UK: In-House Counsel: A Privileged Position?

Last Updated: 10 August 2011
Article by Eve McBrinn and Katie Papworth

The Grand Chamber of the European Court of Justice ('ECJ') has today (14th September 2010) handed down its judgment in the appeal of the joined cases of Akzo Nobel Chemicals and Akcros Chemicals v Commission (T-125/03 and T-253/03).

The European Commission ('EC') rejected the claim of legal professional privilege ('LPP') for correspondence with Akzo's in-house lawyer. The ECJ has upheld the decision of the European General Court (previously known as the Court of First Instance) and has ruled that, under European Union ('EU') law, correspondence between an in-house lawyer and its client in relation to competition law is not protected by LPP because an in-house lawyer does not enjoy the same level of independence from his employer as a lawyer working in an external law firm. We have considered further the impact of this potentially momentous decision below:

Legal professional privilege ('LPP') is an established legal principle of English law and is a fundamental right pursuant to which the confidentiality of communications between a lawyer and his client is preserved; if a document attracts LPP, there will be no obligation to disclose it to the court or third party. In the case of AM & SEurope v Commission of the European Communities (18 May 1982, Case 155/79) the ECJ acknowledged LPP as a principle of EU law in the following circumstances:

  1. Legal advice must be requested and given for the purposes of the client's rights of defence; and,
  2. The communication exchange must emanate from independent lawyers.

In a well developed legal system the right to raise a defence to a claim is taken for granted but, often overlooked, the essential corollary to this right is that a client be entitled to consult fully and frankly with a lawyer on the understanding that anything said will not compromise the defence.

In today's decision of the Akzo Nobel & Akcros Chemicals appeal, it appears that this fundamental EU law principle has been eroded, at least in as much that advice given by an in-house lawyer will not be considered confidential should the company be investigated under the EU competition regime.


In February 2003, the EC, together with the Office of Fair Trading, carried out dawn raids at the premises of Akzo & Akcros in Manchester alleging possible anti-competitive practices in breach of EU competition law. During the course of its investigation, the EC sought to remove documents from the premises which, Akzo submitted, should properly be protected from disclosure by LPP.

The disputed documents were two emails exchanged between the managing director and Akzo Nobel's coordinator for competition law (an Advocaat of the Netherlands Bar and member of Akzo Nobel's legal department). Despite the fact that the documents had been produced for the purpose of obtaining legal advice, in May 2003, the EC rejected the claims made by Akzo Nobel and Akcros that they were protected by LPP.

Akzo Nobel and Akcros challenged the EC's decision. On 17 September 2007, the challenge was rejected by the European General Court on the basis that in order to attract LPP, the main purpose of the document had to be the seeking of external legal advice. Accordingly, communications with an in-house lawyer could never attract LPP as the independence between the solicitor and client was a pre-requisite to a finding of privilege.

The ECJ's Decision

Today the ECJ, the highest court in the European Union, has upheld the decision of the European General Court which, in practice, significantly narrows the scope of LPP under EU law and the documents which may attract it.

Rationale of the decision

  • The decision, based on the principles established in AM SEurope v Commission, is based on the requirement of independence which, the ECJ found, means the 'absence of any employment relationship' because an in-house lawyer 'is less able to deal effectively with any conflicts between his professional obligations and the aims of his client.'
  • Further, and on the basis that there is a lack of independence, the ECJ (following the advice of the Advocate General) opined that an in-house lawyer completing the task of competition law coordinator is less able to sever the close ties between lawyer and employee, which does not allow him to ignore the commercial strategies of his client, and will potentially place him in a position of conflict. An independent legal advisor, on the other hand, will be better placed to withdraw their services should a conflict of interest arise. The ECJ further reasoned that in-house lawyers are generally dependant, in an economic sense, on their employer. Taken together, these arguments underpin the decision that communications produced by in-house lawyers should not attract LPP in EU competition investigations.


