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Sept. 14 (Bloomberg) -- Akzo Nobel NV, the world’s biggest maker of paints, lost an appeal over its attorney-client privilege in a case that could have curtailed the investigative powers of European Union antitrust regulators.

The European Court of Justice, the EU’s highest court, today rejected Akzo’s bid to have legal privilege extended to in-house company lawyers during antitrust raids.

“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,” an 11-judge panel of the Luxembourg-based EU court ruled. Being an employee “by its very nature, does not allow him to ignore the commercial strategies pursued by his employer.”

The dispute was triggered by European Commission antitrust raids on Akzo’s U.K. offices in 2003. Officials seized documents, including e-mails, notes and memos, which Akzo said were privileged communications. Lawyers said Amsterdam-based Akzo’s defeat will make it more difficult for companies to confide in their own legal experts and hand an advantage to the commission, which enforces competition law in the 27-nation EU.

Akzo “is disappointed by the court’s judgment and will thoroughly review its decision,” spokesman Oskar Bosson said by telephone after the ruling.

‘More Reticent’

The ruling could make company executives “more reticent in seeking legal advice internally,” said Suzanne Rab, an antitrust lawyer at law firm Hogan Lovells LLP in London.

The decision also makes it easier for the commission to conduct antitrust probes, said Philippe Rincazaux, a partner in Paris with law firm Orrick Rambaud Martel. The regulator “is now in a much clearer position and will be much freer in its investigations.”

The commission said in an e-mail it welcomed the ruling, which “concludes a long-standing litigation.” Akzo’s initial bid to extend the legal professional privilege to in-house lawyers was rejected by a lower court in 2007.

Today’s ruling will “make it difficult for in-house counsel to openly communicate with their business people and ensure compliance with the EU competition law rules,” Dirk Arts, a partner at law firm Allen & Overy LLP in Brussels, said in an e-mail.

The Association of Corporate Counsel, which has more than 25,000 in-house lawyers as members, said the EU court ruling is “antiquated” and will have “serious ramifications.”

The case is C-550/07 Akzo Nobel Chemicals Ltd. and Akcros Chemicals Ltd. v the Commission of the European Communities.

To contact the reporter on this story: Stephanie Bodoni in Luxembourg at

To contact the editor responsible for this story: Anthony Aarons at

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