On 14 September 2010, the Court of Justice of the European Union (CJEU) gave its much awaited judgment in Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v European Commission.
In its judgment, the CJEU confirmed that communications between in-house lawyers and their employers will not receive legal professional privilege (privilege) in respect of investigations under EU competition law.
This contrasts with the greater protection afforded to in-house lawyers in UK competition investigations.
Privilege under EU competition law
The following documentation will attract privilege vis à vis a Commission investigation into alleged breaches of EU competition law:
- Any external communication from external lawyers qualified to practise in an European Economic Area (EEA) Member State which is made in connection with the exercise of a company's rights of defence.
- Any internal preparatory documents made for the exclusive purposes of seeking external legal advice, where that advice attracts privilege.
- Any internal documents made for the exclusive purposes of reproducing external legal advice in an unamended form, where that advice attracts privilege.
However, it is important to note that the following will not attract privilege under EU competition law:
- Communications, including legal advice in respect of EU competition law, from in-house lawyers to their employers.
- Internal preparatory documents in respect of requests for legal advice from non-EEA external lawyers (e.g. US/Japan), and external legal advice received from non-EEA external lawyers (i.e. where the external legal advice would not attract privilege).
- Internal preparatory documentation that serves a dual function (e.g. a factual background that is used both to brief management and to seek legal advice from an external EEA-qualified lawyer), as this has not been prepared for the exclusive purpose of seeking external legal advice.
- Any internal documents which amend, supplement, add to, comment upon or otherwise alter the external legal advice received from EEA-qualified lawyers (e.g. emailing a pdf copy of management comments upon external legal advice).
Differences between privilege in the EU and the UK
The EU position with regard to privilege in respect of in-house lawyers' communications differs from the position under the national laws of a number of Member States.
In particular, communications from in-house lawyers to their employers will attract privilege under English law where the communication is made confidentially for the purposes of legal advice on what should prudently and sensibly be done in the relevant legal context.
Where communications from an in-house lawyer attract privilege under English law, UK competition authorities such as the Office of Fair Trading (the OFT) are not entitled to review such communications during the course of an investigation into an alleged breach of UK competition law.
Clearly, this then gives rise to a degree of uncertainty for companies and in-house lawyers seeking to retain privilege and effectively manage "legally privileged" communications in jurisdictions, such as the UK, where two different privilege "regimes" apply to in-house lawyers' communications.
Five practical suggestions to retain privilege
In view of this, here are five practical suggestions intended to retain privilege insofar as possible. We also consider the worst case scenario: what to do in the event of an investigation?
Assess the compliance risk without creating a paper trail
In the event of a potentially sensitive issue arising in respect of competition law, avoid creating an internal paper trail in the first instance, and discuss the issue either over the phone, or in person, with in-house and/or external lawyers to ascertain the compliance risk associated with the issue at hand.
Consider instructing external EEA-qualified lawyers
If the compliance risk includes an EU competition law risk, consider whether it would be prudent to seek to retain privilege in the event of a Commission investigation insofar as possible by obtaining any written advice which may be required from external EEA-qualified lawyers.
Ensure documents prepared for the purposes of obtaining legal advice are clearly marked as privileged
Where internal documents are prepared for the exclusive purposes of obtaining external legal advice, these documents (and any emails to which they are attached), should be clearly marked "Private and Confidential - Legally Privileged External Lawyer/Client Work Product".
Similarly, where internal documents are prepared for the purposes of obtaining legal advice from in-house lawyers, these should also be clearly marked "Private and Confidential - Legally Privileged Lawyer/Client Work Product", given that such documents could attract privilege under national law.
Be careful when circulating legal advice internally
When circulating any unamended advice received from external lawyers, or prepared by in-house lawyers (which could attract privilege under national law), ensure that all recipients are aware of the risks associated with losing privilege, and do not amend or circulate the external advice further.
File documents which attract privilege in a separate "Legally privileged" file
Keep all documentation which you believe attracts privilege under either the EU or national "regimes" in a separate file clearly marked as "Legally privileged", both in hard copy (if any), and on computer systems, with e-folders preferably password protected.
The file should include an up-to-date index providing the author, recipient, and the general context within which the document was written. In the event of an investigation, the company's in-house and/or external lawyers will be well placed to review the file in its entirety, and ascertain precisely what must be disclosed to the investigating authority in the circumstances.
Worst case scenario: what to do in the event of an investigation?
Ascertain which authority is investigating and under which powers
If the Commission is investigating an alleged breach of EU competition law, communications between in-house lawyers and the company will not attract privilege; if a national authority (such as the OFT) is investigating an alleged breach of national competition law, such communications may attract privilege (and will in the UK).
Provide the officials with the index of the "Legally privileged" file
Officials can consider the index of the "Legally privileged" file which should detail the author, recipient, and the general context of each document which the company believes attracts privilege. The officials may clarify with the company's in-house and/or external lawyers how privilege attaches to these documents.
Do not allow officials to view any document in dispute
While officials are entitled to question whether a document in protected by privilege, the CFI's judgment in Akzo confirmed that Commission officials are not entitled to even a cursory glance of a document where a bona fide claim is made that the document in question is covered by privilege.
Make a record of any dispute regarding privilege
Where officials are not satisfied that a document attracts privilege on the basis of the author, recipient and general context, a record should be made of this fact, and the disputed document should be placed in a sealed envelope. If it is a Commission investigation, the Commission may decide to adopt a decision rejecting any claim for privilege. This decision can be appealed to the General Court (previously the CFI), and the Commission is not entitled to read the contents of the document until the dispute has been resolved.
Discovering documents which attract privilege during an investigation
If during the course of the investigation a document is discovered which you consider attracts privilege but has not been filed as such, do not show this document to the officials. Instead, name the author and recipient of the document, and refer to the context within which the document was written. If need be, show the headed notepaper, but do not disclose the content of the document.
Again, if the officials are not satisfied that the document attracts privilege, a record should be made of this fact, and the disputed document should be placed in a sealed envelope until the issue of privilege has been appropriately resolved.