In-house lawyers cannot claim protection, says European court

In-house lawyers cannot now assume that all of their correspondence with their employer is covered by lawyer-client confidentiality rules, following a judgment this week from Europe's second-highest court.

The Court of First Instance of the European Communities (CFI) has just published its ruling in a case between Dutch chemical company Akzo Nobel and the European Commission, which was investigating Akzo over alleged price-fixing.

The Court said that not all communication about a case between a company and its in-house lawyers was protected by confidentiality rules, and ordered the release to the Commission of some documents held in escrow until the resolution of the case.

The ruling says that communication by in-house lawyers to people within a company did not attract the same protection as communication from an external lawyer to a client.

The ruling said that, in a previous case, "the Court of Justice expressly held that the protection accorded to [legal professional privilege] under Community law … only applies to the extent that the lawyer is independent, that is to say, not bound to his client by a relationship of employment".

It said that the law differed in European countries, where some offered identical protection to in-house lawyers, some did not, and many had laws that were unclear or untested.

Competition law specialist Guy Lougher of Pinsent Masons, the law firm behind OUT-LAW.COM, said that UK companies were already being careful about protecting document confidentiality, and that they would have to continue to be careful.

"As a result of the ruling, existing costly practices used by in-house lawyers within the UK to protect the confidentiality of some communications, such as routing certain documents through an external independent lawyer, will have to continue," he said.

The CFI said that some in-house documents would be protected, but only if they were created specifically for seeking advice from external lawyers.

"It is helpful that companies can rely on legal privilege under this exception even when an internal document is not to be sent physically to the external independent lawyer, because for example telephone advice is being sought, as long as it is to be used for the sole purpose of seeking legal advice from an external lawyer," said Lougher.

"In rejecting the claim to privilege the CFI intends to set a high threshold for determining when the exception will apply. Companies will need to consider very carefully precisely how they gather information or documents in order to maximise the possibility that this new exception might apply," he said.

Akzo Nobel was being investigated for potential price-fixing in the market for coatings and plastics when it was raided by European Commission investigators. Investigators seized internal company documents in 2003 and Akzo sought to protect them under legal privilege.

That attempt was rejected, though Akzo won one small part of the ruling when the Court said that the Commission did infringe confidentiality when it forced the company to allow it a cursory glance at some documents.