The Attorney–Client Privilege in Antitrust: Unravelling the Transatlantic Debate

Abstract

The Attorney–Client Privilege constitutes an essential and widely recognized right in judicial systems worldwide, aiming to protect the confidentiality of communications between a lawyer and their clients. However, there is no single understanding among jurisdictions on the scope of the privilege, which stems from different approaches between legal traditions as to the role of the lawyer within the judicial system. In adversarial systems, an attorney is an agent and zealous representative of their client, whereas inquisitorial systems consider the lawyer primarily an instrument to the administration of justice and the search for the truth. On this basis, while the US courts recognize the privilege for in-house lawyers, the European Court of Justice has refused such recognition holding that in-house lawyers are not sufficiently independent to safely fulfil their judicial functions. In an environment of increased international trade between the US and the EU it has become ever-more important to understand and scrutinize both approaches. Issues regarding legal professional privilege become increasingly complicated in cases with extraterritorial elements, where foreign interests rise as a crucial element in the assessment.

I. INTRODUCTION

Few disparities between the US and the EU antitrust enforcement regimes have created as much controversy as the approach regarding the scope of the legal professional privilege. The privilege, which in the common law world is often referred to as the attorney–client privilege, is one of the oldest recognized confidentiality principles in common law judicial proceedings.¹ Its aim is to protect from disclosure communications between an attorney and their client on the premises of confidentiality. In doing so, it fosters trust and cooperation between a person, physical or legal, and their lawyer as it allows the former to freely obtain legal advice without the fear of disclosure.² Because of its essential functions, the privilege is also recognized as part of the fundamental protective rights of defence,³ thus choices regarding its scope require particular consideration.

Importantly, because recognition of the privilege serves as a restriction to the discovery of the truth, its scope is determined by a balancing exercise between the rights of the accused person and the societal need for effective enforcement of the law and discovery of the truth. As a result of this conflict between enforcement efficiency and rights of defence, there have been completely opposite views on the privilege and the debate is long standing.⁴ For instance, in the 18^th century Jeremy Bentham had questioned the very need for the privilege’s existence,⁵ although this view could hardly be supported nowadays. Other scholars advocate for the expansion of the privilege, such as Rice who claimed that it should be available regardless of whether communications were made in confidence⁶ and Giesel who supported its expansion beyond the scope of legal advice.⁷

Legal systems tend to put a different emphasis when conducting the balancing exercise to determine the scope of the privilege. Generally, common law, adversarial, systems, such as the UK and the US, tend to have a more expansive view of the privilege, whereas civil law, inquisitorial, systems, like the EU and many of its current members, tend to adopt a narrower approach, although this categorization is not absolute. Most relevant for this article is the debate as to whether the privilege should extend to communications between in-house lawyers, or whether it should only apply in relation to external counsel. While in the US it seems that the debate is mostly settled and attorney–client privilege is generally recognized to extend to communications between a firm and its in-house lawyers, things are not the same in the EU legal order. In two cases the Court of Justice of the European Union (the “CJEU”) held that legal professional privilege in EU competition law cases is limited to communications between lawyers and external counsel, because only these lawyers benefit from a sufficient degree of independence. This case-law has been consistently applied by the European Commission (“the Commission”) in competition investigations. It is important to note that while the case-law was specific to competition investigations, the CJEU judgements could apply to all cases conducted by a Union-level enforcer, such as data protection and sector-specific regulations. Indeed, the EU courts have applied the limitation to the scope of legal professional privilege to tax⁸ and intellectual property⁹ cases.

Over the years, there has been zealous argumentation on the merits of this approach, and it is not clear whether this case-law still reflects reality. By way of, non-exhaustive, examples, in 2000, the Norwegian Supreme Court recognized the privilege for internal lawyers and in 2018, reformations in Hungary equated the status of in-house and external lawyers, which extended the privilege to the former, thus deviating from the EU case-law.¹⁰ Most recently, the French Parliament passed a bill recognizing confidentiality for in-house counsel.¹¹ This indicates that many of the EU Member States have recognized the merits of the US and UK model and moved towards a more expansive approach to the privilege.

The disparities between systems are not important merely from a comparative law viewpoint. Antitrust enforcement has been globalized to such a degree that US companies often become targets in EU investigations and vice versa. As antitrust enforcers are increasingly broadening their enforcement reach, companies from one side of the Atlantic often become subjects to investigations on the other side. In these situations, whether and how firms can exercise their defence rights and especially the extent to which they can rely on the attorney–client privilege is crucial for the proper exercise of the rights of defence. Against this backdrop, this article explores the debates around legal professional privilege.

Part II sets the rationale and underlying principles for the EU and the US recognizing confidentiality in communications between an attorney and their client. Part III explores the different positions between the two jurisdictions for the recognition of the privilege to in-house lawyers. It explains that the EU case-law attributes the choice to exclude in-house counsel mainly to reservations as to the ability of internal lawyers to maintain their independence from their employers, by adopting a formal criterion as to the legal nature of the lawyer-client relationship. Part IV aims to test the merits of the EU approach through testing its individual elements against choices made by other judicial systems. First, it analyses the role, functions, and independence requirement for lawyers in both adversarial and inquisitorial legal systems. Then, it expands on literature as to the independence of in-house lawyers and subsequently it explains why some jurisdictions, such as the US, recognize the extension of the privilege to internal counsel. Part V examines how the EU legal system could change its current approach to recognize confidentiality and whether this is a sound choice, arguing that the answer depends primarily on the criterion used to assess independence. Finally, part VI focuses on the ever important extraterritorial treatment of legal privilege, to examine how should confidentiality claims concerning foreign lawyers be treated. It analyses how would the US and the EU assert extraterritorial jurisdiction to examine competition concerns from practices not occurring withing their strict jurisdictional borders. Subsequently, it reviews whether in such circumstances states should apply the laws of the attorney’s jurisdiction on the basis of international comity. It is argued that while that there is not sufficient ground to mandate the application of the principles of international comity, it would be beneficial both for the Commission and the EU courts to recognize the principle at least in the same manner as the EU courts do. Finally, it summarizes some issues with the EU recognizing privilege for foreign in-house counsel. While ultimately these are policy decisions, the long reach of enforcers outside their jurisdictions has important implications to the rights of the persons subjected to antitrust enforcement.

II. THE RATIONALE FOR PROTECTING LEGAL PROFESSIONAL PRIVILEGE

The term legal professional privilege describes the principle of confidentiality from which written communications between a lawyer and their client benefit.¹² It has been suggested that the term is misleading as the confidentiality of communications is a right of the client, rather than a privilege appointed to the legal profession.¹³ The privilege is in any case exercised by the lawyer, who has the right to refuse to testify and to surrender documents covered by the privilege. As the right to confidentiality is a privilege, it can be waived by the lawyer’s client if the latter considers it within their interests to do so.¹⁴

Almost all legal systems recognize the confidentiality of the communications between a lawyer and their client. An analysis for the EU and the US follows.

In the EU, there is no Union-level legislative recognition of the privilege and specifically in competition law, Regulation 1/2003, which defines the Commission’s investigative powers in antitrust cases, does not make any reference to the right.¹⁵ Rather, the privilege has been recognized as part of the legal traditions of Member States and according to the EU Courts and the European Court of Human Rights (the “ECtHR”) its basis can be found on fundamental human rights. As held by the ECtHR in Altay¹⁶ and affirmed by the General Court (the “GC”) in Orde van Vlaamse Balies,¹⁷ the right of privacy, protected under Article 7 of the Charter of Fundamental Rights of the EU (the “Charter”) and Article 8 of the European Convention on Human Rights (the “ECHR”), also safeguards the “right to respect for communications between lawyers and their clients.”¹⁸ However, as the GC held, these “are not absolute rights, but must be considered in relation to their function in society. Indeed, as can be seen from Article 52(1) of the Charter, that provision allows limitations to be placed on the exercise of those rights, provided that those limitations are provided for by law, that they respect the essence of those rights and that, in compliance with the principle of proportionality, they are necessary and genuinely meet objectives of general interest recognized by the European Union or the need to protect the rights and freedoms of others.”¹⁹

In the case of legal professional privilege, setting boundaries on the privilege’s application is justified on the basis of the existence of overarching societal interests. An explanation of the competing interests can be found in the opinion of A.G. Kokott in Akzo Nobel. The A.G. explained in her, non-binding, opinion that “[l]egal professional privilege serves to protect communications between a client and a lawyer who is independent of that client. On the one hand, it is the essential corollary to the client’s rights of defence and, on the other hand, it is based on the specific role of the lawyer as ‘collaborating in the interests of justice’ and as being required to provide, in full independence, and in the overriding interests of justice, such legal assistance as the client needs.”²⁰ She further stated that the ability of lawyers to adequately carry out their duties of advising, defending and representing their clients is linked to the fundamental right to a fair trial under Article 6 of the ECHR and Article 47 of the Charter, as well as the presumption of innocence and the right of defence under Article 48 of the Charter.²¹ According to the A.G. opinion, preservation of the aforementioned rights would be diminished “if lawyers were obliged, in the context of judicial proceedings or the preparation for such proceedings, to cooperate with the authorities by passing them information obtained in the course of related legal consultations.”²² In the EU, and most civil law jurisdictions, the attorney–client privilege is closely related to the rights of defence and originated from criminal law practice which regarded that communications between an accused person and their defence lawyer are confidential and immune from disclosure.²³ Moreover, as Christoforou observed, the purpose of the privilege is not considered to be the concealment of facts and thus the privilege only protects the confidentiality of communications and not the facts underlying these communications, provided that they can be found from other sources.²⁴

The US also has a long tradition in recognizing the attorney–client privilege. Although it is difficult to accurately identify the exact origins and rationale of the privilege,²⁵ historically in common law systems it is held to have its origins in the Elizabethan era,²⁶ when it was thought to stem from the “oath and honour” of the lawyer and their duty to guard the interests of their clients, whereas modern law views this confidentiality as part of the individual’s rights of defence.²⁷ The US Supreme Court has held that the privilege “is founded upon the necessity, in the interest and administration of justice, of the aid of persons having knowledge of the law and skilled in its practice, which assistance can only be safely and readily availed of when free from the consequences or the apprehension of disclosure.”²⁸ According to the Supreme Court, the privilege is “the oldest of the privileges for confidential communications known to the common law”, one that aims to “encourage full and frank communication between attorneys and their clients and thereby promote broader public interests in the observance of law and administration of justice.”²⁹ Under this utilitarian perspective, the privilege aims to provide security and trust in the relationship between the attorney and their client by enabling free exchange of information for the lawyer to provide fully informed advice.³⁰ As the Court of Appeal stated in re Shargel, the underlying principle for the privilege is that “encouraging clients to make the fullest disclosure to their attorneys enables the latter to act more effectively, justly, and expeditiously, and that these benefits outweigh the risks posed by barring full revelation in court.”³¹ However, since the purpose of the privilege (to suppress the truth) runs counter to the dominant aims of the law,³² it must be narrowly defined within the logic of the principle.³³

In the US, the privilege protects not only communications between attorney and client, but also “work product” prepared by the attorney in the conduct or anticipation of litigation.³⁴ On this basis, privilege protected information “falls outside the arena of discovery and contravenes the public policy underlying the orderly prosecution and defence of legal claims.”³⁵ In fact, the court emphasized that “not even the most liberal of discovery theories can justify unwarranted inquiries into the files and the mental impressions of an attorney”.³⁶ This rule has also passed on the Model Rules for Professional Conduct R.1.6, Comment 3, which states that “[t]he attorney–client privilege and work product doctrine apply in judicial and other proceedings in which a lawyer may be called as a witness or otherwise required to produce evidence concerning a client.”³⁷

III. DICHOTOMY AS TO RECOGNISING CONFIDENTIALITY FOR IN-HOUSE LAWYERS

Despite most legal systems recognizing the need for protecting the communications between a lawyer and their client, there is no common view as to the extent of that protection or the conditions for the recognition of the privilege. One of the most important divergencies among states is whether communication with in-house lawyers should benefit from confidentiality.³⁸ The term in-house lawyer/counsel could encompass a variety of cases regarding both the legal bond between the “lawyer” and the firm, for example a contract of employment or for the provision of legal services, and the status of the individual, for example a member of a Law Society/Bar Association, or a holder of a law degree/legal knowledge. In this analysis the term will refer to the more contentious situation, where the individual is an active member of a Bar or Law Society, obliged to comply with the relevant duties, and is connected with the firm through a contract of employment.

