Managing risk in the workplace is crucial for avoiding commercial disputes. In recent years, active risk management has become critical in companies as businesses balance the encouragement to reduce costs versus management of legal risk. Generally, poor communication and delivery, inadequate or no contract drafting and ineffective risk management procedures are largely to blame.
One way to reduce the risk of disputes escalating is by carrying out an early analysis of the key legal issues, which can be achieved by collating the essential documents in an organised format and preparing a detailed description of the case by identifying and speaking to personnel involved. It is also recommended that external advice is sought at an early stage by instructing an expert if the dispute is particularly technical and/or external lawyers. Formulating a strategy and spending money early on could reduce the risk of higher, long term expenditure if the dispute escalates, for example by encouraging alternative dispute resolution. Well trained staff and encouragement of an open ‘no blame’ culture will also aid such investigations.
MANAGEMENT OF DOCUMENTS
A particular pitfall is the inadequate management of documents when carrying out investigations and ensuring that companies maintain any legal advice and/or litigation privilege.
Legal advice privilege relates to confidential communications between a client and lawyer and enables the exchange of information between a lawyer and client in a frank and open manner without fear of the communications being relied on by the opposing party.
Litigation privilege is wider in application but narrower in scope. It applies where proceedings are either current or in reasonable contemplation. Not only does it protect communications between a lawyer and client, but also between third parties if such communications exist for the dominant purpose of the conduct or preparation of litigation. Litigation means adversarial proceedings of any type, including tribunals and arbitration.
Issues can arise when pursuant to internal investigations lawyers give advice about commercial matters when not acting in a legal capacity if the report is not prepared for the dominant purpose of litigation. Care should therefore be taken when carrying out internal inquiries and the basis on which parties seek legal advice, by:
- Ensuring the instruction is clear that legal advice is being sought; forwarding on e-mails without comment, particularly to an in-house lawyer, may cause problems.
- Identifying who will have responsibility for managing instructions to lawyers. Care will need to be taken to ensure that individuals outside of the ‘instructing’ group do not create documents which disclose matters of concern. Even if they relate to instructions being given to lawyers, they will not necessarily be privileged.
- Ensuring any advice on the commercial aspects that could be deemed as not giving legal advice is separated out into standalone documents.
Seeking advice before asking staff to undertake research or investigative work connected to the instruction of their legal advisers in order to preserve privilege. Guidelines should be circulated at the outset to all business managers and employees involved in the dispute explaining the extent of the disclosure obligations and the implications.
- Seeking advice before asking staff to undertake research or investigative work connected to the instruction of their legal advisers in order to preserve privilege. Guidelines should be circulated at the outset to all business managers and employees involved in the dispute explaining the extent of the disclosure obligations and the implications.
- Keeping communications with lawyers on a separate file marked ‘privileged and confidential’. Restrict the circulation of written legal advice and avoid notes or summaries of legal advice and exercise caution when commenting upon it in writing or when showing it to colleagues.
- Seeking immediate legal advice if a request is received for information from a regulatory authority or they become a party to an inquiry.
In summary, a business can benefit from their in-house lawyers working closely with the business and gaining an understanding of the commercial drivers, through attending management meetings, engaging with compliance and governance policies and working towards being seen as part of the wider team rather than an obstacle.