France: Protecting legal privilege

Author: | Published: 1 Oct 2010
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A protest movement is growing against massive and undifferentiated data-processing/computer seizures by the investigators of French competition authorities. These include documents benefiting from legal privilege. What are the rules applicable to the protection of these documents in France and how may they differ from the European Commission rules?

On April 29 2010, Juliane Kokott, the Advocate-General before the European Court of Justice (ECJ), delivered her opinion in the Akzo Nobel case, objecting to the extension of the protection of Legal Professional Privilege (Legal Privilege) to documents and opinions issued by in-house lawyers registered to a national Bar. This opinion has been fiercely criticised by legal advisors all over Europe, in the name of the rights of the defence. Yet the opinion of the Advocate-General is in line with French competition law, which is rather restrictive in defining the limits of legal privilege protection.

Legal Privilege is a protection granted to certain types of documents exchanged between a client and their lawyer, which on this account, benefit from confidentiality. As a result of this protection, it is impossible for investigators to seize these documents for demonstrating the existence of an infringement of tax, criminal or competition law; this point is fundamental.

Legal privilege is addressed by article 28 of the EC Regulation n° 1/2003 of December 16 2002. Regarding national law, this principle is indirectly echoed by Article L.450-4 of the commercial Code referring to Article 56 of the French Code of criminal procedure. legal privilege is guaranteed in French competition law. Concerning proceedings for legal privilege enforcement, major differences between European and French competition authorities can be observed.

The powers of investigators intervening during visits and seizures under French competition Law are very wide. They allow seizure of a multitude of documents linked to the object of the investigation. The limit of this object is defined in France by the order of the freedoms and custody judge (Juge des Libertés et de la détention : JLD ) who is in charge of allowing the visits and seizures, or by the European Commission for European matters. One of the limits set to the seizure of documents lies in the protection of the confidentiality of all communications exchanged between an undertaking and its external counsel. The French approach is strictly in line with the European case law that specifies the documents benefiting from legal privilege.

Interpretation of the notion of "lawyer" however, has created very polemical debates and remains very topical at the moment, in anticipation of the decision of the European Court of Justice in the Akzo-Nobel case (Akzo Nobel Chemicals, tribunal of first instance of the European Communities of September 17 2007, T-125/03 and T-253/03). Under current case-law, the protection of legal privilege only extends to communications issued by an external and independent counsel without any salary link to the customer company. French in-house lawyers are not allowed to be independent lawyers, whereas in-house counsels in Germany, Belgium and The Netherlands have the possibility of remaining members of the bar. As Bar membership entails fulfillment of deontological duties, those countries have acknowledged that documents originating from any legal advisor who is a bar member can protected by Legal Privilege equally well as documents from an independent lawyer.

In the Akzo case, however, the European Courts reasserted that in-house lawyers are explicitly excluded from Legal Privilege, irrespective of their membership of any bar or law society or their subjection to any professional discipline, ethics or protection under national law.

On the merits, the case relates to the European Commission's investigation into an alleged cartel in the plastic additives sector. During a dawn raid at the premises of Akzo Nobel Chemicals and Akcros Chemicals in the United Kingdom in February 2003, the Commission removed copies of emails exchanged between the General Manager of Akcros and a member of Akzo's internal legal department who is a lawyer admitted to the bar in the Netherlands. Akzo and Akcros argued that these communications were protected by legal professional privilege and that therefore, the Commission was not permitted to seize them.

The Court of First Instance (CFI) dismissed this challenge, on the basis of an earlier ruling in the AMNS case in which the European Court of Justice had recognised that written communications are protected by legal privilege if the communication is connected with the exercise of the client's right of defence, is made "for the purposes and in the interests of the client's right of defence" and is sent by or to an independent lawyer, or one who is "not bound to the client by a relationship of employment".

The CFI stated :

Akzo and Akcros, supported by the International Bar Association and various other interested parties, appealed to the ECJ. They argued that the AMNS precedent should be overturned on the basis that in-house lawyers play an increasingly important role in modern business and should enjoy the same protection as external counsel. "(...)The Court thus laid down the test of legal advice provided 'in full independence' (AM & S, paragraph 24), which it identifies as that provided by a lawyer who, structurally, hierarchically and functionally, is a third party in relation to the undertaking receiving that advice.

Accordingly, this Court rejects the applicants' principal argument and holds that the correspondence exchanged between a lawyer bound to Akzo Nobel by a relationship of employment and a manager of a company belonging to that group is not covered by LPP [Legal professional Privilege], as defined in AM & S." (Judgment of the Court of First Instance (First Chamber) of 17 September 2007 – Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v Commission, T-125/03 and T-253/03, Par 168 and 169)

Although this decision, (presently pending before the European Court of Justice) has been strongly criticised, the Advocate General Kokott, in denying any extension of the protection of legal privilege to in-house lawyers, has adopted the controversial CFI decision in its recent opinion of April 29 2010.

