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Europe Guts The In-House Privilege

The European Court of Justice said last week that communications between management and in-house attorneys aren’t protected from disclosure or discovery in investigations by the European Commission.

The appeal to the ECJ was brought by Akzo Nobel Chemicals and a subsidiary. The European Commission was investigating them in 2003 for possible anti-competitive behavior. It found two e-mails between the managing director and Akzo Nobel’s coordinator for competition law, a company lawyer who was also a member of the Netherlands Bar.

The EC added copies of those e-mails to the investigative file. Akzo objected, but the European Commission decided the emails weren’t covered by legal professional privilege, and the lower court agreed.

The EJC in 1982 had said in AM&S Europe v. Commission that for a communication to be privileged, it has to concern “the client’s rights of defence” and must emanate from “independent lawyers.”

In Akzo’s appeal, the European Court of Justice said because an in-house lawyer is an employee, he or she doesn’t “enjoy a level of professional independence comparable to that of an external lawyer.”

The court said:

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.

The decision applies to EU-level competition proceedings but will have a broader impact.

The Washington, D.C.-based Association of Corporate Counsel called the effect of the ruling “perverse.” The group’s former London head, J. Daniel Fitz, said it puts companies who rely on the expert advice of their in-house lawyers at a disadvantage by forcing them to divulge confidential communications and jeopardizing their standing in litigation matters, as well as day-to-day business.

A copy of the Judgement of the Court (Grand Chamber) dated 14 September 2010, Case C‑550/07 P, Appeal under Article 56 of the Statute of the Court of Justice brought on 30 November 2007 by Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd can be viewed here (at the top of the index).

Akzo Nobel N.V., a Netherlands-based pharmaceutical company, paid $2.9 million to settle Foreign Corrupt Practices Act offenses under the U.N. oil-for-food program in late 2007.

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1 Comment

  1. Gutting is perhaps not the most appropriate characterization. The privilege for in-house counsel never really existed for EU lawyers, at least not since 1982. From the holding in AM & S Europe Limited the two factors in their entirety : "[1]such communications are made for the purposes and in the interests of the client ' s rights of defence and ,…[2] they emanate from independent lawyers , that is to say , lawyers who are not bound to the client by a relationship of employment ." What you state is only part of the rule without pointing out the employment relationship. Akzo was challenging the second factor by trying to carve out an exception for barred lawyers who work in-house. There's clearly a battle in the EU between various professional responsibility systems. In several countries you cannot even be a lawyer and in-house counsel at the same time. This is the majority rule for the ECJ for quite some time even though some AG's have argued for the minority rule which would grant the exception for barred in-house lawyers.

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