On the same day (17 September 2007) as the Court of First Instance (CFI) in Luxembourg handed down its watershed competition decision in the Microsoft case, they handed down another highly significant judgment on the issue of legal professional privilege and the status of in-house lawyers under EC Competition Law.
Ever since the decision in the case of AM&S Europe Ltd v Commission of the European Communities (1983) communications including legal advice given by in-house lawyers to the companies for whom they work cannot be withheld as legally privileged communications from the European Commission in an EC Competition Investigation. This means that the Commission investigators can have access to legal advice and opinions given by in-house lawyers.
This leads to an absurd result that the same communications are held to be legally privileged under UK law because in-house lawyers are entitled to legal professional privilege for their communications with their employers.
In the context of EC competition proceedings, however, in-house lawyers have been made to hand over sensitive legal advice on the merits of their employer’s legal position. This duty to disclose has also even been extended to communications written by in-house lawyers summarising external lawyers’ advice. This has undoubtedly compromised the rights of the defence.
Understandably ever since 1983 the AM&S Decision has sparked widespread criticism from in-house lawyers and competition lawyers in private practice. There has therefore been a long campaign to reverse the earlier judgment.
The opportunity came in the case of Akzo Nobel Chemicals Limited and Akcros Chemical Limited v European Commission. The CFI, Europe’s second highest Court, in its judgment on 17th September 2007 disappointed many when it reaffirmed that legal professional privilege does not cover in-house counsel communications even if the lawyer concerned is a member of a Member State Law Society or Bar. The European Court of Justice in the AM&S case stated that any person must be able, without constraint, to consult a lawyer whose profession consists of the giving of independent legal advice to all those in need of it. However, the right of legal professional privilege is not absolute.
For a document to be privileged it must satisfy the following conditions. First the document in question must have been created for the purpose and in the interests of the client’s right of defence. Secondly such communications must involve independent lawyers who were members of the Bar or Law Society of a Member State. What is therefore meant by “independent”. In the AM&S case the European Court of Justice stated for a document to be covered by legal professional privilege it must relate to legal advice being sought from an independent lawyer, that is to say one not bound to his client by a relationship of employment.
The CFI fully backed the ECJ in AM&S and saw no reason to depart from its earlier judgment. In addition, the CFI refused to clarify the position of non-EU in-house counsel or external counsel (whose communications are not recognised as privileged in the EU under previous case law).
However, what the case does do is to restrict the right of EC Commission officials to cast a cursory glance over disputed documents during dawn raids. They are allowed to examine letterheads, signatures and markings on documents. They are not allowed to scan or read disputed documents. Undertakings are entitled to refuse permission for Commission officials to look at documents if appropriate justification is provided. The disputed documents must be placed in a sealed envelope pending a decision on their alleged privileged status.
In addition, documents prepared by executive for the purpose of a competition law compliance programme are covered by privilege if they are prepared exclusively for the purpose of obtaining legal advice from external counsel or external lawyers qualified in the EU in exercise of their rights of defence.
The decision is helpful in clarifying certain procedural rights of companies in the event that there is a disagreement with the European Commission over whether a document is legally privileged or not. However, it is bad news for in-house lawyers and non-EU qualified private practice lawyers whose legal advice to their clients will not attract legal professional privilege. These communications will still be subject to full disclosure to the European Commission in the context of EU Competition proceedings and may be highly detrimental to their clients.
Companies are therefore well advised to ensure that advice is sought from private practice lawyers qualified in an EU Member State or if in-house counsel provides a legal opinion on sensitive legal issues which could be relevant in the context of EU competition law investigation or proceedings that these are not provided in any written, typed or machine readable form.