The European Court of Justice (the "ECJ") today rejected the appeal from Akzo and Akcros v Commission. The ECJ:
- decided that communications between in-house lawyers and other employees of the same business should remain outside the scope of legal professional privilege ("LPP") under EU law; and
- ruled that the application of LPP at the EU level requires independence which, in part, means the absence of any employment relationship between the lawyer and his client.
Background
The decision of the ECJ stems from a challenge to the existing interpretation of EU law on legal privilege in Akzo and Akcros v Commission.
The longstanding EU position, as laid down in the AM & S case, is that written communications between a lawyer and their client would only be protected by LPP where:
- the communications were made for the purposes of and in the interests of the client's rights of defence; and
- they emanate from independent lawyers, who are not bound to the client by a relationship of employment.
It was the second of these two limbs that Akzo and Akcros sought to contest.
The case centred on a number of items of correspondence between an in-house lawyer and an employee seized by the Commission in the course of an EU competition law dawn raid. The applicants argued that first, communications with in-house lawyers who are members of the Bar or Law Society of a Member State should be protected under LPP. The principle of 'independence', it was suggested, also applied equally to in-house and external lawyers, since membership of professional organisations subject all lawyers to professional and ethical requirements. It was argued that the distinction should therefore be drawn between those lawyers who are and are not subject to these professional requirements, rather than on their relationship of employment.
In the alternative, it was argued that if the AM & S decision did exclude in-house lawyers, it would be appropriate for the ECJ to extend the scope of LPP. It was argued that in the majority of Member States, including the UK, LPP extended to in-house counsel. It was further argued that the increased responsibilities placed on undertakings to self-assess their compliance with EU competition rules means that the use of in-house lawyers was becoming essential in large organisations and should be positively encouraged by an extension of the protections available.
These arguments were rejected by the Court of First Instance (now the General Court) on 17 September 2007 and Akzo and Akcros submitted an appeal.
Akzo and Akcros were supported in their appeal by interventions from The Republic of Ireland, The Kingdom of Great Britain and Northern Ireland, The Kingdom of the Netherlands, The International Bar Association, the Society of Bars and Law Societies of Europe, the Nederlandse Orde Van Advocaten, the American Corporate Counsel Association and the European Company Lawyers Association. There were no interventions supporting the position of the Commission.
The Chief Executive of the Law Society of England and Wales, Des Hudson, remarked that "it appears to be a foolish move by the court not to refresh its case law to reflect the realities of the 21st century. The role of in-house counsel has greatly evolved since 1982."
Advocate General's Opinion
Advocate General Kokott on 29 April 2010 again rejected, in unusually forthright language, the arguments raised by Akzo and Akcros in favour of maintaining the position in EU law of LPP and the original interpretation of AM & S (see Community Week issue 470). In brief, the Advocate General argued that due to economic dependence on their employer, in-house lawyers were not sufficiently independent from their 'client' and could be less prepared in dealing with conflicts of interest. She further suggested that the changes in the legal landscape since AM & S were not sufficient to justify such a significant change in the EU's approach to LPP.
The American Corporate Counsel Association reflected that "the AG's ruling infers that on the day that an experienced and ethical lawyer enters a corporate headquarters to work on-premise, they somehow check their credentials and honor at the front door."
It was anticipated that the ECJ would follow the recommendations made by the Advocate General in her opinion.
The ECJ Judgment
The ECJ, following the Advocate General's recommendations, found in favour of the Commission in the appeal.
The ECJ held that the General Court had not erred in its interpretation of the AM & S decision and that, despite enrolment with a Bar or Law Society and any additional professional ethical obligations placed on an in-house lawyer, he cannot be deemed to be truly independent for the purposes of LPP. The position of an in-house lawyer is inevitably influenced by and subject to the commercial strategies undertaken by the employer. The ECJ supported the approach taken by the Advocate General, that the independence of lawyers should be framed positively, with reference to their professional ethical obligations, and negatively, by the absence of an employment relationship.
Furthermore, the argument proposed by Akzo and Akcros regarding the purported breach of the principle of equal treatment was dismissed by the ECJ. The ECJ supported the view of the Commission that in-house lawyers and external lawyers are in fundamentally different positions and therefore can be treated differently in the application of LPP.
Additionally, the ECJ considered that a change in the established case law could not be justified by the developments in competition law since the judgment in AM & S and, further, that there was no discernable trend in Member States in favour of extending the scope of LPP to in-house lawyers. The ECJ considered the EU rules on LPP formed part of the framework of restrictions and conditions that apply to lawyers in the exercise of their profession and that it is for the client to determine whom to seek advice from based on the framework applicable to that particular profession.
The ECJ additionally supported the view of the Commission that it was right to have LPP defined at an EU level to avoid the complexity and uncertainty in attempting to apply the differing national rules on LPP in the pursuit of EU competition investigations, thereby ensuring that undertakings are treated equally.
Effect of the Judgment
This judgment affirms the longstanding approach of the EU courts to the question of LPP under EU law. The appeal and its judgment consider most of the persuasive arguments raised by proponents of a change in the law. None of these arguments were, however, deemed compelling enough, in the opinion of the ECJ, to alter its approach. The judgment therefore can be seen to bring a degree of certainty to the privileges attached to the role of in-house lawyers in the EU.
There remains, however, a divergence between the approach on an EU level and that in some of the Member States, including the UK. Whether this decision will have a significant impact on the provision of in-house competition advice remains to be seen.
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