By William Lawler and Yousri Omar

On September 14, 2010, the European Court of Justice delivered a blow to multinational businesses by holding that communications with in‑house counsel are not protected by the attorney-client privilege; referred to by the Court as the legal professional privilege.¹ The decision stemmed from an appeal by Akzo Nobel Chemicals and its subsidiary Akcros Chemicals related to an investigation for possible anticompetitive behavior.

During the course of the investigation, investigators for the European Commission seized copies of a number of documents from Akzo’s facility in the United Kingdom. At issue were written communications between the Company’s managing director and Akzo’s coordinator for competition law, a member of the Company’s legal department, and the Netherlands Bar. When the Company objected to the seizure, the lead investigator for the Commission reviewed the documents and determined that they were not protected by the legal professional privilege.

In holding that the legal professional privilege did not apply in this case, the Court relied on its 1982 decision in AM&S Europe v. Commission. In AM&S, the Court adopted two conditions that must be met before applying the privilege:

1. the exchange with the lawyer must be connected to the “client’s rights of defence,” and
2. the exchange must be with “independent lawyers, that is to say lawyers who are not bound to the client by a relationship of employment.”²

The crux of the Court’s inquiry turned on whether in‑house counsel, by virtue of her employment relationship with the Company, could truly ever be independent.

The Company argued that an in-house attorney who is a member of a bar is just as independent as an external lawyer, because her conduct is governed by the bar and subject to the rules of professional ethics and discipline. The Court, however, rejected that argument holding that an in‑house attorney, despite enrollment with a bar, can never be as independent as an external lawyer. The Court wrote that “an in-house lawyer cannot, whatever guarantees he has in the exercise of his profession, be treated in same way as an external lawyer, because he occupies the position of an employee which, by its very nature, does not allow him to ignore the commercial strategies pursued by his employer, and thereby affects his ability to exercise professional independence.” Rather than take this opportunity to reverse this aspect of the 1982 AM&S decision, the Court reaffirmed its position that communications between Company management and an in-house lawyer, by virtue of the employment relationship, can never be protected by the legal professional privilege.

Therefore, in-house counsel and their employers, when reducing communications to writing, must be aware of the fact that the legal professional privilege may not attach to their communications. This is of particular import when dealing with matters that may be subject to investigation by the Commission. Accordingly, companies should take proper precautions to reduce the risk of disclosure, including establishing compliance policies and procedures and providing regular employee notifications regarding the sensitivity of communications and the risk of disclosure.

For more information, please contact V&E partner William Lawler. Visit our website to learn more about V&E's Antitrust practice. Get a .pdf of this issue of Antitrust News & Notes e-newsletter.