In-house ruling causes dismay

Internal communications by in-house lawyers are not protected by legal professional privilege in EU competition law investigations, the European Court of Justice ruled this week.

The decision, in Akzo Nobel Chemicals and Akcros Chemicals v European Commission (Case C-550/07 P), which upholds Advocate General Kokott’s Opinion, has caused widespread dismay among the legal profession.

Geraldine Elliott, head of commercial litigation at Reynolds Porter Chamberlain LLP, says companies will wonder why European law trumps long-held national legal traditions and creates this kind of anomaly: “The court concluded that as a result of the in-house counsel’s ‘economic dependence’ on his employer he does not enjoy a level of professional independence comparable to that of lawyers in private practice.”

Elliott says the judgment means that even notes by an in-house lawyer on legal advice prepared by an external lawyer could be disclosable under EU law, so in-house counsel should be cautious when documenting any comments or advice on competition issues. “In-house counsel at businesses where European competition investigations are a realistic prospect will have to be very careful about writing down anything that could be used against the company in the event of an investigation,” she adds.

The dispute arose after Commission officials seized correspondence between employees and in-house counsel during a 2003 anti-competitive investigations raid on Akzo Nobel’s Manchester offices. The company argued that the documents were protected by privilege.

Sir Christopher Bellamy QC, senior consultant at Linklaters, says: “This is a disappointing judgment. In modern circumstances the primary enforcer of competition law is often the in-house lawyer. In my view, that role should be strengthened, not weakened.

“This judgment, however, makes it more difficult for companies to take effective and prompt advice from their in-house legal department, and will I fear prove counter-productive.”

Des Hudson, chief executive of the Law Society, says in-house lawyers are “the front-line guarantor of compliance” and companies would only ask difficult or sensitive questions when they knew they could do so in confidence.

Matthew Fell, CBI director for competitive markets, says: “We are disappointed that the court has not taken the opportunity to bring the 30-year-old case law up to date and recognise the fundamental role that in-house lawyers play in competition law compliance.”