Following a series of well-publicised regulatory investigations in various jurisdictions commencing in 2012, a number of banks, including the Royal Bank of Scotland plc ("RBS") admitted to rigging LIBOR for their own ends. The LIBOR scandal predictably resulted in litigation against the financial institutions concerned. One such claim was brought by the Property Alliance Group (“PAG”) against RBS in the English High Court. An important recent interim judgment in this case has reinforced a broad application of legal advice privilege in the context of regulatory investigations.

The case concerns a claim by PAG that RBS induced it to enter into a number of interest rate swap agreements that employed GBP LIBOR as a reference rate. PAG claimed that by proposing such swaps, RBS implicitly misrepresented that it was not manipulating the GBP LIBOR rate. While admitting to manipulating some LIBOR rates, RBS denied that it had tampered with GBP LIBOR.

As the case progressed, RBS was ordered by the court to disclose internal high level summaries, reports and reviews concerning allegations of LIBOR misconduct in place of what would otherwise have been an unwieldy discovery exercise. Some of the documents to be disclosed related to the work of a high-level committee within the bank, called the Executive Steering Group (the “ESG”).

The ESG had been established to supervise RBS’s response to the various regulatory investigations and related litigation and the committee frequently met with its external lawyers, who essentially acted as the secretariat for the meetings. In that regard, the external lawyers prepared and sent the ESG:

  1. memoranda informing and updating the ESG on the regulatory investigations; and
  2. summary minutes of the meetings (the “ESG Documents”).

RBS claimed legal advice privilege over the entirety of the ESG Documents. Legal advice privilege protects from disclosure confidential communications between clients and their lawyers for the purposes of seeking and / or receiving legal advice. This was challenged by PAG, as RBS’s privilege claim extended to the entirety of the ESG documents, as opposed to only those parts actually containing legal advice.

On 5 November 2015, the English High Court delivered a judgment in favour of RBS, concluding that the ESG Documents were indeed all privileged in their entirety. Given that the external lawyers had been engaged by RBS in response to the LIBOR investigations, the court was satisfied that the ESG Documents had been prepared by the lawyers in a “relevant legal context”. In preparing the ESG Documents, the external lawyers were not doing so simply as a matter of administrative convenience, but rather as part of the “continuum of communication and meetings … the object of which was the giving of legal advice” even if some or parts of the documents did not expressly contain legal advice.

The decision recognised the public policy justification for legal advice privilege as applying to this scenario. The court said that lawyers should be able to provide their client with candid factual briefings as well as legal advice in the context of regulatory investigations. The public interest, the court held, would be advanced if regulators were able to deal with lawyers who could accurately advise their client how best to respond and cooperate with an investigation.