EU opinion imperils privilege for in-house counsel

EU opinion imperils privilege for in-house counsel

Canadian companies operating in the European Union and their in-house lawyers could soon face a new challenge in their practice of privilege.

Communication between companies and their in-house lawyers does not have the same solicitor-client privilege in EU competition cases as communication between companies and outside counsel, according to the April 29 opinion in Akzo Nobel Chemicals Ltd. and Akcros Chemicals Ltd. v. European Commission by Advocate General Juliane Kokott that faces approval at the Court of Justice of the European Union later this year.

“A salaried in-house lawyer, notwithstanding any membership of a bar of law society, does not enjoy the same degree of independence from his employer as a lawyer working in an external law firm does in relation to his client. Consequently, equal treatment of both professional groups in regard to legal professional privilege is not required as a matter of law,” notes a press release from the court on the opinion.

The advocate general’s opinion is not binding on the court. It is the AG’s role to propose an independent legal solution to the court in cases for which it is responsible and that raise new points of law. Their opinions are advisory, but are very influential and followed in the majority of cases. The judges of the court are now deliberating the Akzo case.

Due to the international nature of most EU competition cases and the fact it is common for Canadian companies to work with EU-based counsel and vice versa, if the opinion becomes a ruling, it would leave Canadian companies and their in-house counsel in Europe in jeopardy, says Randy Hughes, a partner and head of the competition group at McCarthy Tétrault LLP.

“Companies and their counsel need to be prudent in their communications under these circumstances,” says Hughes. “The opinion is not helpful because it makes them even more subject to the erosion of privilege.”

The European court is expected to make a final decision on the case later this year, but in light of previous decisions and practices, the judges usually follow the opinion of the advocate general assigned to the case, says Adam Fanaki, a partner at Davies Ward Phillips & Vineberg LLP in Toronto and an expert on competition law.

“The outcome is not unexpected, but it is nonetheless disappointing,” says Fanaki, adding it is going to make it more difficult for in-house counsel to give advice to their employers and will force them to do their communications face to face rather than through e-mails or letters.

Unlike the European Union, courts in Canada have consistently afforded privilege protection to both in-house and private practice lawyers, according to the two Toronto competition lawyers.

The advocate general’s opinion stems from a raid on the offices of a plastics company accused of running cartel practices. Two e-mails between the company and their in-house counsel were found, and the company wanted them excluded from the case. The EU General Court handed the original ruling in the case of Akzo Nobel and Akcros Chemicals against the European Commission, saying the claim should be dismissed. The claim was then appealed to the European Court of Justice.

The European Company Lawyers Association has said it hopes the Court of Justice will rule against the advocate general’s opinion. 

“We are of course disappointed that the advocate general did not accept the arguments in favour of privilege that were made by three member states and by five important and experienced lawyers’ organizations. We are waiting with interest to see what the Court of Justice will say in its judgment,” said association president Han Kooy in a statement.

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