Most jurisdictions have some form of protection for preserving the confidentiality of communications involving lawyers, whether known as (legal professional) privilege, professional secrecy or something else. How far that protection extends, and how easily it may be broken, varies enormously. In England, the protection, once gained, remains strong, but recent cases have tended to restrict the extent of it, particularly by comparison to other common law jurisdictions (privilege/professional secrecy rules in civil law jurisdictions tend to be narrower than common law jurisdictions in any event). The issue becomes most acute in a pre-litigation (or investigative) phase.

Which privilege rules apply, or why should non-English lawyers care?

Where proceedings are brought in an English court (there remains considerable debate about the appropriate law of privilege to apply in a multi-jurisdictional arbitration). English law privilege principles will apply, regardless of the locations of the lawyers, clients or documents or the law of the advice given. The English courts will not treat a document as privileged simply because it is considered so in another jurisdiction. Lawyers whose home jurisdictions may have more generous privilege rules need to be keenly aware of this when advising on multinational disputes, to avoid inadvertently creating damaging documents that may then become available to the other side and/or regulators.

As a recent demonstration of the impact this can have, in Re RBS Rights Issue Litigation [2016] EWHC 3161 (Ch) interviews of a bank's employees were undertaken separately by US lawyers and English lawyers (as agents for the US lawyers) in investigations in response to US SEC subpoenas and to allegations by a US employee. It was accepted that the interview records would be privileged under US principles. However, the English court held that English rules applied and that the interview records were not privileged under English rules (for the reasons explained below) – and so were not protected from disclosure to the claimant/plaintiff shareholders.

The one exception is if a request is made by a foreign court for documents or witness evidence in England. In those circumstances, privilege under either English or the foreign law (or both) may be claimed, preventing attempts to arbitrage between different levels of protection in other jurisdictions (see Section 3, Evidence (Proceedings in Other Jurisdictions) Act 1975; Article 14 Council Regulation (EC) No 1206/2001).

A thumbnail sketch of English privilege rules

Under English rules, the most common type of privilege attaches to:

  • confidential communications between a lawyer and his or her client for the purpose of giving or receiving legal advice ("legal advice privilege"); and

  • confidential communications between a lawyer and his or her client, or between a client or his or her lawyer and a third party, for the dominant purpose of litigation which are in prospect ("litigation privilege").

Each element of the test must be met for privilege to apply – which may not always lead to the result a foreign lawyer (or sometimes even an English lawyer) might expect.

Legal professional privilege under English law

Confidential

A communication must be confidential; ie not in the public domain. A document will not usually be confidential if it has been shared with a third party, even if the document fulfilled the privilege criteria before being shared.

There is, however, a limited exception to this general principle, following a New Zealand case (B v Auckland District Law Society [2003] UKPC 38). A privileged document can be shared with a third party (such as an auditor) without waiving privilege as against the rest of the world, if the privileged document is provided for a limited purpose and on a confidential basis. This is called a limited waiver of privilege.

Although a limited waiver may be implied in some circumstances (for example, when a privileged document is provided to a parent company's board), in order to be sure, the party sharing the privileged document should ideally ask the recipient to acknowledge that (i) it is receiving a privileged communication for a limited purpose; (ii) the communication is to be held in confidence and should not be disclosed; (iii) there is no waiver of privilege; and (iv) the document will be returned/destroyed on request. This is very different to the position under, for example, US law, where the concept of a limited waiver is not (consistently) recognised.

Communication

Documents created by a client must be communicated to the lawyer (or, in the case of litigation privilege, a third party) to attract privilege. Working papers or preparatory material prepared by a client but not communicated will not be privileged.

Documents created by the lawyer and not communicated may attract privilege as part of his or her working papers. However, this exception will not extend to documents that would not have been privileged even if they had been communicated, such as the lawyer's records of non-privileged communications.

Lawyer

"Lawyer" includes members of the legal profession, including in-house counsel and foreign lawyers (regardless of whether the foreign lawyer is advising on English law or another type of law), as well as those acting under their supervision (such as trainees, paralegals and secretaries). However, it should be noted that privilege does not apply to communications with in-house counsel in the context of competition investigations by the European Commission (Akzo Nobel Chemicals Limited & anor v European Commission (Case C-550/07 P)). There is an ongoing debate as to whether the loss of privilege in an EU context extends to non-competition matters. The position is therefore different to many civil law jurisdictions such as France and Germany where in-house counsel typically do not attract privilege. It is also different to the position under US law, where "lawyer" includes non-lawyers who are facilitating the rendering of legal advice.

