Caven blog

Controversial ECJ ruling on legal privilege jeopardises in-house legal advice

The European Court of Justice (ECJ) has ruled that legal privilege does not extend to the advice of in-house lawyers in antitrust cases.

Legal privilege is a long-established legal principle that allows litigants protection from disclosing documents on the grounds that they were privileged communications between the litigant and their legal support. The rationale behind it is that all parties should have a right to receive legal advice without fear that the information disclosed to their legal team could be used against them. The case before the ECJ concerned the use of this principle to allow companies to prevent disclosure of such documents in antitrust investigations concerning them.

The complex question for the court was whether the right to privilege should extend to the advice of in-house lawyers. The ECJ’s decision was that it should not. The court confirmed that for legal privilege to arise under EU law, the exchange with the lawyer must be connected to “the client’s rights of defence” and the exchange must emanate from “independent lawyers”, that is, “lawyers who are not bound to the client by a relationship of employment”. The court’s view was based on their conclusion that in-house lawyers are not sufficiently independent from their employers, they being too close to the companies that employ them.

The ECJ had made a similar ruling in another case in 1982, in a case known as AM&S. The outcome of this most recent case upheld the court’s earlier decision in AM&S. The outcome of the case had been followed closely by analysts, but the advisory opinion of the advocate general given in April this year provided an early indicator of the likely outcome.

This ruling has a significant effect on the in-house provision of legal advice, with much of that advice now unsafe from the prospect of forced disclosure in legal proceedings. Critics consider the outcome of this case to be a serious blow to the in-house legal profession.
It is also against trends towards recognising legal privilege for in-house lawyers in EU member states and non-EU countries including the UK, Ireland, the Netherlands, Greece and Poland.

The decision will have the practical effect of constraining what in-house lawyers will be willing to put in writing to these clients. Critics say the decision severely limits the freedom of in-house lawyers to have open and frank exchanges with their internal clients, undermining their ability to fully advise those clients. However, given that the decision comes from the highest authority in the EU legal system, it is unlikely the issue will be appealed or reheard for the present time, leaving the decision standing.

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