Another Nail in the Coffin for In-House Lawyers' Privilege
Akzo Nobel Chemicals Limited and Akcros Chemicals Limited v Commission of the European Communities
17th September 2007
It is well established that communications between client and lawyer ordinarily attract Legal Professional Privilege. Such communications are not disclosable in proceedings. The rule was conveniently summarised in Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission [2002] HCA 49:
9. It is now settled that legal professional privilege is a rule of substantive law which may be availed of by a person to resist the giving of information or the production of documents which would reveal communications between a client and his or her lawyer made for the dominant purpose of giving or obtaining legal advice or the provision of legal services, including representation in legal proceedings. It may here be noted that the "dominant purpose" test for legal professional privilege was recently adopted by this Court in Esso Australia Resources Ltd v Federal Commissioner of Taxation in place of the "sole purpose" test which had been applied following the decision in Grant v Downs.
But what it the position where the lawyer is not in private practice, but employed in the role of in-house counsel? Are communication with such a lawyer to be afforded the same protection as a lawyer in private practice?
It seems not. The boundaries of this privilege have been reset again by the European Courts. In Australian Mining & Smelting Europe (AM&S) v. Commission of the European Communities [1982] EUECJ C-155/79, [1982] ECR 1575 , the European Court of Justice said that the essential question to ask is whether the lawyer is independent:
" ... it should be stated that the requirement as to the position and status as an independent lawyer, which must be fulfilled by the legal adviser from whom the written communications which may be protected emanate, is based on a conception of the lawyer's role as collaborating in the administration of justice by the courts and as being required to provide, in full independence, and in the overriding interests of that cause, such legal assistance as the client needs. The counterpart of that protection lies in the rules of professional ethics and discipline which are laid down and enforced in the general interest by institutions endowed with the requisite powers for that purpose."
The application of that principle in Australia was lent weight by the decision of Brennan J in Waterford v Commonwealth [1987] HCA 25:
Though I am conscious of the weight of contrary opinion, the approach of the European Court of Justice in A.M. & S. Europe v. Commission seems to me to identify the relevant considerations.
There remained doubt, whoever, as to what the AM&S principle really was. Does an in-house lawyer get to be treated as "independent" on the basis that he or she is admitted to a bar or law society, or is the fact of employment fatal?
In Akzo Nobel Chemicals Limited and Akcros Chemicals Limited v Commission of the European Communities [2007] EUECJ T-125/03 the Court of First Instance of the European Communities came to the latter conclusion. Despite intervention by a number of bar associations and law societies (including the American Corporate Counsel Association and the International Bar Association), it said:
The Court therefore concludes that, contrary to what the applicants and certain interveners submit, the Court in its judgment in AM & S defined the concept of independent lawyer in negative terms in that it stipulated that such a lawyer should not be bound to his client by a relationship of employment (see paragraph 166 above), rather than positively, on the basis of membership of a bar or law society or being subject to professional discipline and ethics. The Court thus laid down the test of legal advice provided 'in full independence' (AM & S, paragraph 24), which it identifies as that provided by a lawyer who, structurally, hierarchically and functionally, is a third party in relation to the undertaking receiving that advice.
The decision does not mean that communications with in-house lawyers are necessarily deprived of privilege, but they are to be denied the same blanket cover that is given to communications with independent lawyers.
These European cases have arisen from the area of competition law, but in principle, it seems that their influence extends much more generally.