Lawyers expressed dismay this week at a European Court of Justice ruling that legal professional privilege does not apply to legal advice given by in-house lawyers in EU competition law investigations.

Ruling in the Akzo Nobel case, the ECJ said that in-house lawyers were not independent enough for privilege to apply to them.

The court said that, even when in-house lawyers are bound by the ethical rules of their law society or bar association, ‘an in-house lawyer… does not enjoy the same degree of independence from his employer as a lawyer working for an external law firm does in relation to his client’.

The ECJ held that, in reaching this decision, it had not violated the principle of equal treatment in relation to internal and external lawyers.

The court followed the opinion of advocate general Juliane Kokott, who recommended to the ECJ in May that legal privilege should not attach to companies’ internal communications with their in-house lawyers.

The Law Society and other lawyers’ groups had intervened in the case, submitting arguments that privilege should apply to communications with lawyers working in-house.

Law Society chief executive Desmond Hudson said: ‘In-house lawyers are the frontline guarantor of compliance. It is sad that while the EU strives to legislate for higher standards of corporate governance and risk management, the decision of the court in effect rejects this key tool in achieving this aim.

‘The court has missed its opportunity to recognise how the role of the in-house lawyer has developed… I hope EU policy makers will come to appreciate the great value that such lawyers bring to both the private and public sectors. It is in their interests to trust these lawyers to get on with their jobs and to trust their regulators to guarantee their independence and ethical behaviour.’

He added: ‘A solicitor is a solicitor, whether working in private practice or in commerce and industry.’

Sir Christopher Bellamy QC, senior consultant at magic circle firm Linklaters, said: ‘This is a disappointing judgment. In modern circumstances the primary enforcer of competition law is often the in-house lawyer. In my view, that role should be strengthened, not weakened. This judgment, however, makes it more difficult for companies to take effective and prompt advice from their in-house legal department, and will I fear prove counter-productive, quite apart from the underlying issue of fundamental rights.’