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Legal professional privilege: An overview of EU and national case law

Jean-François Bellis, October 2011, e-Competitions, No39467

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Since 1982, the year in which the Court of Justice recognized the existence of a legal professional privilege in EU law in its AM & S judgment [1], this issue has been a source of debate as well as frustration within legal and business circles in the EU in view of the limitations to the scope of the privilege set by the Court in its judgment. The judgment had at least the merit of accepting the concept of a legal professional privilege at EU level but, by strictly limiting its personal scope, it generated controversy and criticism. This series of articles discusses the issue of legal professional privilege not only at EU level but also within the legal order of a number of European jurisdictions. Taking a closer look at this important issue comes at a particularly opportune time after the reconfirmation of AM & S by the Court of Justice in its 2010 Akzo Nobel judgment [2].

1. THE LEGAL PROFESSIONAL PRIVILEGE IN EU COMPETITION INVESTIGATIONS

The contours of the EU legal professional privilege doctrine were defined in 1982 in the famous AM & S case in which the Court of Justice recognized "the confidentiality of written communications between lawyer and client provided that, on the one hand, such communications are made for the purposes and in the interests of the client’s rights of defence and, on the other hand, they emanate from independent lawyers, that is to say, lawyers who are not bound to the client by a relationship of employment" [3]. This judgment was seen as a landmark because Regulation No 17/62 [4] did not provide for any legal professional privilege and the obligation to respect the confidentiality of communications between lawyer and client was strongly disputed by the Commission and, as a matter of fact, did not exist in the form claimed by AM & S in the legal order of all the Member States at the time [5]. Together with other principles of procedural fairness, such as the right to a fair hearing [6], laid down by the Court of Justice after 1 January 1973, the recognition by the Court of the existence of the legal professional privilege in competition law investigations reflected the impact of English law on European jurisprudence following the UK’s accession to the EEC.

The legal privilege sanctioned by the Court of Justice in AM & S presented two peculiarities:

- 1. First, the privilege only applied to "independent lawyers". In other words, legal advice given by in-house counsel did not qualify for legal privilege under EU law [7].

- 2. Secondly, the privilege only applied to "any lawyer entitled to practise his profession in one of the Member States, regardless of the Member State in which the client lives" [8]. In other words, the legal privilege protected under EU law did not apply to lawyers qualified in third countries [9]. Even though the Commission indicated that it was prepared to extend the legal privilege to independent lawyers from outside the EU by way of bilateral agreements on the basis of reciprocity, no progress was ever made on that front [10].

These two limitations were the subject of intense criticism as they were perceived as inconsistent with the objective pursued by the privilege, namely that of protecting the confidential character of the lawyer-client relationship, and were viewed as particularly unfair to companies employing in house lawyers rather than outside counsel [11]. As regards the latter point, any attempt by undertakings to invoke the privilege with respect to documents produced by in-house legal staff were roundly rebuffed [12] and, in some cases, the Commission even relied on memoranda of in house counsel to establish the intentional nature of the infringements in question [13].

In Hilti [14], the Court of First Instance was given the opportunity to clarify the scope of the protection granted by the legal privilege in EU competition law proceedings. The question that arose in that case was whether the privilege covered not only legal advice given by an outside lawyer but also the internal company memoranda reporting the legal advice that had been distributed among managerial staff. The Court made it clear that "the principle of the protection of written communications between lawyer and client may not be frustrated on the sole ground that the content of those communications and of that legal advice was reported in documents internal to the undertaking" [15]. It follows from this judgment that any internal documents reporting the content of advice from outside counsel qualifying for the legal privilege also benefit from the same protection.

