The EC’s Court of First Instance (the “Court”) has delivered its decision in the joined cases of Akzo Nobel Chemicals Ltd and Akcros Chemicals Limited v Commission of the European Communities.
The Akzo decision has important ramifications in relation to two major issues affecting privilege under European law:
- The scope of legal professional privilege; and
- The position of in-house lawyers in relation to legal professional privilege.
In addition, the judgment provides useful guidance on the procedure to be followed during the course of a competition investigation by the Commission. It should be stressed that this briefing refers only to the position under European law, and the position of privilege in relation to English law is unaffected.
The importance of the case is underlined by the fact that it has been supported by a number of institutions, including The Council of the Bars and Law Societies of the European Union, the American Corporate Counsel Association- European Chapter, and the International Bar Association.
On 10 February 2003 the Commission ordered Azko to submit to an investigation into anti-competitive practices. Commission officials (with assistance from the OFT) carried out the investigation at Akzo’s premises in England on 12 and 13 February 2003, including seeking documentary evidence of ant-competitive behaviour. During the course of the investigation at Akzo’s premises a dispute arose between Akzo representatives and Commission officials in relation to a number of documents, and whether or not they were privileged. The documents were split into two categories: firstly; a memorandum from the manager of Akcros to one of his superiors containing information gathered internally by the manager in order to obtain legal advice in connection with a competition law compliance programme (plus a copy of the memo with handwritten notes referring to contact with a lawyer) (“Set A”); and secondly handwritten notes of the Akcros manager used to prepare the memorandum and two emails between the manager and Akzo’s co-ordinator of competition, who was a Dutch lawyer employed by Akzo full time in its legal department (“Set B”).
Despite vigorous protestations by Akzo that the documents were privileged, the Commission forced Akzo into accepting that a Commission official examined both sets of documents, under the supervision of an Akzo representative. In relation to Set A, a decision could not be reached on whether the documents were privileged, and so copies were taken, placed in a sealed envelope, and taken away by the Commission. In relation to Set B, the Commission decided that the documents were not privileged, and copies were placed directly onto its files.
The scope of legal professional privilege
Under European law it is an established doctrine that privilege is recognised in relation to “written communications between lawyers and clients for the purposes and in the interests of the client’s rights of defence”. The Akzo case breaks new ground in relation to this doctrine by holding that internal company documents (for example, preparatory fact finding documents such as notes of staff interviews) can be privileged, provided that they were created exclusively for the purpose of seeking legal advice from an external lawyer in exercise of the rights of defence. This position is maintained even if the documents have not been exchanged with an external lawyer, or have not been created for the purpose of being sent to an external lawyer. This is a clear departure from previous European case law, and opens up the possibility that documents produced during fact gathering in certain circumstances can be subject to privilege under European law.
However, the Court stressed that the possibility of treating a preparatory document as privileged must be construed restrictively, and that it would be for the undertaking seeking to rely on the protection to show that the relevant documents were created with the exclusive aim of seeking legal advice from an external lawyer for the purpose of exercising the rights of defence. This position should be unambiguously clear from the documents themselves, or the context in which they were prepared or found. On the facts of the Akzo case, the Court held that Set A, and the handwritten notes in Set B were not covered by legal professional privilege.
This restrictive ‘exclusive purpose’ test can be contrasted with the wider ‘dominant purpose’ test used in English law to determine whether a document is subject to litigation privilege.
The position of in-house lawyers
Since 1982 it has been a well established position under EC law that communications with in house lawyers are not afforded the same protection as those of independent, or external, lawyers (AM & S, Case 155/79). The Court in the Akzo case re-considered this position. Despite the intervention of a number of interested institutions (for example, the International Bar Association), disappointingly for in-house lawyers the Court of First Instance concluded that there was no justification for a departure from the established case law. The Court stated that although the recognition of the role of in-house lawyers, and the protection of their communications, is more common than when AM & S was decided, it was not possible to identify a uniform consistency on, or clear majority support for, this point in the laws of Member States. The Court also found that the differential treatment of communications between in-house lawyers and their clients as compared to external lawyers and their clients was not contrary to the principles of equal treatment or the free movement of services.
As such, the emails between Akzo’s manager and the in house lawyer contained in Set B were not covered by privilege.
Procedure during an investigation
The judgment provides useful guidance on the procedure to be followed during an investigation by the competition authorities. If an undertaking is claiming privilege over a document it should provide the Commission with relevant information to demonstrate why the document should be protected. It is vital to note that the undertaking is entitled to refuse to allow Commission officials to view the document, even briefly, for these purposes unless to do so would not risk revealing the contents of the document. We assume, for example, that showing that an email has been sent to an external lawyer would be enough to show that the document is privileged. If the Commission does not accept the explanation of the undertaking, then the document should be placed in a sealed envelope, which the Commission can take away. The Commission is then not entitled to read the content of the document until it has made a decision in relation to the status of the document which allows the undertaking to refer the matter to the Court of First Instance.
The Court found that despite the Commission having breached the above procedure by reading the disputed documents during the investigation, this did not result in Akros being unlawfully deprived of protection in relation to such documents, as the Commission had not erred in deciding that the documents did not enjoy the protection of privilege.