International Corporations take note. Last week, the ABA Journal reported that the second-highest court in the European Union issued a ruling denying the extension of the attorney-client privilege to communications between companies and their in-house counsel. This judgment of the Court of First Instance, dated September 17, 2007, can be found here: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62003A0125:EN:HTML.
The facts in this case arise out of a 2003 investigation by the Commission of the European Communities into the affairs of Akzo Nobel Chemicals, Ltd, Akcros Chemicals Ltd, and their respective subsidiaries (“Azko”) based on a regulation aimed at seeking evidence of possible anti-competitive practices. During the investigation, the Commission officials obtained a number of documents that Azko declared were protected by the Legal Professional Privilege (“LPP”). The principle behind LPP is similar to that of the United States’ protections of attorney-client privilege. However, the LPP is subject to different discovery rules and procedures in such a regulatory investigation. These procedures and requirements are also laid out in the 33 page court decision.
Most of the court’s opinion discussed the procedures the Commission must adhere to in order to obtain potentially privileged documents and what constitutes a privileged document. The decision reviewed multiple sets of documents with multiple standards for inspection of their content. It was found that the Commission “infringed” upon the procedure for protection of the LPP in reviewing a group of the documents.
The remainder of the decision dealt with the actual issue of how the LPP applied to in-house attorneys in communications with their employer companies. The assertion of the LPP particular to Akzo’s in-house attorney arose in 2 documents concerning e-mail correspondence between the General Manager of Akcros Chemicals and an attorney in Azko’s legal department. Turning to case law, the court stated that the protection accorded to the LPP under Community Law, in the application of the Anti-Competition regulation at issue, only applies to the extent that the lawyer is independent and not bound to his client by a relationship of employment. It further reasoned that the “independent” lawyer concept is based on a belief in the lawyer’s role as “collaborating in the administration of justice by the courts and as being required to provide, in full independence, and in the overriding interests of the administration of justice, such legal assistance as the client needs.” This idea excludes communications with in-house attorneys, who are deemed to be legal advisers bound to their clients by a relationship of employment, from protection under LPP.
From this, the Court of First Instance determined that for the LPP to apply, the legal advice must have been provided “in full independence,” meaning it was “provided by a lawyer who, structurally, hierarchically and functionally, is a third party in relation to the undertaking receiving that advice.” Because the in-house attorney was believed to be bound to Akzo Nobel, the LPP did not protect the documents at issue from disclosure.
In justifying its, the Court of First Instance made a comparative examination of the application of privilege law in other Member states, and determined that it is inconsistent. It appears that an exception to applying the LPP to in-house counsel may have existed when the attorney was bound by ethical-licensing requirements and subject to review before a board. Azko argued that their in-house attorney was licensed and subject to the obligation of independence and compliance with the Netherlands’ Bar rules. Nonetheless, the Court of First instance still rejected the claim that the LPP protected the communications. It also observed that that a large number of Member States exclude in-house lawyers from LPP protection, and in fact some Member States refuse to allow in-house lawyers to be admitted to the Bar of Law Society. This denial of admittance into the bar appeared to be an indicator to the court that in-house attorneys are not independent and exclusive from the direction of their corporate employers. The court went on to further clarify that “even in countries which do permit this [admission] possibility, the fact that in-house lawyers are admitted to a Bar of Law Society and are subject to professional ethical rules does not always mean that the communications with such persons are protected under LPP.”