Advocate General of the European Union Court of Justice: Internal Company Communications With An In-house Lawyer Remain Unprotected By The Legal Professional Privilege

Date: Jul 13, 2010

Lawyers hoping for a change in European Union law related to the protection of company communications with in-house counsel will not be encouraged by a recent opinion by Advocate General Juliane Kokott of the European Union's Court of Justice. In her April 29, 2010 opinion, Kokott held that the legal professional privilege does not protect company or group communications with an in-house lawyer because in-house lawyers are not sufficiently independent. Case C-550/07 P, Akzo Nobel Chemicals Ltd., and Akcros Chemicals Ltd. v. European Commission, http://curia.europa.eu/jcms/jcms/j_6/.

While not binding, Kokott's opinion provides an indication of how the European Union Court of Justice may ultimately decide this case.

Now before the European Union Court of Justice is Akzo and Akcros' appeal from the Court of First Instance's dismissal of their challenge to the European Commission's use of certain documents. Specifically at issue is whether the legal professional privilege extends to two emails between the general manager of Akcros and Akzo's in-house coordinator for competition law, who was also a member of the Netherlands Bar. The emails were discovered during an investigation conducted by the European Commission at the premises of Akzo and Akcros in the United Kingdom in order to "safeguard evidence of possible anti-competitive practices." Id.

Central to Kokott's reasoning was a 1982 case that held that the confidentiality of a written communication between lawyer and client hinges on whether the communication is made in connection with the exercise of the client's rights of defense, and whether the communication is made with an independent lawyer – a lawyer who is "not bound to the client by a relationship of employment." Id. (citing Case 155/79, AM & S Europe Limited v. Commission of the European Communities, 1982 E.C.R. 01575).

Kokott explained, "an enrolled in-house lawyer, despite his membership of a Bar or Law Society and the professional ethical obligations associated with such membership, 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 clients." Case C-550/07 P, Akzo Nobel Chemicals Ltd., and Akcros Chemicals Ltd. v. European Commission (April 29, 2010).

Kokott did not find in-house lawyers to be sufficiently independent because: (1) lawyers are often required to follow their employer's instructions and are "part and parcel of the structures of the company or group;" (2) in-house lawyers are typically completely economically dependent on their employer; and (3) in-house attorneys identify more strongly with the client – their employer – as well as with its corporate policy and strategy than "would be true of external lawyers in relation to the business activities of their clients." Id.

Although twenty eight years have passed since the AM & S decision, Kokott found that the ‘legal landscape' had not changed in such a way that would require the law to be changed on the European Union level. Id. The legal professional privilege is recognized in all twenty seven Member States of the European Union. Id. However, the privilege extends to internal company or group communications with in-house lawyers in only three Member States – Ireland, the United Kingdom, and the Netherlands. Id. The application of the privilege in Akzo would have likely been different if the investigation were conducted by national authorities and national law applied instead of European Union law.

The scope of the legal professional privilege in the European Union remains at odds with the application of the attorney-client privilege in the United States which offers broader protection to company communications with in-house counsel. Upjohn Co. v. United States, 449 U.S. 383 (1981); Lewis v. Wells Fargo & Co., 266 F.R.D. 433, 444 (N.D. Cal. 2010). Recently, the U.S. District Court for the Northern District of California even ruled that the attorney-client privilege applies to confidential documents created by company employees to assist company counsel in providing legal advice even if the documents are not addressed to counsel and as long as the employee understands the intended use of the document. Lewis, 266 F.R.D. at 444-45; see Litigation Alert: Court Explains Circumstances in Which an Employer May Invoke the Attorney-Client Privilege When Communications are Neither Authored By Nor Addressed To Counsel

Given the differences in the scope of the attorney-client privilege in the United States and the European Union, in-house attorneys and the companies that employ them should be aware that under European Union law company communications with an in-house attorney remain unprotected by the legal professional privilege.