The European Court of Justice (“ECJ”) in Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v Commission of the European Communities (Case C-550/07 P) (the “Akzo case”) has confirmed that internal communications by company employees with in-house counsel are not legally privileged in competition law investigations by the European Commission. The decision will have far reaching consequences for multinational companies operating across Europe. It is now clear that communications with their in-house counsel will be available to the Commission and could be used against the companies involved during investigations into infringements of EU competition law.
The national laws of privilege in each Member State remain unaltered. The Irish Courts and the Irish Competition Authority have previously afforded in-house counsel the benefit of legal professional privilege in certain circumstances. Given that the ECJ judgment is in conflict with the position under Irish law, it is important to be clear as to which set of rules apply. The opinion of the Advocate General in the Akzo case indicates that the position is as follows: the EU rules apply when the European Commission carries out an investigation in a Member State. Where a national authority (e.g., the Irish Competition Authority) assists the Commission with its investigation, the EU rules will still be applicable. However, where a national competition authority undertakes its own investigation under its national competition law legislation or under Article 101 or 102 of the Treaty on the Functioning of the European Union, the national rules on privilege will apply.
Why the ECJ decided that in-house counsel communications do not attract legal professional privilege
The ECJ relied significantly on its previous decision in AM & S Europe v Commission (Case 155/79 ECR 1575) where it stated that, for communications between lawyers and clients to be protected by legal professional privilege, the exchange must, first, be connected to the client’s rights of defence and, second, must emanate from an “independent” EU qualified lawyer. In the Akzo case, the ECJ focussed on this requirement of “independence”. The ECJ confirmed that in-house counsel do not have the requisite level of independence because of the economic dependence and close relationship with the employer (for example, the Court noted that in-house counsel cannot ignore the commercial strategies of their employers). In this regard, the ECJ recognised that an in-house counsel may be subject to professional ethical obligations as a result of enrolment in a Bar or Law Society but concluded that such obligations do not ensure a degree of independence equivalent to an external lawyer.
The Court rejected various arguments advanced by Akzo seeking to broaden the scope of legal professional privilege to include in-house counsel (including arguments relating to legal certainty, the protection of the rights of defence and the evolution of EU competition law enforcement procedures since the AM & S decision) and ultimately concluded that legal professional privilege is limited to external lawyers.
Privilege Post Akzo – what does this mean for in-house counsel in Ireland?
If they have not already done so, companies will need to consider how to ensure the confidentiality of the advice given before and during investigations led by the European Commission. Companies may wish to review their procedures regarding the seeking and dissemination of legal advice to ensure that they are better protected should an EU investigation follow.