EU court delivers setback for in-house lawyers
18 Sep 07
Court of First Instance denies legal professional privilege to employed counsel
Communications between a company and its in-house legal counsel cannot attract legal professional privilege in the context of European Union antitrust proceedings, the Court of First Instance ruled yesterday.
The EU court rejected an application by Dutch company Akzo Nobel Chemicals Ltd and its British subsidiary Akcros Chemicals Ltd, seeking the return of documents seized by the European Commission in the course of an investigation into possible anti-competitive practices.
The companies, supported by a number of bars and legal associations including the CCBE, had argued among other points that emails exchanged between the general manager of Akcros and a member of Akzo Nobel's in-house legal team, who was a member of the Dutch bar, was privileged.
They maintained that the earlier AM & S case, which required that advice be obtained from an "independent" lawyer to qualify, did not rule out a member of a bar or law society who was bound by professional obligations and ethical rules. In this case the lawyer was covered by an agreement under which the management of the Akzo Nobel Group accepted that the obligation of independence and compliance with the bar rules under Netherlands law prevailed over loyalty to the group.
The court however ruled that the requirement for an independent lawyer in AM & S was based on a concept of the lawyer’s role as collaborating in the administration of justice by the courts and as being required to provide, in full independence, and in the overriding interests of the administration of justice, such legal assistance as the client needs.
"It follows that the court expressly excluded communications with in-house lawyers, that is, legal advisers bound to their clients by a relationship of employment, from protection under LPP." The five-judge court pointed out that the court in AM & S had rejected an express proposal by Advocate General Sir Gordon Slynn that a lawyer who remained a member of the profession and subject to its discipline and ethics should be treated in the same way as independent lawyers.
"The court therefore concludes that, contrary to what the applicants and certain interveners submit, the court in its judgment in AM & S defined the concept of independent lawyer in negative terms in that it stipulated that such a lawyer should not be bound to his client by a relationship of employment..., rather than positively, on the basis of membership of a Bar or Law Society or being subject to professional discipline and ethics."
The court did reject arguments by the Commission that the seizing of documents for which privilege was claimed was not itself subject to review, and that it was entitled to give a cursory reading to see whether the documents were capable of attracting privilege. The judges approved the use of the sealed envelope procedure pending the resolution of disputes.
"Significant guidance"
Commenting on the case, John Schmidt, competition law partner at Shepherd and Wedderburn, said: "While on the face of it Akzo simply reaffirms the pre-existing case law by holding that in-house lawyers' advice is not covered by legal professional privilege, it provides significant further guidance on the limits of what the Commission is entitled to do in cases of genuinely disputed documents.
"In particular, the Commission is not entitled even to look through the documents where (i) there is a genuine dispute over whether a document is covered by privilege (i.e. that it is not clear from the face of the document that it is or is not privileged; and (ii) the company provides a sufficient explanation of the circumstances that would make it privileged (even if disputed by the investigators); and (iii) where a cursory examination of the document would provide the Commission with information is shouldn't have.
"In those circumstances the correct process is either to leave the document with the company or to take it in a sealed envelope and then adopt a formal decision that is appealable to the CFI before reviewing the contents.
"While this increases the company's (and its lawyers') bargaining position, the effect of the judgement is that if the Commission nevertheless reviews the document and subsequently it turns out not to be privileged, any breach of process is de facto healed by the fact that the document was not privileged."
The court's decision can be read on the European Court website.