European Court of First Instance clarifies scope of EC privilege and how to deal with privilege claims during a dawn raid
The European Court of First Instance ("CFI") today issued a long-awaited judgment concerning the EC rules of privilege in Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v Commission (joined cases T-125/03, T-253/03).
What is privileged?
Following this Akzo case, privilege in EC investigations extends to the following categories of documents:
- written communications exchanged with an external independent lawyer after the initiation of an anti-trust investigation;
- earlier written communications exchanged with an external independent lawyer which have a relationship to the subject-matter of that procedure;
- internal notes circulated within an undertaking which are confined to reporting the text or the content of such communications with external independent lawyers containing legal advice;
- preparatory documents drawn up exclusively for the purpose of seeking legal advice from an external independent lawyer in exercise of the rights of the defence.
What happened in this case?
During a dawn raid (unannounced on-the-spot investigation) by the European Commision seeking evidence of possible anti-competitive practice at Akzo and Akcros' offices, a dispute arose concerning certain documents.
Akzo told the Commission that the documents in question were protected by legal privilege. The Commission's team leader decided to review briefly the documents in front of the Akzo representative to determine whether they were indeed covered by legal privilege. The official placed one set of documents in a sealed envelope, and another set directly into the Commission's files.
What is the ruling of the CFI?
- in-house lawyers are not protected
The CFI confirmed the European Court of Justice case law (the AM&S case of 1982) which "expressly excluded communications with in-house lawyers, that is, legal advisers bound to their clients by a relationship of employment, from protection under LPP' (Legal Professional Privilege, or the principle of professional confidentiality, as it is known in continental law systems).
The case law defines the concept of independent lawyer in negative terms:"such a lawyer should not be bound to his client by a relationship of employment", rather than positively, "on the basis of membership of a Bar or Law Society or being subject to professional discipline and ethics".
The test is therefore that legal advice should be provided 'in full independence, which the CFI defines as that provided by a lawyer who, structurally, hierarchically and functionally, is a third party in relation to the undertaking receiving that advice".
Therefore, the advice of in-house counsel is not protected under EC law by LLP, and can be examined and used by the European Commission. Although specific recognition of the role of in-house lawyers and the protection of communications with such lawyers under LPP is relatively more common today than in 1982 when AM&S was handed down, the CFI ruled that it was not possible to identify tendencies which are uniform or have clear majority support in that regard in the laws of the EU Member States.
- categories of documents protected
Before this Akzo case, there were three categories of documents protected: (i) written communications exchanged with an external independent lawyer after the initiation of an anti-trust investigation; (ii) earlier written communications exchanged with an external independent lawyer which have a relationship to the subject-matter of that procedure, and (iii) internal notes circulated within an undertaking which are confined to reporting the text or the content of such communications with external independent lawyers containing legal advice.
The Akzo case adds a fourth category, namely preparatory documents drawn up exclusively for the purpose of seeking legal advice from an external independent lawyer in exercise of the rights of the defence, even though those particular documents are not sent to the external lawyer. The reference to the rights of the defence may imply that this category covers only documents created in the context of an investigation, but the CFI is not specific on this issue.
The CFI made clear that the fact that a document has been discussed with a lawyer is not sufficient to give it such protection, and that the possibility of treating a preparatory document as covered by LPP must be construed restrictively. In particular, it notes that the fact that a document has been drawn up under a competition law compliance programme is not sufficient in itself for that document to benefit from protection under LPP.
- procedure to be followed
The CFI confirms that if the privileged nature of a document is not clear from external indications (e.g., by showing the letterhead of the document), the company officials may refuse to allow the European Commission officials even a cursory look at the documents, provided that the company "considers that such a cursory look is impossible without revealing the content of those documents and that it gives the European Commission officials appropriate reasons for its view".
The disputed document must then be placed in a sealed envelope, which will be taken away by the Commission. The Commission should then issue a formal decision rejecting the company's request for protection of the document under LPP.
Next, the company will have the opportunity to bring an action before the CFI against the rejection decision and to bring an application for interim relief. The Commission is not entitled to open the sealed envelope until the CFI's judgment is handed down or the time limit for bringing an action before the CFI against the rejection decision has expired.
Consequences for business
The judgment provides helpful procedural security for a company that wants to prevent the European Commission during a dawn raid from reviewing the contents of a privileged document.
The power to prevent the Commission from looking at a privileged document can often be crucial, as the information contained therein, whilst it cannot be used by the Commission to prove an infringement, might otherwise be used by the Commission to obtain "leads" to begin new investigations.
The judgment reinforces the need for companies to have in place effective and up-to-date dawn raid defence strategies to ensure that they make full use of their rights to refuse the Commission access to privileged documents. It also emphasises the importance for companies carefully to consider how to create internal documents in a way which ensures as far as possible protection under LPP.
The CFI notes that its restricted position on LLP does not undermine the possibility to comply with competition law since companies can have recourse to external lawyers in order to benefit from LLP, as follows:
"(..) even if the adoption of Regulation No 1/2003 and of the Commission Notice on Immunity from fines and reduction of fines in cartel cases may have increased the need for undertakings to examine their conduct and to define legal strategies in respect of competition law with the help of a lawyer who has in-depth knowledge of the particular undertaking and of the market in question, the fact remains that such exercises of self-assessment and strategy definition may be conducted by an outside lawyer in full cooperation with the relevant departments of the undertaking, including its internal legal department. In that context, communications between in-house lawyers and outside lawyers are in principle protected under LPP, provided that they are made for the purpose of the undertaking's exercise of the rights of defence".