Whether such lawyers should benefit from the privilege is an extremely important point, because due to the ever-increasing regulating legislation and legal obligations, nowadays most large enterprises employ large legal teams as in-house consultants to manage their tasks, which may include readily available consultancy, ensuring compliance with various obligations, interacting with public authorities, representing the firm, and in some states conducting litigation. Since in-house counsel are almost always involved in the most significant business decisions, which are usually those which attract attention from the competition authorities, whether or not privilege is recognized has serious implications on the ability of the enforcement institutions to find evidence, as well as the ability of undertakings to defend themselves. This section explores the different approaches in the EU and the US.

A. The EU Approach

Recognition of and respect for the legal professional privilege does not stem directly from the EU treaties or the procedural rules for competition proceedings. Instead, the case-law of the CJEU has provided the EU approach as to the recognition of the privilege and the extent of its application.³⁹

The first case which considered the principle of legal privilege for in-house lawyers was AM&S, where the undertaking aimed to deny the Commission access to its correspondence with its in-house counsel on the basis that they were protected by privilege under UK law. Upon the undertaking raising an action for annulment, the ECJ was called to decide whether legal professional privilege applied in the EU competition procedure and whether it was an EU principle or for the Member States to decide on the extent of its recognition and application. The Court held that it is possible to recognize confidentiality of attorney–client communications by considering the principles and concepts common to the laws of Member States.⁴⁰ The ECJ found that recognition of the privilege was common ground in the legal traditions of Member States, as most of them protected written communications between lawyers and their clients provided that they were made to facilitate the client’s rights of defence and the communications were made with an independent lawyer, one who is not connected with their client through an employment relationship.⁴¹ According to the ECJ, confidentiality only covered written communications associated with the subject matter of a competition investigation, whether made before or after the initiation of proceedings,⁴² and that the independent lawyer could be any lawyer who is entitled to practice law in one of the Member States.⁴³ The scope of the privilege was broadened in Hilti to also cover all “the internal notes which are confined to reporting the text or the content” of communications between a lawyer and their client.⁴⁴

Since the judgment in AM&S, the legal professional privilege has been recognized as one of the general principles of EU law.⁴⁵ Despite the decision being severely criticized,⁴⁶ the principle was reaffirmed in Akzo Nobel, a cartel investigation in which the Commission and the British authorities seized during a dawn raid documents and emails held by a member of Akzo’s legal department, who was registered with the Netherlands’ Bar. Membership in the Netherlands Bar allows for significant professional independence and obliges all members, even those working in-house, to comply with the rules of professional ethics. The issue the CJEU had to examine was whether a lawyer for the purposes of the principle could be an in-house lawyer if they are sufficiently independent. The defence line in Akzo Nobel was not that the criteria for recognition of privilege in AM&S were wrong, but that, based on the rationale of the case-law, the term “independent lawyer” should be interpreted to cover in-house lawyers if they are members of a bar association, are sufficiently independent, and have to comply with ethical rules and obligations. The EJC, however, rejected this argument and, instead maintained that “[i]t follows, both from the in-house lawyer’s economic dependence and the close ties with his employer, that he does not enjoy a level of professional independence comparable to that of an external lawyer.”⁴⁷ The practical significance of the privilege is that the Commission is prohibited from using the privileged documents as the basis for an infringement finding decision,⁴⁸ unless the right holder waives the confidentiality right.⁴⁹

Based on the case-law in AM&S and Akzo Nobel, there are two main conditions for communications to benefit from legal professional privilege:⁵⁰

First Condition: The legal advice must be linked to “the exercise of the client’s rights of defence in relation to current or future legal proceedings, being a component of the broader right to a fair trial.”⁵¹ The Court in AM&S explained that as the requirement of due process in competition proceedings requires for the rights of defence to be fully exercised, “and the protection of the confidentiality of written communications between lawyer and client is an essential corollary to those rights.”⁵²

It is questionable, however, whether this condition remains relevant. In Orde van Vlaamse Balies,⁵³ the GC seems to have overturned the position in AM&S. The Court relied on Article 7 of the Charter and Article 8(1) of the ECHR to reject an understanding of the privilege that applies to attorney–client communications only in relation to current or future litigation, holding that such a limitation was not proportionate to the aim of punishing tax evasion.⁵⁴ Importantly, the Court held that “the protection of [legal privilege] covers not only the activity of defence but also legal advice.”⁵⁵ The GC referred to “the requirement, the importance of which is recognized in all the Member States, that any person must be able, without constraint, to consult a lawyer whose profession encompasses, by its very nature, the giving of independent legal advice to all those in need of it and, on the other, the correlative duty of the lawyer to act in good faith”.⁵⁶ This case seems to have altered the requirement for the first condition to just the provision of legal advice.⁵⁷

However, the Case Ordre néerlandais des avocats du barreau de Bruxelles, might have reverted the case-law back to its original state. In response to the gross violations of international law by the Russian Federation, the Council of the European Union issued legislation limiting the rights and protections afforded to the Russian Government and Companies based in Russia. The Duch Bar Association of Brussels applied for annulment of the legislation, to the extent that it restricts legal protectional privilege to only apply in relation to current and prospective judicial proceedings. According to the GC, the protection afforded by Article 7 of the Charter, concerning the protection of private life differs from that of Article 47 of the Charter, which concerns an effective remedy and fair trial, in that Article 7 applies outside of the context of judicial proceedings.⁵⁸ In addition, according to the GC, “the Court of Justice has not ruled that that protection was intended to guarantee a fundamental right of access to a lawyer and to legal advice from a lawyer irrespective of any link with judicial proceedings, but rather that its sole purpose, in the light of the right to respect for private life, was to preserve the confidentiality of correspondence between a lawyer and his or her client.”⁵⁹ Therefore, “it cannot be inferred from the case-law of either the European Court of Human Rights or the Court of Justice that the protection guaranteed in Article 7 of the Charter and that guaranteed in Article 47, considered in isolation or together, are such as to form the basis of a fundamental right for all persons to have access to and be advised by a lawyer other than in the context of existing or probable litigation.”⁶⁰

While in its judgment the GC referred to Orde van Vlaamse Balies, it seems that the newer decision overturned the previous position. Caution is advised, however, before reaching such a conclusion. The decision in Ordre néerlandais is one reached in an environment of political tension and in the context of sanctions towards Russia for engaging into a war of aggression. Instead of directly intending to set out the scope of attorney–client privilege, the GC may, instead, have intended to validate the political choice of the EU to restrict the rights of Russian companies in response to Russia's actions. In a comparison of the rationale of the attempted restriction in Orde van Vlaamse Balies, which is the public interest of avoiding tax fraud, and that in Ordre néerlandais, which aims to safeguard human rights, world peace and international law, the aims of antitrust, and thus the justifications for restrictions to the attorney–client privilege in that area, seem to be more akin to the tax case. While it has been observed that competition law has sponge-like characteristics, and thus may incorporate external avlues,⁶¹ including democratic concerns,⁶² its core aim is preservation of consumer welfare,⁶³ an aim that does not necessarily justify a too narrow interpretation of undertakings’ rights and privileges, especially in light of the criminal nature of competition law.⁶⁴ It may be that the CJEU will moving forward affirm the newer position in Ordre néerlandais, and apply it to other areas, such as competition law. However, an affirmation in a context outside political tension and war sanctions would be required for a safe estimation on the matter.

Second Condition: The legal advice must be offered by an independent lawyer. In AM&S, the Court held that the requirement as to the position and status as an independent lawyer “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.”⁶⁵ The Court further explained that “[t]he 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.”⁶⁶ As Christoforou observed, the Court chose the legal (the legal nature of the relationship) instead of the actual (whether the lawyer is actually independent) relationship between the attorney and their client.⁶⁷

The Commission has applied this case-law in a plethora of investigations.⁶⁸ Nevertheless, it will be subsequently shown that the exclusion of in-house lawyers from the legal professional privilege protection remains a contentious matter, even though there has yet to be a successful invocation of the privilege for in-house lawyers,⁶⁹ which has significant practical implications for the undertakings’ rights of defence.⁷⁰

B. The US System

In contrast to the EU model, the recognition of attorney–client privilege⁷¹ for both external and in-house counsel is a long-established principle in the US.⁷² The Supreme Court has held that “in the corporate context, the attorney–client privilege applies to communications between corporate employees and a corporation’s counsel made for the purpose of obtaining or providing legal advice.”⁷³ The Court has further explicitly clarified that the privilege also extends to the protection of communications between a corporation and its in-house counsel, as well as work product prepared by in-house counsel for a corporate client.⁷⁴ Holding otherwise “makes it difficult for corporate attorneys to formulate sound advice” and “threatens to limit the valuable efforts of corporate counsel to ensure their client’s compliance with the law.”⁷⁵ In Upjohn Co. v. United States, the Court further emphasized that the significance of in-house counsel privilege is significantly increased with the ever-expanding array of legislation concerning modern corporation, which requires companies to “constantly go to lawyers to find out how to obey the law.”⁷⁶ As to the elements of the privilege, Dawson Jr. et al. identify eight: (i) Where legal advice of any kind is sought; (ii) from a professional legal advisor in his capacity as such; (iii) the communications relating to that purpose; (iv) made in confidence; (v) by the client; (vi) are at his instance permanently protected; (vii) from disclosure by himself or by the legal advisor; (viii) except the protection be waived.⁷⁷

The courts have consistently applied the attorney–client privilege to in-house counsel work products, as such recognition is essential for the preparation of documents involving legal advice and assessments of risk. For example, in Shelton v. Am. Motors Corp.⁷⁸ the Court held that the in-house counsel is not obliged to testify on documents from the car manufacturer company she was employed at which concerned relevant information on accidents with vehicles similar to the one at the examined case, because such documents would be relied upon in preparation of her client’s defence. It is also important to note that because the attorney–client confidentiality privilege extends to in-house lawyers, the latter are subject to the same professional obligations as external legal counsel.⁷⁹ As to the scope of the privilege, Hazard Jr. had identified some controversy over its exact limits, although he considered that “it is common ground that the privilege ought to apply at least to communications by an accused criminal to his counsel, in contemplation of defence of a pending or imminently threatened prosecution, concerning a completed crime.”⁸⁰

IV. ANALYSING THE RATIONALE FOR THE DISPARITIES

It was seen that contrary to the US, where there is no distinction between in-house and external lawyers as to the application of the legal professional privilege, in the EU the scope of the privilege is much more restrictively defined. Despite the judgment in Orde van Vlaamse Balies defining a broader scope to include general legal advice to the categories of communications protected, the status of in-house lawyers has remained the same since the decision in AM&S in 1982. This part delves deeper into the rationale of the different systems. As aforementioned, the ECJ conditioned, in AM&S and Akzo Nobel, the recognition of the privilege to the degree of lawyer’s independence further holding that independence is a requirement for them to fulfil their role as collaborators in the administration of justice. The ECJ further defined independence as the absence of an employment relationship with the client. In this context, first, it will be examined what role do different legal systems envisage for lawyers to fulfil, and how they interpret the requirement for independence. Subsequently, it will be examined whether in-house lawyers are sufficiently independent, arguing that the answer would be potentially different depending on whether the assessment is conducted on the basis of the ECJ’s formal approach, or from a substantial viewpoint. Finally, it will be explained why some legal systems, like the US, make the choice to recognize legal professional privilege for in-house lawyers.

A. The Role, Function, and Independence of Lawyers in Various Legal Systems

In adversarial common law systems,⁸¹ while the lawyers are obliged to operate with independence and with a view to assist in the administration of justice, they act primarily as agents of their client.⁸² That being said, there are differences between the UK and the US as to the extent to which this principle applies.

