A recent decision of the European Court of Justice (ECJ) has confirmed that internal communications between in-house lawyers and their fellow company employees are not privileged in relation to European Commission (Commission) competition law cases(1). This decision upheld the decision in 2007 of the European Court of First Instance in the long running Akzo Nobel case(2) and is not unexpected in light of the Advocate General’s opinion. Nearly twenty years after the decision in AM & S v Commission(3), the ECJ has not departed from the position that in order for relevant communications in relation to rights of defence to be privileged they must emanate from an independent lawyer who is not bound to the client by a relationship of employment.
The ECJ Judgment
The Akzo Nobel case related to a “dawn raid” carried out in 2003 by the Commission, assisted by officials of the Office of Fair Trading, at Akzo Nobel’s premises in the UK. During the course of the investigation, a dispute arose as to whether or not certain emails and related hand written documents exchanged between an Akzo Nobel senior officer and an in-house lawyer were covered by legal professional privilege.
In respect of the main ground of appeal, the ECJ affirmed the test for legal professional privilege in Commission competition law investigations as set out in AM & S v Commission. The ECJ held that an in-house lawyer, despite his enrolment with a Bar or Law Society and his related professional ethical obligations, does not enjoy the same degree of independence from his client as an external lawyer. The employment relationship of an in-house lawyer affects his ability to exercise professional independence and does not allow him to ignore commercial strategies pursued by his employer. Therefore, only written communications exchanged with an independent lawyer, who is not bound to his client by an employment contract, can avail of the protection of legal professional privilege. In light of this, the ECJ considered that the differing treatment of in-house and external lawyers did not violate the EU principles of equal treatment.
The ECJ rejected the argument that the legal landscape had changed since the AM & S v Commission decision in 1982. The ECJ found that a large number of EU member states still exclude correspondence with in-house lawyers from protection under legal professional privilege. The evolution of EU competition law under Regulation 1/2003(4) had not suggested that lawyers in independent practice and in-house lawyers be treated in the same way with respect to legal professional privilege as that principle is not the subject matter of the regulation.
The ECJ rejected the argument that the protection of the rights of defence of undertakings would be lowered on the basis that recourse to legal advice from an in-house lawyer would not be as valuable or as useful if not protected by legal professional privilege. It held that individuals seeking legal advice must accept the restrictions and conditions applicable to the legal profession. The ECJ also found that the lower court’s judgment did not violate the EU principles of legal certainty, national procedural autonomy, and conferred powers.
The ECJ decision does not alter the position of in-house counsel under Irish law who are treated in the same manner as external counsel, with both enjoying the protection of legal professional privilege. The ECJ decision applies only to EU competition law investigations conducted by the Commission, where the Commission is either acting alone or where the Commission is assisted by a national competition authority (such as the Irish Competition Authority). The Irish Competition Authority will continue to follow the Irish law approach to legal professional privilege when conducting investigations under Irish competition law or if it conducts an investigation under EU law at the specific request of the Commission, as is provided for by Article 22 of Regulation 1/2003.
It should also be noted that breach of EU competition law (Articles 101 and 102 of the EU Treaty) is also a breach of the Irish Competition Act 2002 (the Act). Although the position has not been tested, it is expected that if the Irish Competition Authority were to investigate a breach of EU law on its own initiative (ie under the Act), Irish rules on privilege would also apply in this case.
The decision is seen by most lawyers as a missed opportunity to extend legal professional privilege in Commission investigations to correspondence with in-house lawyers who are independently regulated by a Bar or Law Society and who are very often in the front line in ensuring an organisation’s compliance with the law.
Accordingly, it remains vital for companies to clarify at the start of any investigation the laws under which the investigation is being carried out and whether (and in respect of which documents) legal professional privilege can be relied upon.
Recommended Next Steps:
- Companies may have to review their competition law compliance policies and reassess their use of and communication with in-house lawyers.
- If written advice is required on EU competition law matters, organisations should consider instructing external counsel.
- When seeking external legal advice the internal document should be exclusively drawn up for that purpose and marked accordingly.