UK: In-House v External Lawyers: A Level Playing Field?

The Competition Appeal Tribunal (the "CAT") recently confirmed that an in-house lawyer should only be required to give the same form of undertaking as external counsel and solicitors, despite this being disputed by external lawyers. This welcome decision goes some way towards bridging the gap in equality between the treatment of in-house and external lawyers. The gap nevertheless remains pronounced by the different treatment of in-house lawyers and external lawyers in the context of legal professional privilege at the EU level.

On 25 January 2012, in the case of Telefonica UK Limited v Office of Communications, the chairman of the CAT, Mr Justice Henderson, gave an order in relation to the ability of an in-house solicitor to give an undertaking in a confidentiality ring to ensure that confidential information exchanged for the purpose of the hearing is kept within a limited number of the parties' legal advisors.

The exchange of sensitive information is high on the agenda of competition authorities around the world. Confidentiality rings are increasingly being used by companies to allow the exchange of business-sensitive information between individuals who undertake not to disseminate that information to their wider organisation or anyone else, and so prevent any risk of an impact on competition. This case highlights the increasing use of confidentiality rings.

Mr Justice Henderson ordered that in establishing a confidentiality ring, an in-house solicitor of Everything Everywhere ("EE") "should give the same form of undertaking as that to be given by the parties' external counsel and solicitors". Mr Justice Henderson found that "no good reason... [had] been given for requiring a different form of undertaking from EE's in-house lawyer"; that "the in-house lawyer in question is subject to the same professional obligations as external solicitors"; and that "given the professional standing and experience of the EE in-house lawyer, it would be invidious and unreasonable to require her to give additional confidentiality undertakings that are not also required from external lawyers".

The in-house lawyer in question is a solicitor admitted to practice law in England and Wales who has around 25 years of experience as a practising solicitor. In these circumstances, it was found to be invidious and unreasonable to require her to give additional assurances not required from external lawyers. However, the same in-house lawyer with 25 years of experience would not be able to assert privilege in legal advice given to her employer in EU proceedings when her counterpart external lawyers would. The choice of the word "invidious" by Mr Justice Henderson is a strong one, defined by the Oxford English dictionary as meaning "likely to arouse or incur resentment or anger in others" or "unfairly discriminating and unjust". In-house lawyers may indeed feel resentment, anger or that they are unfairly discriminated against by being unable to assert privilege in EU proceedings.

Whilst privilege in the legal advice given by in-house solicitors is recognised at a national level in England and Wales, and in many other national jurisdictions, it is denied at the EU level. The European Court of Justice (the "ECJ") confirmed in Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v European Commission (C-550/07P) that the advice of in-house lawyers does not attract legal professional privilege since an in-house lawyer does not have the same degree of independence from its employer as external lawyers because of economic dependence and close ties with its employer. The ECJ considered that this was the case regardless of national professional rules, which may oblige an in-house lawyer to comply with the same strict standards of conduct as an external lawyer. The ECJ further found that because a large number of Member States still exclude in-house lawyer correspondence from legal privilege, and because in-house lawyers are often not admitted to a Bar or Law Society in a number of Member States, the situation in Member States had not evolved sufficiently to justify a recognition of legal privilege in the advice given by in-house lawyers.

However, there are a number of Member States where in-house lawyers are admitted to the same Law Society and subject to the same strict standards of conduct as external lawyers, such as in England and Wales. Similarly to the situation recognised by Mr Justice Henderson in Telefonica UK Limited v Office of Communications, the unequal treatment of in-house lawyers in these circumstances may be said to be invidious and unreasonable. If the in-house lawyer's questionable independence from its employer does not preclude an in-house lawyer from giving the same undertakings as an external solicitor when both are subject to the same professional standards and requirements, then why should it preclude the in-house lawyer from giving privileged legal advice in the same circumstances?

Given the professional equivalence of in-house and external lawyers in England and Wales, it is not surprising that in-house lawyers here feel unfairly treated by the refusal to recognise legal privilege at the EU level in the advice that they give. The recent decision of the CAT, that in-house lawyers can give the same undertakings as external lawyers, highlights the discrepancy between the English national approach and the European approach. Adopting a national approach to the law of privilege in European proceedings would even out this discrepancy and allow for a flexible approach to privilege in different Member States where there is a varying degree of similarity between the standards required from in-house and external lawyers.

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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