It was not a quiet August for in-house lawyers.
They had a very brief period during the hottest days of the month in which to reflect on, and possibly respond to, a 20 page order dated 3 August by the president of the General Court of the Court of Justice of the European Union. The order again confirmed the restriction of legal professional privilege (LPP) at EU level to lawyers in private practice (or ‘external lawyers’), and refused to grant it to in-house lawyers.
The case is Broadcom Inc and VMWare International Unlimited Co. v the European Commission (T-280/26 R), and is, not surprisingly, a competition case in which the European Commission is demanding documents. The Commission alleges that Broadcom is abusing its dominant position in several markets for virtualisation software (tying or bundling products and services, charging abusive prices, limiting interoperability and increasing customer lock-in).
The new features of the case relating to LPP are twofold. First, the Commission is demanding that in-house counsel in the US, who would be able to claim LPP over those documents in the US, hand them over to the Commission because such privilege does not apply in the EU. It is true that previous cases - AM & S Europe v Commission (155/79) and Akzo Nobel Chemicals and Akcros Chemicals v Commission, (T‑125/03 and T‑253/03) - have long held that LPP is not recognised at EU level for in-house counsel, regardless of whether the privilege is recognised at Member State level. But that was within the EU, where the court’s writ clearly runs. This new order is a case where the court is saying that EU rules override local rules in a third country.
The second new feature is that the court did not rule on the application of the exclusion to external lawyers in a third country. The usual rule, as explicitly stated by the Commission, is that ‘communications between independent lawyers qualified to practise in third countries outside the territory of the European Union and their clients are not privileged under the case-law of the EU Courts’. However, in this case, the Commission exceptionally accepted ‘to exclude from the scope of the contested decision communications to and from all external independent lawyers, including those who are qualified to practise in third countries outside the territory of the European Union, that contain legal advice and related attachments’.
It would be interesting to know the outcome of an order as to whether LPP applies to US (or other third country) external lawyers. The court went out of its way to highlight the lawyer’s role of collaboration in the administration of justice in a democratic society. It said that any person must be able, without constraint, to consult a lawyer, and the lawyer must provide, in full independence and in the overriding interests of justice, such legal assistance as the client needs. Does that apply to external lawyers in a third country? We don’t yet know.
But it doesn’t apply to in-house lawyers: ‘An in-house lawyer, despite his or her enrolment with a Bar or Law Society and the rules of professional ethics and discipline to which he is, as a result, subject, does not enjoy the same degree of independence from his or her employer as a lawyer working in an external law firm does in relation to his or her client. Consequently, an in-house lawyer is less able to deal effectively with any conflicts between his or her professional obligations and the aims of his or her client.’
A number of thoughts occur.
First, how could the court have decided any other way? If they had given US in-house lawyers the LPP they sought, it would have meant that US in-house lawyers would be in a better position than EU in-house lawyers. Not only would that have been absurd, it would also mean that EU companies would be able to dodge the rule relating to LPP for EU in-house lawyers by basing their in-house counsel outside the EU.
On the other hand, the court’s rule, based on a decision in 1979 and confirmed in 2003, is more and more out of touch with the growing practice of companies hiring in-house counsel for their legal work. In England and Wales, around a quarter of the profession works in-house. Maybe the rule belongs to a past age, since around half of member states - maybe more now - recognise LPP for in-house counsel. For how much longer will the court contort itself to distinguish between the two kinds of lawyers?
And yet now may not be a good time to push for the independence of decision-making by in-house counsel. We in the UK are still grappling with the outcome of the Post Office Horizon scandal, and in the US lawyers employed by the administration have been threatened and coerced into partisan fealty by their client.
There will doubtless be a number of interventions in any appeal against the order. We already know about one.
Good luck to those who have to untie this increasingly complex Gordian knot both fairly and sensibly.
Jonathan Goldsmith is Law Society Council member for EU & International, chair of the Law Society’s Policy & Regulatory Affairs Committee and a member of its board. All views expressed are personal and are not made in his capacity as a Law Society Council member, nor on behalf of the Law Society
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