ECJ Confirms No Privilege for In-House Counsel in EU Competition Investigations: Practical Guidance for Clients

September 20, 2010

In its judgment in Case C-550/07 P Akzo Nobel on September 15, the European Court of Justice (ECJ) confirmed that legal professional privilege does not protect communications between a company and its in-house lawyers during European Commission competition investigations. The judgment upholds the ECJ’s 1982 ruling in AM&S Europe v. Commission, that legal advice can only be privileged in such investigations where it is connected to ‘the client’s rights of defence’ and where it emanates from an ‘independent lawyer’ qualified to practice in an EEA Member State. The ECJ reiterated in Akzo that an employed (or in-house) lawyer does not have the requisite degree of independence to benefit from privilege because of their economic dependence on and close ties with the employer.

Whilst not unexpected, this judgment disappoints the many third-party interveners in the proceedings including the UK, Dutch and Irish governments, and the American Corporate Counsel Association, who argued that in-house lawyers’ communications should benefit from similar protections as external lawyers. Coming at a time when the European Commission’s investigative powers are increasing, the ruling continues to make it hard for companies to take effective and prompt advice from their in-house counsel.

Please note that the ECJ’s ruling in Akzo does not address whether communications given by US attorneys or other external lawyers qualified outside the EEA would be privileged in European Commission investigations, and so the legal position remains that this advice is not privileged.

This alert provides practical advice for clients on how to maximise protection of communications which may be of interest to the European Commission in the context of competition investigations or reviews.

Practical Implications and Guidance for Clients

The European Commission often uses its extensive powers in cartel, abuse of dominance and merger investigations to require the production of large quantities of information and documents. During dawn raids, in particular, the Commission obtains sweeping access to IT systems and files. It is therefore essential to know which documents are privileged and can therefore be withheld. Also critical for clients is to know the limits of the scope of legal professional privilege when creating documents so as to avoid generating documents which may have to be disclosed during a Commission competition investigation or review.

In this context, a document can only be withheld from the Commission on legal professional privilege grounds if, broadly, it is a communication (i) regarding the company’s rights of defence and (ii) with an independent external lawyer, i.e., a lawyer who is not bound to the company by a relationship of employment and who is qualified to practise in an EEA Member State. In practical terms, therefore, any written request from a company to its in-house lawyer for legal advice is not likely to be privileged, and nor is any advice given by the in-house lawyer in response to such a request.

Internal preparatory documents, including summaries of external lawyers’ advice, may be privileged, even if they have not been exchanged with an external lawyer, if they were prepared exclusively for the purpose of seeking legal advice from an external lawyer in exercise of the rights of defence. Further, internal documents merely summarising or reporting the text or content of an external lawyer’s advice, whether prepared by an in-house lawyer or other company employee, may also be protected if the communication from the external lawyer would also have been privileged. However, if such documents include the opinion or commercial judgment of the in-house lawyer or employee, or other additions or amendments, they run the risk of falling outside protection from disclosure.

In order to ensure the greatest degree of protection for businesses operating in Europe, in-house counsel are advised to:

  • conduct sensitive in-house competition-related investigations orally;
  • consider instructing external EEA-qualified lawyers if written advice is required, ensuring that the advice is written on the external lawyers’ headed notepaper/emails;
  • resist creating preparatory documents which are not sent to external lawyers, unless it is clear on the face of the document that it is created solely for the purpose of obtaining external legal advice; and
  • ensure all privileged communications between the company and external lawyers are clearly marked “Privileged and Confidential- External Lawyer-Client Communication” and placed in a separate physical and/or on-line file (hosting separate servers for each country in which the company does business is also recommended).

Additionally, where commercial, compliance or policy issues are addressed alongside legal issues, it is advisable to keep the two groups separate to avoid the commercial issues contaminating the legal purpose. Equally, in-house counsel should restrict the circulation of communications containing legal advice within the company only to those who need to see it, as privilege may be lost if documents are too widely disseminated. Finally, when circulating external legal advice, in-house counsel should not make any additions or amendments to it and limit the preparation of summaries of such advice.

As regards national competition investigations, given that the rules protecting communications between lawyers and their clients vary between EU Member States, advice on national rules should be sought in the context of a national competition law investigation or an investigation potentially involving EU and national competition law issues.

Background to the Akzo Case

In February 2003, the Commission and the UK’s Office of Fair Trading conducted a dawn raid on Akzo’s premises in Manchester, England. During the antitrust investigation, a dispute arose over whether the Commission had the right to access emails between an Akzo general manager and an in-house counsel (who was a member of the Dutch Bar), which Akzo claimed were privileged. The Commission decided in May 2003 to reject Akzo’s privilege claim and refused to return the documents. Akzo appealed this decision to the General Court and then to the ECJ.

In September 2007, in Joined Cases T-125/03 and T-253/03, the General Court held, inter alia, that there was no legal professional privilege in communications between a company and its in-house lawyer and therefore such communications may be seized by the Commission during investigations. This point was appealed by Akzo to the ECJ, in the present case, which ruled that the EU legal landscape had not evolved to an extent that would justify expanding the scope of legal professional privilege to in-house lawyers. Indeed, the ECJ found that “no predominant trend towards protection under legal professional privilege of communications within a company or group with in-house lawyers may be discerned in the legal systems of the 27 Member States of the European Union.”

As the ECJ’s ruling in Akzo does not address whether advice given by US attorneys or other external lawyers qualified outside the EU would be privileged, the legal position remains that this advice will not be privileged.

For more information regarding this alert or to discuss any questions or concerns about the Akzo judgment, legal professional privilege, and all other aspects of European and US antitrust laws, please contact the following lawyers:

Leiv Blad, Co-chair, Antitrust and Trade Regulation Group, +1.202.373.6564

This article was originally published by Bingham McCutchen LLP.