The Court of Justice, the highest court in the European Union (‘EU’), has ruled that communications between corporations and their in-house counsel are not protected by the Legal Professional Privilege (‘LPP’), the European version of the attorney-client privilege.

The Court’s decision in Case C-550/07 P, Akzo Nobel Chemicals and Akcros Chemicals v. Commission, means that in-house counsel will not be able to assert the attorney-client privilege in  investigations by the European Commission.  The competition authorities of individual EU Member States will still apply their national rules on LPP, which may recognize communications with in-house counsel as privileged.       

The case arose from the European Commission’s Directorate General for Competition’s dawn raid of Dutch chemicals group Akzo Nobel NV in February 2003.  The officials were investigating alleged price-fixing among producers of heat stabilizers, an additive used in the manufacturing of certain plastics.

Among the documents seized in the raid were two emails between a company general manager and an in-house lawyer admitted to the Netherlands Bar.  Akzo claimed that these documents were covered by LPP.  In May 2003, the Commission adopted a decision rejecting this claim.

After an unsuccessful appeal to the General Court, Akzo appealed to the Court of Justice in November 2007.

Akzo argued that the General Court had incorrectly interpreted the decision of the Court of Justice in Case 155/79 AM&S Europe v. Commission [1982] ECR 1575.  In AM&S, the Court of Justice held that one of the conditions for LPP to attach to an exchange between a client and a lawyer is that the lawyer must be “independent,” that is to say “not bound to the client by a relationship of employment.”  The General Court, Akzo claimed, had interpreted this language too literally.  The condition that a lawyer must be independent could not exclude in-house lawyers.  An in-house lawyer enrolled at a Bar or Law Society was subject to rules of professional ethics and discipline that made that lawyer as independent as an external lawyer.

The Court of Justice rejected this argument.  The requirement that written communications be exchanged with an independent lawyer in order to be protected by LPP was “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.”  This, according to the Court, necessitates the absence of any employment relationship between the lawyer and his client. 

In addition, the Court noted, in-house lawyers may be required by their employers to perform other tasks which may have an effect on the corporation’s commercial policy.  In this case, the Akzo lawyer was the company’s competition law coordinator.  The Court stated that such functions reinforce the ties between the lawyer and his employer to such an extent that he does not enjoy a level of professional independence comparable to that of an external lawyer. click here for more »

Online and other private gambling companies are looking forward to their winnings as a result of the ruling by the European Court of Justice in Luxembourg (ECJ) that Germany’s state-run gambling monopoly violates European Union law.

The EU’s highest court has ruled that Germany’s justification for the state monopoly on gambling rang hollow and struck down the law in a landmark decision that opens the door to the German market for private betting companies, including online companies.

Under a 2008 bill, Germany allows only state lotteries – a gambling monopoly that Germany sought to justify by arguing that it protects consumers from the harm of gambling and prevents gambling addictions.

However, the ECJ labeled this justification “unjustifiable” in light of the “intensive advertising campaigns” undertaken by the state-run gambling companies and the addictive automated gambling machines also allowed under Germany’s monopolistic rules.  The ECJ opined that, “[i]n such circumstances, the preventive objective of that monopoly can no longer be pursued, so that the monopoly ceases to be justifiable.” In addition, the ECJ noted that Germany’s gambling legislations is “contrary to the fundamental freedoms of the EU.”

This ruling comes after the German legislation was challenged in regional courts by online gambling companies; the regional courts then asked the ECJ for a ruling on the legality of the German monopoly.  This ruling is in stark contrast to previous ECJ rulings deeming state lotteries in other EU states legal because of their goal of limiting the negative consequences of gambling on society.

The consequences of this ruling could be far-reaching in Germany, where the state-run lottery and betting companies have earned billions in euros.  In addition to staunching the flow of gambling income to the state, this ruling could redirect those billions to private gambling companies and allow private gambling companies to flourish in a market previously closed to them.

