The United States exported an all-time record high of $2.2 trillion worth of goods and services in 2012. But while U.S. business has gone global, the attorney-client privilege has not always come along for the ride.
In 2010, the European Court of Justice (ECJ) in Akzo Nobel Chemical Ltd. and Akcros Chemical Ltd. v. European Commission confirmed prior case law that only communications between external lawyers and their clients benefit from attorney-client privilege during investigations by the European Commission (EC). The EC has controversially read prior case law as limiting attorney-client privilege to EU-qualified lawyers and it was hoped that the ECJ would clarify this position in Akzo Nobel. It did not do so with the result that many types of attorney-client communications routinely assumed to be privileged in the U.S. may not receive protection in the European Union.
The cloud around the scope of U.S. attorney-client privilege in the E.U. extends inter alia to:
- U.S.-based in-house counsel advising their European-based company;
- U.S.-based outside counsel advising a European-based company;
- U.S.-based company executives disclosing information to E.U.-based in-house counsel;
- U.S. privilege rights being waived by parties involved in EC investigations; and
- EC investigations being conducted outside of Akzo Nobel’s specific antitrust context.
In the wake of Akzo Nobel, any U.S. company conducting business in Europe must ensure all of its attorneys take special care to preserve attorney-client privilege.
Background on Akzo Nobel & EU Privilege Law
Understanding the full scope – and limitations – of the Akzo Nobel decision requires some background in E.U. privilege law. The foundation for attorney-client privilege in the E.U. comes from a 1982 decision, AM & S Europe Limited v. Commission of the European Communities (AM&S), in which the ECJ recognized legal profession privilege (LPP) at the E.U. level when two prerequisites were present. The critical elements are:
- the correspondence in question must have been made “for the purposes and interests of the client’s rights of defence;” and
- the correspondence must also “emanate from independent lawyers, that is to say, lawyers who are not bound to the client by relationship of employment.”
The ECJ further stated that the protection of LPP applied to any (external) lawyer entitled to practice in any of the E.U. member states, which has been restrictively interpreted by the EC subsequently as limiting LPP to E.U.-qualified lawyers.
Turning to Akzo Nobel, in 2003, anti-trust investigators for the EC seized two e-mails between Akzo Nobel’s U.K.-based managing director and the company’s Dutch in-house competition lawyer. Challenging the seizure, Akzo Nobel argued in court that the e-mails were privileged. Applying AM&S, though, the lower court held that in-house lawyers were not truly “independent” and therefore could not qualify for privilege.
Appealing the decision to the ECJ, Akzo Nobel argued that AM&S’s “independence” requirement had been satisfied because in-house lawyers were required to adhere to the external ethical and professional standards of their E.U. Member State’s Bar. The ECJ rejected the company’s arguments and affirmed a strict interpretation of AM&S’s two-prong LPP framework. The Court held that an in-house lawyer’s employment relationship precluded the possibility of truly independent decision-making, notwithstanding the existence of external professional obligations, making their communications and work product ineligible for LPP.
Implications for U.S. Parties
Akzo Nobel confirmed that a wide gulf exists between U.S. and E.U. approaches to privilege for in-house attorneys. Because of this asymmetry and the EC’s stance towards non-E.U. qualified lawyers, U.S. parties face an increased risk of unwanted or unforeseen disclosures when they store or transmit sensitive information in the E.U.:
- Privilege risk for U.S.-based in-house counsel
Communications emanating from U.S.-based in-house counsel may no longer be privileged during EC investigations because Akzo Nobel’s reasoning applies equally to in-house counsel based in the E.U. and in the U.S.
- Privilege risk for U.S.-based outside counsel
Akzo Nobel confirmed that LPP may attach to communications between company executives and “independent,” outside counsel. However, the ECJ failed to clarify whether “independence” requires enrollment in an E.U. Member State’s Bar or Law Society. In AM&S, the ECJ hinted that E.U. legal qualifications were a freestanding prerequisite for LPP; the advisory opinion of the Advocate General in Akzo Nobel affirmed this view, arguing that the extension of privilege to non-E.U. lawyers “would not under any circumstances be justified.” Absent further clarification by the E.U. courts, it is possible that even outside counsel will not qualify for LPP if they are not licensed to practice law within the E.U.
- Privilege risk for confidential information provided to E.U. in-house counsel
Akzo Nobel’s categorical denial of privilege for E.U.-based in-house lawyers indicates that information provided by U.S. actors may be discoverable during EC investigations. In addition to the potential impact of these disclosures on the European investigation, there is an added risk that the EC will turn over discoveries to US authorities for use in subsequent domestic investigations.
- Potential for inadvertent waivers of U.S. privilege
Unlike in the E.U., in-house lawyers are eligible for attorney-client privilege in the U.S. However, that privilege can be waived if a party “voluntarily” compromises the confidentiality of relevant communications. The turnover of documents to the EC following Akzo Nobel may be interpreted as such a waiver. In order to preserve their U.S. privilege rights, companies under investigation by the EC may have to affirmatively demonstrate that their document turnovers are not voluntary; however, the procedural requirements for such a showing of “involuntariness” have yet to be fully defined.
- Uncertain scope of the Akzo Nobel ruling
The underlying facts of Akzo Nobel involved an antitrust investigation by the EC. However, the ECJ’s holding was broad enough to encompass any kind of information-gathering activity conducted by the EC. At least until the issue is clarified by the E.U. courts, in-house counsel and U.S. executives may be vulnerable to disclosure and/or waiver in all areas where the EC has native investigative capacities.
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Following Akzo Nobel, sensitive information shared with E.U. in-house counsel and corporate executives may no longer be protected by attorney-client privilege. Collaboration with E.U.-qualified outside counsel may be necessary to satisfy the ECJ’s strict eligibility requirements for LPP. To ensure the client may speak frankly and freely with legal counsel and to preserve attorney-client privilege in the event of a dispute, therefore, attorneys supporting multinational corporations and others with business abroad are well advised to collaborate with counsel experienced in cross-border case management.