Akzo Nobel Chemicals and Akcros Chemicals were subject to a competition investigation by the European Commission, during which the Commission seized several documents over which the applicants claimed legal professional privilege.
The applicants challenged: (1) the process by which the Commission determined whether certain documents attracted privilege; and (2) the Commission’s decision to reject privilege of those documents.
The European Court of First Instance (the CFI) determined that the Commission had infringed the procedure for determining whether certain documents attracted privilege by forcing the applicants to allow them a cursory look at the documents and secondly, by reading the documents without giving the applicants the opportunity to contest the Commission’s decision that the documents did not attract privilege1.
The CFI held that a company can refuse to allow the Commission a cursory look at the document, if doing so would reveal the content of the document. The document should then be put in a sealed envelope. If the Commission formally decides to reject the company’s request for privilege, then it is open to the company to bring an action before the CFI to challenge the Commission’s decision to reject privilege.
Only if the Commission’s decision is upheld by the CFI can the sealed document be opened. The CFI’s decision is important in relation to two major issues affecting privilege under European law:
- the scope of legal professional privilege
- the position of inhouse lawyers in relation to legal professional privilege.
In relation the first issue, the CFI did partially extend the current scope of privilege under European law by stating that internal documents prepared specifically and exclusively for obtaining legal advice from external lawyers would attract privilege. This slight extension under European law looks likely to be interpreted restrictively by the European courts in order that documents will not attract privilege just by reason of the fact they are eventually given to external lawyers.
On the second issue, the CFI held that privilege would only apply to communications with an independent lawyer. This came as a further blow to in-house lawyers, who have pushed for documents prepared by them, for purposes other than obtaining independent legal advice, to attract privilege.
Communications between the company and its inhouse lawyer will not, therefore, attract EC privilege and will be free to inspection by the European Commission.
The Court’s reasoning for this approach appears to be that not all in-house lawyers are truly independent. This reasoning has attracted criticisms in countries such as the UK where in-house lawyers are still members of The Law Society and subject to the same professional discipline and ethics as independent lawyers.
Consequences of the judgment
The following documents will now attract privilege under EC law:
- written communications between client and independent lawyer, for the purposes of the exercise of the client’s right of defence, after the initiation of an investigation
- earlier written communications, with an independent lawyer, which have a relationship with a subject matter of that procedure
- internal notes circulated within an undertaking which are confined to reporting the text or the content of communications with independent lawyers containing legal advice
- preparatory documents drawn exclusively for the purpose of seeking legal advice from an independent lawyer in the exercise of the rights of defence.
With deadlines looming for the implementation of the Companies Act 2006, a number of regulations have been made or are in the pipeline. Recent weeks have also seen the publication of various consultation papers, some of which may have an important bearing on auditors’ and accountants’ liability, in what is likely to become an increasingly difficult and litigious climate.