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Akzo Nobel: Scope of Legal Privilege in EU Competition Context

The Court of Justice of the European Union (ECJ) has clarified the extent to which companies may be able to prevent disclosure of documents during European Commission competition investigations on the basis that the documents are protected by legal p

In doing so it has confirmed that communications to and from in-house lawyers in this context do not attract privilege.

In this alert we consider the practical implications of the ECJ's judgment for companies doing business in Europe, focussing in particular on its ramifications from the Belgian, Dutch, English, French and German law perspectives.

What is the significance of documents being protected by legal privilege?

In the context of both merger control reviews and competition law investigations, the European Commission (Commission) often uses its wide-ranging powers to require the production of large quantities of information and documents. In particular, during dawn raids, the Commission generally obtains extensive access to company systems and files.  It is therefore vital to have a clear and ready understanding of which documents are privileged (and need not be disclosed) and which are not.  It is also extremely important, as a matter of good housekeeping, to appreciate the limits of the scope of legal privilege when creating documents in order to avoid generating documents which may have to be disclosed during an investigation or review.

Background to the ECJ's judgment

In 2003 the Commission, assisted by the UK Office of Fair Trading (OFT), carried out dawn raids on the UK premises of Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd, seizing a considerable number of documents. Among the documents seized were internal emails exchanged with one of Akzo's in-house lawyers, an Advocaat of the Netherlands Bar.  Akzo and Akcros asserted that these and certain other documents seized by the Commission were protected by legal professional privilege.  The Commission disagreed.

At first instance, the General Court found that the emails in question (and the other documents at issue at the time) were not protected by privilege, relying on an ECJ decision from 1982 (AM&S Europe v Commission [1982] ECR 1575).  This was principally on the basis that, in its view, in-house lawyers lack the independence that it considered was a necessary cornerstone of privilege in the EU context because they are bound by an employment relationship with their client.  Further, in the General Court's view, there had not been a sufficiently significant change in the role of in-house lawyers since the AM&S decision to justify a different approach in this case.

Akzo and Akcros appealed. The question in the appeal was whether the emails were protected by legal professional privilege.  In April of this year, Advocate General Kokott gave her opinion on this issue and recommended that the ECJ should dismiss the appeal in its entirety.

The ECJ's judgment – legal professional privilege not available to in-house lawyers in the EU competition context

The ECJ has rejected the arguments raised by Akzo and Akcros (and those of a number of bodies who intervened in the proceedings, including the Council of the Bars and Law Societies of the European Union, the European Company Lawyers Association and the governments of the UK, Ireland and the Netherlands) and has upheld the General Court's decision that communications to and from in-house counsel do not attract privilege in the context of a Commission investigation.

Like the General Court, the ECJ reached this conclusion principally on the basis that privilege only protects communications with independent lawyers and an enrolled in-house lawyer 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 clients.  Consequently, in the ECJ's view, an enrolled in-house lawyer is less able to deal effectively with any conflicts between his professional obligations and the aims of his client.

The ECJ also found that there had been no infringement of the principle of equality because in-house lawyers are in a fundamentally different position from external lawyers, so this was not a case where comparable situations were being treated differently. It further held that the legal situation in the member states had not evolved since the decision in AM&S to an extent which would justify a change in the approach to privilege in relation to in-house counsel and the recent modernisation of the law in relation to anti-trust proceedings did not change the position either.  Nor did treating in-house counsel differently reduce the protection of an undertaking's rights of defence or offend the principle of legal certainty.  The ECJ was also unconvinced by a series of other arguments made by the appellants and those intervening in the proceedings.

Practical Implications

A number of practical implications stem from the ECJ's decision and the decision of the General Court at first instance.

Which documents attract legal privilege in the EU competition context?

