Group general counsel of the National Australia Bank, David Krasnostein, nominated it as one of the most important issues the in-house legal profession will face this year.

“It’s of great concern to all of the general counsels and the companies in Australia,” he said.

“We’re intending to become quite active in this discussion.”

He said claims that legal professional privilege issues had added to the length and cost of the Oil-for-Food Royal Commission should not be an excuse to weaken the privilege itself. Instead, he said attention should be focused on ways to fast-track privilege determinations.

One option might be a “special court or avenue within the courts to have legal professional privilege issues raised and determined relatively quickly,” he said.

In the wake of the findings of the Cole Royal Commission, the Federal Attorney-General, Philip Ruddock, last year asked the ALRC to investigate legal professional privilege and how it impeded the investigations of Commonwealth agencies, including the coercive powers of royal commissions.

The then shadow Attorney-General, Nicola Roxon, said the inquiry didn’t go far enough and should answer the “bigger question about whether [legal professional privilege] is being used to avoid appropriate scrutiny of other transactions”.

Krasnostein said it was important not to react too strongly to “aberrational events” such as the actions of one or two companies such as AWB, HIH or James Hardie.

“If you step back and say, ‘well what about the mass of legal advice given every day to guide Australia’s biggest companies — how does that work?’. It works the way it should work, which is clients; the overwhelming majority of business, complying with the law,” he said.

John Fast, chief legal counsel of BHP-Billiton, said the “right balance” had to be struck between “protecting what are legitimate communications, and at the same time not using privilege as a means of obfuscating and I guess corrupting the law”.

He said, however, it was important that any greater access to material protected under professional privilege didn’t in effect mean removing the ability to “have any communications with anyone, without being obligated to expose them”.

Peter Turner, CEO of the Australian Corporate Lawyers Association, said one of the most difficult “balancing acts” to maintain for in-house counsel and external counsel alike was their duty to the courts and their duty to their client.

He said professional independence is “essential”, and duty to the court will always come before client.

However, sticking to that responsibility was becoming increasingly difficult, he said, in part because lawyers often do not have the time to go through “thousands of documents in order to make that determination themselves”.

Krasnostein said the amount of regulation affecting corporations today meant in-house lawyers had to be well informed about the activities of their companies to ensure they remained compliant with the law.

“It’s extremely difficult even for lawyers to keep up with it and clients have got no hope of doing it without lawyers.”

As a result, “continual legal advice” is essential, he said. But to be able to give good advice company lawyers had to be given the facts.

“An important part of that is the client being very comfortable in being able to be open and frank with your lawyer,” he said.

“Now if you take away that protection so the lawyer says, ‘you’re better off not telling me everything because I can’t keep a secret, so don’t tell me what I don’t want to hear’, then it’s going to be very difficult to give the advice that clients need to comply with the law.”

See Lawyers Weekly’s report next week on what some of Australia’s top in-house counsel think are the big challenges for themselves and the profession in 2007