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Legal Privilege Court of First Instance – Akzo Nobel v Commission

Kristina Nordlander

Introduction

• Background to legal privilege concept in EC law

• The Akzo case

• Scope:

– Who has privilege

– What information is privileged

• Procedure

• Practical tips

Background

Doctrine of Lawyer-Client Relations

• Old European concept

– As far back as 16th century English common law

• Originally protected the integrity and honour of the solicitor

• Developed into protecting the client

• Rationale: Complete and open communication without fear of disclosure is essential for effective legal representation

Doctrine of Legal Privilege

• Human Rights and fundamental freedoms:– 1980 National Panasonic case: ECJ applied principles of Article

8(2) ECHR in the context of Commission investigations

• AG Warner in 1982 AM&S case– “in a civilised society, a man is entitled to feel that what

passes between him and his lawyer is secure from disclosure”

• Legal privilege protection is about– The right of a client (individual/corporate) to receive legal

advice (oral/written) in privacy

– The duty of the lawyer to remain silent and withhold client information

• Privilege protection prevails over the interest of discovery

Is there an EC privilege concept?

• Legal privilege recognized in Member States

• But no express provision under EC law

• 1982 AM&S case :

”Community law […] must take into account the principles and concepts common to the laws of [Member States] concerning the observance of confidentiality, in particular, as regards certain communications between lawyer and client.”

• ECJ created an EC privilege rule based on Member States’ general law principles

Privilege in EC investigations

• 1982 AM&S ECJ judgment

• September 2007 CFI judgment in Akzo (under appeal to ECJ)

– Note different rules in Member States

What is legal privilege?

• It protects certain communications between lawyer and client from disclosure to third party

• It may ensure that such communications are inadmissible as evidence in legal/administrative proceedings

Preliminary Questions

• In what context is privilege claimed and against who?

• Where is the document/information located?

– may determine applicable law

– varying risk of disclosure: e.g. US discovery

Commission’s Investigative Powers

• The Commission has the power to:

– request information from undertakings

– undertake on-site inspections (”dawn raids”)

– enter the homes of members of staff (e.g. managers, directors)

– examine documents irrespective of medium

– take copies or extracts of documents

• Safeguards - the Commission must respect legal privilege

Communication is Privileged when:(as case law stands today)

• Lawyer acts in capacity of legal counsel qualified in a Member State

• Lawyer provides independent legal advice (no employment relationship to client)

• Lawyer acts subject to and in compliance with ethical rules and effective disciplinary system– Court said in AM&S that the status as an independent

lawyer is based on a conception of the lawyer’s role as collaborating in the administration of justice by the courts …and that the counterpart of the protection afforded to communications lies in the rules of professional ethics and discipline which are laid down and enforced in the general interest …

What type of Communication?

• For the purpose of the client’s right of defence

• Linked to the subject matter of a Commission procedure

• Is the trend towards broadening the scope?

– 1990 Hilti case:– Legal documents prepared by in-house counsel reporting advice by independent

lawyer

– UK House of Lord ruling of 2003 in “Three Rivers”:– Legal privilege covers all the documents connected to the lawyer's

advisory task, including ‘presentational’ advice

– 2007 CFI in Akzo:– Working / summary documents for the purpose of obtaining the assistance of an

outside lawyer

Akzo v Commission

Akzo: The Facts

• Commission investigation seeking evidence of anti-competitive practices

• Investigation took place at Akzo’s premises in the UK

• Akzo claimed privilege over two sets of documents

Set A:

– two memoranda from the general manager of Ackros Chemicals to one of his superiors, containing information gathered from employees for the purpose of Akzo’s competition compliance program

- the second of the two memoranda bore handwritten notes indicating that the document had been discussed with the superior and, subsequently, with outside counsel

Set B:

- a number of manuscript notes by the general manager that formed the basis of the memoranda in Set A

- two emails between the general manager and Akzo’s coordinator for competition law, who is an in-house counsel admitted to the Bar in the Netherlands

European Commission Actions

“cursory look” at the documents at Akzo’s premises:

• Set A documents might be covered by privilege and should be placed in a sealed envelope for further consideration

• Set B documents were definitely not covered by privilege and should be placed on the investigation file

later Decision:

• Set A documents were not covered by privilege

Main pleas of Akzo

• Commission breached the procedure, set out in AM&S, by taking a “cursory look” at the documents

• By violating the protection of privilege the Commission infringed the fundamental rights on which the principle is based

• Commission unjustly rejected Akzo’s claim to privilege protection for the five documents at issue in Sets A and B

CFI on procedure

• Commission not entitled to read disputed documents before adopting decision that undertaking can appeal to the Court (harm upon disclosure)