A document can only be withheld from the Commission (when the Commission is conducting an investigation on its own behalf) on the basis that it is privileged if, broadly, (1) it is a communication regarding the company's rights of defence and (2) the communication is with an independent external lawyer, that is to say a lawyer who is not bound to the client by a relationship of employment who is qualified to practise in a member state of the European Economic Area (EEA).  Documents preparatory to requests for external advice and summaries of advice from external lawyers may also be protected in certain circumstances.  In practical terms:

  • Advice from and communications with in-house lawyers remain excluded from the scope of legal privilege in the context of Commission investigations.  Any written request from a company to its in-house lawyer for legal advice is not likely to be privileged.  Nor is any advice given by the in-house lawyer in response to such a request.
  • Communications with external lawyers are likely to be privileged, provided they meet the test set out above.
  • Internal preparatory documents (including working documents or summaries) may be privileged even if they have not been exchanged with an external lawyer provided it can be proved that they were prepared exclusively for the purpose of seeking legal advice from an external lawyer in exercise of the rights of defence.  In many cases this may be difficult to establish.
  • Internal documents which merely summarise or report the text or content of an external lawyer's advice, whether prepared by an in-house lawyer or other company employee may also be protected by legal professional privilege if the communication from the external lawyer would also have been privileged.  However care should be taken in the drafting of such reports.  If they include the opinion or commercial judgment of the in-house lawyer or employee, or other additions or amendments, they run the risk of falling outside the ambit of the protection from disclosure.

Guidelines for in-house lawyers

In the context of EU competition law only, the following guidelines continue to be sensible advice on good document housekeeping:

  • ensure sensitive in-house lawyer investigations are conducted orally and in-house lawyer advice is only given orally;
  • consider instructing independent external lawyers if written advice is required and ensure that the advice is recorded on their headed notepaper;
  • be careful about creating preparatory documents which are not in fact sent to external lawyers.  Although preparatory documents may be protected, it may be difficult to prove to the satisfaction of the Commission or the Court that a particular document was created solely for the purpose of obtaining external legal advice.  If you do create such documents, make sure their purpose is clearly set out;
  • ensure all privileged communications between the company and external lawyers are clearly marked (in the header of each page and in the subject field of e-mails) "Privileged and Confidential - External Lawyer-Client Communication" and placed in a separate file similarly clearly marked;
  • if commercial, compliance or policy issues are addressed in parallel with legal issues, keep the two elements separate to avoid the commercial purpose contaminating the legal purpose;
  • ensure that any external lawyers instructed are EEA-qualified;
  • restrict the circulation of communications containing legal advice within the company to those who truly need to see it as privilege may be lost if documents are too widely disseminated; and
  • if you are circulating external legal advice, do not make any additions or amendments to it and limit the preparation of summaries of such advice.

Finally, given that the rules protecting communications between lawyers and their clients vary across the EU member states, advice on national rules should be sought in the context of a national competition law investigation or an investigation potentially involving EU and national competition law issues. Further, national law advice should also be sought in relation to national Court procedures more generally.


Kees Schillemans, Anti-Trust Partner in Amsterdam, who advised the Netherlands Bar in their intervention in this case, and Marieke van Hooijdonk, Litigation Partner in Amsterdam, comment:  The ECJ's judgment does not affect the scope of legal privilege in national Dutch competition, civil or criminal law cases. In the context of investigations by the Dutch competition authority, the Dutch Competition Act grants legal privilege to all lawyers admitted to the Dutch Bar, irrespective of whether they are in-house or external counsel.  One of the most remarkable points in the judgment is that the Court took the view that in-house lawyers can by definition not be truly independent, while under Dutch law, in-house lawyers admitted to the Bar ("Cohen-advocaten") are to be considered independent, provided that certain requirements to safeguard their independence are met. As a result of the ECJ's judgment, such Cohen-advocaten can invoke legal privilege in case of an investigation carried out on the basis of the Dutch Competition Act, but not when the investigation is carried out on the basis of EU competition law.

The ECJ's judgment does not change the position under Dutch law that lawyers admitted to the Bar (both in-house and external) can invoke legal privilege before the Dutch Courts, while other lawyers cannot.  A company or consumer claiming damages as a result of a cartel can thus not force an in-house counsel admitted to the Bar to disclose internal documents relating to the matter, or compel this in-house counsel to testify. Provided the general requirements for disclosure are met, this will be different for non-admitted in-house counsel who should therefore be even more careful than their admitted colleagues when providing written advice to the company.

Dirk Arts, Anti-Trust Partner in Brussels, comments:  The ECJ's judgment will continue to make it difficult for in-house counsel to communicate openly with their business people and ensure compliance with the EU competition law rules.

