On 14 September 2010, the Court of Justice of the European Union (the "COJ") issued its much anticipated judgment on the scope of legal professional privilege under EU competition law. The judgment in Akzo Nobel Chemicals Ltd v Commission of the European Communities (Case C-550/07 P) has clarified the extent to which companies are able to prevent the disclosure of documents during European Competition Commission (the "Commission") investigations on the grounds that such documents are protected by legal professional privilege.
The decision affirmed the two-part test laid out in AM&S Europe v Commission  ECR 1575 (Case 155/79), under which legal advice only attracts privilege if (1) it is connected to "the client's rights of defence" and (2) it emanates from "independent lawyers", who are not "bound to the client by a relationship of employment".
Whilst the case was decided in relation to antitrust/competition proceedings, there is concern about the potential ramifications for in-house counsel throughout Europe.
This alert follows on from the previous alert we published on 24 June 2010 titled "Akzo-Nobel".
What is Legal Professional Privilege?
Legal professional privilege protects the confidentiality of communications between lawyers and clients. In particular, it prevents the production of such communications in legal proceedings.
Legal professional privilege is treated differently by the individual EU member states. Some such as the UK, Ireland, The Netherlands, Greece, Portugal and Poland all afford a degree of protection to communications with in-house counsel. Other EU states, including France and Germany, do not extend legal professional privilege to communications with in-house counsel. The new judgment does not impact national regimes.
Nevertheless, the COJ's decision applies to all Commission investigations and proceedings wherever they occur, and wherever the communication took place. Thus, for example, an email written or received by in-house counsel in England is not automatically protected from disclosure to the Commission.
In 2003, the Commission carried out a number of "dawn raids" (now also known as "surprise visits") on the UK premises of Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd, seizing many documents, a number of which were internal emails exchanged with one of Akzo's in-house lawyers, an Advocaat of the Dutch Bar. Both Akzo and Akcros claimed that these and certain other documents were protected by legal professional privilege. The Commission disagreed.
The European Court of First Instance (now known as the General Court), found that the documents were not protected by legal professional privilege and the COJ has now affirmed the decision of the General Court and followed the opinion of Advocate General Juliane Kokott given in April 2010, holding that, under EU competition law, communications with in-house lawyers within a company or group were not covered by legal professional privilege, because such lawyers did "not enjoy the same degree of independence from his employer as a lawyer working for an external firm does in relation to his client."
The COJ's ruling clarifies that communications between in-house counsel and their employer companies are not protected by legal professional privilege in proceedings before the Commission, regardless of where the communication was made or whether such in-house counsel are affiliated to a national Bar or Law Society and notwithstanding the obligations of professional conduct and discipline owed by in-house legal counsel. This is of particular concern given the increasing co-operation between competition authorities within the EU and worldwide, as disclosure in respect of one authority's investigation may count as a waiver in any other investigations and/or subsequent litigation.
The conflicting privilege regimes within Europe mean that in-house counsel cannot rely on the applicable domestic regimes with confidence. For example, in the UK, correspondence exchanged with qualified lawyers admitted to the Law Society (or any other countries' Bar or Law Society) is covered by legal professional privilege, whether they are in-house or in private practice. Therefore, investigations carried out by the OFT (i.e. pursuant to English competition law) are governed by English rules regarding legal professional privilege, which protect correspondence with both in-house and external lawyers alike. This would also apply to investigations by the OFT conducted at the request of the Commission. However, if the OFT merely assisted the Commission, the EU rules would apply and the same documents would not attract legal professional privilege. Further, once disclosed to the Commission documents can be validly requested and relied upon by the OFT.
The COJ's decision has been met with wide-spread dissatisfaction by those who had hoped that it would take this opportunity to better safeguard the role of in-house lawyers, in providing legal and ethical advice to their employers. However, given the categorical nature of the ruling, that dissatisfaction is unlikely to be remedied for quite some time.
Whilst the Akzo decision is limited to investigations conducted in the competition arena, it may have wider consequences. It will be for the national courts of EU member states to determine whether in-house counsel communications are disclosable during litigation before them. Companies should remember that disclosure of documents in one forum could lead to the loss of privilege before another court or tribunal (including in private actions following Commission investigations - even in other jurisdictions). In particular, there is concern that the decision could have implications for in-house counsel's involvement in checking whether planned activities comply with, for example, anti-bribery rules.
Companies should therefore be mindful of the COJ judgment and it is recommended that the following procedures be considered in order to safeguard documentation created by in-house counsel.
Practical Steps that can help protect Privileged Information
- Where appropriate label documents to reflect the nature of any privilege attaching, e.g. "prepared for the purpose of seeking the advice of external counsel in respect of defence of [ ]" or "Privileged and Confidential - External Lawyer/Client Communication".
- If your company is the subject of a competition (antitrust) authority dawn raid, or other investigation, identify from the outset which authority is conducting the investigation and the capacity in which it is acting, in order to identify the applicable level of legal professional privilege.
- Immediately claim legal professional privilege over privileged documents. Once privilege is asserted, documents will only be released to the competition authority following inspection by an independent third party.
- Consider implementing a document retention policy to prevent accidental disclosure.
- Continue to take care as to how commercially or legally sensitive in-house advice is sought and recorded. If in doubt, provide advice orally.
- If you do circulate external legal advice, do not make any summaries, additions or amendments, as this may waive privilege.