September 17, 2007
The EU’s second highest court, the Court of First Instance (CFI) has today, 17 September 2007, upheld the narrow scope of legal professional privilege in relation to documents seized in the context of EC competition law.
In particular, the CFI declined to extend legal privilege in EU competition cases to in-house counsel. The CFI also declined to extend legal professional privilege to outside lawyers who are not members of a Bar or Law Society in an EU Member State, on the grounds that this was not relevant to the case in hand.
In February 2003 the European Commission, assisted by representatives of the UK Office of Fair Trading, dawn raided the premises of Akzo Nobel Chemicals Limited and Akcros Chemicals Limited (collectively referred to as "Akzo") seeking evidence of anti-competitive behaviour. During the investigation, Akzo’s representatives claimed confidentiality over two sets of documents on grounds of the legal professional privilege ("LPP"):
Set A: A memorandum from the general manager of Akcros to one of his superiors containing information gathered during internal employee discussions for the purpose of obtaining external legal advice on a competition law compliance programme. A second copy of this memorandum bore handwritten notes of contacts with a named lawyer.
Set B: A number of handwritten notes made by the general manager of Akcros, said to have been produced during employee discussions for the purpose of preparing the memorandum in Set A above. In addition, this set of documents included two emails between the general manager of Akcros and Akzo Nobel’s competition law coordinator.
On examining the documents, the Commission confirmed that it was unable to determine the LPP status of the Set A documents, and therefore placed copies in a sealed envelope to take away at the end of the investigation. The Commission later rejected the claim for LPP over Set A and gave notice of its intention to open the sealed envelope. In relation to Set B, the Commission informed Akzo at the time of the investigation that LPP did not apply. Copies of these documents were placed on the Commission’s case file without being sealed.
Appeal to the CFI
Today’s judgment encompasses two areas of contention brought by Akzo before the CFI. First, a request for annulment of the Commission’s 2003 decision ordering the dawn raid investigation. Second, a request for annulment of the Commission’s decision rejecting the claims for LPP — both tacit rejection through the act of seizing and placing the Set B documents on the file without being sealed, together with the subsequent formal decision to reject LPP claims over the Set A documents.
Request for annulment of Commission decision ordering the investigation
The CFI stated that an action for annulment is only admissible if the disputed act produces binding legal effects so as to affect the interests of the applicant by bringing about a distinct change in their legal position. In this case, the decision ordering the inspection did not produce such legal effects and, therefore, the action for annulment was inadmissible. The decision merely authorised the dawn raid, whereas the LPP issues disputed by Akzo clearly arose afterwards.
Request for annulment of Commission decision rejecting LPP
The CFI found the actions relating to the Commission’s rejection of LPP to be admissible on the premise that, where an undertaking relies on LPP to oppose the seizure of a document, the decision to reject that request produces legal effects for the undertaking by bringing about a distinct change in its legal position.
On the substantive issues, the CFI provided the following clarification:
An undertaking is not required to reveal the contents of a disputed document to the Commission in order to justify LPP protection, provided that the undertaking produces relevant facts to support its position (such as the author of the document, for whom it was intended or the objective and context of the document). Alternatively, a cursory look at the document may provide sufficient information so as to satisfy the Commission of the LPP status. 2
However, an undertaking is not required to allow the Commission even a cursory look at the document if it considers that it would be impossible without revealing the content of the document. Again, the undertaking must provide reasons for any refusal.
The CFI found that the Commission had infringed the procedure for LPP protection as the Commission had effectively forced Akzo to allow it a cursory look at certain disputed documents. Akzo’s representatives had claimed, with supporting justification, that a cursory look would not enable to Commission to assess the status of the documents without giving them the opportunity to read the contents. However, the Commission ensured Akzo’s compliance by emphasising the penalties for obstruction of an investigation.
Where the Commission considers that a certain document does not fall within LPP, it may place a copy of that document in a sealed envelope and take it away at the end of the investigation pending subsequent resolution of the dispute. However, the Commission is not entitled to read the disputed document before adopting a decision enabling the undertaking to appeal the matter to the CFI.
The CFI found that the Commission had infringed LPP procedure by placing the disputed Set B documents on the file, without Akzo having the opportunity to apply to the Court to prevent the Commission from reading them. However, the Commission’s formal decision to reject confidentiality over the Set A documents did not infringe LPP procedure as the documents were placed in a sealed envelope and Akzo was able to appeal this matter to the Court.
Assessment of legal professional privilege
Despite the findings of the Court in relation to the Commission’s procedural infringements, the CFI ultimately found that none of the disputed documents in fact fell within the scope of LPP.
The CFI followed the current prevailing authority on LPP under EU proceedings, AM&S, in clarifying that:
Preparatory documents, even if not exchanged with an external lawyer or created for the purpose of being sent to a lawyer, may nevertheless be covered by LPP provided that they are drawn up exclusively for the purpose of seeking legal advice from a lawyer in exercise of the rights of defence.
However, the mere fact that a document has been discussed with a lawyer is not sufficient to afford it such protection.
The fact that a document has been put together under a competition law compliance programme is not sufficient, by itself, to grant that document LPP protection.
Communications with in-house lawyers, i.e., legal advisers bound to their clients by a relationship of employment, are expressly excluded from protection under LPP.
In this case the CFI found insufficient evidence to show that the documents were drawn up exclusively for the purpose of seeking legal advice. Amongst other factors, the memorandum was not addressed to the lawyer, the documents made no mention of seeking legal advice, the information gathering process may in fact have been part of the implementation of Akzo’s compliance programme and the emails were exchanged with an in-house lawyer as opposed to independent counsel.
Although the CFI did not take this opportunity to address the concerns of many in-house counsel that the LPP rules applicable in EU proceedings should be extended to cover certain in-house legal communications, the CFI has provided useful clarification on the procedural safeguards that the Commission must adhere to when applying the LPP rules in the context of competition law investigations.
1/ In Joined Cases T-125/03 and T-253/03, Judgment of 17 September 2007.
2/ With the exception set out in Hilti v. Commission that in-house documents which merely report or summarise an external lawyer’s advice are covered by LPP if the communication from the external lawyer would have been privileged if written down.
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