The ECJ rejected the claim of legal privilege relying on its previous judgment in AM & S Europe v. Commission [1982] ECR 1575. The following extracts from the Akzo judgment are self-explanatory as to the reasoning adopted by the court:
40. … in AM & S Europe v Commission, … 41. the Court stated that the protection [of legal privilege] was subject to two cumulative conditions. … first, that the exchange with the lawyer must be connected to ‘the client’s rights of defence’ and, second, that the exchange must emanate from ‘independent lawyers’, that is to say ‘lawyers who are not bound to the client by a relationship of employment’.In deciding the question of legal privilege, the ECJ has taken up the opportunity to expound on the role of an in-house lawyer and distinguish it from the role of an external lawyer.
42. … the requirement as to the position and status as an independent lawyer, which must be fulfilled by the legal adviser from whom the written communications which may be protected emanate, is based on a conception of the lawyer’s role as collaborating in the administration of justice and as being required to provide, in full independence and in the overriding interests of that cause, such legal assistance as the client needs. The counterpart to that protection lies in the rules of professional ethics and discipline which are laid down and enforced in the general interest.
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44. It follows that the requirement of independence means the absence of any employment relationship between the lawyer and his client, so that legal professional privilege does not cover exchanges within a company or group with in-house lawyers.
45. … An in-house lawyer, despite his enrolment with a Bar or Law Society and the professional ethical obligations to which he is, as a result, subject, does not enjoy the same degree of independence from his employer as a lawyer working in an external law firm does in relation to his client. Consequently, an in-house lawyer is less able to deal effectively with any conflicts between his professional obligations and the aims of his client.
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47. Notwithstanding the professional regime applicable in the present case in accordance with the specific provisions of Dutch law, an in-house lawyer cannot, whatever guarantees he has in the exercise of his profession, be treated in the same way as an external lawyer, because he occupies the position of an employee which, by its very nature, does not allow him to ignore the commercial strategies pursued by his employer, and thereby affects his ability to exercise professional independence.
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49 It 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.
50 Therefore, the General Court correctly applied the second condition for legal professional privilege laid down in the judgment in AM & S Europe v Commission.
The direct effect of the ruling in Akzo Nobel is likely to felt by companies operating in the EU and it is unlikely to affect the law in jurisdictions where domestic law confers legal privilege on in-house lawyers. However, in jurisdictions where such privilege is not conferred expressly by domestic law on in-house lawyers, the Akzo Nobel judgment could have some persuasive value.
Under Indian law, the Bar Council of India Rules require any lawyer taking up full-time salaried employment to “intimate the fact to the Bar Council on whose roll his name appears and shall thereupon cease to practise as an advocate so long as he continues in such employment” (Rule 49, Section VII, Chapter II, Part VI). Hence, the reasoning of ECJ in the Akzo Nobel judgment ought to apply with greater force in such circumstances, ceteris paribus (i.e. without taking into consideration other procedural and evidentiary aspects of domestic Indian law, if any, that may operate to the contrary).