The European Court of Justice ruled yesterday (maintaining the position under existing law) that in-house counsel have no right to claim legal professional privilege over communications between them and their employer in European Commission investigations.

The findings in the long-awaited judgment on the Akzo Nobel appeal, whilst disappointing, were largely expected and pre-empted by the Advocate General’s opinion earlier this year. The decision follows established case law that communications involving competition issues will only be subject to legal professional privilege where they are connected to “the client’s right of defence” and that the exchange must emanate from “independent lawyers” ie “lawyers who are not bound to the client by a relationship of employment” . In the view of the Advocate General:

“An in-house lawyer, despite his involvement with the Bar or Law Society and the professional ethical obligations to which he is, as a result, subject, does not enjoy the same degree of independence from his employer as a lawyer working in an external law firm does in relation to his client. Consequently an in-house lawyer is less able to deal effectively with any conflicts between his professional obligations and the aims of his client”.

Akzo were subject to an anti-trust raid by the European Commission at their offices in Manchester in early 2003. Of all the documents seized, two e-mails emanated from the in-house counsel on competition issues. Legal professional privilege was claimed over those documents but the Court of First Instance rejected Akzo’s claims. As the matter went to appeal Akzo were supported in their campaign to re-instate legal professional privilege by a number of interveners including the UK Government; International Bar Association; Association of Corporate Counsel and many others, but to no avail.

The ECJ has been categorical in this decision. In-house counsel now (in essence) are not trusted to give independent legal advice on such competition issues or indeed to advise on competition compliance. If such advice is given, it will be subject to disclosure and scrutiny if the European Commission instigate a cartel investigation. Legal professional privilege is maintained if the advice is given by external counsel or lawyers.

Please note that this ruling does not alter the English law position on legal professional privilege, which applies to all communications between in-house counsel and its employer provided that the in-house counsel is acting in a legal capacity and not an executive function.