On Sept. 14, 2010, the European Court of Justice (Azko Nobel Chemicals Ltd and Akcros Chemicals Ltd, Case. No. C-550/07 P), issued a judgment finding that the attorney/client privilege does not apply to communications between company management officials and in-house counsel in competition cases or investigations by the European Commission. The ruling concerned emails exchanged by a director general of the company and an in-house lawyer who was a member of the Netherlands Bar. Companies doing business in Europe should take note of the decision and recognize that communications with in-house counsel in the EU will not be accorded privilege protection in competition cases or investigations by the EU.

Relying on prior precedent, the Court found that the attorney/client privilege applies only to exchanges with “independent lawyers.” The Court stated: “It follows that the requirement of independence means the absence of any employment relationship between the lawyer and his client, so that legal professional privilege does not cover exchanges within a company or group with inhouse lawyers.” The Court rejected the argument that an in-house lawyer’s professional obligations provided sufficient independence: “An in-house lawyer, despite his enrolment with a 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.” Further, “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 very nature, does not allow him to ignore the commercial strategies pursued by his employer, and thereby affects his ability to exercise professional independence.”

The Court rejected other arguments, including that EU member states have increasingly recognized the role of in-house counsel in advising companies, and extending the attorney/client privilege to in-house lawyers. Although the Court recognized this tendency, it indicated that it was impossible to identify tendencies which were uniform or had clear majority support among the laws of the member states.

The companies’ appeal was supported by the European Company Lawyers Association, the American Corporate Counsel Association, the International Bar Association, among other organizations. The ruling has been criticized as failing to give proper weight to the professional obligations and role of in-house counsel in advising management on legal compliance.