Akzo Nobel [16] provided the Court of First Instance with the opportunity to revisit the issue of legal privilege in EU competition law proceedings and more specifically to determine whether the exclusion of in-house counsel from the scope of the privilege was still justified. This particular aspect of the AM & S judgment had come under increasingly severe criticism from in house lawyers and their associations [17]. The case related to documents which had been seized by the European Commission during an inspection of the premises of Akzo Nobel Chemicals and Akros Chemicals (at the time, the two companies were part of the same group). The documents consisted of communications between Akros’ General Manager and Akzo’s in-house counsel, who was a member of the Dutch bar association. Despite the parties’ objections, the Commission found that the documents were not protected by legal privilege, relying on the 1982 AM & S judgment of the Court of Justice. The Commission noted that the AM & S judgment explicitly stated that independent lawyers were those who "are not bound to the client by a relationship of employment". In an appeal to the General Court, Akzo and Akros contested the Commission’s interpretation of the scope of the legal privilege under EU law, arguing that the scope established in AM & S should be interpreted as including communications with in-house counsel where the lawyer is a member of a bar or legal professional association, since the rules of any such association would be sufficient to ensure the counsel’s independence. The judgment, however, came as a disappointment as the General Court essentially confirmed the existing case law [18]. In particular, the Court refused to extend the personal scope of legal professional privilege beyond the limits established by the Court of Justice in the AM & S judgment on the ground that, even though the protection of communications with in-house lawyers under legal privilege is "relatively more common today than when the judgment in AM & S was handed down«, it is not possible, however, «to identify tendencies which are uniform or have clear majority support in that regard in the laws of Member States" [19]. The Court also noted that 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 recognize them as lawyers established in private practice" [20].

While also confirming the Hilti judgment, the Court of First Instance clarified that internal preparatory documents may be covered by legal professional privilege when drawn up exclusively for the purpose of seeking legal advice from an external lawyer in exercise of the rights of defence [21]. The Court, however, held that the mere fact that a document had been discussed with a lawyer was not sufficient to give it the protection of legal privilege.

Beyond these confirmations, the Akzo Nobel judgment of the Court of First Instance provides significant and novel guidance as regards the procedure to be followed when applying for the protection of confidentiality for written communications between lawyer and client. The Court of First Instance made it clear that an undertaking subject to an investigation is entitled to refuse to allow the Commission officials even a cursory look at specific documents allegedly covered by legal professional privilege, provided that such a cursory look would inevitably lead to the disclosure of the contents of the disputed documents and that the undertaking provides the Commission officials with appropriate reasons for its refusal accordingly [22]. Where the Commission considers that the material presented by the undertaking is not sufficient to demonstrate the confidential nature of a disputed document, a copy of the latter may be placed in a sealed envelope and removed with a view to a subsequent resolution of the dispute [23]. In any event, even where the Commission is not satisfied with the materials and explanations given by the representatives of the undertaking for the purposes of proving that the document concerned is covered by legal privilege, it may not read the content of the document before it has adopted a decision allowing the undertaking concerned to refer the matter to the Court of First Instance, and, where appropriate, to submit an application for interim relief [24]. In that regard, the Commission is bound to wait until the time limit for bringing an action against the rejection decision has expired before reading the content of those documents [25].

The Akzo Nobel judgment of the Court of First Instance was appealed to the European Court of Justice [26]. In a judgment delivered on 14 September 2010, the Court confirmed that legal privilege does not apply to communications between a company and its in-house lawyers in the context of EU competition investigations. In the judgment, the Court has made two points clear: the AM & S judgment does not provide for legal privilege for communications between a company and its employee, regardless of whether the employee is a member of a bar association, and there is no need, at present, to amend the rules set out in AM & S.

With respect to the first point, the Court dismissed the appellants’ arguments concerning the effect of membership in a bar association, stating that, despite the professional and ethical obligations imposed by bar codes of conduct, these rules cannot ensure that an in-house counsel maintains a degree of independence from his employer similar to the independence of an external lawyer. In particular, the Court held that the status of employee, by its very nature, prevents an in house counsel from ignoring the commercial strategies pursued by his employer, thereby affecting his ability to exercise professional independence [27].

With regard to the second point, the Court rejected the appellants’ numerous claims that evolutions in Member State and European law require an expansion of legal privilege under European competition law. In particular, the Court noted that only a minority of Member States granted legal privilege to communications with in-house counsel and that there did not seem to be an overwhelming trend towards expanding the privilege to this extent [28]. The Court also held that the modernization of EU competition law and procedural rules does not require a re-examination of the scope of legal privilege. Finally, the Court stated that the application of legal privileges of differing scope by national and EU authorities does not infringe the principle of legal certainty, since the scope of each privilege and the instances in which it applies are clear [29].

2. THE LEGAL PROFESSIONAL PRIVILEGE IN NATIONAL COMPETITION INVESTIGATIONS

Prior to being subjected to a lively debate at the European level, the legal professional privilege has been part of the legal order of a number of Member States as a component of the right to a fair trial laid down in Article 6 ECHR and the right to privacy provided for in Article 8 ECHR [30]. However, due to the supremacy of EU law’, the EU case-law laid down in the AM & S and Akzo Nobel judgments has had a decisive influence over the decisions taken by Member States with respect to issues raised in connection with the scope of the legal professional privilege.

