The European Court of Justice (the "ECJ") recently released a landmark decision, Akzo, confirming that communications between in-house counsel and their internal clients are not protected under European competition law by legal professional privilege, otherwise known in Canada as solicitor-client privilege.
The ECJ's decision in Akzo transcends the boundaries of Europe. It has profound global implications with respect to how legal advice is sought and received in the area of anti-trust/competition law. For example, companies faced with cartel exposure can be subject to worldwide enforcement activity, a multiplicity of domestic amnesty programs and a surge of complex civil litigation. This has given rise to an integrated global team of in-house and external lawyers working on behalf of an implicated company.
The onus is now squarely on companies – notwithstanding their location - to take affirmative steps to protect their legal communications. Companies, in conjunction with their in-house and external lawyers, need to carefully structure their global legal communications in order to maximize the application of privilege over legal communications and documents.
In 2003, the European Commission (the "Commission") ordered Akzo Nobel Chemical and its subsidiary Akcros Chemicals to submit to an investigation aimed at seeking evidence of possible anti-competitive practices. The Commission conducted searches or 'dawn raids' at the premises of Akzo Nobel and Akcros. In so doing, the Commission seized two emails exchanged between the managing director and an in-house lawyer for Akzo Nobel, amongst other documents. The in-house lawyer was an Advocaat of the Netherlands Bar. The Commission analyzed the two e-mails and decided that they were not protected by legal professional privilege.
Akzo Chemicals claimed that the two emails should be protected by legal professional privilege. Their claim was rejected by the Commission, the General Court (previously named the Court of First Instance) and most recently by the European Court of Justice.
The ECJ Decision
Akzo Chemicals, along with a number of intervenors (including the British, Irish and Dutch governments and a number of European Lawyers' and Bar Associations), claimed that the General Court wrongly refused to protect the two emails with legal professional privilege.
They encouraged the ECJ to revisit its longstanding decision in AM & S Europe v Commission regarding legal professional privilege. In AM & S, the ECJ held that exchanges between a lawyer and its client are protected by legal professional privilege at the EU level subject to two conditions:
- the exchange with the lawyer must be connected to the client's right of defence in relation to the Commission's investigation and;
- the exchange must emanate from an independent and external lawyer entitled to practise in the European Economic Area (EEA).
Akzo and the intervenors submitted that the criterion that the lawyer must be independent cannot be interpreted to exclude in-house lawyers and that an in-house lawyer enrolled as a Bar or Law Society is, on account of his or her obligation of professional conduct and discipline, as independent as an external lawyer. In dismissing this submission and adopting the reasoning in AM & S, the ECJ observed that the concept of an independent lawyer is premised upon that lawyer's ability to collaborate in the administration of justice and to provide legal advice in full independence of all other interests but the client's. Full independence, in the ECJ's view, included the absence of any employment relationship between the lawyer and his client. Therefore, legal professional privilege did not protect written communications within a company with in-house lawyers, including the two emails at issue. The ECJ noted:
…an in-house lawyer cannot, whatever guarantees he has in the exercise of his profession, be treated in the same way as an external lawyer, because he occupies the position of an employee which, by its nature, does not allow him to ignore the commercial strategies pursued by his employer, and thereby affects his ability to exercise professional independence.5
Scope of Akzo in the EU
Akzo sets out the position on privilege only under EU anti-trust/competition law investigations conducted by the Commission. When an anti-trust/competition investigation is carried out by a national authority in a Member State (such as the Office of Fair Trading in the UK), even if such investigation is carried out on behalf of the Commission, any in-house communications will be protected by national rules on legal professional privilege (see below for the position in England). The EU principles will only apply where the Commission investigates directly in anti-trust/competition law matters. This will not, however, provide much comfort to companies trying to determine whether advice from their in-house lawyers may end up before the Commission.
