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September 14, 2010 12:39 PM

Are In-house Lawyers Second-class Citizens When It Comes to Privilege?

Posted by Zach Lowe

In-house counsel in Europe and the U.S. are fuming today after a top European court ruled that full attorney-client privilege does not apply to European in-house lawyers in antitrust investigations, according to Bloomberg and the U.K. publication Legal Week

The case at issue concerned a 2003 investigation by the European Commission, the EU's antitrust authority, into alleged anticompetitive behavior at the U.K. offices of the Dutch chemicals company Akzo Nobel. Investigators raided the company's offices in Manchester and seized lots of documents, including communications from Akzo's in-house legal team the company claimed should be protected by attorney-client privilege, according to Bloomberg, Legal Week, and this useful overview of the case from the Washington, D.C.-based Association of Corporate Counsel. The Commission disagreed, saying the privilege did not apply to the in-house lawyers, since they were Akzo employees and thus part of the larger company rather than independent counsel. 

Lower EU courts upheld the Commission's stance, and Akzo appealed to the European Court of Justice, the EU's highest court, Bloomberg reports. An 11-judge panel of that court today tossed out the appeal and agreed with the Commission's notion that full attorney-client privileges do not apply to in-house lawyers' communication with their employers. (Click here to download a copy of the ECJ ruling.) "An in-house lawyer cannot, whatever guarantees he has in the exercise of his profession, be treated in the same way as an external lawyer," the court wrote, according to Bloomberg.

As you might expect, in-house lawyers and their law firm counterparts are fuming. Susan Hackett, the ACC's general counsel, released a statement saying the organization is "dismayed" the EU court "did not seize the opportunity to recognize the independent judgment and value of the in-house profession." She added: "The idea that professional independence stems from the type of office a lawyer works in, rather than from their moral and professional compass, evidences a deep misunderstanding of legal professionalism and lawyers."

What are the practical implications? The most serious is the possibility that company higher-ups in Europe will be less likely to ask in-house lawyers for advice or confide in them, according to the ACC and lawyers who spoke to Legal Week and Bloomberg. The reason is obvious--any documents related to such conversations aren't going to be protected by attorney-client privilege. "A risk is that an environment is being created where company executives will be more reticent in seeking legal advice internally," Suzanne Rab, an antitrust lawyer at Hogan Lovells, told Bloomberg. 

 

RELATED STORIES FROM CORPORATE COUNSEL

Foreign Logic: Recent EU Ruling Continues to Deprive In-House Lawyers of Privilege

GCs Put Up Their Dukes After Court Says 'No Privilege for You'

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