European Court ready to reject privilege protection for in-house lawyers
The Court of Justice of the European Union (CJEU) is on course to continue to deny legal professional privilege (LPP) to legal advice given by in-house lawyers in EU competition law investigations. Under current EU law, communications between clients and external lawyers are covered by LPP and therefore need not be disclosed to the Commission during competition investigations. In the ongoing Akzo Nobel case(1), the parties sought to persuade the court to extend this to in-house lawyers. Advocate General Kokott's opinion rejected such an extension.
Akzo Nobel was subject to a dawn raid during which an argument arose as to whether documents produced by in-house lawyers were covered by LPP. The Commission rejected the privilege claim and the parties appealed to the General Court.
Case law on this topic is sparse at European level but a previous rather old case (AM&S (2)) held that LPP protection does not apply to any advice from the investigated company's in-house lawyers.
In the appeal the parties sought to persuade the higher court that the decision in AM&S was outdated. The key argument was that any lawyer who is a member of a regulated profession should be regarded as independent and LPP should accordingly attach to their advice irrespective of whether or not they are employed by the company.
The General Court refused to follow the argument and rejected the appeal. The parties appealed further to the CJEU for a final ruling. The appeal hearing took place on 9 February 2010, the Advocate General's opinion which provides a formal analysis and recommendation was released today.
Advocate General Kokott invites the court to reject the appeal and uphold the General Court's ruling. First, she draws a distinction between the level of independence that an outside lawyer enjoys compared to an in-house lawyer who is employed, essentially by only one client. This would create a higher level of a potential conflict of interest between the aims of the (internal) client and the ethical duties of a lawyer. Second, she states that only the UK, Ireland and the Netherlands provide similar LPP protection to in-house lawyers and therefore there is no general trend within the EU to extending LPP.
What does this mean going forward?
First, the Advocate General's opinion is not the final ruling of the court but is an important advisory step. Since the opinion is often followed by the court, today's ruling provides a strong indication that the CJEU is likely to reject LPP protection for in-house lawyers.
Second, if the CJEU follows the Advocate General, it means that the law as stated in AM&S continues to apply.
This is regrettable as in-house lawyers, particularly when they are competition specialists, have an important role to play to ensure and monitor compliance. Delivering that without LPP protection for their advice will be much harder. It also means more valuable time will be spent avoiding the "LPP trap" by seeking external advice. For companies the challenge will be to implement systems that will allow issues to be identified without creating "hostages to fortune" or setting its own "LPP trap".
The CJEU's final ruling is expected at the end of summer.
(1) Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v Commission Case T-125/03 and T-253/03
(2) AM & S v Commission Case 155/79