South Carolina BAR Journal
SC Lawyer, January 2012, #1.
The EU Court's Decision Akzo Nobel is Not a Big, Bad Wolf
South Carolina LawyerJanuary 2012The EU Court's Decision Akzo Nobel is Not a Big, Bad WolfBy Francesca Giannoni-Crystal and Nathan M. CrystalOn September 14, 2010, in Akzo Nobel Chemicals Ltd. v. EU (Case-550/07), the European Court of Justice (ECJ) unanimously held that communications between in-house counsel and company executives are not privileged. It is hardly newsworthy that in Europe in-house counsel do not enjoy the attorney-client privilege (called the "professional privilege"). In 1982 the ECJ in AM and S Europe v. Commission (Case-155/79) focused on the requisite of independence to hold that a communication exchanged with an independent/external lawyer related to the client's rights of defense was privileged. Many, however, have been disappointed by Akzo Nobel because they expected the ECJ to extend the privilege to in-house counsel, considering that their role had expanded and the need for protection of their communications had increased. The ECJ did not do so.
While the decision has been criticized in the U.S. and warnings issued about the risk to American companies, the impact of the decision is not as great as critics claim because: (1) In very few European countries are in-house counsel members of the bar and are granted the professional privilege. Even if the ECJ had recognized the privilege, its decision would only have applied to EU litigation, not to domestic cases. (2) The professional privilege and the American attorney-client privilege are different. (3) Finally, the privilege is especially important in the U.S. because of discovery, while in Europe there is no discovery.
The Akzo Nobel decision
In 2003, during a European Commission's investigation regarding anti-competitive practice by two companies of the same group, Akzo and Akcros (hereinafter "Akzo"), a dispute arose between the commission officials and Akzo as to the disclosure of certain documents. In particular, the dispute focused on two e-mails exchanged between an Akzo executive and Akzo's coordinator for competition law (who was enrolled as an Advocaat of the Netherlands Bar and was also a permanent employee of Akzo). While Akzo alleged that the materials were privileged, the commission's officials disagreed and seized them. Akzo sued. The court of first instance ("General Court") rejected the claim, and Akzo appealed to the ECJ, alleging misapplication of the law or in the alternative, advocating a change in the law.
Clarifying AM and S Europe, the ECJ held that in-house counsel were not entitled to the privilege because they were not independent from their clients. As a result "an in-house lawyer is less able to deal effectively with any conflicts between his professional obligations and the aims of his client." Akzo Nobel¶ 45.
As the General Court stated: independence is necessary because of "the lawyer's role as collaborating in the administration of justice by the courts." General Court in Akzo Nobel ¶ 4. Being independent means that a lawyer must "structurally, hierarchically and functionally," be "a third party in relation to the undertaking receiving that advice." Id. The lack of independence exists even if the attorney is enrolled as a member of a bar: "It follows, both from the in-house lawyer's economic dependence and the close ties with his employer, that he does not enjoy a level of professional independence comparable to that of an external lawyer." Id.¶ 49.
In arguing for a change in the law, Akzo claimed that national legal systems had evolved as to the application of the privilege to in-house counsel. However, the ECJ found no evolution. Akzo Nobel¶ 72.
In conclusion: Akzo Nobel stands for the proposition that the professional privilege does not attach to communications by or with in-house counsel, either enrolled or un-enrolled in a bar. However, this proposition should not be threatening to American companies based in or making...