“While ACC generally supports enforcement regimes that incentivise corporate compliance programs, we are concerned about the impact of the law on legal privilege. The draft law promises a significant reduction in fines if the company conducts an internal investigation into misconduct while at the same time eliminates legal privilege for pre-indictment investigations,” it said.

“By limiting legal privilege to post-indictment internal investigations, the draft law undermines its incentives for corporate compliance programs and internal investigations.

“Corporate internal investigations are a standard practice in today’s corporations. The success of an internal investigation is completely dependent upon the cooperation of a company’s employees and officers, and for that reason, the protection of legal privilege is very important.”

Protecting employee communications with investigating counsel from disclosure to the government allows counsel to better uncover the true facts and circumstances around alleged wrongdoing, ACC continued, for the reason that privilege “encourages employees and officers to be more candid, enhances the likelihood that employees and officers will proactively seek advice from lawyers, and improves the lawyer’s ability to assess the effectiveness of corporate compliance initiatives”.

Most internal investigations, ACC added, are carried out before a company is formally accused of a crime.

“Investigations are more probative when they occur as close in time as possible to the alleged wrongdoing, and early investigations help corporations assess their potential liability, make changes to their business processes, and inform stakeholders about potential impact on financial performance,” it reflected.

“While a company may ultimately disclose the information learned in an investigation to the government, it does so in a way that preserves its right of defense and hopefully decreases its liability so that it can continue serving its corporate purpose.”

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With its incentives for corporate compliance, the VerSanG-E legislation “recognises the valuable role that corporations play in monitoring their own practices and constantly improving their legal compliance”, ACC concluded, urging reconsideration of the draft law’s removal of privilege for pre-indictment investigations, “as that will only serve to deter corporate efforts to promote internal compliance”.

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