In-house counsel will need to hammer home the importance of good housekeeping i.e. ensuring that as much material as possible is subject to privilege - otherwise a seemingly innocuous email regarding contact with a competitor, even something as innocent as a trade association meeting, could later be taken by the Commission as evidence of anti-competitive conduct.

Compliance programmes rely on business people having an open dialogue with their in-house lawyers, but this judgment undermines efforts to instil a culture of open dialogue regarding potentially anti-competitive behaviour, and may increase costs for legal advice if companies decide the safest approach is systematically to involve their external lawyers.

In Belgium, following the General Court's decision, the College of Competition Prosecutors (Auditoraat/Auditorat) stated that it will no longer treat communications with in-house lawyers as legally privileged in procedures conducted on the basis of the Belgian Competition Act. This policy shift is highly contested and, arguably, may be in breach of the Act of 1 March 2000 establishing the Institute of in-house lawyers, which protects the confidentiality of communications with in-house lawyers who are members of the Institute. It therefore remains to be seen whether the Belgian Competition Council and, as the case may be, the Court of Appeal of Brussels or the Cour de Cassation will follow the College of Competition Prosecutors' approach. However, the College of Competition Prosecutors will certainly feel reassured by the ECJ's judgment and it may be expected that when conducting inspections it will deny the application of legal professional privilege to communications with in-house lawyers.

Konstantin Seifert, Anti-Trust Associate in Hamburg, comments: Given the very narrow scope of  the disclosure rules in German civil proceedings, legal privilege in Germany is predominantly relevant in anti-trust investigations.  At a national level, however, its scope is quite limited and it generally does not apply as broadly as legal privilege under European law.  The rather unusual result of the ECJ's decision, however, is that European law has an even more restrictive approach to the specific question of whether legal privilege applies to in-house counsel than German law has.  Under German law, although there has not yet been a Supreme Court decision clarifying whether or not communications with in-house counsel are covered by legal privilege, lower Courts' judgments indicate that such communications can be protected if the in-house counsel's position is similar to that of an external, i.e. independent, lawyer (although it would only apply to the extent that the documents in question are in the in-house lawyer's sole custody).  So, in the end, a case-by-case analysis is necessary under German law, whereas under European law there is now a clear rule against legal privilege for communications with in-house counsel.

Given the absence of German Supreme Court rulings on the subject, the ECJ's decision might set an example to lower German Courts, leading to an even more restrictive approach to legal privilege for in-house counsel under German law. This remains to be seen.

Laetitia Benard, Litigation Partner in Paris and Olivier Fréget, Anti-Trust Partner in Paris, comment:  The ECJ's decision does not change the scope of legal privilege under French law which, although potentially wide in material scope (advising and litigating) and in forms (correspondence, documents, notes taken during a discussion with a lawyer, content of a discussion etc), is limited to exchanges between a company and its external lawyers.  Exchanges within an organisation, including those to and from in-house lawyers, are not covered by legal privilege.  It is consequently strongly advisable that all exchanges concerning, in particular, sensitive anti-trust matters (compliance training, anti-trust audits, and other sensitive advice) always include external lawyers.

Philip Mansfield, Anti-Trust Partner in London and Jonathan Hitchin, Litigation Partner in London, comment: As in the Netherlands, in England communications with in-house counsel are generally protected by legal privilege.  The ECJ's judgment does not change that.  The different treatment of in-house counsel communications at an EU level and at a national level in England can result in inconsistent defence strategies and/or analyses by the EU and UK in cartel investigations and potential follow on damages actions before the English Courts.   If critical documents concerning a cartel are created by in-house lawyers they are disclosable to the Commission but may be withheld from the UK OFT.  Where the agencies are pursuing parallel investigations, this could result in analyses being based on potentially contradictory evidence.  It is possible that the OFT and indeed the English Court in any subsequent follow on damages actions may take the position that a company handing over in-house counsel materials to the Commission waives the legal privilege that would otherwise be recognised in the UK, but this has not been tested.  This inconsistency already exists between the US and EU and raises significant problems in global cartel cases, and sits particularly uncomfortably with the obligation on leniency applicants to cooperate fully with agencies as a condition to their reduction in fine.  However, it is arguably more serious where agencies like the OFT and Commission enjoy parallel jurisdiction and have an obligation to ensure their respective investigations are consistent.

Click here to read the ECJ's judgment.