UK: The Akzo Nobel Judgment - European Court Continues To Deny Legal Privilege To In-House Lawyers.

Last Updated: 13 January 2008
Article by Simon Holmes and Dr. Gordon Christian

First published in PLC Cross-Border Service 2007.

This article considers the impact of a recent Court of First Instance decision on the issue of legal privilege in Europe and provides some practical advice on document handling in EC competition law matters in the light of the judgment.

The recent Court of First Instance (CFI) decision in Joined Cases T-125/03 and T-253/03, Akzo Nobel Chemicals and Akcros Chemicals v Commission (not yet reported) (Akzo) is important for three reasons:

  • It significantly affects both the internal preparation of, and the seeking of advice on, competition sensitive documents.
  • Existing compliance programmes, information gathering exercises in merger cases and dawn raid procedures will need to be revisited.
  • It confirms the existing narrow scope of privilege under EC law (see below, The existing case law position: AM & S).
The Concept Of Privilege

The concept of "privilege" originates from the public policy perspective that it is desirable for clients to be able to speak freely to their legal advisers without fear that such correspondence may be disclosed, either during the course of litigation proceedings or regulatory investigations.

The question of whether certain documents are privileged, and therefore shielded from disclosure, can be a complex one, the answer to which can have a significant impact on the conduct and the outcome of a case.

In Europe, this question was recently reconsidered by the CFI in Akzo. The judgment in that case confirmed the narrow scope of legal privilege and failed to extend the privilege that exists for communications between clients and external lawyers to equivalent communications between clients and in-house lawyers (see box, The Akzo judgment: key points).

This article briefly explains the existing case law position on privilege in Europe and considers Akzo and its impact. It also provides some practical advice on document handling in EC competition law matters in the light of the judgment (see box, Dealing with EC competition law matters post Akzo: dos and don'ts).

The Existing Case Law Position: AM & S

The well-established position on privilege for the last 25 years has been the rule set out by the European Court of Justice (ECJ) in the AM & S case (Case 155/79 AM & S v Commission [1982] ECR 1575). In the case, the ECJ held that written communications between lawyers and clients only applied if the following conditions were met:

  • The communications in question were made for the purposes and in the interests of the client's rights of defence.
  • The communications emanate from independent lawyers, that is, those not bound to the client by a relationship of employment.

The ECJ justified the second condition with the concept that the lawyer's role in such circumstances is to collaborate with courts in the administration of justice. The ECJ considered that a bond between lawyer and client that is created by an employment relationship compromised the lawyer's status to an extent that did not enable the ECJ to extend the protection from disclosure to documents emanating from non-independent lawyers (such as in-house lawyers).

The ECJ in effect concluded that as the concept of privilege in EC law was based on principles common to the laws of the member states, that concept could not be more extensive at EC level than the situation in a majority of member states. In other words, because not all member states protected documents created by non-independent lawyers from disclosure, the EC principle had to be limited to the rule set out above.

The Akzo judgment: The Facts

The case arose as a result of a dawn raid executed by the European Commission (the Commission) investigating possible anti-competitive practices at the premises of Akzo Nobel and its subsidiary Akcros Chemicals on 12 and 13 February 2003.

During the course of the investigation, staff informed Commission officials that certain documents contained in a file were likely to be privileged documents and as a result covered by the rule protecting the confidentiality of communications between lawyers and their clients. The Commission officials stated that they needed to take a quick glance at the documents to satisfy themselves that they were indeed privileged. A dispute arose in relation to five documents.

The first group of documents (Set A) consisted of two memoranda:

  • A typewritten memorandum from the general manager of Akcros Chemicals (the General Manager) to one of his superiors, containing information gathered through the course of internal discussions with other employees for the purpose of obtaining outside legal advice in connection with a competition law compliance programme.
  • A copy of this memorandum with handwritten notes referring to contact with an external lawyer, who was mentioned by name.

As the Commission officials were not able to reach a final conclusion as to whether the documents were privileged, they took copies of the documents and placed them in a sealed envelope that they took away at the end of the investigation.

The second group of documents (Set B) was found by the head of the investigating team definitely not to fall within the remit of legal professional privilege. As a result, copies of the documents were taken and simply placed with the rest of the file. These documents comprised of:

  • A number of handwritten notes made by the General Manager during discussions with employees, and which formed the basis of the typewritten document in Set A.
  • Two e-mails exchanged between the General Manager and Akzo Nobel's co-ordinator for competition law, an in-house lawyer registered as an Advocaat of The Netherlands Bar.
The Judgment: Substantive Points

generated a lot of interest mainly due to the fact that this was an opportunity to test in a Community court a rule that had significant consequences for relations between a business, its inhouse legal advisers and external counsel. In addition, the rule had, in many parts of the legal profession, increasingly been considered as anachronistic and suitable to be overturned. The scale of opposition to the AM & S rule was clear even from the long list of intervening parties who supported Akzo's case: the Council of the Bars and Law Societies of the European Union, the Algemene Raad van de Nederlandse Orde van Advocaten (Netherlands Bar Association), the European Company Lawyers Association, the American Association of Corporate Counsel and the International Bar Association.

The main substantive outcome of Akzo is that the AM & S rule still stands, that is the CFI refused to extend the scope of legal professional privilege at EC level to in-house lawyers. Although the CFI acknowledged that specific recognition of the role of in-house lawyers and the protection of communications with such lawyers was more common today than at the time the AM & S case was decided, the CFI repeated the same justification for its decision as it had in AM & S 25 years earlier. The CFI, after a comparative review of the relevant national laws on privilege, still found that it was not possible to identify tendencies that were uniform or had clear majority support to extend the EC privilege concept as argued by Akzo.

