On Sept. 14, 2010, the European Court of Justice (Azko Nobel
Chemicals Ltd and Akcros Chemicals Ltd, Case. No. C-550/07 P),
issued a judgment finding that the attorney/client privilege does
not apply to communications between company management officials
and in-house counsel in competition cases or investigations by the
European Commission. The ruling concerned emails exchanged by a
director general of the company and an in-house lawyer who was a
member of the Netherlands Bar. Companies doing business in Europe
should take note of the decision and recognize that communications
with in-house counsel in the EU will not be accorded privilege
protection in competition cases or investigations by the EU.
Relying on prior precedent, the Court found that the
attorney/client privilege applies only to exchanges with
"independent lawyers." The Court stated: "It follows
that the requirement of independence means the absence of any
employment relationship between the lawyer and his client, so that
legal professional privilege does not cover exchanges within a
company or group with in-house lawyers." The Court rejected
the argument that an in-house lawyer's professional obligations
provided sufficient independence: "An in-house lawyer, despite
his enrolment with a Bar or Law Society and the professional
ethical obligations to which he is, as a result, subject, does not
enjoy the same degree of independence from his employer as a lawyer
working in an external law firm does in relation to his client.
Consequently, an in-house lawyer is less able to deal effectively
with any conflicts between his professional obligations and the
aims of his client." Further, "an in-house lawyer cannot,
whatever guarantees he has in the exercise of his profession, be
treated in the same way as an external lawyer, because he occupies
the position of an employee which, by its very nature, does not
allow him to ignore the commercial strategies pursued by his
employer, and thereby affects his ability to exercise professional
independence."
The Court rejected other arguments, including that EU member states
have increasingly recognized the role of in-house counsel in
advising companies, and extending the attorney/client privilege to
in-house lawyers. Although the Court recognized this tendency, it
indicated that it was impossible to identify tendencies which were
uniform or had clear majority support among the laws of the member
states.
The companies' appeal was supported by the European Company
Lawyers Association, the American Corporate Counsel Association,
the International Bar Association, among other organizations. The
ruling has been criticized as failing to give proper weight to the
professional obligations and role of in-house counsel in advising
management on legal compliance.
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