Handing down its decision in the appeal of the Akzo Nobel case today1, the European Court of Justice has determined that legal professional privilege does not and should not extend to communications between in-house counsel and their business clients in EU Commission competition investigations.
The ECJ's rationale for the decision, and for maintaining the status quo, is that in-house lawyers are perceived to be less independent from their employers than private practice lawyers are from their clients. As a result the ECJ regards in-house lawyers to be at greater risk of running into conflicts of interest between their professional obligations and the aims and wishes of their employers.
Notwithstanding the level of support and protest for change from, among others, European and American legal associations, the ECJ's decision does not come as much of a surprise given the recommendations made by Advocate General Kokott on this controversial issue in April 20102. Nevertheless, it remains a disappointing outcome for in-house counsel. The decision confirms that the ECJ does not regard in-house lawyers to be on an equal footing with their peers in private practice when it comes to compliance with professional obligations.
The appellants in the case had argued that the "modernisation" of procedural rules on cartels has increased the need for inhouse legal advice but the European Court did not consider that this justified a change in the case law. The decision is disappointing in failing to acknowledge the important role played by in-house counsel in assessing and promoting their employers' compliance with the law, a role which is undermined by the European Court's continued refusal to allow them to do so without fear that their advice could potentially be disclosed.
The decision will be most significant for those entities trading across EU member states who might as a consequence be at risk of investigation by the European Commission for possible infringement of EU competition law. It essentially means that any communications between the business and its in-house lawyers would be susceptible to disclosure should such an investigation ever occur. Communications falling within this category include any amendments to or commentary on advice received from an external lawyer, even if these were prepared or circulated by in-house counsel for the purpose of defending an investigation. In the circumstances, in-house counsel should continue to be cautious not to document any advice or comments which are competition sensitive.
The ECJ's ruling does not affect the English law position on privilege: communications with in-house lawyers and, for that matter, any other members of the legal profession exercising their professional skills as a lawyer, continue to be covered by privilege in proceedings on issues governed by English law before either the national courts or national authorities (including competition investigations conducted by the Competition Commission or the Office of Fair Trading).
Notwithstanding the more generous position under English law, in-house lawyers are reminded that privilege does not attach to all communications but only applies to:
- Legal advice given in a relevant legal context (legal advice privilege)
- Communications made for the dominant purpose of litigation that is either pending, reasonably contemplated or existing (litigation privilege).
Finally, in-house lawyers should be aware that whilst privilege might apply to certain documents falling into the above categories in English proceedings, Akzo Nobel confirms that this would be of no avail in the event of an EU Competition commission investigation.
The ECJ's decision to continue to exclude communications from the ambit of legal advice privilege in EU competition investigations undermines the important role played by in-house counsel in ensuring businesses are fully advised on all the legal ramifications of their activities.
In light of the decision, RPC recommends that in-house lawyers continue to adopt an extremely cautious approach to recording any advice on competition related matters.