UK: The Knotty Issue of Privilege in Competition Law in the EU and UK

Last Updated: 1 March 2005

By Iandra McCallum (London)

Privilege in competition law in and within the EU has always been a complex matter, not least because the issue of defining how wide the scope of privilege is and to which document privilege attaches is in itself complex. In addition, a further layer of complexity is added by the different rules which apply to privilege at an EU level and at a national level for each of the 25 EU member states. How does one, for example, advise a company when it is not only difficult to define which documents privilege will attach to, when at an EU level privilege does not attach to documents prepared by in-house counsel, whereas it does attach to documents prepared by in-house lawyers in some member states, such as the UK? What is more, while in some EU member states there is a clear distinction between litigation and legal advice privilege, others do not draw such distinctions and only rely on litigation privilege. Finally, in some EU member states, such as Germany, legal privilege barely exists.

The issue of privilege is very topical at the moment not only because of recent debate in the EU in relation to whether or not privilege should be extended to in-house counsel, or cases such as Three Rivers1 in the UK or Akzo/Akcros2 in the EU, but also because of the drive on the part of the Commission and National Competition Authorities (NCAs) to route out cartel cases. There has been a marked increase in the amount of dawn raids that the regulatory authorities have visited upon firms. The wider investigatory powers which are now conferred on the Commission through Council Regulation No. 1/2003 even allow seizure of documents on private premises. Equivalent powers are afforded to the Office of Fair Trading in the UK by the Enterprise Act 2002. This therefore makes it all the more critical to determine how privilege should be addressed and which documents are protected by privilege.

At the EU level hopes were raised of extending privilege to in-house counsel by a proposal from the European Parliament to extend privilege to communications between in-house counsel and companies in the new EC merger regulations3 provided that "the legal counsel is properly qualified and subject to adequate rules of professional ethics and discipline which are laid down and enforced in the general interest by the professional association to which the legal counsel belongs."

While this proposal was not adopted, a recent case may yet extend some privilege to inhouse lawyers’ communications. On 30 October 2003, the President of the Court of First Instance ("CFI") granted an interim measure for relief in the case between Akzo Noble Chemicals Limited and Akcros Chemicals Limited (the applicants) against the European Commission on communications by in-house lawyers.4 Part of this case centred around legal privilege of documents which were copied by the Commission in a dawn raid in February 2003.

The dispute over privilege centred on five documents which were kept in separate files by the applicants and to which the applicants claimed privilege attached. The five documents were ultimately treated in two different ways. Two of the five documents (Set A), which the applicants claimed were drafted in preparation for the purpose of obtaining external legal advice in connection with competition law compliance, were examined by the Commission and put in separate sealed envelopes as the Commission was not in a position to reach a definitive on the spot conclusion on whether or not privilege attached to those documents. The other three documents (Set B) consisted of hand written notes and of emails between employees of the applicants related to Set A. Set B was copied by the Commission and put on its files but not enclosed in a separate sealed envelope.

Pending the final resolution of the case the President of the CFI ordered that the Commission keeps both Set A and Set B documents in sealed envelopes, that all additional copies of Set B documents are destroyed and the Commission takes no further steps to review or use the documents of either Set A or Set B.

On 27 September 2004 the European Court of Justice ("ECJ") annulled the CFI interim relief order in this case. Rather disappointingly, the EJC did not look specifically at what documents legal privilege attaches to, but rather at the circumstances in which interim measures can be granted and whether the conditions of urgency is satisfied for an application for interim measures. On that basis, the practical application should be to continue applying the findings of the CFI in relation to privilege. If there is any doubt or question raised about privilege of dawn raided documents, in-house counsel should argue to try and get such documents kept separately in a sealed envelope.

Given that the ECJ did not rule on the issue of privilege in general, but rather on the application of interim measures including their application to disputes over privilege and that the ECJ, interestingly, did not address the issue of privilege in relation to the Set B documents, privilege at the EU level is still shrouded in some uncertainty. In the UK however, while the Courts of Appeal decision "Three Rivers" did create some uncertainty with regards to the application of legal advice privilege, this now appears to have been settled by the House of Lords decision in the same case.