It is likely that the ECJ will adopt this approach when it rules on the case in the coming weeks, since it generally follows the advice of the Advocate General on legal issues. In her recommendation, Advocate-General Juliane Kokott distinguishes the nature of the advice provided by in-house lawyers from that provided by external legal advisors. Firstly, she notes that in-house lawyers usually identify much more strongly with their company and its corporate policy and strategy than external lawyers do. Secondly, she observes that in-house counsel are economically dependent on their employer.

In-house counsel distinguish themselves from independent lawyers. The Advocate General relied on the idea that independent, external lawyers are performing a function as collaborators in the proper administration of justice. The proper performance of this role requires their communications with clients to be protected by legal privilege. In-house lawyers, on the other hand, are not sufficiently independent to perform this function and their communications thus do not warrant legal privilege protection. She finally concludes that communications by internal counsel should not be protected by legal professional privilege.

The Advocate General's opinion suggests that legal privilege does not apply to client communications with any lawyer who is not recognised by the EU, thus excluding outside counsel and in-house counsel licensed outside of the EU, something that not many lawyers working in multinational practices have noted.

Internal legal counsel advising clients will accordingly need to be much more careful about what they record in writing and send to their employers, particularly when giving advice about potential competition law contraventions.

Document type

Legal privilege allows protection of any document exchanged prior or after the competition proceedings are engaged, as long as they are related to the proceedings.

Besides the classical protection given to attorney – client communications, case law has extended Legal privilege protection to two types of documents:

First, the CFI in the HILTI order (Order of the Court of First Instance (Second Chamber) of 4 April 1990 Hilti Aktiengesellschaft v Commission of the European Communities. – Case T-30/89, Par 18) has extended the benefit of Legal Privilege to notes internal to the undertaking reporting the content of advice received from independent, and thus external, legal advisers:

"Thus the principle of the protection of written communications between lawyer and client must, in view of its purpose, be regarded as extending also to the internal notes which are confined to reporting the text or the content of those communications"

To the extent those internal notes were not strictly confined to reporting the communications between lawyer and client and were to add or modify those communications, they would be protected by legal privilege.

Secondly, the European Courts have extended legal privilege to preparatory documents written by the client seeking legal advice from an external lawyer.

Such preparatory documents, even if they were not exchanged with a lawyer or were not created for the purpose of being sent physically to a lawyer, may be covered by legal privilege, provided that they were drawn up exclusively for the purpose of seeking legal advice from a lawyer in the exercise of the rights of the defence (Judgment of the Court of First Instance (First Chamber, extended composition) of 17 September 2007, Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v Commission of the European Communities, T-125/03 and T-253/03, Par 120 to 123)

Internal documents prepared for the purpose of seeking legal advice from an external lawyer will still considered to be protected by privilege – although it is preferable to ensure that such documents are clearly marked "Privileged and confidential – prepared for the purposes of obtaining external legal advice". It is important to remember that the mention of legal privilege or any similar mention doesn't prevent documents from being seized by French or European competition authorities.

French competition law appears to be in line with European case-law, as far as the identification of documents covered by legal privilege protection is concerned. However, major differences can be observed between the European Commission and the French competition authorities when it comes to the enforcement of legal privilege.

Enforcement

The European Commission and the French competition authorities have rather different approaches on how to enforce legal privilege protection. This difference is well illustrated by the procedure of data processing seizure. As far as competition visits and seizure are concerned, differences arise between French and European authorities in the definition of legal privilege.

In European proceedings, it is for the undertaking claiming the protection of legal privilege with regard to a given document to provide the Commission with appropriate justification and relevant material to substantiate its claims, while not being bound to disclose the contents of such document. In a significant number of cases, a mere cursory look by DG (Directorate General) competition officials, normally during an inspection, at the general layout, heading, title or other superficial features of a document will enable them to confirm or deny the accuracy of the reasons invoked by the undertaking. However, an undertaking may be entitled to refuse to allow the Commission officials to take even a cursory look, provided that it gives appropriate reasons to justify why such a cursory look would be impossible without revealing the content of the document (Best Practices on the conduct of proceedings concerning Articles 101 and 102 TFEU, point 49).

In the course of an inspection, if DG competition considers that the material presented by the undertaking may be protectable, the officials may place a copy of the contested document in a sealed envelope and then remove it and bring it to DG competition's premises, with a view to a subsequent resolution of the dispute. In cases where the undertaking has claimed the protection of legal privilege and has provided reasons to substantiate its claims, the Commission will not open the sealed envelope and will not read the documents if the company brings an action for annulment and applies for interim relief, until the EU Courts have decided on this application for interim measures. Thus, DG Competition will wait until the time limit for bringing an action against the rejection decision has expired before reading the contents of the contested document. However, to the extent that such an action does not have suspension effect, it is for the undertaking concerned to bring an application for interim relief seeking suspension of operation of the decision rejecting the request for Legal Privilege.