• ‘Cursory look’ not allowed if require contents to be disclosed

• If a certain document may be privileged, Commission can place a copy in a sealed envelope pending subsequent resolution of the dispute

• Commission infringed privilege by:

– taking cursory look at documents in Set A and notes in Set B (NOT emails)

– placing the Set B documents on the file without giving Akzo the opportunity to raise a privilege claim before the Court

CFI on preparatory documents- discussing with a lawyer is not

enoughAkzo argued:

• Memoranda and written notes were covered by privilege because they were the written basis for an oral communication with an outside counsel and made for obtaining legal advice

CFI decided:

• Preparatory documents can be covered by privilege if drawn up exclusively for seeking legal advice from an outside lawyer in exercise of the right of defence

• It has to be unambiguously clear either from the content or from the context that the document was created for the purpose of seeking legal advice

Extending privilege to in-house lawyers?

President of CFI Order of 30 October 2003:

• reached the provisional conclusion – based on evidence submitted on Member State laws – that in-house lawyers may have privilege because:

“the role assigned to independent lawyers of collaborating in the administration of justice by the courts … is now capable of being shared, to a certain degree, by certain categories of lawyers employed within undertakings on a permanent basis where they are subject to strict rules of professional conduct.”

CFI rejected several arguments for extending the scope of privilege to cover

communications between in-house lawyers and their employers:

Member State laws increasingly recognise privilege for in-house counsel under certain circumstances

EU competition law has undergone fundamental reforms, in which the in-house counsel are key, e.g., increased responsibilities to perform self-assessments of compliance with competition rules

Different treatment of in-house and outside counsel raises issues of freedom of establishment and the freedom to provide services

Communications between the general manager and the in-house counsel constituted correspondence between persons established in the Netherlands and the UK - Community law should not be more stringent than those two national laws

Changes in EU after Akzo?

Personal scope of protection

– confirmed that privilege is not extended to qualified in-house lawyers, even if members of a Bar or Law Society

– privilege is not extended to external counsel who are not members of a Bar or Law Society in an EU Member State (however, not at issue in the case)

Material scope of protection

– working or summary preparatory documents prepared by the company can be privileged, but strict conditions have to be met and burden of proof is on company

Procedural safeguards

– inspecting agency is in principle not allowed to cast even a “cursory look” at potentially privileged documents before allowing the chance to raise privilege issues before the Court

Implications in cross-border investigations

• Article 12 of Regulation 1/2003 allows the Commission or a National Competition Authority (NCA) to receive and use as evidence information that it could not have collected itself

• Information can be collected by a NCA which is later forwarded to the NCA of a Member State with a higher standard of legal privilege

– the OFT of the UK has noted that if it is sent the communications of in-house counsel by an NCA of another Member State where such communications are not privileged, it may use them in its investigation

• Companies should not assume that the standard of legal privilege of the Member State where the information is used by the NCA as evidence will necessarily apply

Examples of Member States protecting in-house lawyer communication:

• UK: in-house lawyers members of the respective professional association can claim privilege under same conditions as outside lawyers

• Germany: in-house lawyers admitted to practice as attorney may have privilege for documents in their sole custody; independence must be guaranteed by employer

• Belgium: special law from 2000 provides for confidentiality of in-house counsel advice

• Netherlands: in-house lawyers admitted to Bar have privilege but employer must sign special statute of independence

• Finland: benefit from legal privilege when representing their employer in civil, administrative or arbitration proceedings

• Greece, Portugal, Spain, Denmark: in-house lawyers can be members of the Bar and covered by legal privilege

Non-EU Lawyer Communication

• No privilege for communication with lawyers from jurisdiction outside the EU!

→US lawyers working in the EU are not covered by privilege

• In practice, the Commission might extend the privilege to non-EU qualified outside lawyers?

Some practical advice• documents produced for internal compliance program

should contain a clear indication that advice from an outside counsel is sought

• ideally, all such documents should be addressed and sent directly to outside counsel

• to the extent companies want and expect certain communications to be protected by privilege, outside counsel should be instructed

• companies are entitled to prevent the Commission from reading potentially privileged documents during an investigation

• Commission is obliged to put such documents into a sealed envelope and allow the company the chance to contest its rejection of the claim for privilege protection before the CFI

Examples of Documents

• Compliance program materials

• Interview transcripts

• Summaries of facts to be provided to lawyers

• Law firm memoranda

• E-mails

Contact

Kristina Nordlander

Partner

Sidley Austin LLP

Square de Meeûs 35

Brussels

Belgium

+32-2504-6400

knordlander@sidley.com