Legal Professional Privilege is often regarded as one of the most valuable tools at a business' disposal during a regulatory investigation.
It is always open to a company to share any and all documentation with a regulator. What happens however when early investigations highlight concerns in respect of your business' operations? Are you required to hand this documentation over to regulators, acting as your own prosecutor?
The answer is no. Used correctly, the doctrine of Legal Privilege can protect against compulsory disclosure of specified documents/communications in response to a Regulator's request.
We examine the important features of Legal Privilege and provide simple and practical steps that can be put in place to avail yourself of this tool.
Legal privilege – the basics
Broadly speaking, Legal Privilege can be split into two categories:
Litigation privilege (LP)
LP arises from the principle that a litigant or potential litigant should be free to seek evidence to assist their case without being obliged to disclose the result of their research to a Regulator.
LP applies to confidential communications between a client (this can be an individual or business), legal adviser and a third party (for example, a technical expert) where the communication came into existence with the dominant purpose of being used in connection with contemplated, pending or actual litigation.
Key features of the above are that:
- Litigation must be a real likelihood, rather than a mere possibility – following a critical incident with your business operations however, more often than not this test will be made out.
- The dominant purpose must be using the communication for the purpose of litigation – Courts have been quick to remind parties of the "sole" or "dominant purpose" test required to claim LP i.e. where the dominant purpose of the communication relates to other matters (such as informing internal decisions on risk/required improvements), LP will not apply.
It therefore benefits to be clear in early communications what the purpose of an instruction is. For example, where expert instructions are clearly identified as being obtained for the purposes of litigation, rather than simply assisting internal understanding of the position, this will assist in any claim for this form of Legal Privilege.
In general, Litigation Privilege does not apply to documents that pre-date an incident. This is because it is difficult to meet the dominant purpose test when the incident giving rise to actual/suspected litigation is yet to occur!
Examples of communications over which LP could apply however are:
- Correspondence with Third Parties such as technical experts or forensic accountants.
- Reports prepared by these Third Parties.
- Witness Statements obtained from key witnesses to an incident.
- Legal Advice Privilege (LAP).
The purpose of LAP is to enable a client to place unrestricted confidence in their lawyer. This applies in early stages of investigation, even where litigation is not in existence or contemplated.
LAP applies to confidential communications (i.e. those not already in the public domain), which pass between a client and their lawyer and which have come into existence for the purpose of giving or receiving legal advice about what should be done in the relevant legal scenario.
Take note however, as in a key judgment known as the Three Rivers case, the term 'client' was defined very narrowly as only those employees within a company charged with dealing with external lawyers to give instructions and receive legal advice.
Whilst there remains some ambiguity on this point, it is clear that clients should not assume that all documents produced by employees and sent directly to lawyers will be privileged.
This has been confirmed in the recent RBS Rights Issue Litigation where the Court held that the 'client' only consisted of those employees authorised to seek and receive legal advice on behalf of RBS. Importantly in that case, the records of interviews conducted with employees and ex-employees as part of the bank's internal investigations did not constitute communications from the client.
Privilege is Absolute
It is an established principle that the public interest in maintaining the operation of this doctrine outweighs any restrictions placed upon investigations.
This means that Legal Privilege is absolute; it cannot be overridden.
But beware of waiver!
Although the principle of Legal Privilege is absolute, it is yours to lose!
Legal Privilege belongs to you as the client. If you therefore choose to disclose a document/communication to which Legal Privilege would otherwise apply, that privilege will be lost and cannot be regained. This is known as waiver.
Furthermore even where the document itself has not been disclosed, where reference is made to privileged documents waiver may apply. Whether waiver has occurred in each instance will depend upon an assessment of the reference made – where this extends beyond a reference to its mere existence and extends to comments upon the actual substance of the document or advice this is likely to result in loss of privilege. This often is a consideration for internal reports or committee meetings.
Practical Tips for availing yourself of Legal Privilege
Act quickly following an incident – where an incident occurs, you will get a feel as to whether it is likely to develop into an issue for your business.
In these instances, get your legal team on board early. They can then be as active/passive as you wish in investigations, however to assist in invoking Legal Privilege they should be instructed in the first instance.
They will advise you on the operation of Legal Privilege, however the following represent simple practical steps that can be taken by businesses in all instances:
- Where taking notes as part of internal investigations, consider who within your business constitutes 'the client' if you are looking to rely upon Legal Advice Privilege.
- Before creating post-incident documentation, make clear upon commissioning that these are being created for the dominant purposes of being used in connection with contemplated, pending or actual litigation.
- After creation, ensure that a 'health warning' is placed clearly on the face of any document/communication so as to indicate that Legal Privilege applies.
- Mindful of the risk of waiver, make sure to keep documents confidential – we advise restricting internal circulation to that which is necessary and ensuring that anyone privy to privileged information understands the importance of keeping this confidential. Also consider where any privileged documents are stored so as avoid being initially caught by powers of seizure, thus having to exercise this privilege.
- In addition to directly disclosing privileged documents, ensure that they are not referred to in any other source so as not to risk any allegation of waiver.
- Where documents such as investigation reports need to be shared with Regulators/other dutyholders, consider preparing a secondary report for this purpose to sit alongside the 'warts and all' internal report/.
- LPP reports can be fearless Enquiries without issue in terms of regulators finding the details. But beware how many people have access and where report is stored given wide ranging police and HSE seizure powers
If you wish to discuss any of the above information further, or you would like to enquire about designing a system into your reporting business or investigation procedures, please contact the DWF Regulatory, Compliance and Investigation team.
 Three Rivers District Council and others v Governor and Co of the Bank of England  EWCA Civ 474