In the UK, the Bar Standards Board obliges a barrister⁸³ to observe their duty to the court in the administration of justice, as well as to maintain independence.⁸⁴ The barrister’s primary duty is to the court, and they must act with independence. It is clarified that the duty to the court is such that it “overrides any other core duty, if and to the extent the two are inconsistent.”⁸⁵ The rules further state that the barrister “owe[s] a duty to the court to act with independence in the interests of justice. This duty overrides any inconsistent obligations which [the barrister] may have (other than obligations under the criminal law).”⁸⁶

Moreover, the barrister has the duty to act independently in the client’s best interests. Thus, the rules state that the barrister is obliged to promote and to protect their client’s interests so far as that is consistent with the law and with their overriding duty to the court. While the duty to the court does not prevent them from putting forward the client’s case simply because the barrister does not believe that the facts are as the client states them to be, as long as any positive case put forward accords with the instructions and does not mislead the court. The barrister’s role when acting as an advocate or conducting litigation is to present the client’s case, and not to decide whether the case is to be believed.⁸⁷ Nevertheless, the barrister may not refuse to accept the instructions of their client, irrespective of any belief or opinion which they may have formed as to the character, reputation, cause, conduct, guilt, or innocence of the client.⁸⁸ Therefore, while the primary duty of the barrister is to the court and this would override the duty to the client, should the barrister were to act unethically if they chose to follow instructions, they are otherwise required to advocate for their clients’ interests.

The UK position on the role of the (barrister) lawyer is summarized in Rondel v. Worlsey: “[e]very counsel has a duty to his client fearlessly to raise every issue, advance every argument, and ask every question, however distasteful, which he thinks will help his client’s case. But, as an officer of the court concerned in the administration of justice, he has an overriding duty to the court, to the standards of his profession, and to the public, which may and often does lead to a conflict with his client’s wishes or with what the client thinks are his personal interests. Counsel must not mislead the court, he must not lend himself to casting aspersions on the other party or witnesses for which there is no sufficient basis in the information in his possession, he must not withhold authorities or documents which may tell against his clients but which the law or the standards of his profession require him to produce.”⁸⁹

In the US, there is no single code determining the lawyer’s role and their conduct in every state, but the rules are relatively homogenous and heavily influenced by the American Bar Association’s Model Rules of Professional Conduct. In general, the lawyer acts as an agent of their client and they must diligently represent them until the completion of the case. Abramovsky described the lawyer’s role, in particular in criminal cases, as on the one hand a zealous representative of their client, and on the other, an officer of the court with a duty to society to protect its members. The latter function means that the lawyer’s office should not become a storage room for “the fruits and instrumentalities of past crimes”. Levinson has held that the role of the lawyers is unique because they fulfil the public function of making the legal system accessible to society.⁹⁰ He emphasizes that lawyers are in a fiduciary position, as due to this function they are able to improve or manipulate and abuse the system with their conduct.⁹¹ However, the adversarial nature of the system enables lawyers to solve their conflicting duties towards their clients and towards the judicial system.⁹² Also, lawyers have the duty to preserve the adversarial nature of the legal system by not engaging in conduct that could harm public trust to the adversarial formatting of the system, as well as to protect citizens against the state, when they represent their clients against the government.⁹³

As regards their professional independence, it has been suggested that in the US the term in its collective understanding describes the exclusive right of lawyers to self-regulate the applicable standards of their conduct.⁹⁴ The collective understanding of independence is thus part of the separation of powers, which requires for all aspects of the judicial to be independent from the executive and the legislative. Individual independence concerns the relationship with the clients, and it could mean independence from any pressure that could compromise the lawyer’s ethics and judgment.⁹⁵ Green suggested that the notion of the lawyer’s independence from clients is “in tension with the more compelling idea of the lawyer as agent of, or zealous advocate for, the client, and not nearly as well elaborated in the professional codes or literature.”⁹⁶

In civil legal systems, which are inquisitorial in nature,⁹⁷ the lawyers’ role is more closely associated with the administration of justice. In doing so, they must retain their professional independence and autonomy,⁹⁸ and they may disregard the client’s instructions or refuse their case.⁹⁹

In the French legal system,¹⁰⁰ the lawyers’ role is to assist in the administration of justice. They act as an intermediary between their client and the court and thus enable natural and legal persons to gain access to the judicial system. As the French National Internal Regulations on the profession of an advocate clarify, “as a partner in justice and a key player in the universal practice of law, lawyers are involved in all areas of civil, economic and social life.”¹⁰¹ Moreover, “in the performance of their duties, lawyers remain subject to essential principles in all circumstances.”¹⁰² As Leubsdorf explains, a French lawyer (“avocat”) is not the spokesman, representative or agent of their client and does not merely act for money. They are an independent person lending their eloquence and credibility to clients who require their help and in whose cause they believe. The avocat vouches for their clients by declaring their faith in their cause and actions, which is not something common law lawyers are supposed to do.¹⁰³ To properly fulfil their purposes, avocats are required to act in independence, which is emphasized in the rules of the legal profession.¹⁰⁴ However, the rules do not further specify the requirement of independence. According to Charrière-Bournazel, a lawyer’s independence does not mean freedom to exercise a right, but willingness to always apply sufficient distance to measure the acts that the lawyer considers useful for the case against the law and the ethical rules.¹⁰⁵ Independence may be defined in relation to other legal rules, such as conflicts of interest, confidentiality, and acceptance and withdrawal of cases. So, lawyers must be independent from external pressures such as the interests of third parties, as well as being independent from their clients.¹⁰⁶ Therefore, a French avocat is not the agent of their client, who must zealously represent them, but an external assistant of their client adding eloquence to their cause.¹⁰⁷ Noteworthy that the French inquisitorial system became the basis of other similar systems, such as the German and the Dutch ones.¹⁰⁸

In Germany,¹⁰⁹ lawyers are also considered to be “independent agents in the administration of justice”¹¹⁰ who engage in activities that serve “the realization of a society governed by the rule of law.”¹¹¹ The rules of professional practice require for the lawyer to “exercise his profession freely, independently, as a member of a self-determined and self-regulated profession, subject only to the law and Rules of Professional Practice.”¹¹² To ensure the lawyer’s independence, while the Federal Lawyer’s Act states in section 46(1) that a German lawyer is not prohibited from becoming a salaried employee of a client, such as a corporate entity, an in-house lawyer has more limited rights. According to section 46c, in-house lawyers must be registered as such, they may not represent their employer before regional and higher courts, they may not act as defence attorneys for their employer in criminal and regulatory fining proceedings, if the proceedings relate to a corporate crime, and are exempted from certain provisions of the Federal Lawyer’s Act.

In the Netherlands, the Code of Conduct of the Netherlands Bar Association¹¹³ provides for two things: on the one hand advocates are first and foremost their clients’ counsel and must represent the points of view of their clients, and on the other they fulfil an essential role in the administration of justice. For them to fulfil their roles, they must act completely independently, and according to Rule 2(1) they must not allow their freedom and independence in the exercise of the profession to be put in jeopardy. However, there is no definition as to what exactly independence encompasses. It is clear that lawyers should avoid conflicts of interest (Rule 7(1)), protect confidentiality of information, although they themselves and not the clients are the beneficiaries of the rule and may proceed to disclosure if it would be beneficial for the client and the latter does not object (Rule 6(2)). Moreover, their independence seems to stem from the requirement to comply with the rules and obligations of the legal profession and their membership to the Bar.¹¹⁴ In a recent judgment, the Rotterdam District Court clarified that independence is a determining element to assess whether in-house lawyers should benefit from legal professional privilege and further found that the guarantees the Dutch law confers in the form of obligations and surveillance from the Bar Association are sufficient to enable in-house lawyers to benefit from the privilege.¹¹⁵

Therefore, in both adversarial and inquisitorial systems lawyers fulfil essential functions in the administration of justice and assist in making the judicial system available to their clients. Because of these essential functions, all legal systems mandate their lawyers to act independently. However, there are significant differences as to the structure and underlying principles of each system, which change the scope of the lawyer’s responsibilities. In adversarial systems, lawyers are representatives of their clients’ interests, and they primarily advocate for their clients’ case. Their independence is a requirement for them to fulfil their role in the administration of justice and it is primarily understood as a duty to comply with the ethics and the codes of conduct of the legal profession. In inquisitorial systems, the lawyers’ role is closer associated with finding the truth, regardless of their clients’ interests. This differentiation further results in a more strict and demanding understanding of independence in inquisitorial systems. However, there is not one common line on how exactly this more demanding understanding of independence manifests. In Germany it seems that it stems from the lawyer being completely disassociated from their clients’ interests, whereas in the Netherlands independence it is connected to the obligations and supervision from the Bar.¹¹⁶ Later, it will be shown that this is one potential justification for allowing different understandings on the scope of legal professional privilege regarding in-house lawyers, without any one choice being the more proper than the other.

B. Are in-House Lawyers Independent? Challenging the US Approach

Before evaluating the choice of certain systems to recognize attorney–client confidentiality for in-house lawyers, it should be examined whether and to what extent are in-house lawyers independent. It is supported that the answer depends on whether independence is defined as sufficient distance from the client’s interests and influence or as compliance with the rules and ethics of the legal profession regardless of a potential relationship with the client.

Independence is a technique of governance employed as an intermediate to achieve another goal.¹¹⁷ Therefore, and although already hinted in the previous part, to properly assess the requirement, it is important to clarify the reasoning behind the need for lawyers’ independence. For the purposes of this analysis, independence refers to the relationship of the lawyer and their client.¹¹⁸ The requirement stems from the nature and function of the lawyer in the legal system, which has also led to the belief that the legal profession is one providing public service and not an entrepreneurship. Richard Posner, for instance, suggested that while competition is beneficial for consumers as it generally leads to higher quality services and lower prices, commercialization of the legal profession would lead to an erosion on the protection of public interests because competitive pressures will push lawyers to keep their clients satisfied, rather than raising objections.¹¹⁹ While he rejected a formal differentiation between “professionalism” and “commercialism”, Levinson agreed that lawyers differ from individuals engaged in other professions because of, among other things, their special duties.¹²⁰ He went on to explain that the lawyer’s duties are often in conflict with each other, especially the duty to the client’s interests, with that to society, the interests of third parties, preservation of justice, and the ethics of the legal profession, with the conflict becoming more intense if the client’s interests or instructions require obscuring the truth.¹²¹ Because of these conflicting duties, Gordon submits that “the loyalty purchased by the client is limited, because a part of the lawyer’s professional persona must be set aside for dedication to public purposes”.¹²² However, according to Levinson such conflicts become increasingly difficult to handle where the lawyer would be brought in a very disadvantageous position should they refuse to act for the client, for example if they are refuse to carry out the instructions from their law firm’s hierarchy.¹²³

Levinson then emphasized that while other professions also face conflicts, the lawyer stands at a particular spot because of the public, or quasi-public, nature of their profession and its wide applications to society and the judicial system.¹²⁴ He also considers the adversarial nature of the US legal system as an additional dimension to the issue. Even where the lawyer does not directly engage with the adversarial function of the legal system, for example in-house lawyers or government counsel, they have a special responsibility to participate in articulating and enforcing appropriate standards for their conduct. ¹²⁵ Thus, the lawyer may be required to disclose confidential information when there is an overarching duty to other parties or society and should not cover up crimes, offer false evidence or take a frivolous position in litigation.¹²⁶ For the fulfilment of these functions it is essential for the lawyer to act in independence.

