Focus: In-house lawyers and legal professional privilege: the European view continues
15 September 2010
In brief: A recent European Court of Justice decision1 has found that legal professional privilege does not apply to communications between a company and its in-house lawyers because in-house lawyers lack the necessary degree of independence. Partners Richard Harris (view CV) and Paul Nicols (view CV) and Law Graduate Thomas Prince report.
How does it affect you?
- The European Court of Justice has held that, under EU law, legal professional privilege does not attach to lawyer-client communications where the lawyer has a contract of employment with the client.
- The case reinforces the need for Australian and multi-national companies with activities in the EU to take care when advice is provided by in-house lawyers, as under EU law those communications may not be privileged.
- The decision is not binding in Australian law, and is not wholly consistent with the existing Australian position in relation to independence, but does reinforce concerns raised in a number of recent judgments as to the ability of in-house lawyers to satisfy the test of independence.
- The case provides a reminder of the importance in Australian law for in-house lawyers to take steps to remain sufficiently independent from their employers in order to ensure that legal professional privilege subsists.
In February 2003, European Commission officials raided Akzo Nobel Chemicals and Akcros Chemicals' (Akzo) offices as part of an investigation into alleged anti-competitive activity. Commission officials took copies of a large number of documents over some of which Akzo claimed legal professional privilege.
A dispute arose in relation to the privilege claims concerning emails between Akzo's management and its in-house lawyers. Akzo sought an order from the Court of First Instance of the European Communities that the documents held by the Commission be returned. The Court refused, holding in favour of the Commission. Akzo appealed, but the Grand Chamber of the European Court of Justice dismissed the appeal.
The court reaffirmed its 1982 decision in AM & S Europe Ltd v Commission of the European Communities2 and held that legal advice can only be privileged where it is connected to 'the client's rights of defence' and where the communication emanates from 'independent lawyers', that is to say 'lawyers who are not bound to the client by a relationship of employment'. It follows that, under EU law, legal professional privilege 'does not cover exchanges within a company or group with in-house lawyers'.
The court rejected a submission that the legal situation in EU members states had evolved since its 1982 decision.
As noted, the decision is not binding in Australian law, although the 1982 decision it affirms was referred to approvingly by some judges of the High Court in Waterford v The Commonwealth.3 Currently, Australian courts have recognised that legal professional privilege can attach to communications between a client and in-house lawyer, provided a sufficient degree of independence can be established. We have previously reported on decisions emphasising the importance in Australian law of independence between the in-house lawyer and client as a matter of fact.4
As a practical matter, there are a number of steps businesses can take to better safeguard against the possibility that an Australian court will find that in-house lawyers are not sufficiently independent for legal professional privilege to subsist. Please contact us if you would like to discuss those steps.
- Akzo Nobel Chemicals and Akcros Chemicals v Commission and Others (C-550/07 P, 14 September 2010).
-  QB 878.
- (1987) 163 CLR 54.
- Focus: In-house lawyers and claims for privilege (September 2007); Focus: Rules of legal professional privilege tightened (May 2008).
- Richard HarrisPartner,
Ph: +61 2 9230 4919
- Paul NicolsPartner, Sector Leader - Industrials,
Ph: +61 2 9230 4414
- Peter O'DonahooPartner,
Ph: +61 3 9613 8742
- Kim ReidPartner,
Ph: +61 2 9230 4037
- Tracey HarripPartner,
Ph: +61 7 3334 3215
- Fiona CrosbiePartner,
Ph: +61 2 9230 4383