The situation can become more complicated where in-house counsel have a dual legal and commercial role. Communications may then contain both legal advice and commercial strategy and need careful scrutiny as to whether they meet the test for privilege. From an English perspective, it is preferable for in-house lawyers to keep their legal advice separate from their business advice.

Client

Who constitutes a "client" when the client is a corporate entity is perhaps the most hotly contested element and the English courts have in recent years taken a restrictive approach. At present, the client is considered to be only those employees who are charged with instructing the lawyers and who are authorised to seek and receive legal advice (Three Rivers District Council and others v Governor & Co of the Bank of England [2003] EWCA Civ 474). "Client" will not, for example, include employees (or former employees) who provide information for the purpose of being given to a lawyer. As they are third parties, privilege can extend to them only if litigation is in prospect.

This narrow definition has been widely criticised and contrasts with the approach taken in other jurisdictions. For example, in Hong Kong the client is simply the company (CITIC Pacific Limited v Secretary for Justice & Commissioner of Police [2015] CACV 7/2012 (CA)). Similarly, the approach taken in the US is broader; an employee is considered to be part of the client group as long as certain conditions are met (the communication has been authorised by superiors in the company, the employee was aware the communication was related to legal advice, it concerns information that could not be obtained from more senior employees and it relates to the employee's duties). While one might hope that the English approach will change in the future, that awaits a decision of the Supreme Court.

Legal advice

By contrast with the narrow definition of "client", legal advice is broadly construed and extends to what might prudently and sensibly be done in the relevant legal context. Factual documents can sometimes be regarded as privileged if they are part of the "continuum" of communications between a lawyer and client: in one recent case, minutes taken by lawyers of the meetings of a steering committee managing numerous regulatory investigations and tables prepared by lawyers showing the status of the investigations were held to be privileged as an integral part of the legal advice (Property Alliance Group Limited v The Royal Bank of Scotland plc [2015] EWHC 3187 (Ch)).

Litigation

The narrow definition of "client" puts a premium on finding litigation in prospect, so as to take advantage of the wider remit of litigation privilege. Unfortunately, recent cases have tended to restrict what amounts to litigation. It has long been accepted that the litigation in question must be adversarial not inquisitorial, ruling out public inquiries and ordinary internal investigations (Re L (A Minor) [1997] AC 16 - query whether the specific facts of that case (relating to the welfare of a child) coloured the decision and so subsequent analysis). In the last year, the court has also ruled that litigation is not in contemplation during a regulatory or criminal investigation until the client has sufficient knowledge to know that a prosecution is likely (Serious Fraud Office v Eurasian Natural Resources Corporation Ltd [2017] EWHC 1017 (QB) (an investigation by the Serious Fraud Office)). A similar approach was taken even more recently in R v Jukes [2018] EWCA Crim 176 (an investigation and prosecution by the Health & Safety Executive). However, Bilta (UK) v Royal Bank of Scotland [2017] EWHC 3535 found on the facts that action by Her Majesty's Revenue & Customs was in contemplation before action commenced. This approach has been much criticised, and it is to be hoped that it will be reversed on appeal (to be heard in July 2018).

Coincidentally, the German Federal Constitutional Court is also considering the issue of how privilege applies in an internal investigation context in connection with the Volkswagen emissions scandal. It is hoped that the court's decision will clarify the position and provide some much needed guidance.

What's the problem?

The problems created by the narrow definition of "client", combined with the narrowing definition of "litigation", are most acute for institutional clients at the very early stages of potential civil litigation and during regulatory and criminal investigations. At that point, they can only find out the relevant facts by talking to their employees. Since their employees are unlikely to be considered part of "the client", legal advice privilege does not apply. However, if the facts are not yet known, litigation/prosecution may not be considered sufficiently likely to engage litigation privilege. Discussions with employees (and any records of those discussions) are therefore unlikely to be privileged, just when an institution most needs to know the facts and is least able to risk the creation of damaging documents that might fall into the hands of a litigant or regulator. This is very different to some other jurisdictions – for example, in the US notes taken by a lawyer of an employee's interview during the course of an internal investigation are considered to be privileged as long as certain conditions have been fulfilled (an adequate "Upjohn" warning and consent of the interviewee obtained). Lawyers advising in the international context need to be wary of inadvertently damaging their clients' positions by falling foul of other jurisdictions' privilege rules.

This article was first published in the May 2018 edition of the IBA's International Litigation newsletter.