Adrian Wood examines the revisions to legal professional privilege for EC law purposes following the recent Akzo Nobel case


Understandably, much of the initial focus of mainstream press comment in the immediate aftermath of the Court of First Instance's (CFI) ruling last month in the Akzo Nobel case (joined cases T-125/03 and T-253/03, Akzo Nobel Chemicals Ltd and Akros Chemicals Ltd v Commission, 17 September 2007) was on the disappointing decision not to extend to in-house lawyers for EC law purposes the same rules of legal professional privilege (LPP) that apply to communications from external lawyers.



Despite forceful arguments from representative bodies over the potential for in-house lawyers to improve internal company competition compliance, the CFI proved predictably reluctant to rewrite the European Court of Justice's 1982 judgment in AM&S (Case 155/79, AM&S [1982] ECR 1575), citing principally a lack of consensus among member states' laws on LPP.



The Akzo ruling, however, does offer two small but significant extensions to the pre-Akzo position on LPP that will be useful to in-house practitioners. The first concerns the creation of a new category of privileged document in EC law and the second relates to the procedures to be followed when a claim to privilege is challenged during a dawn raid by EC officials.



New head of privileged document

Prior to Akzo (and as neatly summarised in paragraph 117 of the ruling), LPP could be claimed for:

l Written communications exchanged between a client and an independent external lawyer following the initiation of an investigation that could lead to an article 81/82 decision (namely, concerning rules governing the anti-competitive behaviour of companies);

l Earlier written communications between the client and external lawyer that 'have a relationship to the subject matter of that procedure'; and

l 'Internal notes circulated within an undertaking which are confined to reporting the text or the content of communications with independent lawyers containing legal advice.'



This narrow band of privileged documents has now been supplemented by a fourth head, namely any preparatory documents created with the sole aim of seeking external independent legal advice.



The CFI stated that this head of privilege should relate to a company's rights of defence, but there is nothing in the judgment suggesting that the documents for which privilege is being claimed must relate to rights of defence that arise solely in the context of an ongoing or upcoming article 81/82 investigation.



In Akzo, the documents in issue were created three years before the commission officials raided the company. Despite the CFI stating that the new head of privilege must be construed restrictively, it seems reasonable at this juncture to assume that the new head could be claimed for documents created outside of the context of an ongoing or upcoming investigation, although the issue is not beyond doubt.



Under the fourth head, LPP is not conditional on the preparatory document being sent to the external lawyer. A successful claim to privilege will not, however, be made easily. The CFI ruled on the facts that LPP did not cover an internal company memorandum that had been created in the context of applying a competition compliance policy and which the company's general manager had discussed on the telephone with an external independent lawyer. The document did not fall within one of the pre-Akzo categories of LPP and there was no direct evidence that the memorandum had been drawn up for the 'exclusive purpose of seeking external legal advice'.



Clearly, going forward, suitably broad annotations on the front page of relevant internal documents (such as 'created for the sole purpose of seeking external legal advice from [X] on [date]') - whether such documents are drafted by an internal lawyer or not - will provide useful initial evidence if a claim for privilege under EC law needs to be substantiated. Furthermore, the new head of privilege could prove particularly useful for small companies that might be targeted by the EC but which do not have an internal legal function.



Of particular interest is that this new head of privilege creates the possibility for LPP to be claimed for EC law purposes in circumstances where such a claim (in relation to a document not created by an in-house lawyer) would not necessarily attract legal advice privilege under English common law following the Three Rivers litigation because of the restrictive definition of who is the 'client' in such circumstances .



Where the Office of Fair Trading investigates companies under UK national competition law, or in some (but not all) cases under article 81/82, then national rules of LPP apply. It is a moot point, however, whether section 60 of the Competition Act 1998 would require a UK court to import into UK law any more generous LPP protection offered under EC law as a result of the Akzo ruling.



Dawn raid procedures

The second practical clarification from the ruling concerns the procedures that should be adopted during a EC dawn raid in circumstances where the company's claim to privilege over documents is challenged on-site by the commission. The CFI sets out a procedure to be followed that seeks to balance the legitimate rights of the defence against the commission's desire to access relevant information.



The CFI stated that if, during a raid, a company is unable to prove the privileged status of a document to the satisfaction of commission officials without the risk of the officials seeing the contents of the document, then the proper course is to place the disputed document into a sealed envelope, permit the commission to take it away, require the commission to take a formal decision rejecting the claim for privilege, and permit the company to apply to the CFI for a determination to be made.



Only once an appeal had been determined in the commission's favour, or the period to appeal had expired, could the commission then read the document. The CFI sought to allay commission concerns that spurious and unfounded tactical claims to privilege could be made by companies as a delaying tactic by pointing to the fact that the commission could penalise such claims through uplifts in infringement fines and penalties.



Other issues

Where a business adopts a competition compliance policy, there is all too often an erroneous belief that the compliance manual itself provides a universal protective umbrella for all documents created under that manual's policy. As the Akzo judgment demonstrates, a company needs to reflect on how it secures the protection of LPP for documents created in different circumstances (for example, during compliance training, as part of risk assessment, or in response to company reporting lines etc). It is all too easy for a company to create a Trojan Horse for itself in EC law through inadequate thought being given to how competition compliance strategies should be rolled out across the company.



Despite the CFI's benevolence and clarification, the ruling will do little to lessen the reliance of in-house lawyers on routing certain types of documents through external lawyers in order to claim LPP. Furthermore, the different protections offered by LPP under English common law and under EC law will continue to create serous document management issues for in-house lawyers.



Nevertheless the judicial focus on curbing over-enthusiastic behaviour of commission officials is to be welcomed and comes at a time when the CFI has begun to show greater interest in testing more forensically the reality of legal protections granted to defendants in EC competition law procedures.



Adrian Wood is a professional support lawyer in the EU & competition group of national firm Pinsent Masons