It must be noted that undertakings making requests for protection under legal privilege merely as delaying tactics may be subject to fines (Pursuant to Article 23(1) of Regulation 1/2003).

As far as French law is concerned and contrary to EC law, there is no specific action concerning the protection of documents by Legal Privilege. Hence, in order to claim the protection of legal privilege, undertakings have to bring an action for the annulment that concerned the entire proceedings of visit and seizures, pursuant to article L.450-4 of the commercial code. Indeed, the inspection or seizure procedures may be subject to an appeal to the judge (the JLD mentioned earlier) who has authorized them. The appeal must be lodged within two months of service of the relevant order for the persons occupying the premises where the said procedures took place, and, for other persons brought into the proceedings subsequently on account of items seized during those procedures, of the date on which they became aware of the existence of the said procedures and not later than the date of notification of the claims. The judge rules on such appeals through an order which shall be open to appeal on points of law only, under the rules laid down by the Code of Criminal Procedure. Such appeals do not have suspension effect. There is thus no sealed envelope for protected documents as exists under European proceedings.

The difference between European and French authorities concerning legal privilege is very well illustrated by the case of data processing seizure.

In French case law, electronic mail boxes such as Outlook or Lotus Note are viewed as unique and indivisible. As an electronic mail box is considered to be one single document, French investigators seize the whole contents of the box, even if it contains private correspondence or documents protected by Legal Privilege. In the recent Schering-Plough case (Cour de Cassation, Decision 07-8643 of May 20th 2009) the French Supreme Court (Cour de cassation) reasserted this position.

Based on a complaint from a competitor in France and pursuant to a court order, the French competition authority (Conseil de la concurrence now known as the Autorité de la Concurrence) obtained documents from a French subsidiary of Schering-Plough's relating to Subutex, one of the products that the subsidiary markets and sells. Any resolution of this matter adverse to the French subsidiary could result in the imposition of civil fines and injunctive or administrative remedies.

On July 17 2007, the JLD ordered the annulment of the search and seizure on procedural grounds. In its ruling, the judge authorised the return to the claimant of undifferentiated data that were seized by the competition authority using a key-word targeting device during its investigation. On July 19 2007, the French authority appealed the order to the French Supreme Court. On May 20 2009, the French Supreme Court overturned that annulment and remanded the case to the Court of Appeal of Paris on the basis that the JLD had not examined each document to assess whether it should have been seized and whether it had been lawfully seized. The Supreme Court reasserted the indivisibility of electronic mail boxes.

The following reasoning is made: as documents seized contain at least some elements that can be used to demonstrate that the suspected anticompetitive practices have been committed, then global seizure is necessary and to be authorized.

It is to be noted that, on March 4 2010, the Paris Court of Appeal confirmed the validity of the seizure's operations.

Considering an electronic Mailbox as an indivisible document is rather different than the European authorities' approach, which is founded on a case by case basis. European investigators do not ab initio view an electronic mail box as a unique and indivisible document. They will have a precise examination of each single document within every mail of the electronic mail box. Global seizure of an electronic mail box can however happen in European proceedings, when investigators don't have enough time to examine each piece of document on the visited company premises. European Officials may place a copy of the contested document in a sealed envelope and then remove it and bring it to DG competition's premises or neutral premises (It can even be the company lawyer's office). The seal will be broken only with the parties in order to continue documents examination.

This last example shows how different French and European proceedings are. It is to be underlined that Legal Privilege may in fact be much more widely granted under European competition law. Although legal privilege protection in Europe and in France may have seen major progress thanks to its extension to new types of documents and specific proceedings that take it into account, some reforms still need to be implemented.

About the author

Jean-Christophe Grall is the founding and managing partner of MG Avocats – Grall & Associés. He has been a litigator and an antitrust practitioner for more than twenty years and has handled a broad range of complex litigations and transactions.

Contact information

Jean-Christophe Grall
MG Avocats – Grall & Associés

156, boulevard Haussmann
75008 Paris — France

Tel: 33(1) 53 57 31 70
Fax: 33(1) 47 20 90 40
Web:www.mgavocats.fr


About the author

Thomas Lamy joined MG Avocats – Grall & Associés in 2001 and has been a partner in the firm since December 2004. He has been practising French and EU competition and distribution law for twelve years. Jean-Christophe Grall and Thomas Lamy regularly provide antitrust and distribution law advice in French and EU matters.

Contact information

Thomas Lamy
MG Avocats – Grall & Associés

156, boulevard Haussmann
75008 Paris — France

Tel: 33(1) 53 57 31 70
Fax: 33(1) 47 20 90 40
Web:www.mgavocats.fr