as in-house counsel for companies, who are not recognised as advocates in India, due to an artificial distinction between lawyers in private practice and lawyers advising their clients in an in-house capacity, as their employees. By not recognising the crucial role of in-house lawyers, both the Bar and the Bench are ignoring ground realities and are failing to do everything necessary to make India’s legal system more efficient. This is not only detrimental to India’s corporate governance infrastructure but also for its development aspirations.
Cascading inefficiencies and India’s development aspirations
India’s overburdened judiciary is crippled by long delays and chronic lack of infrastructure. India’s legal system has already been highlighted as a factor hindering the ease of doing business. In 2020, India ranked 163 out of 190 countries in contract enforcement, its lowest rank among all the metrics used to measure the ease of doing business. Several commentators have also highlighted India’s tedious and lengthy legal process as a factor affecting its economic growth.
In such a scenario, excluding in-house counsels restricts the ability of a large number of lawyers to serve their clients in an efficient way. In-house legal teams play a crucial role providing legal advice to their management, assisting them in their risk mitigation efforts, and steering companies through regulatory uncertainties. Without the shield of attorney-client privilege, in-house teams may hesitate in providing candid legal advice. If a company is not confident that its internal legal advice — be it on regulatory risks or potential liabilities — will be protected from investigating agencies, it will restrict the scope of legal analysis that companies can conduct internally. They will be compelled to seek external legal advice for their sensitive strategic initiatives.
The forced externalisation will only make the legal process more tedious and time-consuming. Issues that could be resolved internally will now require formal external engagement. The friction of the external engagement process and, needless to say its cost, may delay the time-to-market for new products and the speed of contractual negotiations. This potential deterioration in legal efficiency comes at a time when India is already struggling with a slow and tedious legal system.
Unless India has a robust and efficient legal system, India’s dreams to become a developed country will not become a reality. The shared dream of reaching the last mile of economic inclusion to each Indian can only be realised if we have a strong legal setup that is inclusive, diverse and responsive to the needs of the modern Indian economy. India’s legal system cannot become efficient and responsive by excluding an entire class of lawyers from serving their clients effectively.
Employment versus independence: An artificial binary
The Supreme Court’s decision — reflecting the most common argument against including in-house lawyers within the umbrella of “advocates” — hinges on a distinction between a “fully salaried employee” and an independently practising lawyer. According to this logic, an in-house counsel will “always be beholden to his employer and obliged to protect their interest” and may be influenced by “commercial and business strategies”. The argument appears to be that the in-house counsel cannot be advocates since their advice may not be independent. However, this binary between independent advocates and beholden in-house counsels does not accurately characterise the role of in-house counsels. It is the job of in-house counsels to provide independent legal advice. Without independent and impartial advice, a company will not be able to evaluate the risks or potential liabilities arising out of its initiatives. In fact, it is the lack of attorney-client privilege that hinders independent legal advice from in-house counsel as they have to be aware that their advice may potentially be scrutinised by investigating agencies.
Indeed, other common law jurisdictions such as the UK and Singapore do not recognise this binary. While discussing the common law on attorney-client privilege, Lord Denning, in Alfred Crompton Amusement Machines Ltd. v. Customs and Excise Commrs.2, observed that the mere fact that a legal advisor is an employee and works for a singular client does not make any difference to the privilege accorded to their communication with their client. They are expected to uphold the same standards of honour and etiquette and therefore deserve the same privilege. However, if such a legal advisor works in a different capacity, such as a business advisor, he would not be accorded the privilege. Consequently, in English law, it is not the employment status but the capacity in which the in-house counsel proffers advice, that matters when according privilege.
Singapore, even prior to amending its law to explicitly extend privilege to in-house counsel, followed the same logic. In Singapore, for any communication to be privileged, it had to be between a legal advisor and her client, it had to be made by in-house counsel in their capacity as legal advisors and it had to be confidential. The Singapore Court of Appeal has even held that any distinction between legal advice from an in-house counsel and traditional lawyers is “artificial, unjust and unfair”.
Concerns of impartiality of legal advice can well be ameliorated by extending privilege to in-house counsel only when they act as legal advisors and not when they advise on business or commercial strategies. That in-house counsel may consider their employers’ business interest when rendering legal advice should not be a deterrent as any good lawyer is expected to consider their client’s interests when rendering legal advice so long as they uphold other professional standards. Such approach would be pragmatic, further India’s development goals, and be in line with the common law rules from which India’s law on privilege evolved.
A call to action
The Supreme Court’s judgment should be seen as a call to action by the executive, the legislature and, most importantly, the Bar Council. If we are serious about making India a developed country by 2047, we should be prepared to do everything that is necessary to make India’s legal system more efficient. While there are multiple steps to be taken in this regard, surely one of necessary reforms is the recognition of in-house lawyers and advocates. The reality is that in-house counsels are already performing all the roles of a lawyer in private practice — denying them privilege only makes the process inefficient and exposes them to criminal prosecution. Therefore, the Supreme Court’s judgment needs urgent legislative correction, not only to align Indian law to global best practices, but to also ensure that it does not detract India from its development agenda.
*Partner, Shardul Amarchand Mangaldas & Co.
**Associate, Shardul Amarchand Mangaldas & Co.