DR Essentials: Being practical about privilege: Latest privilege issues from recent cases

24 November 2016

Michael Stocks, Michael Brown, Louise Lanzkron

Bird & Bird & First for Disputes

Maintaining and protecting privilege is a topic which frequently exercises the minds of in-house lawyers and general counsel. In a world where technological change is fast and the regulatory landscape can move quickly, issues of privilege arise in ways not previously envisaged even ten years ago.

The English courts have recently considered a number of issues relating to the ambit of legal advice privilege, litigation privilege and without prejudice privilege and there are practical takeaways from these cases which in-house lawyers can learn from.

  • Businesses which operate under Regulators or have to comply with statutory processes are either turning to their risk and compliance functions or to lawyers, whether internal or external, to advise on and manage obligations and investigations. With the former, situations are being created where privilege may not be available. With the latter, the question of whether legal advice privilege (and indeed litigation privilege) attaches to these communications has been discussed before the courts in respect of a number of different situations.
  • Where Regulators conduct investigations the status of communications with those Regulators has also been in issue before the courts. If, as seems to be increasingly the case, Regulators and/or investigating authorities are pressing those under investigation to hand over privileged information, do they have procedures in place to protect those privileged communications which they may gain access to in the course of their investigation from disclosure to third parties? If settlement discussions are begun, are those communications protected by without prejudice privilege (WPP)? As WPP, by definition, requires there to be an adversarial position between the parties (which the WP discussions are aimed at settling), at what point does an investigation become adversarial?
  • Privilege is a jurisdictional construct yet given the widespread use of electronic communications, documents are often transferred from one jurisdiction to another with little thought as to the maintenance of privilege in those communications. Organisations need to give thought to protecting these communications and (as far as they are able) maintain privilege in them in a multi-jurisdiction environment especially if documents are transferred to jurisdictions whose idea of privilege is very different to our own (or non-existent).
  • International arbitration has no fixed rules regarding privilege. It is important to consider practically what approaches Tribunals take towards privilege and what can be done to ensure that the Tribunal (or the other side) doesn't demand access to documents which should be subject to protection.
Legal Advice privilege

Legal advice privilege essentially protects non-adversarial confidential communications between lawyer and client for the purpose of giving or receiving advice. The courts have recently considered the concept of 'giving or receiving advice' in a number of different situations. In Property Alliance Group Limited v. Royal Bank of Scotland PLC [1], RBS claimed legal advice privilege in various high-level internal reports, reviews and summaries relating to allegations of LIBOR misconduct in its long-running litigation with Property Alliance Group (PAG). The documents were created to help with the conduct of RBS' response to various regulatory investigations it was involved in and were drafted by RBS' legal advisers. PAG challenged the claim of privilege. The court agreed with RBS that the documents were part of the "continuum aimed at keeping both [lawyer and client] informed so that advice may be sought and given as required"[2]. The court was satisfied that the advice given by RBS' lawyers was in a "relevant legal context"[3] and should be protected from disclosure.

In different circumstances, involving the awarding of a public procurement contract for the decommissioning of twelve nuclear power plants, the Nuclear Decommissioning Authority (NDA) instructed solicitors to advise it during the bidding process[4] . Here, again, the issue was whether the solicitors were giving legal advice. One of the unsuccessful bidders, Energy Solutions (ES) sued the NDA alleging that there had been manifest errors in the way that the tender process had been conducted and the bid awarded. ES sought disclosure of the documents created during this process, submitting that the solicitors had not been giving legal advice but simply acting as evaluators of the bid process. NDA claimed legal advice privilege in the documents and the court agreed, stating that the lawyers had been carrying out a legal review.

However, in Astex Therapeutics Limited v AstraZeneca AB [5] the Court held that"where there is no dispute, the review of a contract by seeking information from employees, and former employees, is unlikely, in most circumstances, to be protected by legal advice privilege". In this case the involvement of lawyers did not 'create' legal advice privilege as the lawyers and employees were not in a relationship where they were giving or receiving legal advice.

Without Prejudice Privilege

The status of privileged material when co-operating with regulators in the course of investigations and settlement discussions with them, was a matter of focus in another of the interim applications in the PAG v RBS litigation[6]. RBS sought to withhold from inspection documents which evidenced negotiations with the Financial Services Authority (now the Financial Conduct Authority) prior to a Final Notice issued by the FSA on 6 February 2013. RBS claimed that the documents were subject to WPP as they were part of discussions between itself and the FSA in connection with the Final Notice. Mr Justice Birss held that genuine settlement discussions with the FSA could be protected from inspection by something analogous to WPP, but such protection could not be seen to operate in an identical manner to WPP in civil proceedings. This is the first time that such a finding had been made in respect of regulated proceedings.

Protecting privileged communications nationally and internationally

Protecting privilege when giving material to investigatory authorities is also a matter of concern for many businesses, especially when that material may have been seized, for example in a dawn raid, and is located on laptops, mobile phones or other IT equipment. The rules as to how these communications will be protected differ depending not only on the jurisdiction involved but also the relevant investigatory authority. For example, although the FCA will protect without prejudice communications with it, the right does not protect the FCA from acting on information received in those discussions.[7]

In relation to protection of privileged material generally when seized by investigators, the English Divisional Court considered this in relation to seizure by the Serious Fraud Office (SFO)[8]. The case concerned whether the procedure set out in the Operational Handbook of the SFO for dealing with materials subject to legal professional privilege "including legal advice privilege and litigation privilege" was lawful. The court concluded that it was because the SFO had very detailed procedures in place to protect such material.

However, different jurisdictions consider the principle of privilege in different ways and do apply different procedural rules to protect the lawyer/client relationship. In- house lawyers need to be particularly aware of the dangers of transferring privileged material out of the jurisdiction where the protection subsists and into a jurisdiction which may not recognise the protection in the same way, or at all. Thought needs to be given to how and where (particularly electronic) documents are stored and what legal protections (if any) are put on those documents, or otherwise how accessible might they be to government and regulatory bodies.

Privilege and Arbitration

International arbitration is subject to different pressures in that each arbitral institution or tribunal can deal with rules on privilege in its own way, and layered on top of this is the governing law of the arbitration which will also have its own rules regarding privilege. This can make preservation of privilege difficult. Having an understanding of how different jurisdictions consider privilege and how that may affect an arbitral tribunal is an essential start to maintaining the protection of confidential privileged communications.

What this means for you?

We will be exploring the issues referred to above in greater detail at our DR Essential Breakfast Briefing on 7 December 2016. At this session Michael Brown, Michael Stocks and Louise Lanzkron will be reviewing general privilege developments as well as looking at the cases and issues identified above. Michael Brown is the lead partner and, together with Michael Stocks and a wider Bird & Bird team, represents PAG in their action against RBS, the trial of which has now taken place and Judgment is currently awaited.

If you would like to attend the Breakfast, please click here >

Previous Dispute Resolution Essentials briefings

 


  1. [2015] EWHC 3187 (Ch)
  2. Balabel v Air India [1988] 1 Ch 317 per Taylor LJ
  3. Three Rivers District Council v Bank of England (No.6)[2005] 1 AC 610
  4. NDA v Energy Solutions [2016] EWHC 1988 (High Court)
  5. [2016] EHHC 2759
  6. [2015] EWHC 1557 (Ch)
  7. Paragraph 5.9 of the FCA Enforcement Guide
  8. The Queen (on the application of Colin McKenzie) v. S.F.O [2016] EWHC 102 (Admin)

Authors

Louise Lanzkron

DR Knowledge & Development Lawyer
UK

Call me on: +44 (0)20 7415 6000