The latest development in the long-running Akzo case suggests that attempts by in-house lawyers to secure the protection of legal professional privilege ("LPP") in relation to EU competition law are unlikely to succeed, following an opinion handed down by Advocate General Kokott ("AG") on 29 April 2010.

The opinion provides a recommendation as to the approach that the European Court of Justice ("ECJ") should take in the appeal by Akzo Nobel ("Akzo") and Akcros Chemicals ("Akcros") against a decision of the Court of First Instance ("CFI") (as it was then known - now the General Court) in September 2007, which reaffirmed the principle of EU law that in-house lawyers lack the required level of independence from their employers to benefit from LPP in this context.

The underlying case dates back to February 2003 when the European Commission issued a decision requiring Akzo and Akcros to submit to an investigation into alleged anticompetitive practices, and "dawn-raided" their respective premises in order to gather evidence.

During the raids, there was a dispute between the companies and the Commission's officials as to whether certain documents, including emails exchanged between the general manager of a subsidiary and an in-house lawyer at the parent company, benefited from LPP. The CFI upheld the Commission's decision that LPP did not apply to these documents. This approach was based on the 1982 decision of the ECJ in AM&S v European Commission, in which it was held that there were two criteria for LPP in communications to be protected at an EU level: (a) the communication must have a connection to the exercise of the client's rights of defence; and (b) the communication must be with an independent lawyer, which excluded an in-house lawyer.

Akzo, Akcros and a number of intervening parties (including bar associations from across Europe) have submitted that the criterion of independence should not be interpreted negatively so as to exclude in-house lawyers, but positively by reference to the professional and ethical obligations to which lawyers are generally subject. As these obligations apply equally to in-house lawyers, it is argued that they are equally independent

The AG was not persuaded by this reasoning, and reiterated that in AM&S the requirement of independence was unequivocally linked to the fact that the lawyer must not be in a relationship of employment with the client. The rationale for this was that an in-house lawyer is less able than external counsel to deal with conflicts of interest between his professional obligations and the aims and wishes of his client. While an external adviser has many clients and is therefore less constrained by the pressures that may be exerted upon him by any of them individually, the in-house lawyer essentially has just one client, on whom he has complete economic dependence.

The AG then went on to consider and reject an alternative argument that there is a need to extend the scope of LPP to take account of the significant developments in the legal landscape since AM&S. These developments included the lack of uniformity within member states as to the scope of LPP (the UK, for example, extends LPP to in-house counsel as a matter of national law), and the modernisation of competition law resulting from Regulation 1/2003, which means that there is an increasing need for internal corporate legal advice.

The AG, however, felt these arguments did not justify any extension to a fundamental principle of EU law and, in any event, such a decision would be a matter for the EU legislature. Whether or not legal developments have led to an increased reliance on in-house counsel, it remained the case that this is not equivalent to communication with a neutral third party that merits the protection of LPP.

Although the AG's opinion does not bind the ECJ, the ECJ normally follows the AG's conclusions. It is highly likely therefore that the ECJ will elect to maintain the status quo in relation to LPP, thus disappointing the many organisations that have campaigned for a change to the law as established by AM&S.

While even an adverse judgment from the ECJ may not spell the end of the debate in this area, in the absence of legislation changing the position, the message for businesses is simple: faced with potential EU competition law issues, you will need to instruct external counsel to be certain that communications about your defence benefit from LPP.

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