President of ECJ denies legal privilege for inhouse counsel

By Pauline Kuipers


On 27 September 2004, the President of the European Court of Justice (ECJ) overturned a preliminary order given by the President of the Court of First Instance (CFI) in the case Commission v Akzo Nobel and Akcros Chemicals on the extent of the notion of ‘legal privilege’.[1]

The matter related to a Commission investigation regarding to possible anti-competitive practices by Akzo Nobel and Akcros Chemicals. The Commission, assisted by the UK Office of Fair Trading, had carried out a dawn raid at the companies’ premises in the UK. During this dawn raid, the Commission seized and made copies of numerous documents. With respect to five documents, a discussion arose between the Commission/OFT officials and representatives of the companies, which was the cause of these proceedings.

The documents at issue

The five documents were treated in two different ways by the Commission and are therefore designated as ‘Set A’ and ‘Set B’ documents. The Set A documents were placed in a sealed envelope by the Commission officials, who considered themselves not in a position to reach a definite conclusion as to their privileged character on the spot. The Set B documents were placed with the rest of the file, since the Commission officials were of the opinion that these documents were definitely not protected by legal privilege.

Set A consisted of a 2-page memo from the general manager of Akcros to his superior, which contained information gathered, according to the applicants, for the purpose of obtaining external legal advice in connection with the company’s existing competition law compliance programme. Set A further contained a second copy of the same memo containing hand-written notes referring to one of the external lawyers.

Set B consisted firstly of a series of handwritten notes by the same general manager used for the purpose of preparing the aforementioned memo. The set further contained email corre­spon­den­ce between the general manager and Akzo Nobel’s competition law co-ordinator, who was an in-house counsel at Akzo Nobel and was also registered as an attorney at the Dutch bar.

The interim order of the CFI

Akzo explained to the Commission why it was of the opinion that legal privilege was attached to both sets of documents, so that these could not be reviewed by the Commission. The Commission then informed Akzo that it took the position that the documents were not privileged but gave them the opportunity to submit comments.

Akzo then lodged an application to the CFI requesting annulment of the Commission’s decision on the (lack of) privileged character of the documents. Following a dismissal by the Commission of its request to return or destroy the documents concerned, Akzo brought a second action appealing the Commission’s decision on this point.

On 30 October 2003, the President of the CFI handed down a decision in the joint cases. The President dismissed Akzo's application on the first matter for its failure to establish a prima facie case. However, on the second case, in order to prevent serious and irreparable harm to the rights of Akzo and Akcros, the President of the CFI found that the Commission was not allowed to read the Set A documents. The Commission was ordered to submit the sealed envelope with the Set A documents to the Registry of the CFI to be kept there pending the main case. The President based his interim decision on the complexity of the interpretation of the AM&S case[2] and the fact that it could not be ruled out that the Commission had failed to observe the procedural principles laid down in that judgment. With respect to the Set B documents, the President found that the condition of urgency was not met since the Commission had already read these documents.

The appeal and cross-appeal before the ECJ

Both the Commission and Akzo/Akcros appealed the CFI’s order, the Commission for reversal of the order and Akzo/Ackros for dismissing the application for other interim measures.

By order of 27 September 2004, the President of the ECJ reversed the CFI’s order for lack of urgency with respect to both sets of documents.

The President of the ECJ set out that interim measures may only be ordered if the cumulative requirements of prima facie justification in fact and in law and of urgency, i.e. it is necessary to prevent irreparable harm to the applicant’s interests, are satisfied. This means that if the condition of urgency is not met, it is not necessary to examine the other conditions.

The President then referred to the ECJ’s preliminary orders in the NALOO case and the Roquette Frères case, in which the court explained the requirement of urgency and stressed that the Commission should not be easily prevented from using the documents or evidence which it might have obtained in an investigation.

The President pointed out that the Commission had accepted, in this case, that if it were decided in the main action that the documents concerned were covered by legal privilege, the documents would have to be removed from the Commission’s file and the Commission would be unable to rely on them as evidence. Moreover, the Commission had agreed not to grant access to the Set A documents to any third party until a decision in the main case was rendered. Thirdly, the President found that the mere reading by the Commission of the Set A documents, without that information being used in proceedings for the infringement of EC competition rules, although possibly affecting the legal privilege, was not in itself sufficient to show the requisite urgency for granting interim measures.

Under these circumstances, the President ruled that the harm that could possibly result from a more detailed reading (than the cursory review of the officials during the dawn raid) of those documents by the Commission, was not sufficient to establish the existence of serious and irreparable harm and thus not sufficient to satisfy the condition relating to urgency.

With respect to Akzo’s cross-appeal, the President of the ECJ confirmed the CFI’s judgment that since the Commission had already read the Set B documents and would not be able to use them if its decision was annulled in the main case, the condition of urgency was not fulfilled. Harm could only be established if the Commission took measures on the basis of the information in Set B and Akzo had not been able to demonstrate that this was more than a hypothetical risk.

Commentary: all hope is lost for in-house counsel privilege?

After the interim order of the CFI in September 2003, high hopes were raised for the acknowledgment of a legal privilege for competition law advice from in-house counsel. The reversal of the CFI’s order now seems to indicate that the ECJ is less inclined to consider acknowledging legal privilege for in-house counsel than the CFI. On the other hand, the ECJ’s order does not expressly discuss the merits of the case or the prima facie value of Akzo’s legal arguments in the main case.

Moreover, a number of critical comments can be made with respect to the ECJ’s order.

Firstly, the President seems to ignore the fact that the same arguments used to deny urgency with respect to the Set A documents will also generally apply to legal privilege for external counsel. Also regarding legally privileged documents from outside counsel it could be argued that, since the Commission would not be able to use them if legal privilege were confirmed in the case on the merits, there would be no harm in review by the Commission during an investigation. However, that would run contrary to the principle of legal privilege as acknowledged by the ECJ in AM&S. It would also deprive investigated companies of an effective protection of legally privileged correspondence and documents.

Secondly, it can be questioned whether the President carefully weighed the interests of the Commission against the interests of the applicants. It is difficult to see how the Commission would be harmed in any way by not being able to review the documents until the CFI (and possibly the ECJ on appeal) has ruled on the merits of the case. Since the envelope would be secured and there is no fear of embezzlement or disappearance, the Commission’s investigation would only suffer delay as a result of the fact that it cannot review the documents.

In conclusion, we can only wait for the CFI’s decision on the merits to see whether a legal privilege will, in fact, be accepted for in-house counsel. Until that time, in-house lawyers and their companies cannot rely on their internal competition law advice and correspondence being covered by legal privilege, not even if the in-house counsel is registered as an attorney at the bar.

[1] President CFI 30 October 2003, T-125/03 and T-253/03, n.p.

[2] ECJ 18 mei 1982, case 155/79 AM&S / Commission, ECR 1575




Pauline Kuipers


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