Many Member States such as Romania and Finland have introduced the legal professional privilege concept in their competition law proceedings through provisions dealing with the rights of defence. Finland introduced the protection of the rights of defence in its new Competition Act and expressly referred to the EU case-law in connection with self incrimination and legal privilege [31]. The Romanian Emergency Government Ordinance amending competition regulation gives more details on the legal professional privilege and prohibits the seizure of documents containing an expression of the undertaking’s right to defence [32]. This law expressly provides that two categories of documents cannot be seized in competition investigations: communications between the undertaking and its lawyer for the sole purpose of the exercise of the rights of defence as well as preparatory documents drafted by the undertaking for the sole purpose of the exercise of the rights of defence, even if they have not been sent to a lawyer or have been created with the purpose of being physically sent to a lawyer. In other Member States, the confidentiality of written communications between lawyer and client is enshrined in general legislative provisions which are of general applicability [33]. Under national law, the extent of the legal privilege seems to be the same as that defined by the Court of Justice in the sense that only documents drafted by an independent lawyer in the interest of the client’s rights of defence are given confidential treatment.

Bearing in mind the principles set out in the EU case-law, national courts have dealt with questions which have not been expressly dealt with by the EU Courts. Thus, the Hungarian Supreme Court has ruled that the communication between client and lawyer for the purpose of exercising the client’s rights of defence which took place before the initiation of the competition procedure by the national competition authority may be covered by the legal professional privilege and therefore may not be used as evidence of an infringement of competition rules [34]. The Court ruled that the only element which must be taken into account to determine whether the document falls under the scope of the legal professional privilege is its content, namely either the actual or potential exercise of the rights of defence. Furthermore, the Court stated that the document must expressly mention that it is subject to lawyer-client privilege in order to qualify for the legal professional privilege.

Consequently, under national law, the nature of the legal professional privilege and its application rely on essentially the same criteria as those defined by the Court of Justice. The legal professional privilege is only granted when the document is created by an independent lawyer, excluding in-house counsel, for the purpose of the exercise of the rights to defence [35].

Recent judgments handed down by national courts have provided more details on the scope of the protection of the lawyer-client communication. In a ruling issued in September 2009, the Spanish National Court set two criteria in connection with the legal professional privilege. First, the Court stated that the privilege is not a constitutional right but is rather part of the broader principle of rights of defence enshrined in the Spanish Constitution. Second, the seizure of hard drives containing documents covered by the legal professional privilege as well as data unrelated to the anti-competitive conduct does not constitute a breach of the rights of defence since, in the case at hand, the National Competition Authority did not effectively use the privileged information against the applicant in the course of the procedure.

As regards the role played by in-house lawyers, the Court of Justice has consistently refused to extend the legal professional privilege to lawyers who are bound to the client by a relationship of employment. On that point, Member States’ Courts have tended to follow the same approach. In this respect, however, the Swiss Civil Supreme Court in a case in which it aligned itself with the EU Court of Justice, indicated the specific conditions according to which the legal professional privilege might apply to in-house counsel. To that end, documents should be entrusted to the in house lawyer as legal advisor and would be protected only where they are under the in-house lawyer’s custody. However, these considerations remain to a large extent hypothetical in so far as the Court did not rule on that specific question.

3. CONCLUSION

Ideally, the legal professional privilege in EU anti-dumping proceedings should cover any communication for the purpose of obtaining legal advice between a client and a lawyer regardless of whether the lawyer is self-employed or whether the Bar with which he or she is registered is an EU or a non-EU Bar. Seemingly created for the sole benefit of EU Bar members in private practice, the legal professional privilege defined by the Court of Justice presents a clear, though probably unintended, protectionist character. The reason for the unsatisfactory personal scope of the EU legal professional privilege lies perhaps in a misunderstanding about what exactly the privilege covers and, more specifically, what exactly it allows a lawyer to do. In her Opinion in Akzo Nobel, Advocate General Kokott stated that a possible abuse of the legal professional privilege might consist "in handing over evidence and information to an undertaking’s legal department, under cover of a request for legal advice, for the sole or primary purpose, ultimately, of preventing the competition authorities from gaining access to that evidence and information" [36]. This was one of the arguments that she put forward to justify excluding in-house lawyers from the scope of the privilege. Suffice it to say that the legal professional privilege is restricted to the legal opinion and advice provided by a lawyer and that it can not, under any circumstances, be used to provide a safe haven for evidence of an anti competitive practice. Suspicions about possible abuses of the privilege cannot justify limiting it to a particular category of lawyers. As Advocate General Slynn advocated in his Opinion in AM & S, the legal professional privilege should be granted to lawyers "who are professionally qualified and subject to professional discipline" [37] even if they are employed as in-house counsel in the legal department of an undertaking. Let us hope that the Court of Justice will eventually come to that conclusion as well.

