The recent European Court of First Instance decision in Akzo Nobel has reaffirmed that in-house legal counsel cannot claim legal professional privilege protection when under investigation by the European Commission.
The decision confirms the previous position of the ECJ in 19821, that under European law, a company can only claim privilege in relation to communications that come from external lawyers and only then if they relate to the company’s rights of defence.
On the facts of the Akzo Nobel2 case, this meant that emails between Akzo’s manager and its in-house counsel were not protected by privilege. The rationale behind the ruling appears to be that not all in-house counsel, as employees of the company, can be seen as truly independent. However, the decision has been severely criticised by professional bodies in some European countries (such as the UK), where in-house counsel can join a national law society, have a duty of independence, and can claim privilege in domestic matters.
Internal documents prepared by a company specifically and exclusively for seeking legal advice from external lawyers should still attract privilege. However, in house counsel will have the burden of demonstrating this and, in Akzo Nobel, the fact that documents were later provided to external counsel did not make them privileged (as this was not the exclusive purpose of their preparation).
Practical effect of the decision
Companies may have to review their competition compliance policies in light of the decision. The practical effect for in-house counsel is that they may be forced to provide advice orally or engage external lawyers if they wish to maintain privilege over written communications in the context of European Commission investigations.
As a matter of good practice all documents and correspondence prepared exclusively for the purposes of obtaining external legal advice should be marked as a privileged communication.
Guidance on Commission investigations
The decision also gave some useful guidance on the procedures to be followed during an investigation by the Commission. In-house counsel should be aware of their rights in such circumstances.
If the company wishes to claim privilege over a document it will need to show the authorities why privilege should attach to it. A key point arising from the decision is that the Commission is not entitled to view the contents of the documents at this stage. It may be possible to demonstrate that a document has been sent to or from an external lawyer by showing the Commission the heading of an email or fax without revealing the contents of the document itself. If, however, the Commission does not accept the company’s explanation, the documents should be placed in a sealed envelope. The Commission can then take the sealed envelope away but should not open and review the documents until a decision has been made as to their status. The company can challenge that decision before the Court of First Instance.
Privilege under English law
In domestic matters, outside the context of the European Commission, in-house counsel can usually claim privilege over their dealings with officers of their company for the purposes of providing legal advice. However, following the Three Rivers decision, a key issue is to ensure that privilege is maintained as between the legal team and “the client”, a term which may now be narrowly construed and may not extend to certain individuals and departments within the same commercial organisation.
Many in-house counsel are likely to be concerned with privilege in the context of disclosure during litigation, investigations and regulatory proceedings by such bodies as the FSA and the Inland Revenue. Practical tips in such circumstances include:
- Lawyers (in-house counsel or external) should be involved from the outset in any investigation into a company’s affairs, particularly if it is a fact finding investigation.
- The issue of privilege should be discussed between the client and lawyer at the outset of the investigation, so the work can be structured to maintain privilege. Identify at the outset who is “the client”, and perhaps confirm this in writing.
- Those outside the remit of “the client” should be advised not to create documents which relate to the matter without the prior consent of the client.
- Fact finding should be carried out by the lawyers.
- Take care where requests for information are made outside “the client”.
- Do not copy correspondence/advice outside of “the client”. If this is deemed necessary, for example, to external non legal advisors, protective measures should be put in place.
- Mark all correspondence “confidential and legally privileged”.
- Internal communications and discussions within the client company should be discouraged unless in the presence of a lawyer