Akzo Nobel Chemicals Ltd & Akcros Chemicals Ltd v European Commission CoJ Case C-550/07 P 14 September 2010
A seven year battle to give legal advice from in-house lawyers the protection of legal professional privilege in European competition investigations has failed. The Court of Justice of the European Union (CoJ – previously known as the ECJ) has confirmed that nothing significant has changed since its last ruling on the point in AM&S Europe v Commission in 1982.
Akzo’s appeal was supported by Ireland, the Netherlands and the UK as well as by a number of bodies including the Council of the Bars and Law Societies of the EU, the International Bar Association and the American Corporate Counsel Association.
The court confirmed that under EU law legal professional privilege applies only where:
- the exchange with the lawyer is connected to the client's rights of defence; and
- the exchange emanates from independent lawyers, that is to say lawyers who are not bound to the client by a relationship of employment.
Although Akzo’s in-house lawyer was a member of the Netherlands Bar and subject to the regulations of a professional organisation, in many of the 27 EC member states in-house lawyers are not allowed to be admitted to a Bar or Law Society. Even though the court recognised that the protection of correspondence with in-house lawyers has increased since the AM&S case, the majority of the member states still exclude such correspondence from the protection of privilege and there is no predominant trend towards extending privilege to communications with in-house lawyers. .
Under English law, legal advice given by an in-house lawyer to his employer is privileged in the same way as legal advice given by an external lawyer to a client. This decision does not affect the position under English law. Within the EU, only Ireland, the Netherlands, Greece, Portugal and Poland take the same approach as the UK to this issue, which is why, although disappointing, the outcome of the Akzo appeal was a foregone conclusion.
In the UK, therefore, companies have the headache of dealing with two conflicting regimes. Where a competition investigation (known as a dawn raid) is carried out by a UK competition authority such as the Office of Fair Trading (OFT), the company is able to refuse to hand over documents containing relevant legal advice from its in-house lawyers since this advice is protected by privilege under English law. By contrast, where the investigation is carried out by the European Commission, communications with in-house lawyers must be handed over. To avoid this risk, companies need to route legal advice through their EEA qualified external lawyers to protect its confidentiality or ensure that internal sensitive advice from their in-house lawyers is not committed to paper.
It’s important to note here that lawyers, whether private practitioners or in-house lawyers, who are not qualified in an EEA country are not entitled to claim privilege. This has been the case since the AM&S decision and companies taking advice from lawyers in, for example, the US, need to be aware of this problem. US law firms may be able to avoid the problem by ensuring that advice intended for European clients is signed off by a colleague who is qualified in the EEA but this will not always be feasible.
It is worth noting the different national approaches to privilege in general as this will be relevant to companies operating in several jurisdictions and to litigation involving foreign parties and/or courts. Very broadly, under a civil law system only legislative enactments are considered legally binding and judges interpret rather than make the law. Civil law legal systems are found in the majority of countries in the world, for example Belgium, France, Germany, Italy, Japan, Luxembourg, The Netherlands, Portugal, Romania, Russia, Slovakia, Spain, Sweden and Switzerland. Most civil law countries do not impose an obligation to disclose documents harmful to a party's case, which in turn affects the role privilege plays.
In many of these civil law jurisdictions, privilege only covers documents in the hands of a lawyer and documents even including advice from a lawyer, will not necessarily be privileged in the client's hands. And as Akzo demonstrates, most civil law jurisdictions distinguish between legal advice given by external and in-house lawyers. By contrast, most countries with common law legal systems (which give great weight to the precedence of case law and trace their legal heritage back to England) such as the United States, India, Canada, New Zealand and Australia, take broadly the same approach to privilege as we do under English law.