On 14 September 2010, the European Court of Justice ("ECJ") delivered the long awaited judgment in the case of Akzo Nobel Chemicals and Akcros Chemicals Ltd v European Commission, an appeal concerning legal professional privilege ("LPP") and communications between a company and its in-house lawyer in EU Commission competition investigations. In its ruling on the appeal this week, the ECJ upheld the decision of the Court of First Instance ("CFI") from September 2007, confirming that LPP does not attach to communications between a company and its in-house lawyer in EU Commission competition investigations meaning any such communications will be susceptible to disclosure in competition investigations.

The judgment of the CFI received heavy criticism across Europe in September 2007. The latest judgment has done little to assuage the concerns expressed by so many as to the effect of the decision on Europe's businesses and the overriding fear that the LPP which ordinarily attaches to communications between in house lawyers and their employer may be in jeopardy.

In the case of Akzo Nobel, in the course of a search carried out by the Commission and Office of Fair Trading in 2003, the Commission copied a number of documents which Akzo Nobel asserted were covered by LPP. The Commission told Akzo Nobel that it would have to briefly review the documents in question so that it could determine whether or not the documents were in fact covered by LPP. The head of the investigating team reviewed the documents and formed the opinion that the documents were not privileged and took copies, placing them with the other documents forming part of the investigation which not surprisingly gave way to a dispute between the Commission and the parties being investigated culminating in the latest judgment.

In an earlier decision of the ECJ in AM & S Europe v Commission, the Court held that the confidentiality of communications between lawyers and clients should be protected at Community level, subject to two conditions: (1) the exchange must relate to 'the client's rights of defence'; and (2) the exchange must 'emanate from independent lawyers', being 'lawyers who are not bound to the client by a relationship of employment'. The question of independence appears to have been pivotal in the Court's rationale for reaching the decision it has.

The Court determined that regardless of the professional regime to which an in-house lawyer is subject, an in-house lawyer cannot be treated in the same way as an external lawyer because he is an employee of the client. The Court said that this 'by its very nature, does not allow him to ignore the commercial strategies pursued by his employer, and thereby affects his ability to exercise professional independence'.

Privilege is intended to place a restriction on the relevant material available to parties and to the Court so as to enable justice to be done. The general train of thought is that a client should be at liberty to consult his lawyer, whether in-house or external, on certain matters, whether or not litigation is contemplated, without the worry that such communications may later be used against them in the course of litigation.

At first blush the decision is only of significance for those whose business is not restricted solely to Jersey and who trade across the European Union member states since such businesses run the risk of being faced with a competition investigation. There is clearly the potential however for this judgment to have wider reaching consequences on a number of levels in Jersey.

Firstly, it is likely to be of significance in local competition matters not least because Jersey's competition law is based on EU competition law. The fundamental provisions of Jersey's competition law are the prohibition of anticompetitive arrangements, abuse of dominant position and the control of mergers and acquisitions. Article 60 of the Competition (Jersey) Law 2005 provides that the Jersey Competition Regulation Authority ("JCRA") and the Jersey Court shall attempt to ensure that so far as possible questions arising in relation to competition are dealt with in a manner that is consistent with the treatment of corresponding questions arising under Community law in relation to competition within the European Community. That being case, this decision may impact on how the JCRA and the Jersey Court interpret any questions in respect of LPP in future, the reality being that there is now the real risk that communications between in-house lawyers and their employers may be susceptible to disclosure in competition investigations locally. Secondly, it may also prove to be the case that other regulatory bodies such as the Jersey Financial Services Commission or similar such bodies try to use this judgment to access documents between in-house lawyers and their employers.

Finally, does this latest judgment reflect a new way of thinking on LPP for Jersey? Although it does not strictly speaking affect the legal position as it stands on LPP in Jersey at present, it does create potential problems for the future of LPP and the interpretation of privilege generally. The judgment is very much in its infancy in terms of its effect in Jersey. At this stage we can only begin to scratch the surface of its potential implications long term which will need to be explored further and which no doubt will be. In the meantime, businesses should exercise the utmost care when dealing with any communications as between the business and in-house lawyers.