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September 15, 2010 12:24 PM

LETTER FROM LONDON: Europe's Underprivileged In-House Lawyers

Posted by Chris Johnson

In-house lawyers throughout the western world are up in arms after the European Court of Justice (ECJ) yesterday denied in-house counsel the protection of privilege in antitrust cases. The September 14 ruling brought to an end a fierce and long-running battle involving Dutch chemicals giant Akzo Nobel, which claimed that documents seized by a European Commission team during a 2003 raid on its U.K. offices were covered by attorney-client privilege.

The Association of Corporate Counsel's top lawyer Susan Hackett was just one of several senior figures to publicly criticize the ECJ decision, which seemingly betrays a lack of confidence by the European judiciary in the ability of in-house lawyers to remain impartial. In its judgment, the European Union's highest court refused to afford in-house counsel the same status as external advisers because they are "in a fundamentally different position"--essentially criticizing the role of in-house lawyer as one of insurmountable professional and ethical conflict.

The ruling applies only to E.U. competition investigations--Europe's in-housers are covered by privilege in all other matters--but to have their credibility undermined in so public and decisive a manner makes the ruling a bitter pill to swallow, particularly as it contradicts recent moves to grant their external peers greater freedom in such matters. Earlier this summer, the U.K.'s Solicitors Regulation Authority relaxed its conflict rules relating to Chinese walls, permitting law firms to accept instructions from multiple clients even if it presents a clear business conflict. Previously, firms were only able to operate with these internal information barriers if a conflict became apparent after the assignment was accepted.

That the ECJ considers internal counsel incapable of such objectivity is a perverse inconsistency and suggests a surprisingly outdated view of the profession. But while many will be disappointed that the court passed up an opportunity to encourage some much-needed reform, few should be surprised. Akzo's appeal had already been knocked back by the E.U.'s lower General Court in 2007. In April the ECJ's own Advocate General Juliane Kokott issued a preliminary opinion stating that in-house lawyers face a "conflict of interest between his professional obligations and the aims and wishes of his company, on which he is more economically dependent."

With Akzo left with no further avenue to appeal, the only way that this verdict can be overturned is if the ECJ itself has a change of heart. Given the emphatic wording of the judgment, this seems highly unlikely.

It is important to view this development with perspective, however. While the result may legitimately be considered unsatisfactory, the furor over it risks drowning out one simple truth: that nothing has changed. As before, a company's own lawyers will always be involved in internal antitrust investigations--in such situations, an intimate knowledge of the business' inner workings is crucial--but their lack of privilege dictates that external counsel will continue to handle documents relating to defense strategy or other sensitive information in competition cases.

The position of privilege with regards to European in-house counsel was clarified almost 30 years ago in the AM&S Europe case, when it was ruled that communications between lawyers and their clients in E.U. antitrust cases should be protected as long as they are connected to the client's "right of defense" and that the lawyers are not "bound to the client by a relationship of employment." When the dust finally settles, this most recent judgment will be revealed as one that merely maintains that decades-old status quo.


Chris Johnson is chief European correspondent for The American Lawyer. Contact him at [email protected].

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