The vexed issue of the law relating to legal privilege concerning European Commission1 competition investigations has been clarified by the Court of First Instance.
In brief, communications between an in-house lawyer and his/her company will not benefit from legal privilege with respect to Commission proceedings.
This means that the Commission may view such documents during a dawn raid; take copies and rely upon them to establish a breach of EU competition rules by the company in question - or others. The Commission may also rely on such materials to demonstrate the level of knowledge of the company that was acting illegally - an issue that will affect the level of fine imposed. With the new Commission guidelines on calculation of fines2 suggesting that the 10% “ceiling” of annual global group turnover will become more the “norm”, this is an issue to be taken seriously.
Now that the Commission has clarification on this issue, it may be pro-active in requesting and considering documentation created/held by in-house counsel in the course of its investigation. It may also ask for such materials to be delivered up to it. In those national jurisdictions which likewise do not recognise in-house privilege (such as France), an increased willingness to view inhouse counsel’s work product may also be expected by the national competition authorities in relation to their own national competition rules.
Legal privilege for in-house counsel in domestic court proceedings and vis-à-vis those national regulatory authorities which do recognise privilege, such as in the UK, is not affected. By way of guidance, we set out below the positive steps you can take to benefit fully from the legal privilege available; and note the traps for the unwary.
Golden rule no.1
Keep privileged documentation in a separate file/folder both in hard copy (if any) and on your computer systems. Preferably password protect legally privileged folders.
What documents will be privileged vis à vis the European Commission?
- Any correspondence from external (“independent”) lawyers who are qualified to practise in an EEA Member State which is made for the purposes of the exercise of your company’s rights of defence.
Note: We will mark all correspondence relating to your exposure under the EU competition rules as “Privileged legal advice from external lawyers”.
- Any preparatory documents made for the EXCLUSIVE purposes of seeking external legal advice.
- Any documents made for the EXCLUSIVE purpose of reproducing the external legal advice.
Golden rule no.2
Clearly mark on this documentation “Private and Confidential - Legally privileged external lawyer - client communication”.
What will not be privileged?
- Legal advice received from non-EU external lawyers (e.g. US/Japan).
- Preparatory documentation that serves a dual function, e.g. a factual background that is used both to brief management and to seek legal advice.
- Documents you prepare for management that supplement legal advice you have received.
Golden rule no.3
Keep a record of the recipients of external legal advice. Ensure that recipients are aware of the risks involved in losing privilege and have also received this note. Ensure that the legal advice is not circulated further by these recipients, let alone add their own comments/opinions.
And if the worst happens….
Legal privilege in a dawn raid - remember
Officials are not entitled to even a cursory glance of a document where you make a bona fide claim that it is legally privileged.
Where you consider that a document is privileged, do not show the officials the document. Instead, name the author of the document, refer to the context in which the document was written or, if need be, show the headed notepaper. Do not disclose the content of the document.
Where officials are not satisfied by the explanation given, a record should be made of this fact and the disputed document should be placed in a sealed envelope.
The Commission may then decide to adopt a decision rejecting the company’s claim for legal privilege. This decision can be appealed to the Court of First Instance. The Commission is not entitled to read the contents of the document until the dispute has been resolved.
A case study
Your head of sales slips into your office one Monday morning looking sheepish. He wishes to tell you about the “shadow club” he is participating in with his competitor counterparts just before trade association meetings.
- You take copious handwritten notes in your “day book”.
- You prepare a note for the chairman giving the company’s options and the immediate action you propose to take.
- You speak to your human resources department - what should be done about this individual who has acted in breach of the company’s compliance programme? They take more notes and suggest that disciplinary proceedings be instituted against the individual.
- You write to your external legal advisors asking for advice and attaching your note to the chairman.
- You contact your PR agents to brief them so that they are ready with a company statement, in case it all blows up.
What traps are there for the in-house counsel?
- It is advisable that in-house counsel mark his/her own notes “Privileged legal advice prepared for purposes of consulting external counsel”. This document should be kept in a separate file marked “Privileged documentation: In-house/external counsel communications”. Safer still, immediately get your external counsel on the speaker phone, and ask them to record the conversation.
- Ask HR not to produce any documentation on this issue (even hand-written notes) until the company has completed its investigations and determined what action it will take with respect to its own exposure under the EC competition rules.
- Initially, brief your chairman orally. Again request no notes be taken. If a written memorandum is necessary, wait until your external counsel has prepared its advice and request they set out the factual scenario in the written advice.
- Be careful as to how you brief your PR people. Again request that they are circumspect as to what they record.
Good habits: document retention of legal privilege vis-à-vis the European Commission
You are receiving this note because you are or could in the future be a recipient of documents which relate to your company’s compliance with the EC competition rules. This note sets out a number of “good habits” that you should follow when you are filing/retaining such documentation.
Competition law compliance is an issue to be taken seriously. If your company has been involved in an infringement of the EC competition rules, it could be investigated by the Commission and would face potentially large fines.
During an investigation into a potential breach of EC competition rules, the Commission is entitled to inspect company premises and take copies of internal documents. National competition authorities may do likewise. As such, it is important to ensure that the Commission or other national competition authorities do not inadvertently have sight of documents which are legally privileged.
Here are some practical hints and tips relating to the filing/retention of legally privileged documents
Create a file for hard copy documentation and label it “Private and Confidential: Legally privileged external lawyer - client communication.”
Set up a folder labelled: “Legally privileged external lawyer - client communication” on your internal computer system. Limit who can have access to that folder. Get it password protected.
Put all documentation received from external lawyers in relation to competition law issues in the folder. This should already be marked as “legally privileged”.
Don’t forget to include all internal documentation that relates to the competition law issue in question; this will include any handwritten notes. This documentation should be marked “Private and Confidential - Legally privileged external lawyer - client work product”. Where the documentation is not marked as such, which it should be, raise the issue with your line manager.
Do not copy or make available any of this documentation to others unless you have specifically discussed this with either in-house counsel or external lawyers.