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In-house Access Insight & Commentary for In-House Counsel Worldwide

AKZO Decision Denies Legal Privilege Protections (LPP)/Confidentiality To Clients of EU In-House Counsel

Posted in Cross Borders, Privilege

On April 29, Advocate General Juliane Kokott of the Court of Justice of the European Union issued her opinion in the case of Akzo Nobel Chemicals Ltd v. EU (Case-550/07) suggesting that legal professional privilege does not apply to communications with in-house lawyers.  [The AG’s opinion proposes that the Court should dismiss the appeal, but is not binding on the Court of Justice. It is the role of the Advocates General to propose to the Court, in complete independence, a legal solution to the cases for which they are responsible; most commentators agree that the Court relies heavily on the AG’s opinions and directions, but the Court will now begin their own deliberations on the matter and deliver their decision at a later date.] 

The AG’s opinion is based on her belief that internal communications with in-house lawyers, even if they are enrolled as members of a Bar or Law Society, do not enjoy the fundamental protection afforded in the EU to communications between an independent lawyer and his client.  The opinion thus holds that in-house lawyers are not capable of independent judgment under EU professional standards.

According to the AG’s opinion, “A salaried in-house lawyer, notwithstanding any membership of a Bar of Law Society, does not enjoy the same degree of independence from his employer as a lawyer working in an external law firm does in relation to his client. Consequently, equal treatment of both professional groups in regard to legal professional privilege is not required as a matter of law. There is a structural risk that an enrolled in-house lawyer will encounter a conflict of interests between his professional obligations and the aims and wishes of his company, on which he is more economically dependent and with which, as a rule, he identifies more strongly than an external lawyer.”  (See the AG’s press release No 40/10.)

ACC and its European chapter, as intervenors in the Akzo case over the long life of this matter and debate, find this holding to be extremely disappointing, reflecting a fundamental misunderstanding of both the role and responsibilities of in-house counsel, and the impact of financial remuneration on any lawyer retained by a client to represent the client’s legal interests.

Indeed, most in-house lawyers in Europe were fully recognized/respected practitioners in outside practice before beginning their in-house careers: the AG’s ruling infers that on the day that an experienced and ethical lawyer enters a corporate headquarters to work on-premise, they somehow check their credentials and honor at the front door – and that outside counsel, whose livelihoods also hinges on client retention and remuneration, are somehow immune from the professional independence and ethical concerns that dominate the AG’s view of in-house lawyers, simply because outside counsel receives their share of client monies in the form of a retention check, rather than a paycheck. 

ACC holds that lawyers are not ethical or unethical because of their employment setting; that is a matter of their personal integrity – the idea that in-house layers are not capable of such integrity is not only misguided, but insulting.

The decision may have been expected by many, but still creates outrage at the in-house bar.  The AG’s recommendation puts the EU in the backward position of discouraging, rather than encouraging, the crucial provision of preventive legal services to the client by those lawyers best placed and suited to prevent failures from happening:  and all at a time when the society, in the EU and around the world, is more concerned than ever about assuring top-notch corporate compliance and an ethical culture.

For those not familiar with the issues of professional status of in-house counsel in EU jurisdictions, the 27 member states of the EU are split as to whether to accord legal professional privilege in-house counsel.  In the Akzo case, an in-house lawyer admitted in an EU member state that does recognize LPP for in-house communications wished to assert his client’s privilege rights in a matter involving EU law in an EU court – lawyer-client communications in that case were seized in a dawn raid by the EU’s Competition Law Commission; the court denied application of the privilege under the doctrines originally established on these issues in the AM&S decisions in the 1980s (Case 155/79 AM & S v Commission [1982] ECR 1575); the Akzo case and its ramifications on cross-border practice and the roles and responsibilities of in-house lawyers has generated international debate on this question ever since.

ACC’s “takeaways” on the case for lawyers engaged in corporate representation in the EU are as follows:

• In-house counsel provides independent legal advice to their clients, just like outside counsel. In fact, in-house lawyers, protected by employment laws and bound by ethical rules, are often more independent than outside counsel.

• The failure to recognize LPP for in-house lawyers limits their ability to advise their clients on the proper application of the EU competition rules and jeopardizes compliance with those rules. With the ever-increasing fines imposed on companies for competition law violations, it is critical that in-house lawyers are in a position to play a leading role in handling compliance issues, which is more difficult to do if they do not benefit from LPP.

• LPP is part of a company’s fundamental right to consult freely with an attorney of its choosing and not a limitation of the Commission’s investigatory powers. AG’s opinion suggests that LPP does not apply to client communications with any lawyer who is not recognized by the EU, thus excluding outside counsel and in-house counsel licensed outside of the EU – something that not many lawyers working in multinational practices have noted.

For more, see ACC resources on Akzo at: www.acc.com/advocacy/professional-privilege-in-the-eu