Grappling with issues of legal privilege is more of a recurring, rather than emerging, theme for financial services firms. Now, courtesy of Brexit, there is a new issue on the horizon.
Post Brexit, firms operating both in the UK and EU member states and their legal advisors will need to consider, more carefully than ever before, the different EU and UK rules of privilege when structuring investigations and advising on potential competition law issues that could result in the involvement of the European Commission.
Legal privilege in England
The application of English law on legal privilege is an enduring concern for financial services firms conducting investigations and litigation, and it continues to be an issue that is regularly debated in court. Rightly so: it is a fundamental human right, central to the administration of justice; it is in the public interest that firms should be permitted to seek and receive legal advice, investigate, and gather evidence, without losing the benefit of privilege.
"EU legal privilege rules have created an issue for in-house lawyers for some time but Brexit broadens it."
There are a number of potential scenarios where firms, which continue to have sales or a presence in the EU and/or EEA post-Brexit, may be required to disclose legal advice from UK qualified lawyers to the European Commission in the context of a European Commission investigation into potential anti-competitive agreements or abuse of a dominant position. For example, where:
- legal advice has been given to firms based in EU or EEA member states;
- one or more of the recipients of legal advice are physically based in the EU or EEA (e.g. General Counsel or director is based in Germany); and
- legal advice has been given to a UK subsidiary of an EU parent company which could be deemed to have access to its UK subsidiary’s documents.
To avoid this risk of disclosure, firms must carefully consider how legal advice is procured, given, and shared when they face issues that might touch on competition law requirements and, ultimately, may involve the European Commission.
2020 WAS NO STRANGER TO NUMEROUS HOTLY CONTESTED PRIVILEGE DISPUTES. HERE WE SUMMARISE JUST THREE OF THE DECISIONS MADE LAST YEAR.
- In PCP Capital Partners LLP and another v Barclays Bank Plc  EWHC 1393 (Comm), the Commercial Court clarified what constitutes a waiver of privilege. In that case, the judge held that privilege had been waived even though witnesses had only referred to the effect (rather than the content) of legal advice. It’s a reminder that making any reference to legal advice in any communications with third-parties should be approached with caution.
- Earlier in the year, the Court of Appeal in Civil Aviation Authority v R (ex p Jet2.com Ltd)  EWCA Civ 35 re-confirmed the scope of legal advice privilege: only communications created for the dominant purpose of obtaining or giving legal advice will be protected from disclosure on the grounds of privilege. For example, if the dominant purpose of an email is to obtain the commercial views of a non-lawyer then it will not be privileged, even if a subsidiary purpose is simultaneously to obtain legal advice from a lawyer who also receives the email. Jet2 also reinforced the position that an attachment to a privileged email will not automatically be protected by privilege as well.
- In A v B and another  EWHC 1491 (Ch), an auditor had received a statutory notice to provide certain documents to the Financial Reporting Council (the “FRC”) in respect of which its underlying client had asserted privilege. The Business and Property Court had to decide whether the role of the auditor in this situation was essentially ministerial “i.e. passing on to the FRC the claim to privilege made by [its client].” The Court decided that it was not: it is for the auditor “to determine whether the document is privileged […] because it is the person by whom the duty to disclose on service of a statutory notice is imposed.” As such, an auditor must form its own view on whether a document is privileged and may disagree with its underlying client, irrespective of whether the privilege is that of the auditor or the client.
Along with the many changes and challenges presented by Brexit, firms need to be alive to the changed status of legal advice in the context of EU and EEA competition proceedings. Firms should ensure a plan is implemented to manage the new risk that legal advice given by lawyers qualified in the UK may become disclosable to the European Commission, where before Brexit, it would have been privileged. In doing so, we suggest that firms identify all active cases and investigations with a cross-border element to assess the associated risk of a change in privilege rules and seek advice where necessary. We also encourage firms to refresh both their internal training to legal teams and to the business, and reinforce good practices that increase the likelihood that communications are protected by privilege, including ensuring that the business engages with the legal team early where possible disputes are on the horizon or other risks arise.