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
Akzo

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.
Impact

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?
Akzo

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

Do

Don't

  • 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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.