On September 14, 2010, the EU Court of Justice ruled that communications with in-house counsel made in the context of a European antitrust investigation are not protected from disclosure in the EU by a legal professional privilege (LPP)1. This is an important decision not only for European lawyers (whether in-house or not) but for lawyers everywhere whose practice involves matters affected by EU law.2
The EU doctrine on LPP was first formulated by the Court of Justice in the 1982 AM&S judgment3 and was subsequently refined by the intermediate European appellate court (now known as the “General Court”) in 2007.4 This 2010 Court of Justice decision further confirms the very narrow scope of the LPP in the EU.
In the AM&Scase, the Court ruled that, under EU law, the LPP applies only to written communications between lawyers and clients if those communications are made for the purpose and in the interest of the client’s rights of defense and only if the communications are made with an external independent lawyer entitled to practice in one of the EU member states. The 2007 judgment in the Akzo Nobel case reinforced this narrow scope of the LPP by expressly excluding any communications between the company and an in-house counsel, even where the latter is a member of a national bar of one of the EU member states. Internal company documents are thus only protected by LPP if they are created “specifically and exclusively” for the purpose of seeking legal advice from outside counsel in exercise of the rights of defense. The mere fact that a document has been discussed with a lawyer is not sufficient to afford it protection.
Perhaps most important for U.S. lawyers, the Court’s decision means that the LPP does not cover communications with a lawyer qualified in non-European jurisdictions, regardless of whether the lawyer is “independent” and is allowed to practice in the EU under local bar rules (e.g., EU law in Brussels).
The Court of Justice Decision
The September 14, 2010 Akzo Nobel decision concerned a dispute that arose as a result of a European Commission “dawn raid” of the company during which correspondence between an in-house counsel and an employee was seized by the European Commission under applicable EU investigative rules and procedures. The European Commission claimed that it had the right to inspect and seize the documents and to use them in the law enforcement proceeding, rejecting Akzo’s claims that they were covered by LPP. The 2007 decision of the General Court sustained the Commission’s actions. Akzo and Akcros appealed the judgment of the General Court, denying the extension of LPP to communications with Akzo's in-house counsel.
Following the opinion of the Advocate General5, the Court of Justice rejected the various arguments for an expansive LPP made by Akzo/Akcros and adopted a narrow interpretation of the scope of LPP. In the Court’s view, an in-house lawyer does not enjoy the same degree of independence from his/her employer as a lawyer working in an external law firm, despite membership in a local bar or law society and the obligation to follow strict professional ethical rules of practice. The Court considered an in-house lawyer to be a mere employee and economically dependent on his/her employer. Thus, the Court viewed the in-house lawyer as not independent and bound to follow the commercial strategies pursued by the company. Accordingly, concluding that an in-house lawyer cannot be treated in the same way as an external lawyer, the Court rejected the alleged breach of the principle of equal treatment.
Equally, the Court rejected the Akzo/Akcros contention that national laws on the scope of the LPP had changed since the AM&S judgment. In the Court’s view, there was no identifiable predominant trend in the national legal systems of the EU countries towards extending LPP to in-house lawyers.6
The Court further considered that its decision did not restrict the ability of a company to defend itself. The Court posited that any individual seeking advice from a lawyer must accept the conditions and restrictions applicable to the exercise of that profession, which include the rules on LPP.
Finally, as regards the issue of legal certainty, potentially arising from the different scope of LPP at EU and national level, the Court concluded that it was not necessary for identical criteria to be applied to the different procedures. The companies whose premises are searched can determine their position in the light of the powers of the authority conducting the investigation.
While the Akzo Nobel decision arose in connection with an EU cartel investigation, it may have broad implications. It is increasingly important that companies examine carefully how they seek and receive legal advice, particularly where it concerns legal issues in the EU. First, cartel investigations are increasingly multi-jurisdictional7 and the actions and counsel of non-EU lawyers, who may be intimately and substantially involved in the defense, may not enjoy any LPP protections against disclosure of communications and their work product Second, there is no reason whatsoever to believe that this Court of Justice decision is limited to cartel matters. It should apply to all competition matters in the EU. Therefore, the same concerns should arise in the context of other European Commission competition investigations, such as mergers, distribution agreements, and so forth. Finally, one must recognize that the refusal to extend LPP to in-house counsel communication may move to other areas of regulatory scrutiny in the EU.
1 Akzo Nobel Chemicals Ltd and Akcros Chemicals, Ltd. v. Commission, Case C-550/07, 14 September 2010, http://curia.europa.eu.
2 The ruling presumably eliminates the attorney-client privilege that protects communications with clients seeking legal advice but as well the attorney work product privilege that protects an attorney’s mental impressions.
6 In this context, the appellants further argued that the Court must, in deciding the matter, take into consideration the fact that, since 2004, the EU system of competition enforcement requires a great degree of self-assessment, thus leading to an increasing need and use of in-house lawyers to implement compliance programs. Ironically, despite the strong and clear EU policy requiring greater responsibility on companies for compliance, which has been a high priority of the European Commission, the Court of Justice dismissed these arguments as not justifying a change in the case law.
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Howard W. Fogt