The Supreme Court of the United Kingdom has recently granted leave to appeal against an English Court of Appeal decision that common law legal professional privilege does not extend to any professional other than a qualified lawyer. In this newsletter we briefly review the English law of privilege and the potential significance of the final decision in this case to Japanese companies involved in litigation or arbitration to which the English rules of legal professional privilege apply.
What is Legal Professional Privilege?
Legal professional privilege has long been established in English common law and, more recently, has been recognised as a fundamental human right protected by the right to privacy under Article 8 of the European Convention on Human Rights ("Article 8").
There are two main types of privilege recognised under English law:
- legal advice privilege, for communications between lawyers and their clients giving or obtaining legal advice; and
- litigation privilege, for communications between lawyers and their clients, or between either of them and a third party, for the dominant purpose of seeking or obtaining legal advice, or preparing a party's case, in relation to contemplated litigation.
Why does Legal Professional Privilege Matter?
Where legal professional privilege applies, it entitles a party to refuse to disclose privileged documents or communications, or answer questions relating to their subject matter.
Legal professional privilege therefore operates as an exception to the general disclosure obligations in English court proceedings, which require a party to disclose any document:
- on which it relies;
- which adversely affects its case or another party’s case; or
- which supports another party’s case.1
Legal professional privilege can also protect a party from having to disclose documents in a broad range of other situations (for example, following a request from public authorities, such as the police or tax authorities) unless there is clear statutory provision to the contrary.
The Recent Court of Appeal Decision
On 13 October 2010 the Court of Appeal handed down a judgment confirming that legal advice privilege does not apply to any professional other than a qualified lawyer, that is, an English solicitor or barrister, or an appropriately qualified foreign lawyer. 2
The consequence of this judgment is that legal advice privilege is not currently available to clients of other professionals, even if the advice given is legal advice.
The case arose in the context of notices issued to Prudential (an insurance company) by HM Revenue and Customs under their statutory powers seeking documents relating to a tax avoidance scheme. Prudential applied judicial review of the decision to issue the notices, arguing (amongst other things) that the documents requested were protected by legal professional privilege. These included documents by which Prudential sought or received legal advice on tax matters from their accountants.
Prudential argued that privilege should be available for advice on tax law given by accountants, and that the determining factor for the application of privilege should be the function of the advisor (i.e. advising on the law) rather than the status of the advisor (i.e. whether or not the advisor is a lawyer).
The Court of Appeal decision
The Court of Appeal held that legal professional privilege is restricted, at common law, to advice sought from or given by members of the legal professions.
The Court of Appeal recognised that the privacy of communications between lawyer and client is protected by Article 8, but refused to conclude that the same article protects communications with other professionals for the purpose of obtaining legal advice.
The court emphasised the need for legal professional privilege to be clear and certain in its application, since it conflicts with the general public policy that cases should be decided by reference to all available relevant evidence. The court commented that the rule is sufficiently clear and certain in its application to members of the legal profession, acting as such, but if it were to apply to members of other professions who give advice on points of law in the course of their professional activity, serious questions would arise as to its scope and application:
"To which accountants should it apply, given that 'accountant' does not by itself denote membership of any particular professional body, or the obligation to comply with any, or any particular, professional obligations? To which other professional advisers would it apply? To what areas of the law would it apply as regards the advice of any adviser who is not a lawyer as such?"
Only the UK Parliament, the court concluded, can provide answers to these serious and important questions if it decided to extend the application of legal professional privilege.
In its judgment, the court also noted that the question of whether legal professional privilege should be extended to accountants by statute has been addressed on a number of occasions over the last 40 years, but that Parliament has not as a result created any statutory extension of privilege to accountants. As the court commented, "Parliament's failure to change the law in this respect is not an accident".
Application to Japanese in-house legal departments
Although the facts of this Court of Appeal decision relate to advice given by accountants, its clarification of the law of privilege is equally important to non-qualified members of Japanese in-house legal teams.
English legal professional privilege extends to foreign-qualified lawyers, such as Japanese bengoshi or US attorneys. It also applies to those qualified lawyers who work as in-house counsel, provided that the document being protected is a product of the in-house counsel's legal work, as opposed to their business or administrative function.
However, the Court of Appeal decision clarified that privilege extends only to qualified lawyers, and as such, Japanese companies concerned about disclosure obligations should exercise significant care when allowing non-qualified members of in-house legal teams to create or distribute documents in relation to which the company may wish to claim legal professional privilege.
It is commonly agreed that legal professional privilege lies at the heart of the administration of justice:
"At the core of … privilege, in both domestic and international law is the appreciation that those who must take decisions on their own or others' behalf are entitled to seek and receive legal advice and that the provision of a full canvass of legal options and the exploration and evaluation would be chilled, were counsel not assured in advance that the advice proffered, along with communications related to it, would remain confidential and immune to discovery."3
The extent of this assurance will be examined by the Supreme Court when it hears Prudential's appeal. In the interim, we would always recommend seeking the advice of experienced dispute resolution counsel where disclosure of documents and the application of privilege may be relevant.