If independence is viewed in the form the court in AM&S understood it, as disassociation from the clients’ interests that manifests as an absence of a legal relationship with strong dependence elements, in-house lawyers, both those in corporate and in government positions, are the most at risk for their independence to be compromised.¹²⁷ From that viewpoint, the main objections regarding the in-house lawyer’s independence are that they are dependent on one client, who is also their employer, and that they are not only involved in legal consultation, but they are also actively involved in the client’s business and may provide business advice.¹²⁸

Considering their relationship with their employer, as Christoforou also suggested, the fact that in-house lawyers have only one client could be seen as putting them in a difficult and less independent position that independent lawyers. An in-house counsel faces significantly more pressures since they must be mindful and considerate of the interests and business activities of their employer and must comply with, or at least take into account, the directions of their superiors in the company hierarchy, even if the latter are not lawyers. Also, they are continuously involved with the business practices of their firm, and they are directly dependent on the firm’s success for their salary.¹²⁹ In-house lawyers are also accountable to their employer in a stricter way than an external lawyer would be to their clients and they lack the freedom to refuse work that they would find objectionable, as usually such a refusal must be accompanied by resignation.¹³⁰ Moreover, the in-house counsel would be likely to identify themselves with the firm’s interests, which could significantly undermine their independence,¹³¹ and are prone to de influenced by their firm.¹³²

Next, it is appropriate to consider whether it is suitable for a lawyer who is required to maintain their independence to be actively involved in the business matters of their clients. In the preamble, it should be mentioned that the extent to which certain communications should be considered business or legal could vary. For example, it is more likely that communications of an in-house lawyer with other employees or the firm’s management would be of business nature, whereas communications between multiple in-house lawyers of the same firm are more likely to be legal. In any case, it is often difficult to distinguish between business and legal communications during the course of business and on many occasions, legal discussions take into account business principles and strategies. Moving to the core of the issue, Levinson identified serious issues with the notion of the “lawyer-entrepreneur” who is actively involved in their clients’ business, as is the case with an in-house lawyer.¹³³ This situation alters the balance of the legal profession as it introduces additional interests to be accounted for. As regards the duty to the client, the lawyer not only owes the duty of attorney, but also that of a business advisor or partner. Also, the lawyer must balance the attorney’s self-interest to minimize exposure to malpractice liability with the interest as part of the client’s business to maximize profit.¹³⁴ In this situation, he considers that the lawyer is not fully independent and thus trust to their objectivity is hindered. A further issue is that if lawyers become identified with their clients and their business interest, it could imper the reasonably expected independence of the legal profession at macro level.¹³⁵ Moreover, as suggested by L. Scott in the English case Three Rivers District Council v Bank of England,¹³⁶ legal privilege applies in relation to a relevant legal context, which is present when the lawyer provides advice on the “rights, liabilities, obligations or remedies of the client”.¹³⁷ Thus, if a lawyer (in that case it was a solicitor) becomes the client’s “man of business”, the advice may not be legal and not benefit from privilege.¹³⁸ Ultimately, whether an advice is of legal or business nature is a matter that should be examined ad hoc,¹³⁹ however it is arguable whether lawyers should be offering too much business advice.¹⁴⁰

The conclusion would not necessarily be the same if independence is viewed in the form of what Christoforou defined as the actual relationship between the lawyer and the client, which adheres to the lawyer’s professional conscience.¹⁴¹ The arguments as to whether an in-house lawyer would face significantly more pressures than their employer, their economic dependence, and their influence by their firm’s interests would apply in this situation as well. However, the answer would not necessarily be that internal lawyers are at an inherently disadvantageous position as to their independence in comparison with external counsel. Most Bar Associations and Law Societies put emphasis on the in-house lawyer’s duty to comply with the same rules and ethical standards as fully independent ones, and place additional provisions emphasizing that the lawyer is not obliged to comply with the employer’s instructions and is not subject to the employer’s power.¹⁴²

In addition, a legal system may employ and enforce rules that not only enhance an in-house lawyer’s independence, but also provide severe punishment, strike out and charges, for a lawyer who does not adhere to the standards of the profession, to deter unlawful conduct. In such cases, the position of an in-house lawyer would not significantly differ from an independent lawyer with only one major client, which is not generally considered problematic. Thus, from this viewpoint whether a lawyer acts independently cannot be determined solely on whether they have an employment relationship, but more importantly on whether the rules and standards of the legal profession as determined and overseen by the regulating authority guarantee a sufficient degree of independence in the relationship with the employer. Adopting this perspective in a continental legal system would be consistent with the traditionally higher standard of independence and the fundamental requirement that the lawyer’s primary duty is in the administration of justice.

At this point, it should be clarified that even if it were to be accepted that in-house lawyers do not benefit from the same degree of independence as external ones, it could not be supported that they do not fulfil significant functions within society. There is much support in scholarship of their positive impact. DeMott submits that in-house counsel may assist in shaping a firm’s activities and policies in highly desirable directions, through the exercise of influence beyond the minimum requirements of legal compliance.¹⁴³ According to Barclift, internal corporate lawyers assist in the advancement of preventive law practices. Through preventive law, the lawyer is proactively involved in managing the firm’s legal affairs, which enables the development of structures to achieve goals and the setting of strategies for legal risks.¹⁴⁴ According to Rosen, timing is essential for companies to efficiently deal with problems and a corporate (in-house) attorney is able to spot and cure issues before they become pressing and further a lawyer is able to exercise influence in legal matters the earlier they are called in,¹⁴⁵ so internal lawyers are often more beneficial to firms than external ones. Boot and Macey further submit that in corporate governance, a firm may have to choose between monitoring proximity or monitoring objectivity. The presence of in-house counsel increases proximity because they can spot legal issues as soon as they arise, however this may be costly to monitoring objectivity, as the counsel will be too close to the problems.¹⁴⁶ The question therefore is not whether companies should employ in-house lawyers, as the latter are highly beneficial for the firm.

C. Why Certain Legal Systems Traditionally Protect LPP for in-House Lawyers

In previous parts it was shown that some legal systems, traditionally found among those following an adversarial model although this is not the current reality, recognize the application of legal professional privilege both to external and in-house lawyers. Despite the ECJ’s assertation that in-house lawyers do not benefit from the same guarantees of independence and thus it would be potentially detrimental for enforcement to recognize privilege for them, there is evidence suggesting that systems recognizing the privilege are equally efficient. By reference to the US, in this part it will be shown that such a recognition may very well be justifiable on the basis of the lawyer’s functions within the system and the supporting rules that preserve the efficiency of the system.

Historically, in common law jurisdictions, where the principle of legal privilege was developed, legal advisors were acting as independent practitioners, and the clients were for the most part small merchants or individual citizens. With the expansion of modern trade and the development of large enterprises, the conduct of the organization of the profession changed and in-house lawyers became a common site. Since corporations should not be denied the right to privilege it was natural that the attorney–client privilege would extend to in-house lawyers. However, to counteract the potential risks of abusing the privilege through the in-house structure, common law courts developed a number of different standards to limit the application of the privilege to in-house communications, such as the Ampicillin¹⁴⁷ test.¹⁴⁸

In the US, Levinson interpreted the legal professional privilege as part of the lawyers’ duties to society. Citing People v. Beige¹⁴⁹ he argued that the duty of confidentiality to the client outweighs the general duties to society, because society itself has a general interest in preserving the attorney–client privilege and this should be promoted over other general interests.¹⁵⁰ Abramovsky further held that the attorney and client relationship often requires the fullest and freest disclosure of the client’s motives and acts made in strict confidence, which is secured by the lawyer’s honour and fidelity. Confidentiality aims to ensure the privacy of this disclosure, and its absence would mean violation of the sacred trust to the lawyer and would diminish the essence of professional assistance in defending oneself.¹⁵¹ Thus, confidentiality is a tool for the preservation of other fundamental rights, like assistance of counsel, due process, and rights of defence.¹⁵²

However, this right is not unlimited as it could come into conflict with the role of the lawyer as an officer of the court, to whom the interests of society and the validity of the legal system is entrusted. On this basis, Abramovsky submitted that while the principle of confidentiality must be preserved, it should not permit the attorney to withhold from prosecuting authorities the incriminating evidence under their control.¹⁵³ She argued that obstruction of justice significantly impedes the judicial system which is an overarching public interest to that of confidentiality.¹⁵⁴ Therefore, while the attorney should aim to protect their client’s legitimate interests, they should not act to withhold incriminating evidence or assist the client in the commitment of future crimes. A similar argument was employed by Hazard Jr. who considered that in situations where the client is committing or is planning to commit a crime, destroy evidence, or instruct their lawyer to commit a crime, the privilege should be held to be inapplicable.¹⁵⁵ He further supported that in such a situation the inapplicability is not external but internal, as the very conditions of the privilege are not fulfilled where there not a “legitimate purpose”, which constitutes the communications part of the “attorney and client relationship”.¹⁵⁶

The above views are widely accepted in the US. The protection of the attorney–client privilege is thus limited in circumstances where there is an overlying principle that requires protection. Two relevant restrictions for the present analysis are tangible evidence and the crime-fraud exception. As regards tangible evidence, in the leading case In re Ryder¹⁵⁷ an attorney was suspended for having in his possession the weapon and money from a bank robbery. The attorney may not, therefore, conceal the instrumentalities of a crime, otherwise they would become an active participant in withholding evidence.¹⁵⁸ The crime-fraud exception on the other hand restricts the scope of the privilege to exclude, statements seeking the services of the attorney with respect to ongoing or future crimes or frauds.¹⁵⁹ The rationale behind the exception is that clients are not entitled to use lawyers for fraudulent purposes and to safeguard the lawyers’ role in the administration of justice.¹⁶⁰ Because the attorney–client privilege is a right of the client, it is the latter’s intent to abuse the privilege to conceal crimes, that determines whether the crime-fraud exception applies. The exception applies even if the attorney had no knowledge or participation in the actual crime or fraud. These restrictions are particularly relevant for in-house lawyers and prevent their use as a means of concealing evidence from antitrust authorities. Noteworthy that even in the UK, where there is a wider scope to the privilege, the crime-fraud exception is also recognized.¹⁶¹

Overall, those jurisdictions that traditionally recognized the application of legal professional privilege for in-house lawyers do so because of the way their legal systems are structured and progressively evolved. These jurisdictions primarily make use of the advocative system with extensive disclosure procedures and understand the lawyer’s role as an advocate of their clients’ interests. Thus, in balancing between the two functions of the lawyer, representation of the client and administration of justice, they prioritize the former. However, this does not mean that there are no concerns as to the potential dysfunctionalities from this choice and restrictions have been introduced to limit the extent of the privilege. As shown above, even in the US and the UK, which are strong advocates for the in-house lawyer’s privilege, the rules are not absolute, and they cannot be used to the detriment of investigations.

V. IMPLICATIONS OF CHANGING THE CURRENT EU RULES

The previous part illustrated that despite the potential issues threatening the independence of in-house lawyers, certain legal systems, such as the US, consciously emphasize the need to foster an environment of safety when clients seek advice from (any kind of) lawyers and promote the function of the lawyer as an advocate of their client’s legal interests. In doing so, they recognize lawyer-client confidentiality even in communications with internal counsel. However, these systems have also developed a set of rules which enable efficient enforcement, such as extensive discovery procedures, and safeguards against abuses of the rules, including the tangible evidence and the crime-fraud exceptions. This part switches focus on the EU regime for competition cases to examine how the rules on privilege could change and whether such a change is desirable. A significant number of Member States with long-standing civil legal traditions, such as France, Belgium, Spain, and the Netherlands, have adopted the view that the privilege should extend to in-house lawyers. This change reflects a different understanding of the requirement of independence, which is associated with compliance with the ethical and professional responsibilities of the lawyer rather than the legal nature of the formal relationship with the client. It will be supported that both options are viable, and ultimately it is a choice of policy, although the inclusion of in-house lawyers would benefit from additional changes to address the potential inefficiencies that could arise.

