Tuesday, February 12, 2013

The concept of waiver is important in the context of dawn raids and the Commission’s increasing number of requests for privileged documents.
In the case of dawn raids, if, at the time of the raid, an investigation has already begun, then documents prepared by the client pursuant to the investigation are likely to be subject to litigation privilege. If, however, no investigation has begun, litigation privilege cannot obtain.
Although some documents may nevertheless be covered by legal advice privilege the scope of protection under this type of legal privilege is much narrower than that of litigation privilege.
If the Commission, during a raid, happens upon a privileged document, privilege would not be waived and the Commission would not be permitted to use the document in any investigation or proceedings.
There have been instances where the Commission has requested due diligence reports made in contemplation of a merger. These are covered by legal advice privilege when prepared by attorneys or counsel, but not when prepared by accountants. In the event of privileged documents being submitted to the Commission, privilege would be waived.
Litigation privilege and communications between the legal adviser or the client and agents or third parties
In competition law matters, third parties (usually economists) are often briefed. The way in which this is done is important
for the maintenance of privilege.
In the case of legal advice privilege, where no litigation is contemplated, it is important that the attorney or counsel briefs the economist. This is because no privilege arises from the direct relationship between the client and the economist and legal advice privilege can only arise when the purpose of the communication is to gain legal advice.
Where litigation is contemplated there is more leeway. The client may directly brief the economist or any other third party without compromising privilege as long as the purpose of the brief relates to pending or actual litigation.
In the International Tobacco case, Jacobi and Co, a distributor of the plaintiff’s cigarettes, hired a private detective to investigate various facts in order to ascertain whether litigation would be advisable. The detective reported his findings to the solicitors (who acted for both the plaintiff and Jacobi and Co). Disclosure of the communications between the detective and third parties, in the course of the detective’s investigation, was sought.
The solicitors claimed litigation privilege over the information obtained in these investigations. The privilege, the solicitors argued, covered communications between the clients and their legal advisors, the detective and the clients, as well as communications between the detective and third parties during the course of his investigation.
The court held that where information is “called into existence” for the purposes of litigation, it is covered by privilege. The  test thus turns on what is meant by the phrase “called into existence”.
The court held that when a client, in order to communicate with his or her legal adviser, has to prepare that communication, the preparation itself should be privileged. If this preparation was not subject to privilege, then the privilege that arises when the information  is communicated to the legal adviser would also, in effect, be denied.
The court took the approach that, in order for litigation privilege to operate properly, it  had to be extended to cover information falling outside of the communication between the client and the attorney. This demonstrates a purposive approach. The purpose of the protection of privilege would have been negated entirely had the court ordered disclosure of the information obtained during the detective’s investigation. Note, importantly, that this case related to litigation privilege only.
While the Commission generally does not challenge claims of privilege, it is only a matter of time until such a challenge occurs.
In the European Court of Justice (ECJ), in  the case of Akzo Nobel Chemicals Ltd v Commission, the European Competition Commission challenged the applicants’ claim of privilege over communications with in-house legal counsel. The ECJ held that legal advice privilege does not extend to in-house legal counsel. Hence, privilege could not be claimed by the applicants.
The European Commission also issued a practice note stating that where it considers a claim of privilege to be unsubstantiated, its officials may immediately read the relevant document. Furthermore, in the EU, legal privilege can only obtain where the legal practitioner is EU-qualified. As such, any advice obtained from non-EU attorneys in respect of EU competition law advice should be coordinated though an EU-qualified attorney.
Although it is unlikely that so extreme  a position will be adopted in South Africa, clients need to ensure that they conduct themselves in a way that entitles them to  claim and preserve privilege in appropriate circumstances.