Civil Conduct: Going round the houses

This article was written for Solicitors Journal.

Civil Conduct: Going round the houses

Now in-house legal privilege has been removed, what should practitioners do to avoid breaking the new rules? Gavin Foggo and Deepak Arora report

The European Union Court of Justice (ECJ) ruling in Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v Commission (Case C550/07P) on 14 September 2010, has caused much dismay amongst in-house counsel. The judgment confirms that written communications between in-house counsel and their non-lawyer colleagues will not be protected by legal professional privilege for competition investigations by the EU Commission. This is in stark contrast to the position of external lawyers, whose communications with their clients will continue to attract legal professional privilege.

Whilst the ECJ considered that it was doing no more than following the decision in AM & S Europe v Commission [1982] ECR 1575, its decision is disappointing largely because the Court has missed an opportunity to adapt the law to reflect the substantial changes that have taken place in the roles and commercial importance of many in-house counsel since the AM & S ruling nearly 30 years ago. The recent ruling also removes the room for ambiguity which a number of commentators found in the AM & S judgment.

But what does the recent ruling mean in practice? What steps should in-house counsel take?

National UK competition investigations and other, non-competition disputes

The good news is that the ECJ judgment in Akzo Nobel makes it clear that the ruling applies only in respect of EU competition investigations. It does not alter national laws on legal professional privilege in respect of other types of dispute, or even for competition investigations by the authorities of a member state (except where the national authority is assisting the EU Commission). This means that for all other types of dispute in the UK, internal written communications to and from in-house counsel for the purposes of providing legal advice will continue to be protected by legal professional privilege. In those cases, in-house counsel will need to continue to take the usual precautionary measures.

Where an EU Commission investigation is already under way, it is clear that legal advice privilege can only be obtained for communications between external lawyers and the company (whether the individuals at the company are in-house lawyers, or non-lawyer senior executives). It will therefore be vital for the company to instruct an external law firm to advise. In many cases, there will be little change, because most companies already instruct external legal advisers for such investigations.

The much more difficult situation for in-house counsel will be how to handle the provision of legal advice on matters which could impact on EU competition law (and therefore be the subject of a future investigation by the Commission) but where no Commission investigation has commenced. In each case it will be a judgment call as to whether external counsel should be involved. In-house counsel will need to assess the costs and the risks of advising the business themselves or instructing a law firm.

EU competition investigations

Whilst the circumstances will vary in each particular case, in-house counsel may want to consider the following issues for matters which are, or might become, subject to an investigation by the EU Commission.

• Where there is not yet a Commission investigation, undertake a risk assessment of the likelihood of an investigation subsequently being launched: consider whether the matter in issue could conceivably be part of an investigation in the future; consider the risk of this happening; consider the potential damage to the company if the legal advice lost its privilege.
• Where there is an investigation, or the risk of one is too great, instruct an external law firm to provide the legal advice.
• From the outset of any investigation it is important to identify clearly which individuals will count as the lawyer and which as the client for the purposes of providing legal advice. If an external lawyer is advising an in-house lawyer (who is technically the client) then the transfer of the external lawyer’s advice to parts of the company (such as compliance and regulatory teams) may well cause the document to lose privilege.
• Advise non-lawyer colleagues about the creation and dissemination of internal documentation, particularly where such documentation is likely to contain material damaging to the company’s legal position. Even if confidential and provided to in-house lawyers for the purpose of obtaining legal advice, they will still have to be handed to the EU Commission.
• Written legal advice, whether from external or in-house lawyers should be marked as being confidential and legally privileged. Whilst labelling a document in this way will not be determinative of whether it attracts privilege, it will at least assist in persuading people internally of the need to keep the document confidential and not to disseminate it.
• Care should be taken about creating preparatory documents which are ultimately not sent to external lawyers, as this will inevitably weaken any future argument that the documents were created solely for the purpose of obtaining external legal advice.
• Ensure that legal advice provided by external lawyers is circulated internally in the same format in which it was received from the external lawyers. Substantial amendments to external legal advice which alter their intended meaning and conclusions should be avoided as these could adversely affect the status of privilege afforded to them.
• In cross-border matters, ensure that the privilege rules of different states are understood and complied with, in addition to the position in respect to EU Commission investigations.