Akzo-Nobel: what you need to know

What is the background of this case?

The Akzo Nobel case, or Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v Commission of the European Communities (C-550/07), concerns the extent to which legal professional privilege (LPP) can be claimed in EU antitrust investigations for legal advice given by in-house lawyers.

In February 2003, the European Commission ordered Akzo Nobel Chemicals and its subsidiary Akcros Chemicals to submit to an investigation aimed at seeking evidence of possible anti-competitive practices. The investigation was carried out by Commission officials assisted by representatives of the Office of Fair Trading, at the applicants’ premises in the United Kingdom.

During the examination of the documents seized a dispute arose in relation, in particular, to copies of two emails exchanged between the managing director and Akzo Nobel’s co-ordinator for competition law, an advocaat of the Netherlands bar and a member of Akzo Nobel’s legal department employed by that company. After analysing those documents, the Commission took the view that they were not covered by legal professional privilege.

By decision of 8 May 2003 (C (2003) 1533), the Commission rejected the claim made by those two companies that the documents at issue should be covered by legal professional privilege.

Akzo Nobel and Akcros brought actions challenging those two decisions before the General Court, which were dismissed by its judgment of 17 September 2007 (T-125/03). They subsequently appealed against that judgment to the Court of Justice.

The CJEU had previously had the opportunity to rule on the subject of legal professional privilege in 1982 in the case of AM & S Europe Ltd (C-155/79). The court held that it is subject to two cumulative conditions. First, the exchange with the lawyer must be connected to "the client’s rights of defence"; and, secondly, the exchange must emanate from "independent lawyers", that is to say "lawyers who are not bound to the client by a relationship of employment".

The court confirmed its previous decision and accordingly dismissed the appeal, noting that “an in-house lawyer cannot… be treated in the same way as an external lawyer, because he occupies 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 professional independence”.

What is the outcome of the judgment?

The judgment has confirmed existing EU case law that, in relation to EU competition law investigations carried out by the European Commission, the advice of in-house lawyers is not covered by legal professional privilege (LPP).

As such, documents containing advice or other confidential information given by an in-house lawyer to his or her employer cannot be withheld from the European Commission during a competition law investigation on the grounds that they are privileged.

What are the implications for in-house lawyers?

Although the judgment is expressed in quite general terms, it only affects EU competition law investigations carried out by the EU Commission. As the EU Commission is charged with enforcing the Community’s competition rules, it is in this area that it is most likely to require access to relevant documents. Furthermore, Community law must show due regard for the principles and concepts which guide the laws of member states.

Therefore, from a Scottish in-house lawyer’s perspective, it is in the area of EU competition law that you will require to consider the application of EU rules on LPP.

To what extent does LPP not apply to the advice of an in-house lawyer?

The case concerns investigations carried out to ensure the application of EU competition law. Any legal advice given by an in-house lawyer to his or her employer on competition law will not be protected from disclosure to the EU Commission.

However, it does not affect the scope of privilege as a matter of law in Scotland. Under Scots law, the advice of in-house lawyers continues to enjoy ostensibly the same protection as the advice given by a lawyer in private practice, as long as it is given in the capacity of legal adviser.

Privilege in Scots law is, in effect, owned by the client. The client can waive it. A solicitor cannot disclose communications between that solicitor and his client and cannot be compelled to do so unless the client agrees. If the client waives, the solicitor can be compelled to disclose the communications. It has long been accepted that communications include communications between the client and the solicitor and those assisting him in providing legal advice etc, including non-qualified persons. Excluded from privilege are communications forming part of a criminal offence, such as a fraud, where the solicitor was (innocently or otherwise) “directly concerned in the carrying out of the very transaction which is the subject matter of enquiry” (Micosta v Shetland Islands Council 1983 SLT 483).

Should my organisation seek external legal advice on all competition matters?

You will have to decide whether to seek external legal advice based on the factors relevant to your employer’s circumstances. Legal advice given by an external lawyer would be protected by LPP in any EU competition law investigation. It is easier to access advice given by an in-house lawyer if it has been committed to writing. The Commission may, however make requests for “all necessary information” under article 18 of the Modernisation Regulation (1/2003) and accordingly, oral advice could require to be disclosed.

From the EU Commission’s perspective, what “in-house” documents attract LPP?

Another element of this case concerned the mismanagement by EU Commission officials of documents which may have been protected by privilege. During the raid which gave rise to the initial proceedings, officials stated that they needed to examine the documents in question in order to determine whether or not they were privileged. In response to this, the court held that the Commission should be precluded from taking even a cursory glance at documents over which a company claims that LPP should apply, provided:

• the company considers that a cursory glance would be impossible without revealing the content of the documents;
• the company presents the Commission officials with relevant material to demonstrate that the documents are privileged.

The following documents which you are likely to have in your possession will attract LPP:

• communications with an external lawyer seeking advice in exercise of the rights of defence;
• documents prepared by in-house lawyers and clients for the express purpose of seeking legal advice from external lawyers in exercise of the rights of defence (even if the document was not actually sent); 
• internal company notes which are a report of the content of legal advice received from an external lawyer in exercise of the rights of defence.

What action should I take to ensure that LPP is correctly applied?

The types of documents which attract LPP from the Commission’s perspective are detailed above. They should be marked accordingly to ensure that they remain protected.

What is going to happen next?

The Society is in talks with various other bodies in the regulatory and commercial sphere, including the Law Society of England & Wales, to determine what could be done jointly to communicate the importance of recognising legal professional privilege in respect of the advice given by regulated solicitors working in-house.

The Society’s In-house Lawyers Group will be writing to all of our in-house members to communicate this information.

What impact is this decision likely to have on the Legal Services (Scotland) Bill and the status of those solicitors employed by non-solicitors within an ABS?

While there has been a lot of publicity as a result of the Akzo Nobel ruling and its implications for ABS, it should be borne in mind that it has simply confirmed existing case law with regard to the relationship between in-house lawyers and their employers in the context of EU competition law. The Scottish Government therefore maintains its position that the bill is competent and that the judgment will not impact on its progress to stage 3. The Society has not reached a finalised view and is seeking clarification on the Scottish Government's position.

The Society maintains that this ruling fails to recognise that Scottish solicitors acting as in-house lawyers are subject to the same stringent regulatory requirements as private practitioners (unlike many of their EU counterparts). All solicitors are subject to the same standards and are engaged by their employers to give robust, accurate and independent advice. These standards would continue to apply to those solicitors employed within a traditional solicitors' firm, as in-house counsel within another organisation, or an ABS which is not fully owned by solicitors.

Scottish solicitors in any sector must give advice independently and put their duties to the court and to the administration of justice beyond any duty to the employer. Any breach of the Society’s standards of conduct rules could give rise to a complaint and potential sanctions against a solicitor who has contravened them.