Note from the Editors: Although the e-Competitions editors are doing their best efforts to build a comprehensive set of the leading EU and national antitrust cases, the completeness of the database can not be guaranteed. The present foreword provides readers with a fair view of the existing trends based on cases reported in e-Competitions and alternative sources gathered by the author. Readers are welcome to bring to the attention of the editors any other relevant cases. For an overview of the national status of 34 jurisdictions, click here to browse The Antitrust Encyclopedia.

Footnotes

[1] ECJ, May 18th, 1982, AM & S Europe v. Commission, Case 155/79, [1982] ECR 1575.

[2] ECJ, September 14th 2010, Akzo Nobel v Commission, Case C-550/07 P. See Miranda Aldrich de Savorgnani, Rein Wesseling, The EU Court of Justice confirms that communications with an in-house lawyer are not legally privileged (AKZO), 14 September 2010, e-Competitions, n° 34843

[3] See AM & S v Commission, op. cit., para. 21.

[4] See Regulation 17/62, of 6 February 1962, First Regulation implementing Articles 85 and 86 of the Treaty (OJEC n° 13, of 21 February 1962, pp. 204-211 ; English special edition, Series I, Chapter 1959-1962, p. 87).

[5] See Opinion of Advocate General Slynn in AM & S v Commission, (1982) ECR p. 1651.

[6] See ECJ, October 23th, 1974, Transocean Marine Paint Association v. Commission, Case 17/74, [1974] ECR 1063 and the Opinion of Advocate General Warner.

[7] In 1999, the European Parliament proposed to extend the legal privilege to in-house counsel, provided certain conditions were met (EP Minutes of 15 April 1999, Doc. A4-137/99) but this suggestion was ignored by the Commission.

[8] See AM & S Europe v. Commission, op. cit., para. 25.

[9] Interestingly, some of these third countries, such as the United States, do grant the benefit of legal privilege to European lawyers for the purposes of their own antitrust law enforcement. SeeJoshua, ’It’s a privilege’, Competition Law Insight, 11 December 2007, pp. 14–16.

[10] See Thirteenth Report on Competition Policy, point 78. Moreover, in practice, the Commission does not require access to documents prepared by US counsel when sending requests for information.

[11] See for instance Rose, "Challenges for in-house counsels in multinational corporations: preserving the attorney client privilege in the aftermath of Akzo Nobel Chemical Ltd. v. European Commission", The Metropolitan Corporate Counsel, April 2011; ICC Commission on competition, "Competition law and legal privilege", available at www.iccwbo.org.

[12] See for instance, Volkswagen (I), OJ 1998 L 124/60, recitals 90–91; on appeal Volkswagen v. Commission (I), (2000) ECR II-2707; on further appeal Volkswagenv. Commission, fn.110, where the Commission rejected Audi’s claim ’that the documents copied in the course of the investigation in the legal department and in department MI-11 should not be used’. Although the company claimed that the documents were protected by ’attorney’s privilege’ on the ground that the legal staff were acting as independent lawyers, this claim of privilege was not accepted since the legal staff were all Audi employees.

[13] See John Deere, OJ 1985 L 35/58, p. 61, and in Bayo-n-ox, fn. 233, p. 78.

[14] See Hilti v. Commission (I), Case T-30/89, (1990) ECR II, p. 163.

[15] Ibid, para. 18.

[16] CFI, September 17th, 2007, Akzo Nobel Chemicals and Akcros Chemicals v. Commission, Joined Cases T-125/03 and T-253/03ECR II, p. 3523. On this case, see, inter alia, Isabelle Cretenet, Jean-Charles Savouré, Legal privilege et déontologie, Concurrences, N° 3-2008, n°20319, pp. 184-185, and Chantal Momège, Legal privilege : Un (tout petit) pas en avant en matière de legal privilege (Akzo), Concurrences, N° 4-2007, n° 14387, pp. 126-128.

[17] See note 11 above.

