Bringing the house down

Almost 30 years ago, in Case 155/79 AM & S [1982] ECR 1575, the ECJ held that legal professional privilege was available in competition investigations but did not apply to communications with lawyers who are employed in house. This is, of course, contrary to common law conceptions of legal professional privilege. It is also of considerable practical significance, since in the modern corporate world in-house legal departments are important, and, if communications to and from them are subject to disclosure, that is bound to affect their ability to advise, at least in competition law matters.

In Case C-550/07P Akzo Nobel (Grand Chamber, 14 September 2010), the court was asked to reconsider this position, but decided to maintain it.

The case arose out of an investigation. In the course of which the commission seized two emails written by a member of Akzo's legal staff who was qualified and enrolled as an advocate at the Dutch Bar. Not surprisingly, the General Court applied AM & S, and held the documents were not privileged. The question on appeal to the Court of Justice was, in substance, whether AM & S should be overruled.

Time for a change?

There were several arguments deployed in favour of changing the law. The first was, in effect, that AM & S has been widely misinterpreted. Rather than precluding the application of legal professional privilege to in-house lawyers, it should be understood as applying only to lawyers who were not professionally regulated. But, it was suggested, if the lawyer in question was subject to rigorous professional obligations, then legal professional privilege should apply.

The ECJ rejected this suggestion. It confirmed the conventional view that AM & S precludes legal professional privilege where the lawyer is an employee. However rigorous the ethical standards applied, an employee could not (in the court's view) be sufficiently independent '“ sufficiently committed to justice in the abstract, and removed from his or her client's commercial strategy and imperatives '“ for communications to enjoy privilege.

The ECJ's approach on this point does not simply reflect a minor technical difference compared to the common law, but a rather fundamental difference. To the common lawyer, privilege is to protect the client's interest. The client needs confidential advice, and must be free to be candid and to expect candour from his advisers. From this perspective, the independence of the lawyer is not important; what matters is the subject on which advice is given (law) and the client's need for confidentiality to enable candour on both sides. To the ECJ, however, the purpose of the privilege seems to be intimately connected with a conception that the lawyer is a professional with a commitment to the due administration of justice; 'collaborating', as the ECJ puts it, in the administration of justice. From that perspective only the independent lawyer '“ the lawyer untrammelled by ongoing commitment to a particular client's business '“ is entitled to the privilege.

The second strand of argument amounted to a more direct attack on AM & S. It was suggested that times had changed, and that whatever justification there might have been for the rule in 1982, it should now be accepted that communications with (properly regulated) in-house lawyers should attract the privilege. The argument was supported by an analysis of developments in EC competition law, and by a comparative analysis of the laws of member states which suggested that according privilege to communications with in-house lawyers was quite widespread.

These arguments received a frosty reception from the ECJ, which insisted that the independence of the lawyer consulted is to be regarded as essential, and cannot be found when an in-house lawyer is consulted.

Divided opinion

Opinions will differ about this decision. On the one hand it might be said that the restriction of privilege is highly artificial. Are external lawyers really independent? Are they not, often at least, no less 'hired guns' than employees? To the extent that lawyers act in the interests of justice rather than their clients, is it not always because of a commitment '“ usually against their short-term economic interests '“ to ethical principles and regulation which ensures that those ethical standards are met? Do restrictive rules of privilege serve mainly the entrenched interests of a closed-shop of professionals, rather than the public interest?

Conversely, many feel that legal professional privilege '“ necessary as it is in some cases '“ is often misused. A privilege designed to enable candour in professional communications is all too often used to 'cloak' straightforward commercial communications with an inviolable veil of secrecy. This can undoubtedly operate against the public interest. Competition law cases, which sometimes involve unscrupulous arrangements that thrive on secrecy, bring these concerns to the fore.

The disappointing thing about the Akzo judgment is '“ as so often in ECJ judgments '“ the formal requirements and conventions of ECJ judgments prevent any sustained discussion of these policy issues. If one strips out the boilerplate discussion of the facts and summaries of the parties' submissions, the judgment contains little in the way of sustained discussion of the underlying issues. That is regrettable, not least since the judgment is likely to be the last word for another generation on an important and controversial topic.

Still, we know now where we stand. In practical terms, it is as important as ever that advice on competition law questions is '“ if there is any desire to keep it confidential '“ rendered by genuinely independent external lawyers.