Companies might think that advice from with their in-house lawyer is covered by lawyer/client privilege - but not according to a recent ruling from the European Court of Justice.
It is a well-established principle that communications between clients and their legal advisers are usually confidential because of the principle of lawyer/client privilege. It is generally acknowledged that a client should be in a position to make as full disclosure as possible in order for their legal adviser to provide the best and most suitable advice.
The exercise of the principle demands a balancing of interests between ensuring the administration of justice and preserving the confidential nature of these communications.
However, a recent judgment of the European Court of Justice (ECJ) in Akzo Nobel v Commission places severe limits on the application of this principle in respect of communications with in-house lawyers.
This case arose out of a European Commission dawn raid on the premises of Akzo on foot of suspected anti-competitive practices. Akzo objected, on the basis of lawyer/client privilege, to the Commission obtaining and examining certain correspondence exchanged between the management of Akzo and its in-house lawyers. In the proceedings that were subsequently brought by Akzo, the ECJ ruled that the privilege does not cover exchanges between a company and its in-house lawyers. This meant that the correspondence in dispute could justifiably be read and used by the Commission in its investigation.
The ECJ observed that the independence of lawyers may be questionable where they are employees of their client, stating that the existence of an employment relationship results in an in-house lawyer being "less able to deal effectively with any conflict between his professional obligations and the aims of his client". The ECJ said that in those circumstances the in-house lawyer does not enjoy a level of professional independence comparable to that of an external lawyer.
Implications of the Decision
In-house lawyers have come to be an essential part of corporate life and the ECJ's decision is likely to prove problematic. While the decision appears to apply only in relation to Commission competition investigations, it calls into question the privileged status of communications with in-house lawyers. Currently, Ireland is one of the only EU States that applies legal professional privilege to in-house lawyers. This absence of any consensus among EU States on the confidentiality of communications with in-house lawyers was relevant to the ECJ's decision.
One of the practical implications of this judgment is that corporate managers should be aware that external legal advice should be sought where there is a Commission competition investigation. More generally, it may be advisable to seek external legal advice in relation to matters over which a claim to legal professional privilege may be made.