The general principle of legal advice privilege in the UK is that there is understood to be broad protection for communications between a solicitor and his client in the course of the solicitor/client relationship where the solicitor gives legal advice on a client’s legal rights and liabilities, so that even where a particular piece of advice is not advice about rights and obligations, it would still be covered by the inherent "continuum of communication" 5 in the solicitor/client relationship.

This was challenged in the Court of Appeal in the Three Rivers case, though the principle was finally upheld in the House of Lords decision. The documents in question in Three Rivers6 were communications between the employees or ex-employees of the Bank of England (Bank) and its solicitors which were prepared by the Bank for its submission to the Bingham Inquiry on the collapse of the Bank of Commerce and Credit International S.A. (BCCI). It was agreed by all parties that no litigation privilege attached to such documents and therefore the question was whether legal advice privilege would attach. The Court of Appeal therefore looked at (i) whether the documents for which privilege was claimed were documents of a class comprised within the doctrine of legal advice privilege and (ii) whether, in any event, they had been prepared for the dominant purpose of obtaining legal advice or rather for the purpose of placing the facts before Lord Justice Bingham.

Much of the decision centred around the type of inquiry the Bingham Inquiry was and whether privilege should attach to preparation of documents for such a private, non-statutory inquiry. Having determined that this was not the type of inquiry to which litigation privilege of documents would normally attach, the Court looked more specifically at what it deemed to be a "difficult [and] unsatisfactory"7 area of legal advice privilege. In this area, the Court queried the justification for attaching privilege to documents where the lack of such privilege would not inhibit communications between solicitor and client.

The Court of Appeal decision in Three Rivers narrowed the scope of legal advice privilege in that the Court suggested that legal advice privilege should only attach to advice and documents whose dominant purpose is the seeking or obtaining of legal advice concerning rights and/or obligations.

This Court of Appeal decision was overturned by the House of Lords and the position with regard to legal advice privilege in the UK is therefore the same as it was prior to the Three Rivers decision, that is, that there is broad protection for communications between a solicitor and his client in the course of the solicitor/client relationship where the solicitor gives legal advice on a client’s legal rights and liabilities, even where a particular piece of advice is not about rights and obligations. While there is wide relief in the UK about the House of Lords overturning the Court of Appeals decision, many regret the decision did not clarify whether or not communications between an employee and his employer’s lawyer should be treated as communications between client and lawyer for the purposes of legal advice privilege.

On a practical level, what steps should be taken to ensure the existence of the greatest possible protection of documents through privilege? The key guidelines for clients are:

  • Legal advice from internal and from external lawyers is kept on a separate file.
  • That separate file is clearly marked "Legally Privileged Documents."
  • All legal advice to which privilege attaches is clearly marked "privileged and confidential."
  • All correspondence between a firm and its external counsel is clearly marked: "Legally Privileged. Prepared for the purpose of seeking legal advice."
  • To the extent possible, internal sensitive issues should be addressed either verbally or through external lawyers.
  • Written advice on sensitive matters should only be produced by external counsel. This advice should not in any way be amended, added to or quoted from, as this would remove privilege. As soon as possible following receipt, the correspondence should be placed on the file referred to above.
  • During a dawn raid the access to any privileged documents is carefully supervised, and, in case the Commission or NCA wants copies of the privileged documents, these should be kept in a sealed envelope until the issue of privilege is resolved.

Endnotes

1 Opinions of the Lords of Appeal for Judgement in the Court Three Rivers District Council and Others (Respondents) v. Governor and Company of the Bank of England (Appellants) [2004] on Thursday 11 November 2004, following decision of 29 July 2004.

2 Case C-7/04 P(R) Commission v Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd, Order of the President of the ECJ, 27 September 2004

3 Council Regulation (EC) No 139/2004 of 20 January 2004; OJ L 24/1 of 29.1.2004.

4 Joined cases T-125/03R and T/253/03R

5 Balabel v Air India [1988] CH 317

6 Three Rivers District Council and Others v The Governor and Company of the Bank of England [2004] EWCA Cir 218

7 Three Rivers, at paragraph 39

Copyright © 2007, Mayer, Brown, Rowe & Maw LLP. and/or Mayer Brown International LLP. This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Mayer Brown is a combination of two limited liability partnerships: one named Mayer Brown LLP, established in Illinois, USA; and one named Mayer Brown International LLP, incorporated in England.

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