The European Court of Justice (ECJ) this week ruled in the Akzo Nobel and Akcros Chemicals appeals that, under EU law, legal professional privilege does not extend to employed in-house lawyers, thereby confirming existing case law.

In 2003, the European Commission and the Office of Fair Trading carried out a dawn raid in Eccles on the premises of Akzo Nobel and Akcros Chemicals, citing possible anti-competitive practices. During the search, the commission made photocopies of documents which Akzo and Akcros asserted were subject to legal professional privilege.

The documents in question relevant to the appeal were two emails between the general manager of Akcros and an employee of Akzo's in-house legal department, who was also a member of the Netherlands bar. The commission refused to recognise the claim for privilege. Following an unsuccessful application to the Court of First Instance (now the General Court), Akzo and Akcros brought this appeal to the ECJ.

The question of whether privilege applies to in-house lawyers in this EU law context is of great importance to corporate entities with in-house legal departments. The commission's stance was hotly contested. The UK, Ireland and the Netherlands intervened in the appeal in support of the appellants, as did several professional associations at first instance and on appeal, including the Council of Bars and Law Societies of Europe, through which the Law Society of England and Wales supported the appeal.

The ECJ accepted neither that existing case law should be interpreted so as to include in-house lawyers in the scope of privilege, nor that there had been significant developments in the legal landscape that should be reflected in EU law. Arguments that fundamental principles of EU law had been violated were similarly unsuccessful.

Importantly, the ECJ did not accept that in-house lawyers enrolled at a bar or law society are, on account of their professional conduct and disciplinary obligations, just as independent as external lawyers. The court decided that an in-house lawyer is less able to deal effectively with any conflicts between their professional obligations and the aims of their client. This was justified on the grounds that they occupy the position of an employee, which does not allow them to ignore their employer's commercial strategies, thereby affecting their ability to exercise professional independence. The court considered that economic dependence and close ties with the employer were relevant factors.

The ruling has many important implications:

  • In-house lawyers continue to be outside the scope of legal professional privilege under EU law. Internal exchanges of opinions and information between the management of a corporate body and an in-house lawyer employed by them remain outside the scope of privilege. In the context of EU law, in-house lawyers continue to be regarded by the ECJ as less independent than external lawyers.
  • Efforts by entities with the assistance of their in-house legal team to make sure they comply with competition law may generate documents that are not privileged and which could adversely affect their position in any subsequent competition authority investigation. To ensure privilege is maintained where available, external lawyers would need to be instructed.
  • The ECJ's decision applies only to competition proceedings and investigations conducted by the commission. It does not affect the law governing proceedings before national courts. Under English law, in-house lawyers are clearly entitled to assert legal professional privilege over confidential communications with other individuals in their corporate entity.
  • Confidential communications with external lawyers, which are privileged in nature, are unaffected.
  • A minority of the 27 EU member states extend legal professional privilege to in-house lawyers under their national laws. These are the states in the common law area, namely the UK and Ireland, and the Netherlands, Greece, Portugal and Poland. The remaining majority, including Germany and France, do not extend legal professional privilege to in-house lawyers. The ECJ's decision needs to be seen in this context.

James Wingfield is a solicitor at Howard Kennedy