The Serbian Commission for Protection of Competition has announced on its website that in the second week of July it had conducted its first dawn raid on several locations in Belgrade. The coordinated dawn raids were made within an investigation related to “distribution of e-cigarettes and e-liquid”. The allegation is that the investigated market participants have engaged in resale price fixing. The announcement is extremely short on details but the formulations suggest that the first dawn raids were part of an investigation of a vertical restrictive arrangement.
Surprise inspection or dawn raid was introduced in Serbia by the 2009 Competition Act. This is an evidence-gathering method authorizing the Commission to perform an unannounced inspection of the party’s premises, interview the party’s management and employees and inspect and temporarily seize documentary evidence relevant to the investigation. Dawn raid can be performed in relation to any type of competition law infringement, if the President of the Commission reasonably believes that there is a danger of removal or tampering with evidence.
A decision of the President on a dawn raid is not subject to either prior or subsequent judicial review and there is no right to a separate appeal. Only the ultimate decision of the Commission finding an infringement is subject to judicial review. Exceptionally, judicial vetting of a decision to enter premises by force is required for the search of a home.
Given that the purpose of a dawn raid is to prevent concealment of documentary evidence of suspected competition law infringement, it is important for the parties under investigation to know if and when they are entitled to refuse production of certain documents. The Competition Act provides that the correspondence between the party and its punomoćnik (a person holding a power of attorney) which is directly related to the proceedings, is considered privileged. However, the statute does not specify what the privileged status entails. Instead, it confusingly refers to the provisions of the Competition Act on protected data, stating that they apply mutatis mutandis to privileged communication. Finally, the Competition Act authorizes the President of the Commission to remove the privileged status “from certain forms” of communication between the client and its punomoćnik “if there is a suspicion that the communication is being abused”.
The provisions on protected data are designed to ensure that the content of the data and/or their source is not revealed to the public. The Competition Act in this respect stipulates that the data provider may apply to the President of the Commission for the confidentiality protection of the content and/or the source of the data provided to the Commission in the course of an investigation or merger control proceedings. The President will approve the request if he/she determines that the interest of the data provider to have the data and/or their source protected prevails over the interest of the public to have access to the data. The party or a third person requesting the confidentiality status for the data handed over to the Commission must show that it is likely to suffer damages if the data were not protected. A decision of the President of the Commission refusing or rejecting an application for the confidentiality status may be appealed to the Council (a collective decision-making body of the Commission).
These provisions are ill-fitted to the concept of privileged communication. That a communication is privileged entails a presumption that the company under investigation is entitled to withhold such information from the inspectors in order to protect its right to effective defense. In contrast, the provisions on protected data are not aimed at entitling the party to withhold the data from the Commission or at preventing the authority from relying on the data in the investigation, but only at ensuring that they are not disclosed to the public. It is accordingly unclear under Serbian law whether the party under investigation is automatically entitled to legal privilege with respect to the communication with its punomoćnik, if it is able to prove that the communication is directly related to the pending proceedings, or the party must apply for protection to the President of the Commission. It is regrettable that the Competition Act is obscure in an aspect of such vital importance for the legality of the Commission’s searches.
Given that the provisions on legal privilege have not yet been tested in practice, a number of issues that have arisen in the EU and comparative national jurisprudence remain open. One of the questions is whether the Commission and, ultimately, the courts, will interpret the notion of punomoćnik to encompass both lawyers and non-lawyers, , given that under Serbian law, a party to the administrative procedure (and a competition law investigation is such a procedure) does not have to be represented by a lawyer, let alone a qualified lawyer (however, a non-lawyer representative may not charge for the advice). It is also unclear whether the notion of punomoćnik will be interpreted narrowly to encompass only a person formally authorized to represent the suspected infringer in the pending investigation or it will be interpreted in a broader fashion, to cover any counsel advising the party in relation to the proceedings. Similarly, the scope of the “directly related to the proceedings” qualification is still to be clarified in practice. For example, the question arises whether this sintagm covers only the documents drafted by a (legal) counsel or it extends to internal memoranda recapitulating the advice and to internal preparatory documents aimed at assisting the counsel in providing the advice. Another issue is whether the document must be visibly marked as subject to legal privilege in order to qualify for protection afforded to privileged communication.
A number of uncertainties related to the scope of legal privilege, which are now amplified by the reality of dawn raids, makes proper in-house record keeping policies and guidelines concerning both in-house and external legal communication ever more important.
