privilege” exists in the EU where (i) the communication was
made for the purpose of and in the interest of a client’s defense,
and, (ii) where the communication involves an “independent
lawyer, that is to say one who is not bound to his client by a rela-
tionship of employment.”
In John Deere, a 1984 case, the document seized during a simi-
lar raid was a memorandum from Deere and Co.’s American
general counsel to company managers in Europe in which he
expressed the view that company policies may have been violat-
ing EU law. The EC rejected the company’s privilege claim and
used the memo as evidence that the company was engaging in
competition law violations willingly and knowingly.
Akzo Nobel was the latest round in this battle. The case arose
out of raids by the EC in 2003 on the premises of Akzo and
its subsidiary Akcros during an investigation of suspicions that
the companies were participating in a cartel. The documents
seized included two emails between a company executive and
Akzo’s in-house counsel for competition law, who was admitted to the Netherlands Bar. The in-house lawyer had signed
an agreement with Ackros specifically acknowledging his independence, which would have permitted the company to assert
privilege under Dutch law.
In its Sept. 14, 2010 decision, the ECJ reconfirmed AM&S
and held that legal professional privilege did not apply to com-
munications with in-house lawyers in competition law inves-
tigations conducted by the EC under EU law, despite the in-
dependence agreement the Dutch lawyer had signed with the
company. The language the ECJ adopted in coming to this con-
clusion had both practical and symbolic implications. In par-
ticular, the court focused on the in-house lawyer’s “economic
dependence” and “close ties” with his employer to find that he
“does not enjoy a level of professional independence compa-
rable to that of an external lawyer.” Despite the fact that an
in-house lawyer is enrolled with a Bar or law society and has
professional ethical obligations which flow as a result, he “oc-
cupies 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 pro-
fessional independence.”
While the Association of Corporate Counsel (ACC) at-
tempted to diminish the impact of the decision in a September
2010 member briefing by noting that in “concrete terms…the
overwhelming majority of potential legal privilege cases or in-
cidents will not be affected by the Akzo ruling at all,” and that
the decision “has limited legal effect outside EU competition
law investigations conducted by the EC,” an ACC press release
suggested much more grave consequences.
The ACC quoted J. Daniel Fitz, former ACC’s board chair
in London, as saying that the ruling “has serious ramifications
as it denies in-house attorneys and multinational businesses in
Europe and elsewhere the critical legal counsel on competition law matters that companies working in today’s global legal marketplace require. The Court has locked into place the
notion that in-house lawyers are not capable of independent
judgment under EU professional standards.” The ACC’s General Counsel was even stronger in her condemnation. Susan
Hackett said the court ignored “the realities of modern in-house practice. In-house counsel are top legal practitioners
who are just as capable as their outside counsel counterparts;
the idea that professional independence stems from the type of
office a lawyer works in, rather than from their moral and pro-
fessional compass, evidences a deep misunderstanding of legal
professionalism and lawyers.”
And while Akzo Nobel started as a competition investiga-
tion, language in the judgment signals that the same result may
be applied beyond the narrow confines of competition law and
perhaps to other European Union (EU) regulations and institu-
tions. The decision creates a direct conflict with privilege that
might otherwise be accorded at a national level to in-house
counsel (in England, for example). Further, the European Ad-
vocate General’s opinion in the case, though not binding, took
the position that privilege does not extend to external counsel
who are not admitted to the Bar of an EU member state.
For practical purposes, then, all communications between
North American corporate counsel and the offices and subsidiaries in Europe are potentially at risk. The decision could drive
company management to ensure that any communications with
in-house lawyers about EU competition law are oral, not written; North American corporate counsel will need to remember
that their conversations with European counterparts may not
be privileged for certain purposes in Europe; and the possibility
exists that challenges might arise in Canadian and U.S. courts
to privilege claims over inter-company communications: can a
communication with in-house lawyers arise with a “reasonable
expectation of confidentiality” when such communications are
subject to seizure by the European Commission?
A February 2011 discussion paper prepared for the CBA
entitled “Solicitor-Client Privilege: Challenges for the 21st
Century” raises curious questions about privilege in corporate
contexts within its broad sweep. The paper’s author, University of Ottawa Associate Law Professor Adam Dodek, notes
that Canadian law has “only begun to address the multiplicity of issues that can arise in the corporate context” and that
the Supreme Court of Canada “has only determined the most
fundamental question,” that privilege applies to advice given
in the corporate context. Yet in a previous 2010 article upon
which much of the CBA paper is based, Dodek concluded that
“[w]hen the client is an organization, the privilege should not
apply” and argued for reduced protection for privilege in organizational contexts. Such a radical recommendation both misunderstands the importance of privilege within corporations
and—like Azko —could consequently cast corporate counsel
into a lesser status within the profession. In contrast, a 2010
CBA report offers both practical tools for corporate counsel
and reaffirms the importance of privilege to the lawyer-client
relationship in all practice environments.
Akzo Nobel shows there is a need for a better understanding
of the rationale for privilege and of the professional ethics and
role of in-house counsel. Becoming more aware of both the domestic and international challenges, substantive and symbolic,
is only the first step. END
Paul Paton is a professor and director of the Ethics Across the
Professions Initiative at the University of the Pacific, McGeorge
School of Law in Sacramento, Calif. A Canadian lawyer and
academic, he is a frequent commentator on in-house counsel issues.
