Antitrust Alert: European Court of Justice Upholds Judgment That EU Legal Professional Privilege Does Not Extend to In-house Lawyers
Today the Court of Justice of the European Union ("ECJ") issued its long-awaited judgment in Akzo Nobel Chemicals Ltd and Akcros Chemicals LTD v European Commission (Case C-550/07 P). This case deals with the question whether, in the context of European Commission ("Commission") investigations and proceedings, communications with in-house lawyers are protected by legal privilege. The ECJ held that such communications are not protected. As a result of today's judgment, no communications between the management and employees of a company and its in-house lawyers is protected from search and disclosure in EU investigations and proceedings, including antitrust investigations and raids.
During a dawn raid at the premises of two Akzo affiliates in the United Kingdom in a 2003 cartel matter, Commission officials copied and placed in its file two e-mails exchanged between the general manager of Akcros and a member of Akzo's in-house legal department, who was admitted as a lawyer to the Netherlands Bar. Akzo and Akcros brought a challenge before the General Court, arguing that the communications were protected by legal professional privilege and therefore that the Commission should not be permitted to have access to them and other privileged documents (Cases T-125/03 and T-253/03). The General Court dismissed this challenge on the basis of an earlier ECJ ruling on the scope of legal professional privilege.
ECJ judgment in Akzo
The ECJ rejected Akzo's arguments as follows:
"An in-house lawyer, despite his enrolment with a Bar or Law Society and the professional ethical obligations to which he is, as a result, subject, does not enjoy the same degree of independence from his employer as a lawyer working in an external law firm does in relation to his client. Consequently, an in-house lawyer is less able to deal effectively with any conflicts between his professional obligations and the aims of his client." (Akzo, paragraph 45)
The authority relied upon by the General Court in rejecting Akzo and Akcros' challenge dates back to the 1982 AM&S case (Case 155/79). In AM&S, the ECJ recognized that the confidentiality of a written communication between lawyer and client must be protected only if (i) the communication has a connection with the exercise of the client's right of defence, that is, it was a "communication" made "for the purposes and interests of the client's rights of defence," and (ii) it is a communication with an independent lawyer, that is, a lawyer who is "not bound to the client by a relationship of employment."
The issue considered by the ECJ in Akzo concerns only the second of these criteria, whether privilege depends on the independence of the lawyer with whom communications are exchanged. The ECJ found in Akzo that its position in AM&S is still correct and held that, if internal lawyers cannot act as independently as external lawyers, their correspondence cannot enjoy the same level of protection.
EU legal professional privilege and national bar rules
Akzo also made the counter argument that in-house counsel who are admitted to a Bar or Law Society in an EU Member State are subject to professional ethical obligations including confidentiality rules, similarly to external practitioners. The ECJ rejected this argument:
"the fact remains that they are not able to ensure a degree of independence comparable to that of an external lawyer … Notwithstanding the professional regime applicable in the present case in accordance with the specific provisions of Dutch law, an in-house lawyer cannot, whatever guarantees he has in the exercise of his profession, be treated in the same way as an external lawyer, because he occupies the position of an employee which, by its very nature, does not allow him to ignore the commercial strategies pursued by his employer, and thereby affects his ability to exercise professional independence." (Akzo, paragraphs 46 and 47)
The ECJ found that an in-house lawyer's economic dependence and the close ties with his employer make it impossible for them act as independently as external lawyers. It therefore remains the case that communications between in-house lawyers and the management and employees of a company are, in the context of EU competition law investigations and proceedings, not protected by legal professional privilege, even if the in-house lawyer is registered with the local Bar or Law Society of one of the EU Member States.
National legal professional privilege
Some national competition law authorities in the EU, such as Ireland, the Netherlands, and the United Kingdom, respect legal professional privilege for communications with in-house lawyers. In other EU jurisdictions, such as Germany and Austria, legal privilege may be available for communications from in-house lawyers, though this will depend on the scope and organization of the in-house counsel's work and the matters involved.
Akzo and Akcros argued that it is inconsistent with the principle of legal certainty that the protection of a document containing legal advice should depend on which competition authority takes the document during a dawn raid, the national competition authority or the Commission. The ECJ dismissed this argument saying that:
"[T]he undertakings whose premises are searched in the course of a competition investigation are able to determine their rights and obligations vis-à-vis the competent authorities and the law applicable, as, for example, the treatment of documents likely to be seized in the course of such an investigation and whether the undertakings concerned are entitled to rely on legal professional privilege in respect of communications with in-house lawyers. The undertakings can therefore determine their position in the light of the powers of those authorities and specifically of those concerning the seizure of documents." (Akzo, paragraph 104)
Consequently, according to the ECJ, the fact that in the course of an investigation by the Commission legal professional privilege is limited to exchanges with external lawyers in no way undermines the principle of legal certainty. Accordingly, in the event of a dawn raid companies must be very careful to check which authority ordered the search and which authority is conducting the search.
The ECJ judgment is of significance to all in-house counsel. Their exclusion from the protection of EU legal professional privilege is increasingly troublesome, given their invaluable role in the daily work of their employers, in particular their intimate knowledge of the business, their ability to meet the needs of their employer for time-critical advice, and their need to be involved in internal compliance programs.
The judgment is also of significance for external lawyers who are not admitted in the EU. Legal professional privilege applies only to communications with (external) EU qualified lawyers. It follows therefore that communications with non-EU lawyers are not protected from search and disclosure in EU investigations and proceedings.
The judgment does not call into question the General Court's earlier findings that certain internal documents prepared for the purpose of seeking legal advice from an external EU lawyer are protected by legal professional privilege. Whether or not an internal document will in fact be protected by legal professional privilege will depend on the individual circumstances. Accordingly, it remains good practice to add wording such as ‘Privileged and confidential. Prepared for the purposes of obtaining external EU legal advice' to emails and other communications.
One question that remains unanswered is whether legal advice from external EU counsel that does not relate to the subject matter of a Commission investigation is protected. While such legal advice may be safe from Commission inspection on grounds of relevance, it would be useful for the EU courts to clarify that all communications between external lawyers and their clients exchanged for the purposes of obtaining legal advice are privileged.For additional background, see our prior alert at https://www.jonesday.com/antitrust-alert--ecj-advocate-general-recommends-that-court-not-extend-eu-legal-privilege-protection-to-in-house-lawyers-04-30-2010/.
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