On 17 October 2019, the Court of Justice of the European Union ("ECJ") dismissed an appeal by ethanol company Alcogroup and its subsidiary Alcodis (collectivey "Alcogroup") against a ruling of the General Court ("GC") which had dismissed the company's request for the suspension of the European Commission's ("Commission") investigation and the annulment of an inspection decision after the inspectors examined documents marked as legally privileged.
| what you need to know - key takeaways |
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- It is important to watch out for privileged documents during inspections and ensure (without obstructing the inspection) that these are protected as quickly as possible.
- Procedural issues during an inspection do not invalidate the decision to initiate the inspection.
- Procedural steps during an investigation are not amenable to appeal.
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Background
In October 2014, Commission officials carried out an inspection at Alcogroup in relation to an ongoing investigation into possible collusion between companies in the oil and biofuel sectors (the "first inspection"). A second inspection took place in March 2015 in connection with a separate investigation into price fixing and market sharing in the bioethanol market (the "second inspection").
Prior to the second inspection, Alcogroup had agreed with the Commission that documents labelled as privileged would be set aside for review with Alcogroup's lawyers following the inspection. These documents included privileged communications prepared following the first inspection. However, during the electronic searches carried out as part of the second inspection, among the documents 'tagged' by the Commission for export were several communications marked as legally privileged. The Commission explained this as being due to the fact that those legally privileged documents had effectively been swept up with other, non-privileged documents, to which they were related. All documents marked as legally privileged were subsequently separated into a different file following complaints from Alcogroup's lawyers (with the exception of one document, which was returned later).
In April 2015, Alcogroup sent a letter to the Commission requesting that both investigations be suspended. Alcogroup argued that it could not defend itself effectively once the Commission had reviewed privileged documents that had been prepared as part of their defence following the first inspection. In May 2015, the Commission sent a letter to Alcogroup rejecting this request ("Commission's Letter").
On 29 May 2015, Alcogroup appealed: (a) the second inspection decision; and (b) the Commission's Letter. At the same time, Alcogroup also sought interim measures from the GC requiring the Commission to suspend its investigations. This application was rejected.
The appeals
In April 2018, the GC dismissed the appeal as inadmissible. The GC had previously ordered Alcogroup to provide unredacted versions of the relevant communications to the Court (although they were not provided to the Commission).
In its judgment, the GC:
- held that the legality of the decision to inspect Alcogroup in 2015 could not be impacted by any arguments that the subsequent procedure was unlawful; and
- as regards the Commission's Letter, the GC also rejected Alcogroup's challenge on the basis that the Commission's Letter amounted only to a refusal to discontinue the investigative steps at that stage and was not a final determination as regards the privileged nature of the relevant documents.
Alcogroup filed an appeal with the ECJ, which upheld the GC's ruling in full. In its appeal, Alcogroup's arguments included that the GC should have examined whether the inspection decision was adequately reasoned. In Alcogroup's view, that decision should have included 'precautionary measures' to prevent the inspectors from examining documents marked 'legally privileged'. The ECJ upheld the GC's rejection of this argument and held that:
- the inspectors could not have inferred from the absence of such precautionary measures in the decision that they were allowed to review privileged materials; and
- the Commission had not confirmed in its Letter whether its officials had actually read the documents or not, only that tagging could not be equated with reading.
The ECJ's judgment is available here.
Comment
Since Alcogroup's action was dismissed as inadmissible, the ECJ did not rule on the substance of the dispute. The case does, however, highlight the difficulties posed by privileged documents in the context of dawn raids where an authority uses software to trawl through thousands of electronic documents, sort them into families and tag them. In particular it raises some key questions, including:
- if a document has been 'tagged' by the Commission during an inspection, can it be inferred that it has been read by it? On the face of it, the judgment seems to imply that it cannot. However, that is ultimately a question of proof and evidence and, since the action was rejected as inadmissible, it has not been addressed. That will need to be done in the context of an appeal against the final Commission decision (assuming there is one); and
- if privileged communications were read, does that affect the legality of the final decision? In practice this will very likely depend on the extent to which these documents have been relied upon by the Commission and affected the content of the decision.
With thanks to Rob Anderegg of Ashurst for his contribution.
