Attorney’s investigations into possible irregularities and criminal offences such as fraud in companies or organisations – i.e. “internal investigations” – have caused discussion for quite some time. More recently, the discussion focused on a new variant. In this variant, after investigative authorities such as the Fiscal Information and Investigation Service (FIOD) or the Public Prosecution Service (PPS) have informed that a criminal investigation is being conducted into a suspected company, the initial fact-finding is left to the company's attorney-at-law. The execution of such an internal fact-finding investigation, partly for the benefit of the investigative authorities, has given rise to several professional ethics objections and disciplinary difficulties. In particular, the core values (kernwaarden) of independence, partiality, confidentiality, and integrity are at stake. Colleague Mr Dian Brouwer has previously shed his light on this issue in the Magazine for Sanctions Law & Enterprise (Tijdschrift voor Sanctierecht & Onderneming) and NRC Handelsblad.
In view of the objections raised in various contributions, the General Council of the NOvA clarified the explanation to the second paragraph of Rule of Conduct 2 at the end of May. This provision contains an elaboration on the core value “partiality”. Rule of Conduct 2 paragraph 2 reads:
“The interest of the client, and no other interest, will determine the way in which the attorney-at-law handles his cases”.
The starting point for this Rule of Conduct is that an attorney-at-law is always biased, even when acting as an investigating fact-finder, and must therefore only be guided by the client's interests. This requires a professional judgment on the part of an attorney-at-law, allowing him the necessary leeway to promote the client's interests in a manner that the attorney sees fit in consultation with his client.
In the context of internal fact-finding, the NOvA specify that this is part of the professional practice of an attorney-at-law. After all, such an investigation relates to determining the legal position of a client. The NOvA recognise that conducting internal fact-finding investigations involves risks and that the core values and disciplinary rules may be put under pressure by such investigations. To ensure no core values and disciplinary rules are violated by conducting internal investigations, the NOvA have now included six points for attention in the explanation to Rule of Conduct 2 (2).
- 1. An attorney-at-law must leave no room for misunderstanding regarding his capacity as a partial representative (cf. Rule of Conduct 9). The attorney must therefore make clear who the client is and what the purpose/scope of the internal investigation is.
- 2. During the internal investigation, an attorney-at-law must comply with any applicable protocols and must apply an adversarial procedure. This is to prevent the interests of the other party or third parties from being unnecessarily and impermissibly damaged.
- 3. There should be no conflict of interest or appearance thereof. This can occur if an attorney-at-law has (had) close ties with persons relevant to the investigation and does not maintain sufficient distance to the investigation, or if the attorney-at-law (or his colleagues) previously acted in a case that could become or is part of the investigation.
- 4. An attorney-at-law must be aware of the fact that a report of the internal fact-finding investigation may (unintentionally) become public. In this respect it should also be considered that the results of the internal fact-finding investigation could directly be provided to a third party instead of (exclusively) to the client.
- 5. Proper conduct of the profession can be harmed by the prior agreement that the results of the internal fact-finding investigation will by definition be made public. Such an agreement may be at odds with the confidentiality obligation and legal privilege. An attorney-at-law must always make his own decision about applying legal privilege, even if a client releases the attorney from this obligation (in advance).
- 6. An attorney-at-law must prevent his or her independence from being compromised by the fact that a third party (such as an investigative authority, supervisory authority, or the PPS) has control or influence on the attorney's internal fact-finding process.
The question arises whether the new variant of internal fact-finding – in which the attorney-at-law also carries out the initial fact-finding for the benefit of the investigating authorities – is compatible with these points for attention.
The NOvA do not prohibit it in so many words, but it is clear that such an internal investigation would quickly run counter to many of the said points for attention. For example, it is not advisable to advertise an internal fact-finding investigation carried out under the responsibility of an attorney-at-law as "independent". This term can be interpreted in various ways and can give the impression – especially to the public – that the investigation was carried out "neutrally" or "objectively". However, objectivity is not a core value or an important principle for attorneys. On the contrary, attorneys-at-law are partial representatives, even if they conduct an internal fact-finding investigation (see above). By labelling an investigation as "independent", a misunderstanding about the representation of interests can arise, as the Amsterdam Court of Appeal recently pointed out in the so-called SBM case.
Also, the attorney’s confidentiality obligation and legal privilege are threatened, since part of the agreement with the investigating authorities or the PPS will be that sooner or later a report of findings should be shared. It is questionable whether a client can (in advance) discharge its attorney-at-law for such a breach of confidentiality.
Furthermore, in the new variant of internal fact-finding investigations, “two masters are served”. The independence of the attorney-at-law is therefore at stake. Especially if the investigating authorities or the PPS have some influence on how the investigation should be carried out by the attorney-at-law.
In conclusion, conducting an internal fact-finding investigation for a suspected client (i.e. company), partly for the purpose of a criminal investigation, constitutes a high-risk from a disciplinary point of view. Time will tell whether the expansion of the explanation to the Rules of Conduct will calm down the discussion about this variant of internal fact-finding investigations.
Would you like to know more about the clarification of Rules of Conduct? Feel free to contact Oscar Pluimer!
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