A. Could the Privilege be Extended to in-House Lawyers?

The first issue to examine is whether the EU legal system could allow for the recognition of legal privilege to in-house lawyers. Case-law from the CJEU offers the response to this question. In AM&S it was stated that legal professional privilege constitutes one of the general principles of EU law.¹⁶² However, in the absence of specific legal rules in EU legislation, the CJEU relied on the principles and concepts common to the laws of the Member States¹⁶³ to identify the common criteria inasmuch as those laws protect written communications between lawyers and client.¹⁶⁴ Moreover, AG Kokott held in her opinion that the scope of a legal principle, such as the legal professional privilege, may be defined or change “where, in view of the special characteristics of EU law, the aims and tasks of the Union and the activities of its institutions, such a legal principle is of particular significance, or where it constitutes a growing trend.”¹⁶⁵ Thus, the scope of protection could change if EU law itself changes, through legislation or the practices of its institutions, or through a change in the legal traditions of the member states.¹⁶⁶ The ECJ also clarified that in Akzo Nobel where it considered whether the developments in the EU legal system and the legal traditions of Member States since the previous ruling in AM&S are such to justify a departure from the previous position.¹⁶⁷

Importantly, the Court in AM&S held that only “such elements of that protection as are common to the laws of the Member States” could be incorporated in EU law.¹⁶⁸ This approach has been referred to as the “common denominator” approach.¹⁶⁹ As Vesterdorf observed, the legal professional privilege rights have an evolutionary nature. Even if the scope of the right is set at one particular time period, it does not mean that it could not change in the future. This evolutionary nature stems from the unique nature of the EU, whose members retain their sovereignty and to an extent their legislative autonomy, thus bringing the traditions and practices of the Member States to a state of high significance. The potential for an evolution of the practices from which a common denominator could emerge is easier when the rights are not set in primary EU law, as is the case with legal privilege.¹⁷⁰ Thus, with the recognition of a possibility to change the principle, should the traditions of Member States showcase an evolution, the CJEU confirmed the principle of bottom-up integration, which stands for the development of a rule or principle of EU law which derives from the domestic legal traditions of the Member States.¹⁷¹

As to how could such a common denominator emerge, the Cout held in Akzo Nobel that the fact that national laws vary considerably does not prevent the identification of a common criterion.¹⁷² Moreover, it was clarified by AG Kokott that such identification is not necessarily subject to the precondition that the practice in question should constitute a tendency which is uniform or has clear majority support.¹⁷³ What is required is that Member States are willing to accept the extension of legal professional privilege to in-house lawyers provided that certain conditions, set independently by each state withing their own jurisdiction are met.

With the aforementioned in mind, it is questionable in terms of policy whether, assuming that there will continue to be no EU-level statutory approach to the privilege, the current status of the law should change unless the change is requested from the majority of Member States. In the EU landscape, when the scope of a rule is found in the existence of a common denominator, it seems demoting towards the equality between Member States that the minority should dictate the state of the law which will apply to all Member States. Of course, when conducting the assessment of the favoured approach it should be borne in mind that certain Member States will follow the general directions offered by the EU case-law (in this case AM&S and Akzo Nobel), even if their national laws could potentially dictate a different solution. Another issue is why in such an important matter, which reflects the values of the legal system and the extent of the application of rights of defence, the EU chooses not to create an EU-level legislative framework and instead chooses to rely on the underlying values of the Member States’ legal systems. It would be advisable that the EU takes legislative initiative and dictate the EU-level scope of the privilege, regardless of the direction chosen, in competition investigations, instead of relying on potentially outdated case-law.

B. Should the Privilege be Extended to in-House Lawyers?

There is an extensive debate on whether legal professional privilege should be recognized both for in-house and external lawyers. As aforementioned, it is not clear whether the initial view that the privilege only extends to advice offered for litigation purposes was overturned in Orde van Vlaamse Balies or the CJEU reverted back to the original position in Ordre néerlandais des avocats du barreau de Bruxelles. In any case, of concern to this part is whether the restriction of the privilege to external lawyers is the appropriate choice. The policy arguments for and against the extension of the privilege, from the ECJ approach which considered the legal nature of the lawyer-client relationship, from the approach emphasizing on compliance with the rules and ethics of the legal profession and from a fundamental rights approach, follow.

1. Arguments from the Viewpoint of the Legal Nature of the Attorney–Client Relationship

Support for the extension of the principle has been expressed both by stakeholders and scholarship.¹⁷⁴ One of the most widely employed arguments is that the privilege is justified on the basis of protecting fundamental rights of defence and is entrusted to lawyers because of the characteristics of the legal profession and their role in the judicial system. Since in-house lawyers also serve to safeguard the rights of defence, as well as to provide legal advice, and they share the same fundamental role and characteristics with external/independent lawyers, there is no reason why the privilege should not extend to them as well.¹⁷⁵ Another argument is that the state of the law is no longer the same as when AM&S was first decided, since Regulation 1/2003¹⁷⁶ introduced a duty for companies to self-assess the applicability of Article 101(3) and the significance of fundamental rights considerations has increased in the EU. These changes warrant a reassessment of the principles.¹⁷⁷ Furthermore, restriction of the privilege intervenes with the liberty of persons to choose their legal advisors.¹⁷⁸ Moreover, external lawyers may similarly be economically dependent on their clients,¹⁷⁹ especially since the firms subjected to competition investigations are large enterprises, thus raising the economic stakes even for external lawyers and putting pressure event to large law firms not to displease the client. Similarly, it can be argued that the gap between external and in-house lawyers is often small, because by adhering to the rules of their Bar Associations, the latter are sufficiently independent.¹⁸⁰ There is also an equality of arms argument, holding that this position created inequality in the investigation because while the Commission’s internal documents are not meant to be disclosed, the undertaking is susceptible to disclosing their internal legal documents.¹⁸¹

There are also strong policy arguments against the extension of the privilege. First, because the attorney–client confidentiality is not an end in itself but serves to safeguard the rights of defence, there is an inherent balancing exercise that must be conducted between these rights and the need to ensure efficient enforcement of competition rules.¹⁸² As Gippini-Fournier has argued in the past, much caution is required when determining the appropriate personal scope of the privilege. The assessment should not stop at the functional overlap between in-house and external lawyers and should extend to “a careful analysis of systemic incentives and disincentives” of lawyers, since the consequence of recognizing the privilege is that “part of the truth is sacrificed at the altar of legal privilege.”¹⁸³ As regards the balancing exercise, Frese stands in favour if the Court’s judgement in Akzo Nobel. Upon finding that exclusion of in-house lawyers from the privilege would not adversely affect the rights of defence,¹⁸⁴ he considers that the ECJ was right not to create an unwritten limitation of the Commission’s statutory powers.¹⁸⁵ In conducting the balancing exercise between the rights of defence and the Commission’s statutory powers of investigation to punish infringements, what tips the scale towards recognizing the privilege is the safeguard of the independence of lawyers; in his view, this independence does not exist to a sufficient degree in the case of in-house counsel.¹⁸⁶ Regarding rights of defence arguments, Wils submits that they are not convincing because the ability to receive legal advice from external (independent) lawyers is sufficient for undertakings to exercise their rights.¹⁸⁷ Also, the fact that external lawyers’ independence may on occasion be relative and they could also face economic or other pressures from their clients does not mean that the perception that external lawyers are in general more independent and better suited to reject their clients requests where they would interfere with their duties towards the administration of justice is wrong in principle. As to the equality of arms arguments, Gippini-Fournier argues that it does not account for the fact that the positions of the undertaking suspected of an infringement and the investigating authorities are not identical, as the Commission must be equipped with intrusive fact-finding powers to capture infringements.¹⁸⁸

Moreover, the extent to which legal privilege is recognized is often associated with the model and structure of the state’s judicial system and the existence of other rules and procedures around the principle. For example, in the US in-house lawyer privilege exists in an adversarial system where discovery procedures are an essential part of evidence gathering. Since the EU legal system is not based on the same principles¹⁸⁹ and the basis of the procedure are the more intuitive dawn raids and requests of information, it is not appropriate to directly apply a notion of attorney-counsel privilege that does not account for the EU system’s functions.¹⁹⁰ This argument becomes particularly convincing in the context of competition law, which is primarily enforced by administrative authorities of public nature and private enforcement is much less developed in most Member States. In contrast to the US, where even in public and administrative law procedures the finding of an antitrust infringement is the outcome of a judicial process (a trial) where the public authority is a litigant, in the EU, and in most Member States, the system is inquisitorial meaning that the public authorities are equipped with increased powers in search for the truth and authentically determine, at first instance, whether there is an infringement. This does not mean that persons should not be protected by rights which restrict the authorities’ powers. However, if the role of the Commission is not understood as that of a prosecutor or an adversary, but that of an impartial seeker of the truth, it could be justified for legal privilege to not have the same extent as in adversarial systems.

There is also a number of proposed arguments emphasizing on the practical inefficiencies that could arise from such a choice. First, it would significantly impede the ability of the Commission to effectively enforce competition rules. Even though the Commission has been severely criticized for its extensive powers of inspection,¹⁹¹ restricting the ability to acquire knowledge, through inspections and requests for information, of in-house lawyers’ communications containing legal advice would deprive the Commission of a particularly useful source of information.¹⁹² Over-extending the scope of the argument could lead to supporting that no communication should be privileged, which is definitely an unjust proposition. Thus, limiting the scope of the protection to communications with external lawyers, which are conducted ad hoc when legal issues arise, regardless of whether in the scope of litigation or legal advice, and not on a day-to-day basis, as is the case with in-house lawyers, achieves a better balance between the rights of defence and enforcement’s needs. Second, it has the potential to be used to cover up competition law infringements.¹⁹³ If companies were able to conceal documents through their in-house lawyers, the competition enforcement system could easily become inefficient. According to this argument, this avenue of exploitation is particularly concerning because undertakings have the power to coerce their in-house counsel to agree with such practices. While in-house lawyers do not have lower moral and professional standards than external lawyers, they are often in a position where they are unable to refuse the instructions without great personal harm, since they are economically dependent from their employers and bringing an action against them, for example for wrongful termination if they get fired for refusing to comply, will potentially damage their profile, and constitute them less desirable for future employers. As it was seen, relevant issues have been encountered in the US practice. Third, it could reduce society’s trust to the role of the lawyer, if it was recognized that the lawyer’s duty to the client’s interests is greater than their position as an assistant in the search for the truth and the proper administration of justice. Fourth, it could over-burden the time-efficiency of the procedure.¹⁹⁴ In-house lawyers offer both legal and business advice, so the authorities would have to argue about which documents are of legal nature and benefit from the privilege and which should be disclosed. Where the parties disagree, the issue would be solved by the Hearing Officer, with the ability of the undertaking to appeal the decision in the CJEU. It is easy to see how investigations could be stuck for many years in judicial proceedings in the preliminary investigation stages.

2. Arguments from the Viewpoint of Compliance with the Rules and Ethics of the Legal Profession

Despite the aforementioned arguments, some Member States with civil law traditions, such as France, Belgium, Spain, and the Netherlands, have decided to recognize the protection of legal professional privilege for in-house lawyers. In these systems, democratic choice upheld that the obligation of lawyers towards the rules and ethics of their professions and the efficiency of the regulatory supervision of their Bar Associations are of higher significance than the legal nature of the relationship between a lawyer and their client.

It is difficult to argue that, based on the decision in AM&S (this point was not disputed as part of the arguments of the parties in Akzo Nobel), this approach is foolproof. As Christoforou convincingly observed, there is an internal contradiction with the ECJ’s reasoning.¹⁹⁵ The Court based its ruling on the rules of “professional ethics and discipline” as a counterpart to the role of the lawyer as a collaborator in the administration of justice, which requires of them to act in full independence.¹⁹⁶ However, both the A.G.s in the case referred to the exact same rules, but supported that where an in-house lawyer continues to be a member of the appropriate Bar Association or Law Society, and thus is subject to the rules of professional ethics and discipline, they should benefit from the privilege.¹⁹⁷ It seems arbitrary that the Court chose to base its assessment over the matter on the form of the relationship, as opposed to the substantive criterion of whether the lawyers in member states are subject to the rules of personal ethics and discipline and supervised by a regulatory body.¹⁹⁸ Moreover, as aforementioned, even though in some Member States, like Germany, it seems that the form of the relationship is a decisive factor, it is not clear that all or the majority of Member States used, at the time, the same criterion in their evaluations. Adoption of this criterion would also allow for a balancing exercise between the needs to protect the fundamental right of confidentiality of information and the need for efficient enforcement and uncovering the truth, and a lawyer’s independence could be challenged at individual cases, if there is relevant supportive evidence. Support for this approach can be found in the absence of evidence that in jurisdictions which allow in-house lawyers to benefit from the privilege there are not more violations of the professional rules and ethics by in-house lawyers as opposed to external ones. Finally, it is controversial whether enforcement efficiency would be significantly impeded, should the Commission have to recognize confidentiality in in-house counsel-client relationships. In the UK, where the Competition and Markets Authority operates closer to the model of the EU Commission, rather than that of the US Federal Trade Commission (the “FTC”), competition enforcement seems to be on par with the EU, and there is insufficient evidence of enforcement deficiencies in states that have adopted this model.

