Confidential communications with lawyers are privileged – protected in most cases from disclosure in subsequent proceedings or investigations. However, there are increasing doubts as to whether, at least in the context of European Commission investigations, such communications will be protected where they exclusively involve in-house counsel, lawyers who are employees of the party seeking such advice.

This issue arose in Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v European Commission (Case C-550/07P). Organisations representing lawyers (such as the Law Society of Ireland, corresponding bodies in the UK, and the International Bar Association) intervened to argue that communications with in-house Counsel should enjoy the same protection as communications with external lawyers. However, the Advocate General disagrees.

Advocate General Kokott delivered her Opinion in on 29 April 2010. She concluded that legal professional privilege, (which protects communications between lawyers and their clients), does not extend to internal company or group communications with an in-house lawyer in European Commission investigations.

The judgment of the ECJ has yet to be delivered. Although the Advocate General's Opinion does not bind the ECJ, such Opinions are generally followed.

The Background

The dispute over legal privilege arose between Akzo Nobel Chemicals Ltd (Akzo) and Akcros Chemicals Ltd (Akcros) on the one hand, and the European Commission on the other, as a result of a cartel investigation by the Commission. The Commission, as competition authority, conducted a search of the companies' business premises, and copied documents, including emails 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. The companies argued that these documents were privileged and thus exempt from seizure.

On 17 September 2007, the Court of First Instance (now the General Court) dismissed the companies' challenge to the seizure of such documents. The ECJ will determine the outcome of the appeal against that judgment. Advocate General Kokott has recommended that it dismiss the appeal.

The Scope of Legal Professional Privilege under EU law

The Advocate General's Opinion essentially reaffirms the approach of the ECJ in AM & S v Commission [1982] ECR 1575, namely, that under EU law, legal professional privilege applies solely to communications between a client and an independent lawyer.

In AM & S the ECJ identified two cumulative conditions for privilege to arise in EU law:

  1. The communication with the lawyer must be made for the purposes and in the interests of the client's rights of defence; and
  2. It must be a communication with an independent lawyer.  

The Opinion

In their appeal, the companies, and the parties intervening to support them, (including Ireland, the United Kingdom, the Netherlands and various bar councils and lawyers organisations), argued that the criterion of independence of the lawyer must not be interpreted negatively so as to exclude in-house lawyers but positively, by reference to the professional and ethical obligations to which lawyers admitted to a Bar or Law Society are generally subject. The companies submitted that because of the applicable professional ethical obligations an in-house lawyer who is also a member of a Bar or Law Society automatically enjoys the same independence as an external lawyer who pursues this profession on a self-employed basis or as an employee of a law firm.

The Advocate General disagreed, noting that in AM & S 'the requirement of independence is unequivocally linked to the fact that the lawyer in question must not be in a relationship of employment with his client'. The reasoning is that an in-house lawyer, despite his membership of a Bar or Law Society and the professional ethical obligations associated with such membership, '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 clients'. The Advocate General concluded that, as a consequence, there is a structural risk that an in-house lawyer is less able to deal effectively with any conflicts of interest arising between his professional obligations and the aims and wishes of his client, on which he is more economically dependent, than an external lawyer.

The second argument for the companies, that the scope of privilege at EU level should be extended to in-house lawyers, was also rejected. The Advocate General noted there is no discernible trend across the legal systems of the 27 Member States towards treating in-house lawyers in the same way as lawyers in private practice. Only in a minority of the 27 Member States, such as Ireland, the United Kingdom, and the Netherlands, does the protection afforded by legal professional privilege also apply to communications with in-house lawyers. The companies submitted that there is an increasing need for internal corporate legal advice to prevent infringement of competition law, and that the legal advice given by in-house lawyers is particularly valuable in day-to-day business because it can be obtained more quickly and economically and because it is based on an intimate knowledge of the company and its business. However, the Advocate General argued that a departure from AM & S could not be justified by reference to the advantages and significance of internal corporate legal advice or to the procedural-law reform carried out by Regulation No.1/2003.

She also dismissed the third argument advanced for the companies, that the Member States alone are competent to determine the precise scope of legal privilege. She stated that the interpretation and application of legal professional privilege uniformly across the EU is essential for the purposes of competition investigations conducted by the Commission.

Impact of the Opinion

The Opinion – if upheld by the ECJ – will confirm the CFI ruling and the existing jurisprudence suggesting that legal professional privilege at EU level does not extend to internal company or group communications with their own in-house lawyers. However, such communications may be protected in other contexts. For example, under Irish law generally, such communications remain protected by legal professional privilege. The Advocate General noted that: 'the case-law in AM & S applies only to competition proceedings and investigations conducted by the Commission'.

If the ECJ agrees with the Advocate General, their ruling will greatly complicate the way corporations seek legal advice. Advice from in-house counsel will only be protected for some purposes. Such communications will not be privileged in an EU investigation. Corporations and their in-house and external counsel need to be conscious of the extent of legal professional privilege when rendering advice, particularly if European competition law issues are involved.