Legal Briefing

Communication with in-house lawyers not covered by legal privilege

The In-House Lawyer Logo

The Netherlands | 01 December 2010

On 14 September 2010, the European Court of Justice (ECJ) ruled that, in the field of competition law, internal company communications with in-house lawyers are not covered by the confidentiality regime regarding communication between external lawyers and clients. This judgment paves the way for the European Commission, in its role as competition regulator, to gain access to the internal communication (eg notes and e-mails) of the legal department of a company. The appeal, brought by Akzo Nobel Chemicals Ltd and its subsidiary Akcros Chemicals Ltd, which relied on the ‘legal professional privilege’ claim, was rejected by the ECJ.

Background

In 2003 the Commission started an investigation into possible anti-competitive conduct at Akzo Nobel and Akcros. During the investigation, the Commission took notice of certain internal documents (written notes and e-mails). The e-mails were exchanged between the general manager and the in-house lawyer. This in-house lawyer was a member of the Netherlands Bar Association (Nederlandse Orde van Advocaten) and therefore subject to the professional ethical obligations it prescribed. In the Netherlands, in-house lawyers are called ‘employee lawyers’. Specific rules, which safeguard their independence, have to be drawn up in a so-called ‘professional charter’, signed by the in-house lawyer and their employer.

Akzo Nobel claimed that the internal communication between its in-house lawyer and the general manager was confidential, since it had the same status as communication between lawyers and their clients (the legal professional privilege claim). According to Akzo Nobel, the communication could not be used by the Commission in its investigation and the documents should be returned. In its decision, the Commission refused the request of Akzo Nobel to return the documents. Akzo Nobel challenged this decision before the Court of First Instance (CFI).

In its judgment, the CFI referred to previous case law by stating that the protection under legal privilege is subject to two cumulative conditions. First, the exchange with the lawyer must be connected to ‘the client’s rights of defence’. The CFI stated that the protection covers all written communication exchanged after the initiation of the administrative procedure of the Commission and earlier written communications that have a relationship to the subject matter of that procedure. This includes preparatory documents, even if these documents are not exchanged with a lawyer or were not created for the purpose of being sent physically to a lawyer. This is provided that they were drawn up exclusively for the purpose of seeking legal advice from a lawyer in the exercise of the right of the defence. However, the mere fact that a document has been discussed with a lawyer is not sufficient for it to fall under the protection of legal privilege.

Secondly, the exchange must emanate from ‘independent lawyers’, that is to say, lawyers who are not bound to the client by a relationship of employment. The CFI dismissed the action brought by Akzo Nobel, stating that the e-mail exchange between the general manager and the in-house lawyer does not fall within the scope of legal privilege, since the in-house lawyer could not be considered ‘independent’. Akzo Nobel appealed to the ECJ.

European Court of Justice

During the appeal, Akzo Nobel essentially stated that the CFI wrongly refused to apply legal professional privilege to the e-mails that were exchanged between the general manager and the in-house lawyer. Akzo Nobel claimed that an in-house lawyer enrolled at a Bar or Law Society is just as independent as an external lawyer. Moreover, Akzo Nobel claimed that the legal landscape has developed significantly. Therefore, previous case law should be ‘reinterpreted’ as far as it concerns the principle of legal professional privilege.

The ECJ held that an in-house lawyer does not enjoy a level of professional independence comparable to that of an external lawyer; an in-house lawyer is an employee of the company, which does not allow them to ignore the commercial strategies pursued by the employer. Moreover, certain tasks, which may be required under the terms of the employment contract, may have an effect on the commercial policy of the company.

In Akzo Nobel, the fact that the in-house lawyer carried out the task of competition law co-ordinator reinforced the close ties between the in-house lawyer and the employer. Thus, according to the ECJ, ‘the concept of the independence of lawyers is determined not only positively, that is by reference to professional ethical obligations, but also negatively, by absence of an employment relationship’. A membership of a Bar or Law Society and the subsequent professional ethical obligations to which the in-house lawyer is subjected, does not change the position of the ECJ.

Moreover, the ECJ stated that it cannot identify an uniform tendency or a clear majority support in the laws of the member states concerning the scope of legal professional privilege for in-house lawyers. A large number of member states exclude correspondence with in-house lawyers from protection under the legal professional privilege. Additionally, a considerable number of member states do not allow in-house lawyers to be admitted to the Bar or Law Society and, accordingly, do not recognise them as having the same status as lawyers established in private practice. Therefore, the ECJ dismissed Akzo’s appeal.

Comment

This judgment is a confirmation of previous case law. It follows the restrictive interpretation of the ECJ in previous case law concerning the position of an in-house lawyer. According to the ECJ, in over 30 years, no drastic changes have occurred that altered this position. Thus, the Commission, in its role as competition regulator, can access the internal communication of the legal department of a company.

What are the consequences of this judgment on a national level? Since there is no consensus between member states about the legal privilege protection of an in-house lawyer, the practical outcome of this judgment differs among the member states. For example, according to Dutch law, communications with an employee lawyer are covered by the legal professional privilege. This means that the Netherlands Competition Authority cannot use these documents during its investigation. The same applies when the Commission or the national competition authority of another member state asks the Netherlands Competition Authority to carry out an inspection in the Netherlands. In Akzo Nobel, Dutch law applies, which means the communication of an in-house lawyer with its company remains confidential.

This differs if the Netherlands Competition Authority is asked to provide assistance to an inspection of the Commission. In that case, the Netherlands Competition Authority has the same powers as the Commission and is allowed to investigate the documents of an in-house lawyer. Companies have to take these differences into account when communicating with their in-house lawyers. The protection of this communication is not always guaranteed.

By Frederieke Leeflang, EU and competition partner, Boekel De Nerée.

E-mail: frederieke.leeflang@boekeldeneree.com.