3. Fundamental Rights Arguments

There is also a strong case for recognizing legal privilege on the basis of fundamental rights, as conferred by the ECHR and the Charter.¹⁹⁹ In more detail, Article 8 of the ECHR and Article 7 of the Charter hold that “[e]veryone has the right to respect for his or her private and family life, home and communications.” As the ECtHR decided in Altay, the notion of “private life” should be interpreted broadly to include communications those between a lawyer and their client. Such communications should be considered, in principle, privileged because there is a general public interest in persons being free to consult a lawyer under conditions which favour full and uninhibited discussion.²⁰⁰ Apart from their significance as parts of the person’s private life, lawyer-client communications are also protected as part of the fundamental right of defence.²⁰¹ The protection conferred by Article 8 of the ECHR and Article 7 of the Charter extends to public authorities which should not interfere with the right “except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.” Moreover, as established in Saber, limitations to the right of privacy must be compatible with the rule of law and when the right relates to lawyer-client communications, specific procedural guarantees are required.²⁰² Finally, in Altay the ECtHR also established that persons should have a reasonable expectation that their communications with their lawyer will remain confidential and privileged, regardless of whether the matter is of a civil or criminal nature.²⁰³ The significance of the ECtHR case-law was recognized in Orde van Vlaamse Balies,²⁰⁴ which however did not go as far as to find that communications with in-house lawyers should be protected as a matter of fundamental rights.

Admittedly, the ECtHR case-law presents a strong case for the overall significance of the legal professional privilege as part of the person’s fundamental rights. That being said, there is nothing in the case-law that suggests that legal professional privilege is an absolute right that should be granted the broadest possible interpretation to include communications with in-house lawyers. If anything, Article 8 of the ECHR is a qualified right, meaning that it may be restricted, according to paragraph 2, to protect the “interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.” In addition, the ECtHR clarified in Campbell that restrictions to lawyer-client confidentiality may be allowed if they are in accordance with the law and they have a legitimate aim.²⁰⁵ On the second part of the test, the legitimate aim in not recognizing in-house lawyers’ privilege could be the preservation of the legal system’s legitimacy and the trust to the institutional role of the lawyer, which could be put at risk if in-house lawyers, who face stronger pressures due to their relationship with their employers, were to benefit from the privilege. Thus, it is submitted that while human rights are important in the understanding of the privilege, the debate is primarily a matter of social and political choice. As soon as the choice is made to recognize or not internal lawyers’ privilege, human rights instruments can provide valuable guidance as to the exact application of the privilege.

4. Implications of the Choice for the Overall System

It is at this point, it is important to assess the overall consequences for a legal system to recognize in-house lawyer privilege. Such a recognition generally has relative significance for the overall functioning of the system. This is because in most Member States’ civil/private law procedures the rules of discovery are not as developed,²⁰⁶ so private parties have less opportunities and liberty to request disclosure of documents held by the other party and courts are more reluctant to allow disclosures, meaning that the addition of the privilege serves little practical purposes. On the other hand, criminal proceedings are often governed by specific rules which determine the ability of the investigating authorities to collect evidence, and often contain provisions on the treatment of documents in lawyers’ hands. Competition law stands in a peculiar position because its initial conception, particularly at EU level, was that it is an administrative procedure, more akin to tax law, whereby the authorities would examine certain market practices and upon the finding of an infringement would issue an administrative fine. In reality, however, it is now established that competition law proceedings are of criminal rather than administrative nature,²⁰⁷ which mandates for a stronger recognition of many rights of defence. This increases the importance of striking an appropriate balance between the protection of attorney–client confidentiality and the need for efficient enforcement.

In striking this balance, due account has to be taken of the nature and principles of a given legal system. Whether in the EU legal order recognition of the legal privilege for in-house lawyers would be preferable depends on the principles on which the assessment will be conducted. The EU continental understanding of the lawyer as an independent assistant in the administration of justice, who acts primarily with a view towards preserving the truth, rather than to vigorously advocate for their client’s case, would require that they are completely independent from their clients. Adoption of the formal criterion of the nature of the legal relationship would most likely result in the rejection of the privilege for in-house lawyers due to them lacking sufficient independence, whereas the substantial criterion of compliance with the rules and ethics of the legal profession would require an evaluation, conducted according to each jurisdiction’s rules, as to whether the lawyers in question are in a position to comply with the rules and standards of their profession, to benefit from the privilege. Ultimately, this is a political choice better left in the hands of democratically elected governments. However, a choice to recognize the privilege for in-house lawyers could potentially result in inefficiencies in the legal areas where the extension of the privilege has practical implications, and it could potentially undermine antitrust enforcement depending on how active the competition authorities of that state are. In these situations, it should be considered what additional rules should be added to address the enforcement inefficiencies and to prevent abuses of the system, such as a rule equivalent to the crime-fraud exception.

In adversarial systems the policy debate would not be as difficult. This is not due to the fact that lawyers do not have duties towards the administration of justice and preservation of the truth, or they are not independent. Instead, these systems are based on different foundations, whereby the notion of administration of justice is less fixated on finding the truth²⁰⁸ and lawyer is expected to conduct themselves in a manner more focused towards their clients’ interests.²⁰⁹ Thus, it would be easier to recognize confidentiality for in-house lawyers’ legal advice.

VI. EXTRATERRITORIAL TREATMENT OF LEGAL RIVILEGE

It is nowadays undisputed that a significant portion of trade has been globalized. Due to this reality, competition authorities have to combat (and national courts have to assess) with ever-increasing frequency conduct by undertakings who are located, partially, primarily, or exclusively, in foreign jurisdictions. In cases with extraterritorial elements, it becomes more difficult to decide on the recognition and protection of rights. In general, due to the principle of sovereignty,²¹⁰ public authorities, in contrast to private law disputes, do not have to comply with the rules other than those they have set themselves. Be that as it may, it has been called into question to what extent competition authorities should have the right to investigate foreign-based companies and in this situation whether they should account for the legitimate interests of other states, when deciding which law to apply. In addition, even when jurisdiction is established, conflict of laws issues may arise where during the course of an investigation, an antitrust authority exercises its inspection powers, for example by issuing a request to produce documents located in a foreign jurisdiction. In this part, it will be considered how competition authorities may assert jurisdiction, whether the principle of international comity mandates that foreign external and in-house lawyers should benefit from legal professional privilege according to the laws of their own states, and whether there is an adequate solution to balance between the interests of the enforcer and the expectations of the defendants.

A. Do the Authorities and Courts Have Jurisdiction?

In cases which concern companies from different states, it is essential to first assess whether jurisdiction can be established. At this stage, jurisdiction primarily refers to prescriptive jurisdiction,²¹¹ whether the authorities and courts of a state have the capacity to review conduct with extraterritorial elements. Along with the more traditional bases for jurisdiction, such as territorial²¹² and nationality jurisdiction,²¹³ the US and EU courts have employed a number of doctrines to assert jurisdiction in cases with extraterritorial elements.

In the US, the Supreme Court initially rejected the extraterritorial application of the Sherman Antitrust Act through the American Banana decision, at the beginning of the 20^th Century.²¹⁴ Justice Holmes held that it would be unjust and violate the “almost universal rule” which prevents “interference with the authority of another sovereign, contrary to the comity of nations, which the other state concerned justly might resent.”²¹⁵ However, this approach was later overturned with the adoption of the “effects” test in Alcoa,²¹⁶ and later in the antitrust turf in Heartford Fire.²¹⁷ In Alcoa, it was held that “any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders which the state reprehends; and these liabilities other states will ordinarily recognize.”²¹⁸ Subsequently, in Hartford Fire it was stated that “it is well established by now that the Sherman Act applies to foreign conduct that was meant to produce and did in fact produce some substantial effect in the United States.”²¹⁹ While the Alcoa test was subjected to worldwide criticism,²²⁰ the US courts reacted by introducing various interest balancing factors to the test.²²¹ There was a parallel legislative attempt to define the extraterritorial application of the Sherman Act through the Foreign Trade Antitrust Improvements Act of 1982 (“FTAIA”). The FTAIA modified the jurisdictional reach of the Sherman Act to make it inapplicable to foreign transactions, unless a “direct, substantial, and reasonably foreseeable effect” on domestic, import, or export commerce is established.²²²

In the EU, the approach towards establishing jurisdiction in extraterritoriality cases has been equally expansive. Three concepts have been created to deal with extraterritoriality considerations: “the single economic entity doctrine”, the “implementation doctrine”, and the “effects doctrine.”²²³

To understand the single economic entity doctrine, it is first required to examine the notion of the “undertaking”.²²⁴ According to the CJEU jurisprudence, an “undertaking” is any entity engaged in an economic activity²²⁵ which acts as a single economic unit even if it consists of several persons, natural or legal.²²⁶ According to the single economic entity doctrine, a single undertaking can be comprised of “economic entities which consists of a unitary organization of personal, tangible and intangible elements, which pursue a specific economic aim on a long-term basis.”²²⁷ The criterion to consider a corporate group as a single undertaking is where multiple companies pursue the same goal or one of them exercises complete control over others, the latter lacking the ability to make decisions of their own.²²⁸ On the basis of the doctrine, jurisdiction may be asserted over non-EU based parent companies by attributing liability to them for the illegal practices of their EU-located subsidiaries.²²⁹

The second way for the extraterritorial application of competition law, which also limits the shortcomings of the single economic entity doctrine to capture behaviour where no company of the entity is located in the EU, is the “implementation doctrine”.²³⁰ According to it, and on the basis of the territoriality principle, conduct may be captured by Articles 101 and 102 of the TFEU if it is implemented within the EU, irrespective of the geographic origin of the conduct or the undertakings.²³¹ This principle has been challenged on the basis that it contradicts the principles of private international law to establish jurisdiction without the existence of a sufficiently close and relevant link with the regulating state, that is sufficiently compelling to justify the establishment.²³²

The third way to establish jurisdiction is the effects doctrine,²³³ which has the same meaning as in the US. The Commission and the CJEU had recognized the doctrine,²³⁴ although for many years they refrained from employing it in practice. It was not until the Wood Pulp decision where the CJEU held that the Commission has the power to apply the Articles 101 and 102 of the TFEU (at the time the Treaty of Rome) extraterritorially to persons with no establishment in the EU.²³⁵ Support for the effects doctrine has been expressed by AG Darmon who stated that “[i]nternational law does not preclude concurrent jurisdiction. If two assertions of jurisdiction are justified under international law, there is no rule of international law which permits one to be displaced in favour of the other on the ground that the latter is ‘more reasonable’.”²³⁶ In Gencor the GC went closer to the recognizing the effects doctrine as it asserted jurisdiction to examine a South African merger on the basis that it “will have an immediate, substantial and foreseeable effect in the EU”.²³⁷ The ECJ recognized explicitly in Intel, that it jurisdiction can also be established on the basis of “an overall strategy aimed at foreclosing AMD’s access to the most important sales channels”.²³⁸  Intel has been criticized for applying a qualified effects extension for ancillary conduct.²³⁹ However, there is also support that the reasoning of the Court, which utilized the notion of an overall strategy with an effect on trade is justified.²⁴⁰

Overall, antitrust authorities and reviewing courts, both in the US and the EU, have used a number of legal concepts to justify their ability to examine foreign companies’ competitive conduct.