Although the full consequences of the ruling are yet to be seen, the European Gaming and Betting Association welcomed the ruling as part of “much-needed reform” in Germany.   “Other member states have opened or are opening their markets. They show that consumers can be better protected in a market that is both regulated and open to competition,” it said.

The European Union’s antitrust regulator is setting its sights on a $200 million deal for a partial sale of an insecticide business owned by Sara Lee, the food company, to S.C. Johnson & Son, which chiefly makes home-care products.

Both companies are based in the United States, and a European Commission press release acknowledged that the transaction may not “have a Community dimension.”  Even so, the Commission continued, the deal may “affect[] trade within the EU market and threatens to significantly affect competition within” countries that requested the investigation. 

The European Commission’s procedures did not trigger an automatic investigation of the deal.  Rather, the regulator began it after receiving requests from half a dozen European countries, including France, Greece, Italy, Belgium, the Czech Republic, and Spain. 

This isn’t the first time that the Europeans have looked at Sara Lee’s dealings.  The Commission is currently looking into a proposed sale of Sara Lee’s body care unit to Unilever, and is expected to rule by the end of October.  In June, the Commission also cleared the sale of Sara Lee’s air freshener unit to Proctor Gamble.  The deals are part of Sara Lee’s plan to sell off businesses unrelated to its core food business.

The insecticide investigation could prove costly to Johnson, which at the end of August finalized its largest debt offering ever, for $550 million in bonds, which were partially slated for the purchase of Sara Lee’s insecticide business.

The Canadian Competition Bureau has announced that it will consider possible revisions to the Canadian merger enforcement guidelines.

The Bureau will hold a series of discussions on whether its merger enforcement guidelines issued in 2004 are a good reflection of current Canadian merger review practices.  The purpose of such guidelines is to evaluate the potential competitive effect of mergers.

The decision comes in the wake of the recent publication of the revised Horizontal Merger Guidelines issued in the United States, as well as recent theoretical advances in the antitrust and economics fields in analyzing mergers.  Moreover, Canada recently revised its competition law in March 2009 and changed its merger notification process so that it bore more resemblance to that of the United States.  For instance, before the passage of the Canadian antitrust overhaul last year, the country’s competition statute required companies to wait 42 days, followed by a three-year post-merger period during which the government could challenge the merger.  The new law will require a 30-day waiting period during which the government can temporarily stop the deal to ask for more information about it, followed by another 30-day waiting period.  The government can only review closed deals for one year. 

However, Canada’s merger enforcement guidelines have not yet been formally changed.  Paul Collins, Canada’s Senior Deputy Commissioner of Competition for the Mergers Branch, will coordinate the discussions.  Information will be provided at a later date regarding the times and locations of the consultations.

The European Commission has opened a probe to investigate whether marine-insurance agreements among ship owners in the International Group of P&I Clubs (“IG”) restrict competition by blocking rivals from the market. 

The IG is comprised of 13 worldwide “protection and indemnity” clubs of ship owners, which together provide insurance to approximately 93 percent of ocean ships.

The Commission is concerned that certain provisions in the IG’s marine-insurance agreements may restrict competition by blocking commercial insurers or other mutual P&I insurers from the relevant market by restricting access to ship owners.  The Commission stated that it “fears that the provisions at stake in the agreements … may harm ship owners and the insurers that are not members of the IG.”

The provisions at issue involve claim-sharing and joint-reinsurance agreements as well as rules which govern the contractual relationships between the clubs and their members. 

The probe follows the recent expiration of a 10-year antitrust exemption enjoyed by the P&I agreements under European Union regulations.  Although the EU in April again created certain antitrust exceptions for the insurance industry, the P&I agreements were not included among them because their market share rises far above the 20-25 percent maximum provided for by EU competition regulations.

In response to the investigation, the IG stated that “there have been no relevant or material changes to the arrangements or in the market for P&I cover” since regulators last reviewed the agreements in 1999. 

The Commission launched the investigation on its own initiative, even though there have been no complaints regarding these agreements.  There is currently no deadline for completing the investigation.