Solicitor-Client Privilege – Canada
It is well known in Canada that the purpose of solicitor-client privilege is to facilitate full and frank communication between a lawyer and client in the seeking and giving of legal advice. In Canada, solicitor-privilege applies to: (1) communications between a solicitor and client; (2) involving the seeking or giving of legal advice; and (3) where the communication is intended to be confidential by the parties.
In-house counsel in Canada are governed by the same rules of solicitor-client privilege as external counsel. As the court in one leading Canadian case noted:
There appears to be no doubt that salaried legal advisers of a corporation are regarded in law as in every respect in the same position as those who practise on their own account. They and their clients, even though there is only the one client, have the same privileges and the same duties as their practising counterparts.
While solicitor-client privilege applies equally to in-house counsel and external counsel, there are unique features of in-house counsel's position and functions that complicate the application of solicitor-client privilege to the documents they prepare and distribute. Solicitor-client privilege protects legal advice. It does not protect advice on purely business matters even when provided by a lawyer. This distinction, while trite, can be complicated when in-house counsel has multiple corporate responsibilities, such as being a corporate secretary or a member of the board of directors. Courts have, and will, refuse to protect a communication from in-house counsel with solicitor-client privilege if the communication was circulated in the in-house counsel's capacity as a business executive rather than a lawyer.
Legal Professional Privilege - England
English law recognises that communications with in-house counsel are capable of being protected by legal professional privilege. An in-house lawyer is regarded in the same way as an external lawyer, provided they are acting in their capacity as a lawyer and not an executive – as in Canada, advice on purely business matters is not protected.
There are two categories of legal professional privilege in English law. Legal advice privilege applies to confidential communications (written or oral) which pass between a client and its lawyer, whether relating to a contentious or non-contentious matter, which have come into existence for the sole or dominant purpose of giving or receiving legal advice. Litigation privilege applies to written or oral confidential communications between lawyer and client, lawyer and third party or client and third party (experts and witnesses), or other documents created by or on behalf of the client or the lawyer, but only if they were for the sole or dominant purpose of litigation which was reasonably contemplated, pending or existing at the time they came into existence.
Implications of Azko and Practical Tips
Worldwide enforcement activity against anti-competitive behaviour has given rise to an integrated global team of in-house and external lawyers working on behalf of an implicated company. The scope of privilege for in-house lawyers in Europe, when compared with the privilege recognized in Canada and the United States, is greatly restricted. In-house counsel for companies that are active in Europe must take affirmative steps to protect their legal communications and documents. Some practical tips in this regard are as follows:
- Companies, in conjunction with their in-house and external lawyers, need to carefully structure their global legal communications (i.e. joint defence agreements, legal opinions, day-to-day communications) in order to maximize the application of privilege.
- Ensure any advice given to European companies by lawyers outside the EEA (including, of course, Canada) is signed off by a lawyer within the EEA.
- Company officials should ensure that all communications with their in-house lawyer about anti-trust/competition matters and indeed any other sensitive matters are given orally; not in writing. The in-house lawyer can then, if necessary, seek legal advice from an external lawyer. Legal advice communicated between the external lawyer and the in-house lawyer should be marked "Legally Privileged and Confidential" protected by privilege.
- Written communications involving legal advice should be marked on their face as "privileged and confidential" and/or "communication for the sole purpose of providing legal advice". These documents should be stored in a separate file and clearly designated as containing privileged communications. In the event of a search or 'dawn raid', these documents can be plainly identified as privileged.
- Companies must train their employees to carefully prepare and label documents created for the purpose of seeking legal advice.
- Email advice should be given by way of attached documents rather than in the body of the email and the attachment should be clearly identified as confidential and legally privileged. This will present a barrier to immediate disclosure.
- Circulate advice received from external lawyers only to the extent necessary and in original form, without amendment (otherwise privilege may be lost).
- Ensure that recipients of any advice from external lawyers are aware of the confidential nature of the advice.
- Update internal compliance procedures (including search or dawn raid manuals) to reflect the ECJ's decision in Akzo.