B. Should Courts Apply the Laws of the attorney’s State on the Basis of International Comity?

As soon as jurisdiction is established, the next question is whether the antitrust authorities should account for the laws of the defendant’s state throughout the investigation. For the purposes of the attorney–client privilege, the question is less relevant for jurisdictions with a broad approach to the privilege, such as the US, as the defendant can only be brought into an advantageous position from the application of the laws of the investigating authority’s jurisdiction. However, in more restrictive jurisdictions, such as the EU, applying domestic rules would often deprive the defendant from rights it legitimately considered it could rely on. The following sections assess whether the Commission and the CJEU should recognize the privilege for foreign lawyers and whether specifically for in-house lawyers they should apply the current EU framework of AM&S and Akzo Nobel, which does not recognize privilege or whether they should conduct the assessment on the basis of the national laws applicable in these jurisdictions.

In the preamble, it should be mentioned that answering these questions is of vital practical importance especially for US-domiciled companies. Preservation of the attorney–client privilege in the US requires due care on behalf of the privilege holder not to voluntarily disclose the privileged documents, or a significant part thereof.²⁴¹ Moreover, there is US case-law suggesting that voluntary disclosure occurs where the documents are not judicially compelled.²⁴² On this basis, disclosing documents to the Commission in compliance with a request for information due to an antitrust investigation in the EU, without previous challenge of the request before the EU courts, could potentially be treated as a waiver of the privilege in the US.²⁴³

1. Recognizing the Privilege for Foreign External Lawyers

When considering the case for external lawyers, the needs for international cooperation, equal treatment, provided that foreign lawyers have to comply with similar obligations as EU ones, and respect to the rights of defence would mandate that the Commission extends the protection of privilege to foreign independent lawyers.²⁴⁴ However, AG Kokott expressed a different view in her opinion in Akzo Nobel: “the inclusion, in addition, of lawyers from third countries would not under any circumstances be justified”.²⁴⁵ According to the AG, “unlike in the relationship between the Member States, in the relationship with third countries there is, generally speaking, no adequate basis for the mutual recognition of legal qualifications and professional ethical obligations to which lawyers are subject in the exercise of their profession.”²⁴⁶ Wils further finds this position non-problematic from a fundamental rights perspective, because non EEA-based companies can afford to hire EU lawyers to assist in their investigations.²⁴⁷

It is submitted however that these arguments are fundamentally flawed. First, while it is legitimate for a legal order to deny the privilege for lawyers not complying with analogous obligations as EU ones, it is wrong to assume that non-EU-based lawyers do not have to comply with ethical obligations. For example, this argument could not be efficiently employed when considering UK or US lawyers. Second, with the ever-extending reach of competition authorities, which extend their investigations beyond their strict jurisdictional borders, it becomes essential for them to employ adequate measures for the protection of the legitimate interests of undertakings. Where the Commission seeks access to US-based documents which in the possession of a US firm and produced by US lawyers, it seems far-fetched to support that it should not respect privilege because it only applies to EU-based lawyers. Third, such a position would be an overly burdensome restriction of the rights of defence and an unjust and disproportionate discrimination against foreign lawyers, one without a sufficient legal basis. In cases where the rules of conduct applicable to the foreign lawyers are similar to those applicable for EU lawyers and there is no objective justification for the discrimination.²⁴⁸ Fourth, it would increase tensions with other states and hinder international cooperation, if the EU refused to apply at least the same conditions with EU lawyers, when assessing legal privilege for foreign attorneys. Finally, as to Wils’ argument, it is unrealistic to demand that firms should hire EU lawyers to receive legal advice just in case their conduct is investigated by the EU authorities and in any case respect to the rights of defence should not depend on the ability of the person to afford to hire additional lawyers.

2. Recognizing the Privilege for Foreign in-House Lawyers: The Case for International Comity

In contrast to external lawyers, it does not logically follow that the Commission should recognize privilege for foreign in-house counsel since it does not recognize it for EU lawyers. The principle of comity warrants consideration on the matter. With the rapid increase of cases with extraterritorial characteristics, comity considerations have become increasingly important. When multiple jurisdictions are called to examine the same conduct, not accounting for the other side’s interests often leads to undesired consequences including divergent results, multiple sanctions, and misallocation of resources.²⁴⁹

Comity is a principle of international law, according to which a state should defer to the laws of another state because the other has a greater interest to protect.²⁵⁰ In the definition of the US Department of Justice and the FTC, comity “reflects the broad concept of respect among co-equal sovereign nations, and plays a role in determining the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation.”²⁵¹ As Eleanor Fox explained, comity is an amorphous concept, one which does not have immediate implications or clear rules as to whether one state will have a greater claim over the other.²⁵² Legal theory recognizes two forms of comity. Negative comity is a unilateral restraint to an authority’s jurisdiction, whereby even though the authority has competence to act, it refrains from doing so, if it would create conflict with another jurisdiction. Positive comity applies where an authority requests assistance by its counterpart in another country in a matter that affects both states.²⁵³

As regards recognition of international comity in US antitrust, it has been observed that the application of the principle has significantly suffered, especially after the decision in Heartford Fire.²⁵⁴ US courts were so reluctant to restrict extraterritorial application of US antitrust that other states developed statutes to restrict discovery and prohibit recognition of treble damages.²⁵⁵ Where comity was considered, it served to assess cases concerning foreign elements.²⁵⁶ The courts have the right to assert jurisdiction to a broad extent, but retain the discretion to decide on jurisdiction in cases with foreign interests on the basis of international comity.²⁵⁷ However, as Swaine observes, it is rare that a decision will be reached where courts will deny themselves jurisdiction,²⁵⁸ or that the US authorities will apply foreign law during their investigation.

As soon as the courts assert jurisdiction, they have the right to apply their national law to assess the case, including the US rules for recognition and protection of attorney-counsel privilege for in-house lawyers. That being said, Rule 26 of the Federal Rights of Civil Procedure allows grants the court discretion to limit discovery on several grounds, including international comity.²⁵⁹ As stated in Hilton v. Guyot, “‘Comity,’ in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws.”²⁶⁰ Moreover, in Aerospatiale the Supreme Court considered the following factors as relevant in a comity analysis: “(1) the importance to the … litigation of the documents or other information requested; (2) the degree of specificity of the request; (3) whether the information originated in the United States; (4) the availability of alternative means of securing the information; and (5) the extent to which noncompliance with the request would undermine important interests of the United States, or compliance with the request would undermine important interests of the state where the information is located.”²⁶¹ Courts will thus on occasion require a comity analysis before applying US law which would require violation of foreign law principles,²⁶² so in the US the courts would potentially consider foreign privilege rules before applying domestic law,²⁶³ however there is no obligation to follow the principle.²⁶⁴

Similarly, in the EU landscape comity does not have a mandatory effect,²⁶⁵ but, in contrast to the US doctrine, it is also not a recognized principle in EU binding legislation. It is, however, expressed into a variety of bilateral antitrust cooperation agreements including with the US and Japan, although it has been argued that comity provisions in these agreements are generally weak.²⁶⁶ Specifically with the US, there are a number of agreements, such as the EU/US Agreements of 1991²⁶⁷ and of 1998,²⁶⁸ and other legal documents like the best practices on cooperation in merger investigations.²⁶⁹ In the 1991 Agreement, Article VI states that to avoid enforcement conflicts, each party will take account of the other party’s important interests, such as the significance of the anti-competitive activities, potential divergencies over enforcement activities, and the other party’s laws and economic policies. Also, the 1998 Agreement incorporates a comity clause stating in Article III that one of the parties may request of the other party to initiate a competition investigation regardless of whether the requesting party’s competition laws have been breached. However, none of these documents are legally binding, even though the Commission and the CJEU may consider them on occasion, they are very rarely applied, and there is no expectation that the Commission will stay proceedings or will consider the US laws before reaching a decision.

Another instance where the Commission recognized comity was when it invoked the principle in its Brief as Amicus Curiae in United States v. Microsoft Corp. where it held that “when a public authority requires a company established in its own jurisdiction to produce electronic data stored on a server in a foreign jurisdiction, the principles of territoriality and comity under public international law are engaged, and the interests and laws of that foreign jurisdiction must be taken into account.”²⁷⁰ It further stated that “[a]ny domestic law that creates cross-border obligations—whether enacted by the United States, the European Union, or another state—should be applied and interpreted in a manner that is mindful of the restrictions of international law and considerations of international comity. The European Union’s foundational treaties and case-law enshrine the principles of ‘mutual regard to the spheres of jurisdiction’ of sovereign states and of the need to interpret and apply EU legislation in a manner that is consistent with international law.”²⁷¹

However, these statements are not part of an EU legislative act or another act binding for the Commission, for example a Notice. Reference to the principles of the EU Treaties is a strong argument for the Commission to recognize the principle, and indeed as a matter of policy it should not be disregarded without proper assessment where relevant. Nevertheless, an obligation to comply does not seem to stem directly from primary EU law. Thus, comity, which is essentially a rule of courtesy,²⁷² may only be used as guidance on how the Commission could behave in the future regarding certain matters and not as a binding principle. It is not, therefore surprising that Maier has characterized comity as “an amorphous never-neverland whose borders are marked by fuzzy lines of politics, courtesy and good faith”,²⁷³ or as Eleanor Fox has put it, since it is a non-binding principle, even though it “sounds good”, international comity “does little work”.²⁷⁴

These scholarly conclusions/criticisms are validated when looking into CJEU case-law. References to the principle of comity rarely feature in the EU case-law. Most such references can be found in competition law cases and there has yet to be a case where the EU Courts have accepted an argument on the basis of comity. In Showa Denko v Commission, the undertaking argued that because of the international cooperation agreements between the EU and the US, positive comity principles require that one authority should take into account penalties imposed by the other authority. The CJEU confined the EU-US agreement and the comity principle to practical procedural questions like the exchange of information and to a mere cooperation between competition authorities and rejected the argument.²⁷⁵ In Wood Pulp, the defendants challenged the Commission’s jurisdiction to apply its national competition law invoking, inter alia, the principle of international comity.²⁷⁶ However, the Court rejected the argument, without examining its core principles, since it had already accepted that there was sufficient connection with the EU for the Commission to assert jurisdiction.²⁷⁷ Moreover, in Dow v Commission, the Commission asserted jurisdiction over Dow, a US-established company, by finding that it exercised decisive influence over the joint venture DuPont Dow Elastomers LLC, which was found to be part of a pharmaceuticals cartel. Dow argued, inter alia, that it cannot be found liable for the cartel because it did not participate in the illegal conduct itself, and it also did not exercise decisive influence over the joint venture. According to Dow, the principle of (negative) comity set out in the EU-US international cooperation agreement would demand that US law should be taken into account because the Commission was attempting to impose a fine on a US-established company for the conduct of another US-established company.²⁷⁸ The GC fully rejected this argument. It held that the Commission, even when it scrutinizes international cartel conduct, aims to safeguard free competition within the EU. The Court found that because of the specific nature of its task and the legal interests protected in the EU, the Commission’s assessment may deviate from those of competition authorities of non-Member States. In addition, according to the GC, there is no principle or public international law convention that obliges the Commission to take account of assessments made by the competent authorities of a non-member State in the area of competition law, when it examines conduct within the Union. As to the EU-US cooperation agreement, the Court held that its aim is to promote cooperation and coordination and to lessen the possibility or impact of differences between the parties’ assessments, but it does so by “setting out the line of conduct that the parties request one another to follow when enforcing their respective competition laws.”²⁷⁹ According to the Court, “[s]uch reciprocal requests cannot in any event be understood as entailing an obligation on the Commission to arrive at a specific result.”²⁸⁰ It can be thus seen that the CJEU has, up to now, fully rejected arguments on comity. It remains to be seen whether this approach might change in the future.