[18] See Nobel Chemicals and Akros Chemicals v. Commission, op. cit.,para. 169. The CFI ruled that "the correspondence exchanged between a lawyer bound to Akzo Nobel by a relationship of employment and a manager of a company belonging to that group is not covered by legal professional privilege", as defined in AM & S. The President of the CFI, however, ruling on a request for interim measures in the same case seemed more open to reversing the AM & S case law on this issue; see CFI, October 30th, 2003, Akzo Nobel Chemicals and Akcros Chemicals v. Commission, Joined Cases T-125/03 R and T-253/03 R, [2003] ECR II-4771, paras 122–127. The President of the ECJ overturned the decision of the President of the CFI and eventually dismissed the application for interim measures on appeal but he arrived at this position on a different legal basis (lack of urgency), and therefore did not reconsider the principles stated in CFI, May 28th, 2004, Akzo Nobel Chemicals and Akcros Chemicals v. Commission, Case T-253/03, [2004] ECR II-1603, paras. 28–44.

[19] See Akzo Nobel Chemicals and Akros Chemicalsv. Commission, op. cit., para. 170. The CFI noted that a large number of Member States still exclude in-house lawyers from protection under legal privilege, while various Member States have aligned their regime with the Community system following the AM & S judgment.

[20] Ibid, para. 171.

[21] Ibid, para. 123. The CFI concluded that such preparatory documents may be covered by legal privilege even if they were not actually exchanged with an independent lawyer or were not created for the purpose of being sent physically to such a lawyer. It should, however, be noted that the rather subjective criteria referred to by the CFI (documents drawn up ’exclusively for the purpose of seeking legal advice’) may cause controversy in future practice.

[22] Ibid, para. 82. In particular, when raising a claim to privilege with regard to specific documents, the undertaking concerned may inform the Commission of the author of the document and for whom it was intended, explain the respective duties and responsibilities of each, and refer to the objective and the context in which the document was drawn up. It may also refer to the context in which the document was found, the way in which it was filed and any related documents (para. 80). Again, in practice, the position of the CFI will undoubtedly lead to ’lively’ discussions with the Commission’s officials during inspections.

[23] Ibid, para. 83. ’This procedure enables risks of a breach of legal professional privilege to be avoided while at the same time enabling the Commission to retain a certain control over the documents forming the subject-matter of the investigation and avoiding the risk that the documents will subsequently disappear or be manipulated’.

[24] Ibid, para. 85.

[25] Ibid, para. 88.

[26] See Akzo Nobel v Commission, op. cit.

[27] See Akzo Nobel v Commission, op.cit., para. 47.

[28] Ibid, paras 72-74.

[29] Ibid, paras. 100-107.

[30] Opinion of Advocate General Maduro, Ordre des barreaux francophones and germanophone & Others v Conseildes Ministres, C-305/05, paragraph 41 and ECHR, Golder v United Kingdom, judgment of 21 February 1975, § 26 40.

[31] Finnish Parliament, new Competition Act, Government Bill 88/2010 of 11 March 2011. See European Competition Network Brief, The Finnish Parliament approves the new Competition Act introducing amendments to both merger and antitrust rules, 11 March 2011, e-Competitions, n° 36616.

[32] Emergency Government Ordinance 75/2010. See Valentin Mircea, The Romanian Government enacts an ordinance radically overhauling competition legislation (Emergency Government Ordinance 75/2010), 18 June 2009, e-Competitions n° 32664.

[33] See for instance, Article 3 of the French unified national Regulation on principles applicable to lawyers. Furthermore, Article 2.3 of the Charter of core principles of the European legal profession and code of conduct for European lawyers laid down provisions on confidentiality of communications between lawyer and client.

[34] Hungarian Supreme Court, December 2009, BH 2009.364. See Gábor Fejes , Zoltan Marosi, The Hungarian Supreme Court defines the extent of client-attorney privilege in competition proceedings (BH 2009.364), December 2009, e-Competitions, n° 30442.

[35] See for instance, Tribunal for the Defence of Competition, 22 July 2002, Case 508/02, Pepsi-Cola vs. Coca-Cola. See Paloma Martínez-Lage, The Spanish Competition Authority defines the scope of protection of legal privilege (Pepsi-Cola/Coca-Cola), 22 July 2002, e-Competitions, n° 20061.

[36] Opinion of Advocate General Kokott in Akzo Nobel v Commission, (2010) not yet published in ECR, para. 150.

[37] Opinion of Advocate General Slynn in AM & S v Commission, op. cit., para. 18.

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