The ECJ's dismissal of the Akzo appeal last week has generated widespread condemnation from in-house lawyers generally and from many external practitioners, particularly in the US and UK. After 7 years it was hoped that this case would be the catalyst for a change in the law and approach of the European Commission, which does not recognise legal professional privilege in relation to communications with in-house lawyers in the context of competition investigations. Notwithstanding, lobbying and intervention in the case by many governments, including our own, and professional bodies, including ACCA and ECLA, the result is that in-house legal teams will need to continue to make wide use of external legal advisers for advice and compliance issues which they increasingly consider that they are in a better position to address themselves.
Not only is it difficult to always identify the stage at which the protection of external legal advise should be initiated, but also additional external costs will inevitably be incurred. Apart from the legal constraints, General Counsel will also be concerned that this judgment implicitly detracts from their professional status, as well as constraining the role of the in-house team. The heart of the justification for the judgment is that whatever the requirements of professional rules, an in-house lawyer cannot be treated in the same way an external lawyer in terms of professional independence because he is an employee. In-house counsel will rightly argue that this is only a matter of degree. External firms dependent on significant fee income from major clients can also be susceptible to pressure, as Enron showed.
The ECJ did not accept that changes in role of in-house Counsel or their involvement in dealing with greatly increased regulatory activity in the competition field over the last 10 years were sufficient to justify a change of approach. Those trends are however the reason why lobbying will continue, notwithstanding the Akzo judgment, but necessarily now with the objective of achieving statutory revision.
The only small gain that has been made to date is that the Court of First Instance (now the General Court) in the first stage of the Akzo appeal criticised the procedures adopted by the Commission on the raid near Manchester in February 2003 which gave rise to the case and in which I lead the Defence team acting on behalf of Akzo Nobel. Such is the concern over the privilege issue, that some major companies will continue to adopt a policy of not committing certain advice to business colleagues to writing, although this can lead to problems of its own.
In a broader context what will also concern General Counsel in the UK and the US is that the Akzo judgment encourages regulators if for obvious reasons may want to challenge privilege for in-house lawyers in other contexts. The debate in the Akzo case is focused on competition investigations, because this is the main sphere in which the EU Commission exercises its enforcement powers. An additional anxiety for in-house is that EU investigations and regulatory activity could develop in other areas in which in-house privilege could then also be restricted or unavailable, such as environmental compliance, product liability and fraud investigations. As EU law becomes increasingly interwoven with that of member states, there is also an underlying concern that it may in the longer term have an impact on, for example, English law in this context. None of this is imminent, but it helps to explain the high profile which the Akzo case has attracted and the intensity of the views which it has engendered.
It may take some time for the forces in favour of change to regroup, but the issues will re-emerge soon enough on another battlefield.
Jonathan Sinclair - Partner and Head of Commercial Litigation and Antitrust Litigation at the specialist dispute resolution practice Stewarts Law LLP
Telephone: +44 (0)113 222 0029
Mobile: +44 (0) 7769 142265
Email: jsinclair@stewartslaw.com