Finally, since comity, in the form that is relevant for this analysis, is a public international law principle,²⁸¹ to the extent that it is a responsibility/obligation, it may only be invoked in the relationships between states,²⁸² since individuals are not the subjects of international law. Therefore, it is questionable whether undertakings, which are usually corporate entities governed by private law, would be able to successfully invoke it in front of the CJEU to deny the Commission access to communications on the basis that the rules of international comity oblige it to apply foreign law. On that point, it should be noted that so far, the CJEU has not expressly held that private undertakings may not invoke international comity, but it has yet to examine the applicability of the principle in its core.

Overall, should the Commission establish jurisdiction to assess conduct with extraterritorial characteristics, it will be able to examine foreign documents prepared by lawyers regardless of the laws of the state of origin.²⁸³ As regards external lawyers, it is submitted that the Commission should apply the EU regime and recognize attorney–client confidentiality, unless there are serious concerns that the lawyers’ state does not have sufficient guarantees for their independence. The case of in-house lawyers is not similar. Since EU internal counsel do not benefit from the privilege, recognition by analogy is not possible. The principle of comity could be a potential avenue; however, it is not binding for the Commission, even though as argued bellow the Commission should take it into account in its assessments, and since it is an international law principle, undertakings could not successfully invoke it, although it would be possible for the foreign state to diplomatically intervene and request that the Commission and EU Courts respect its laws on privilege on the basis of some great interest that warrants protection.

3. Could the EU Recognize Foreign in-House Privilege?

This final part examines two issues. First, whether the Commission should, under comity or any other international law principle, recognize privilege for foreign in-house lawyers and second, whether there is any satisfactory solution to protect an undertaking’s legitimate expectations.

It should be first stated that the issues are not to be taken lightly. On the one hand, it is essential to secure enforcement tools in a globalized market, where the Commission must assess conduct which could occur in foreign jurisdictions but be highly impactful for the internal market.²⁸⁴ On the other hand, it is easy to imagine a scenario where, say a US based company, with no subsidiaries in the EU but with imports in the EEA, becomes the subject of an extraterritorial investigation. Suddenly, documents it considered to be privileged under US law are requested by the Commission, which on the basis of a request for information, or a “remote dawn raid”, sets a fine for non-compliance, which it could (potentially) enforce through seizure of the imported goods. Not only the undertaking would be forced to submit to surrendering documents which it legitimately considered to be privileged, but this could have further implications for its legal rights as surrendering it to the Commission could be viewed as a waiver of the privilege in the US,²⁸⁵ unless the company is obliged to submit the documents through a judicial order.²⁸⁶

When considering whether the Commission should voluntarily, for example through the principle of comity, recognize legal professional privilege, there are significant arguments against the choice. First, in doing so the Commission would recognize a right for foreign in-house counsel that does not exist in the EU. Therefore, there is no room for a direct analogy. Second, if it were to do so, it would discriminate against EU-based undertakings and lawyers. The latter would find themselves in a position more onerous than that of foreign lawyers. Third, as a matter of doctrine, since the EU legal order recognizes the confidentiality of communications between a lawyer and their client on the basis of a sufficient degree of independence to protect the lawyer’s role in the administration of justice, it should not make an exception for foreign counsel, unless they also exhibit an analogous degree of independence with that required for EU-based lawyers. Fourth, it could be detrimental to the efficiency of enforcement, as globally operating undertakings could hide incriminating or sensitive documents through their in-house legal departments in the states which recognize privilege to prevent authorities in other states from examining them. Fifth, specifically for comity, it could lead to the application of foreign law on the basis that another state has a greater interest. However, when considering the recognition of attorney–client privilege, both states have the same interest, as the principle is associated not only with the debate of efficient enforcement over rights of defence, but also with the lawyer’s role in the judicial system and the administration of justice. Finally, an objection could be raised on the application of foreign law on a public policy exception.²⁸⁷ As explained by Lord Nicholls in Kuwait Airways Corporation v Iraqi Airways Company, foreign law will be disregarded where it would lead to a result wholly alien to fundamental requirements of justice. Such a result would be contrary to public policy and the court should decline to enforce or recognize the foreign decree to the extent required in the circumstances.²⁸⁸ While the exception is not applicable unless the recognition of foreign law would “violate some fundamental principle of justice, some prevalent conception of good morals, some deep-rooted tradition”,²⁸⁹ a case could be made here that recognition of legal privilege for in-house lawyers would be opposite to public policy, because it would allow a restriction in the administration of justice and in finding the truth, which is a fundamental principle of inquisitorial systems, from lawyers who do not have the sufficient guarantees of independence.²⁹⁰

However, there are also strong arguments dictating the application of international comity. First, recognition of the principle would bolster international cooperation and foster an environment of mutual respect for the laws and interests of foreign states. In the modern international competition environment, it is all the more important for enforcers to improve the conditions of their mutual cooperation. Second, recognition may be mandatory in cases where the Commission requires the production of documents outside its jurisdiction, where it would be unable to enforce its own laws. Third, it would arguably not be directly discriminatory to apply different rules for foreign lawyers since the extraterritoriality element could serve as a sufficient justification for the distinction. The same could be said for the doctrinal considerations in the EU position. Fourth, in any case undertakings could try to conceal important documents through their external lawyers, and as mentioned above there is no evidence that in jurisdictions that allow in-house lawyers to benefit from the privilege there are systematic abuses of the rules. Principles of Fifth, it can be argued that the manifestation of the criterion of independence as absence of a formal employment relationship with the client is neither a matter of great interest, as already there are many Member States which renown this position, nor an important part of the EU legal order.

When considering the above questions, it is important to note that not only comity is not a binding principle, but it also seems rather unlikely that the EU legislators would be willing to give it binding character, by incorporating it into the premises of mandatory EU law, for example on the basis of a reciprocity principle. Such a choice would restrict the rage of tools available to the Commission in relevant investigations and it is also debatable whether currently the stronger global enforcers are leaning towards more international cooperation or aim to strengthen their individual powers of inspection.

Moreover, since there are strong arguments both for and against the choice as to whether the Commission should directly apply foreign law and recognize legal professional privilege for in-house lawyers based in other jurisdictions on a voluntary basis, it should be examined whether there are any alternatives for the protection of undertakings’ expectations of confidentiality. One potential solution to extraterritoriality issues in antitrust investigations, which has found support in scholarship,²⁹¹ is the development of mandatory Competition Enforcement Cooperation Agreements whereby the competition authorities and the courts of each state will have sole jurisdiction, but at the same time the obligation to assist with the investigations of other authorities. In such a system, if, for example, the Commission were to assess the conduct of a US-based company, it would request the assistance of the FTC and the latter would initiate proceedings against the company, irrespective of whether the US antitrust laws would prohibit the same conduct. By doing so, the rights of defence and legitimate expectations of the US company would be fully respected because the latter would not be subjected to the Commission’s administrative procedure, whereby communications with in-house lawyers would have to be disclosed. It would also be an efficient solution in terms of enforcement because the Commission’s ability to tackle infringements would not be compromised, since as regards US located evidence, the FTC and the US courts would apply all the relevant, and undeniably efficient, antitrust procedural rules, such as discovery, to scrutinize the conduct.

That being said, it seems unlikely that such a solution would easily be adopted. First, its efficiency would depend on the willingness of different authorities to cooperate, balance the allocation of resources between their own cases and those of other authorities, overcome the issue that they may not benefit directly from their investigation, since they will not be able to issue a fine, and be willing to investigate cases even for conduct that would not be unlawful in their own jurisdiction. Also, political tensions between states would often undermine this cooperation. Ultimately, success of international cooperative antitrust investigations would rely on the efficiency of both competition authorities, when each of them is conducting their own part of the investigation, so such a system could only work with highly active and sophisticated competition authorities. Since this approach is of questionable efficiency, at the very least, the more active competition authorities, such as the Commission and the FTC, should adopt Best Practices on the matter, to clarify their position and set conditions on how they intend to act regarding confidentiality when they assert jurisdiction in extraterritorial investigations.

Overall, in the absence of a highly efficient, both in theory and practice, solution, it seems that undertakings will on occasion be subjected to the investigative and enforcement powers of competition authorities from various states, not necessarily directly related to their state of incorporation. When this happens and courts assert jurisdiction over the case, competition authorities will conduct an assessment as to whether they should comply with foreign law. Where the answer is negative, the undertakings will be subjected to the administrative proceedings of the investigating institution and will be able to exercise protective rights of defence only to the extent they are recognized in the investigator’s jurisdiction. From time to time, and especially in high profile cases, these enforcement practices may create minor tensions between states, and each state may try to block the enforcement actions of the other, to the extent that this is possible.

VII. CONCLUSIONS

It was seen that the issue of the recognition and the scope of legal professional privilege is a source for many questions and debates. The privilege aims to balance the needs for efficient enforcement of the law and the protection of fundamental rights as well as enabling the fostering of safety where a client discloses of information to their lawyer in preparation for their defence. The privilege is also connected to the role of the lawyer within the legal system, to which there are different views. In inquisitorial systems lawyers are primarily assistants in the administration of justice and the search for uncovering the truth, thus they have increased and strict obligations of independence. In advocative systems, lawyers serve as instruments in the administration of justice, but they also have a predominant role as “zealous advocates” and agents of their clients, so their requirement for independence, while fully recognized, has a relatively looser nature.

Due to these differences, many inquisitorial systems do not recognize the attorney–client confidentiality for in-house lawyers, whereas most advocative systems follow the opposite path. In the EU, which does not have primary legislation on the matter, the European Courts have searched for the state of the law in the legal traditions of Member States. Upon recognizing that the majority of Member States have a high demand for independence, which is natural as they mostly have continental legal systems, the Court held in AM&S and reaffirmed in Akzo Nobel that the criterion of independence is assessed by the legal form of the attorney–client relationship, and on this basis legal privilege should not be recognized for in-house lawyers within the EU unless there is a clear movement in their legal traditions. Reviewing this approach, there is supporting literature in both legal traditions that in-house lawyers are particularly prawn to conflicts between their obligations towards the judicial system and their clients. However, these conflicts do not by themselves serve as evidence that in-house lawyers are not sufficiently independent.

In some states, like the US, these issues are not so problematic, because their adopted position on the lawyer’s role differs and they have developed protective legal principles, such as extensive discovery procedures and the tangible evidence and crime-fraud exception. In the EU, where there is not a unified approach across Member States, the debate in competition law stands in the awkward position of being determined on the basis of “a growing trend”. Independence may, in contrast to the findings of the CJEU case-law, also be found in the rules and ethics of the legal profession, compliance with which is overseen by the lawyers’ regulating authorities. Ultimately, it is a matter of policy, and a choice may be made by the Member States to change their rules. In this situation, some systems may require adapting, through legislation and case-law, to maintain their efficiency.

When considering extraterritoriality issues, competition authorities have dramatically expanded their enforcement reach far and beyond their strict jurisdictional borders. These practices have resulted in significant issues when the authorities seek to examine sensitive documents. Such documents may be protected under privilege in their origin state, but the examining authority may not recognize the confidentiality in its own jurisdiction. It was supported that in similar cases, for example external lawyers, the Commission should apply the same standards of protection for foreign lawyers, as those for EU-based ones. When it comes to in-house counsel, it is questionable whether the answer should be the same and there are strong arguments for both views. Currently, since there is no mandatory legal framework the undertakings can rely upon to claim confidentiality and in the absence of a working international cooperation framework, there will be occasions where the undertakings will find themselves in very discomfortable situations, where their rights may be to a degree compromised in the call for enforcement efficiency.

The issues described are certainly complex, as they are entangled with the structure, scope and aims of judicial systems. Many of the current rules, as they exist in different jurisdictions, are the result of the development of law and it is certainly interesting to see states with a long inquisitorial tradition such as France changing their laws in recognition of the in-house privilege. Since the French Competition Authority is highly active among its European peers, it remains to be seen how it will adapt to this change, whether it and the French courts will be able to efficiently tackle the issues that will inevitably arise, and what new legislation and case-law will emerge to secure enforcement efficiency and ultimately freedom in the market.

Footnotes

Author notes