Whether this decision represents the first step to a full scale departure from the EU principle of LPP remains to be seen. Notably, the UK, Ireland and the Netherlands all supported Akzo Nobel and Akcros' appeal and therefore, so far as the UK is concerned, documents produced by in-house counsel will continue to attract LPP in domestic investigations. It must be remembered, however, that this decision will affect all Member State companies including those based in the UK in the context of EU competition investigations.

The potential for the Akzo decision to set a dangerous precedent should not be overlooked. The arguments advanced by the ECJ in finding that an apparent lack of independence should negate a claim of LPP could be applied equally to situations other than competition investigations. Nothing in today's judgment suggests otherwise and one may find that the removal of LPP creeps, by degrees, to other areas.

Today's economic climate has led many organisations to look at ways in which costs can be reduced; instead of having a panel of independent legal advisors, many organisations have chosen to bring some of the work in-house – particularly in relation to compliance issues – and one wonders whether the ECJ's decision may see organisations reversing this trend and opting to again consult independent legal advisors on competition and compliance issues. Indeed, Akzo and Akcros argued that the 'modernisation' of the procedural rules on cartels has increased the need for in-house lawyers, the importance of which should not be underestimated in preventing infringements, since in-house lawyers have intimate knowledge of their clients and their activities. Accordingly, the cost benefit to an organisation of retaining in-house counsel needs to be evaluated: does the potential disclosure of legally sensitive documents outweigh the shorter term cost saving and benefit on in-house know-how associated with in-house counsel?

Having considered today's judgment companies should ensure that:

  1. When dealing in the context of competition investigations companies should check the status of LPP with the authorities they are dealing with. There is always the risk, however, that the investigation will escalate to the EU in which case advice, where possible, should be sought from independent and external counsel so as to avoid the risk of disclosure;
  2. Organisations should review current practices to ascertain what issues in-house lawyers advise on. In the event advice on competition law is sought from an in-house legal team, written communications should be kept to a minimum and external advice should be obtained where possible so as to protect the LPP of any advice;
  3. Issues may arise when global organisations discuss competition law across jurisdictions. It is important to note that across the legal systems of all 27 Member States, LPP is not subject to one universal rule. Only a few Member States, including the UK, Ireland and the Netherlands, apply LPP to communications of this kind with in-house lawyers. Accordingly, and in light of the EU's position as set out in today's judgment, organisations are best advised to err on the side of caution and to assume that in-house communications in respect of competition law issues across jurisdictions will not attract LPP in the same way as domestic law provides protection.


Commerce, and in particular international trade, requires certainty. The decision of the ECJ adds nothing by way of certainty. For example, how will secondees, regularly used by large corporates, be treated moving forward? The potential ramifications of the decision are significant and likely to be tested.

We are now faced with differing laws as to the privilege in-house documents attract in different Member States. Before English courts, advice provided by in-house lawyers is always afforded LPP, whilst in Italy, for example, and now in accordance with EU law, in-house communications are not privileged. This lack of uniformity is unwarranted (not least because it is unhelpful) and, absent a trend showing the removal of LPP for in-house lawyers at a domestic level in Member States, the ECJ could have decided to err on the side of caution and add certainty by holding that in-house lawyers are afforded the same rights as private practitioners.

The contents of this brochure are intended as guidelines for clients and other readers. It is not a substitute for considered advice on specific issues. Consequently, we cannot accept any responsibility for this information or for any errors or omissions.

Thomas Eggar LLP is a limited liability partnership registered in England and Wales under registered number OC326278 whose registered office is at The Corn Exchange, Baffin's Lane, Chichester, West Sussex, PO19 1GE (VAT number 991259583). The word 'partner' refers to a member of the LLP, or an employee or consultant with equivalent standing and qualifications. A list of the members of the LLP is displayed at the above address, together with a list of those non-members who are designated as partners. Regulated by the Solicitors Regulation Authority. Lexcel and Investors in People accredited.

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