The CFI set out the law and current rule on EC privilege as follows: internal company documents that are drawn up exclusively for the purpose of seeking legal advice from an independent (that is, external) lawyer in exercise of a company's rights of defence, even if they have not been exchanged with a lawyer or have not been created for the purpose of being sent to a lawyer, may be covered by privilege.

The equally important flipside of the coin is that, for example, documents created for other purposes and documents merely shown to a lawyer do not attract privilege.

Applying these rules, on the facts the CFI found that neither the Set A nor the Set B documents attracted privilege.

The Judgment: Procedural Points

Most of the coverage of Akzo has concentrated on the CFI's treatment of the substantive point at issue, that is, the scope of privilege in EC law. However, the CFI's judgment is also interesting and important on procedural aspects, and indeed, it is in relation to dawn raid procedures that the judgment is likely to have its most immediate impact.

The CFI set out the appropriate rules as follows:

  • As long as the company can present the Commission officials conducting the dawn raid (inspectors) with evidence that certain documents are privileged, the company need not reveal the content of such documents to the inspectors.
  • If the company can properly argue that even a cursory glance at the documents would reveal their contents, the inspectors are not allowed to take even that cursory glance.
  • Where the inspectors disagree with the company's characterisation of certain documents as privileged, the inspectors can seal and remove the documents until the dispute is resolved. However, the inspectors are precluded from accessing the documents until a decision has been adopted by the Commission allowing the company concerned to refer the matter to the CFI for determination.

Unsurprisingly, Akzo has drawn sharp criticism both from groups representing the interests of inhouse lawyers as well as from business leaders. It is undeniable that the role of an in-house lawyer is far removed from what it would have been at the time of AM & S. These days, in-house lawyers play a key role in ensuring that compliance with all applicable laws, including competition law, is high on the agenda of their clients within the business. It seems somewhat surprising, therefore, that the CFI appears unwilling to move away from a somewhat artificial characterisation of in-house lawyers as "non-independent" merely because of their employed status.

However, although Akzo lost on the "big point", businesses across Europe will welcome the CFI's confirmation that the Commission must strictly follow a set procedure when dealing with documents over which privilege is claimed.

It is not yet clear whether Akzo will appeal the CFI's judgment to the ECJ - it has until mid- November to do so on points of law only. Regardless of whether Akzo is appealed or not, this case is unlikely to be the end of the battle fought by in-house lawyers and their representatives to gain equal protection from disclosure for their work product as external counsel currently enjoys.

In the meantime, the one point that in-house lawyers should take from Akzo is that, for a document to attract privilege under EC law, it must have been drawn up exclusively for the purpose of seeking legal advice from an independent lawyer.

The Akzo Judgment: Key Points
What system of law does Akzo relate to?

Set out below, in question and answer format, are key points about the scope and outcome of Joined Cases T-125/03 and T-253/03, Akzo Nobel Chemicals and Akcros Chemicals v Commission (not yet reported) (Akzo).

What is the headline point that arises out of the judgment?

is only relevant for EC law on legal privilege - it does not affect or change national privilege rules in the EU, and therefore it does not apply to investigations by national competition authorities. Akzo only deals with the scope of the legal privilege doctrine in the context of investigations by the European Commission into allegedly anti-competitive conduct. Akzo is likely to be particularly important for dawn raids carried out by the European Commission.

Why did the Court of First Instance (CFI) decide as it did?

The Akzo judgment failed to extend the privilege that exists for communications between clients and external lawyers to equivalent communications between clients and in-house lawyers. The CFI believes that, due to the employed status of in-house counsel, as opposed to the independence of external lawyers, the in-house counsel's independence is not guaranteed and communications between the client and its in-house lawyer(s) therefore do not merit the protection of privilege.

What are the repercussions for companies with an in-house legal adviser or in-house legal team?

It is likely that in-house lawyers will need to consider carefully whether advice they provide should be put down in writing (and therefore potentially be subject to disclosure) or whether external counsel needs to be used to maintain the privileged nature of the documents in question.

What has been the reaction of the in-house community and those representing their interests?

Unsurprisingly, the in-house community feels that the CFI has not given sufficient weight to the changes that have occurred since the original case in which the rule originated was decided (the AM & S case (Case 155/79 AM & S v Commission [1982] ECR 1575)). The Law Society of England and Wales published a press release "vigorously condemning" the Akzo judgment, and many in-house counsel commented along similar lines.

Dealing with EC competition law matters post Akzo: dos and don'ts



  • Consider instructing external counsel if written advice is required on EC competition law matters.
  • Prepare documents for other purposes (for example, for the board of directors) and assume that such documents are privileged if external legal advice is then sought on them.
  • Consider whether it is necessary or appropriate to provide in-house advice on EC competition law in writing.
  • Mix up legal and commercial issues in internal documents, as documents containing commercial issues are unlikely to qualify for privilege.
  • Have a separate filing system for privileged documents (both hard copy and electronic filing) which is clearly marked and appropriately protected.
  • Assume privilege applies to documents merely discussed with or sent to external counsel.
  • When seeking external legal advice, make it clear that the document is exclusively drawn up for that purpose.
  • Add to, summarise or amend external counsel's legal advice with commercial issues as privilege may be lost.
  • Clearly mark any documents as such ("Strictly Private & Confidential - External Lawyer/Client correspondence - Legally Privileged").
  • Forget that Akzo only deals with EC privilege, not with national privilege regimes under which in-house lawyers may be able to rely on privilege.
  • Update compliance programmes and dawn raid manuals to reflect the procedural rules contained in Akzo.
  • Update document handling procedures for assessing major projects such as proposed mergers.

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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