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European Court of Justice shows no sympathy for legal professional privilege for in-house Counsel

14/09/10

In its keenly awaited judgment in Akzo Nobel Chemicals and Akcros Chemicals v Commission, the Court of Justice has dismissed an appeal asking it to reconsider the restrictive position in relation to legal professional privilege (LPP) for in-house counsel that it laid down in the AM&S case 25 years ago. Thus, the position remains that communications for the purpose of obtaining legal advice are only protected under EU competition law if they are with EU-qualified "independent" lawyers, that is, lawyers not bound to the client by a relationship of employment.  The judgment will be a disappointment for business and will infuriate in house lawyers who are members of a bar or law society.

During the course of an investigation by the Commission at Akzo Nobel's premises in Manchester, Akzo had claimed privilege for various documents.  The Commission's decision rejecting those claims was upheld by the Court of First Instance (now the General Court: see judgment in case T-253/03).  The appeal to the Court of Justice concerned only an e-mail exchange between an Akzo executive and the Dutch in-house counsel in charge of the group's competition law compliance policy.

The Court unequivocally states that an employed lawyer cannot be as professionally independent as an external lawyer, and that Bar or Law Society membership made no difference.  According to the Court, an employed lawyer cannot ignore the commercial strategies pursued by his employer and that will affect his independence.  It followed that the Court found no breach of the principle of equal treatment in treating advice from employed lawyers differently from advice from external counsel.

The Court also rejected any suggestion that the underlying national laws on LPP showed greater convergence since AM&S such that there was unanimity or a predominant trend towards LPP protection for communications with in-house lawyers.  Likewise, the Court did not find a reason to depart from AM&S in the changes brought about in competition law by Regulation 1/2003 (requiring greater self-assessment by firms of their compliance with competition law and, according to Akzo, thus requiring more sophisticated advice from those familiar with the business).  Short shrift was also given to contentions that defence rights were affected (the Court essentially saying that the client must accept the limitations imposed on the lawyer that it chooses) or that legal certainty could be affected by the AM&S rule.

There may be a crumb of comfort in the Court of Justice's clear ruling that this regime only applies in EU law as regards the EU Commission and does not affect the position under national law.

James Flynn QC represented the CCBE (the Council of the Bars and Law Societies of Europe) in the proceedings before the Court of First Instance and the Court of Justice.

Mark Hoskins QC appeared for the United Kingdom before the Court of Justice.