The European Court of Justice has issued a major decision on the
limits of privilege in the European Union (EU). On September 14,
2010, the EU's highest court ruled in Akzo Nobel Chemicals
Ltd. v. Commission (Case C-550/07 P) that legal professional
privilege (which includes solicitor–client privilege)
does not apply to communications between a company and its
in-house counsel. This ruling highlights important strategic
considerations for parties conducting business in the EU.
The Privilege Claim
The case arose from a search of Akzo's offices in the United
Kingdom by the European Commission, which was seeking evidence of
alleged violations of EU competition laws. The Commission seized
documents containing communications between Akzo's in-house
counsel and other employees concerning Akzo's competition
compliance program. The in-house lawyer was a member of the Bar of
the Netherlands. Akzo claimed that the documents were protected by
legal professional privilege, a claim that the Commission rejected.
Akzo appealed to the EU courts.
Under the laws of both the U.K. (Akzo's location) and the
Netherlands (of whose Bar the in-house lawyer was a member), legal
professional privilege protects the legal advice given by in-house
counsel. However, the European Commission is governed by
supra-national EU law. The issue before the European Court of
Justice was whether, under EU law, the advice of in-house counsel
is protected by legal professional privilege.
The Court held that legal professional privilege does not attach
to legal advice given to a company by its in-house counsel, even
where privilege would attach to the company's communications
with external counsel. The Court based the distinction on what it
described as in-house counsel's lack of "professional
independence" from the employer company.
The Court held that legal professional privilege is available
only when legal advice is given by an "independent
lawyer." Although the Court acknowledged that in-house counsel
in many EU states are subject to professional ethical obligations
that prevent them from conducting themselves improperly, it found
that the in-house lawyer's employment relationship deprives the
lawyer of the necessary independence: "[A]n in-house lawyer
cannot, whatever guarantees he has in the exercise of his
profession, be treated in the same way as an external lawyer,
because he occupies the position of an employee which, by its very
nature, does not allow him to ignore the commercial strategies
pursued by his employer, and thereby affects his ability to
exercise professional independence."
The Court's ruling reaffirmed principles of EU privilege law
set out in the 1982 decision in AM & S Europe v.
Commission. In 1982, only a handful of European states
recognized legal professional privilege for communications with
in-house counsel. Since then, however, a number of EU states have
enacted legislation specifically extending privilege to in-house
counsel. Akzo and several interveners argued that, under the
principle of equal treatment that governs EU law, the Court should
have overturned the earlier decision in AM & S Europe
and extended the privilege. The Court rejected this argument,
citing what it described as a lack of "clear majority support
in the laws of the Member States."
Implications of the Decision
The Akzo decision is directly contrary to Canadian and
U.S. privilege law, under which in-house counsel are regarded as
being in every respect in the same position as external counsel,
and under which the precise nature of the lawyer–client
relationship is largely irrelevant to the determination of whether
privilege attaches. North American companies doing business in
Europe, and which may be involved in proceedings in EU courts, need
to be aware that communications that are privileged on this side of
the Atlantic may not be privileged under EU law.
The narrow scope of privilege protection in the EU as affirmed
in Akzo makes it more challenging for inhouse counsel to
perform their legal advisory role efficiently. In Europe, a number
of companies have adopted somewhat unusual practices to protect
privilege. Some in-house counsel avoid setting out their legal
advice in writing or retain external counsel to provide key written
advice that they might otherwise have delivered themselves. In the
Akzo proceedings, the European Court of First Instance
explicitly acknowledged that these kinds of practices might be
In-house counsel for businesses that are active in European
markets should take note of Akzo and consider whether to
take precautions to protect the confidentiality of the legal advice
that they provide.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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