Legal opinions are commonly used in a variety of situations. For example, in the context of a cross-border transaction, a legal opinion may be used for the purpose of opining on whether certain transaction documentation is valid and enforceable in a particular jurisdiction and complies with the local law of that jurisdiction. In transactions involving multiple jurisdictions where the governing law of the documentation is English law, a combination of foreign and English law legal opinions may be required and in such circumstances the lawyers in the relevant jurisdictions will need to ensure that together the legal opinions opine on all relevant matters. In finance transactions, a legal opinion may be required to satisfy certain conditions precedents in the transaction documents (either to enable the transaction to complete or to support a particular credit rating) and will usually be required by the lenders to give them reassurance that the legal effect of lending in the transaction concerned is what they expect it to be. Legal opinions are also used in connection with bond issues where the issuer's lawyers may need to provide a legal opinion to the managers of the bond issue for the purpose of providing comfort to the managers that the terms and conditions of the bonds do not contravene any laws.
The addressee of a legal opinion will be expected to and will actually rely on the accuracy of the opinion for the purposes of evaluating the legal risks of the transaction or project. If the opinion subsequently turns out to be inaccurate or misleading in any way, the addressee of the opinion may be entitled to bring an action against the law firm issuing the opinion in contract and/or in tort. A firm’s liability will depend on the wording of the opinion, however, it is for this reason that opinion will only be given after appropriate procedures have been completed by the firm in question and will usually expressly include certain assumptions and reservations (which are discussed in more detail below) upon which the opinion is made.
This article briefly considers some of the key matters an English legal opinion would be expected to cover and certain practical issues to be considered prior to a party requesting for a legal opinion. It is important to note that a legal opinion should not be considered to be a substitute for legal advice and the parties to a transaction will need to ensure that they receive extensive legal advice in the matter concerned prior to the issuance of such an opinion.
Key features of an English legal opinion
Background – This section of the legal opinion will usually provide background information in relation to the transaction and the documents to which the opinion is being given. There will also be a statement which provides that the opinion is limited to English law and no other jurisdiction.
Documents reviewed and enquiries made – The legal opinion will identify the documents that have been reviewed for the purpose of preparing the opinion. This will usually include the transaction documents (i.e. a facility agreement and security documents in the context of a finance transaction), constitutional documents of the company for which the legal opinion is being sought, board minutes or other corporate authority of the company and any searches which have been carried out against the company. In relation to the transaction documents, the opinion will also state whether they are signed originals, copies or in final draft form. In relation to the searches which have been carried out in relation to the company, these would typically include a search of the records held at Companies House and the Central Registry of Winding Up Petitions. Depending on the transaction it may also be necessary for searches to be carried out at the Land Registry and trademarks registry. Regardless of the search, it will be important for the opinion to specify the time and date of the search and, in the case of a company search, confirm whether the search is an update to a search previously carried out.
Assumptions – The legal opinion will expressly state the assumptions on which it is made. These will vary depending on the circumstances and the nature of the transaction, however, typical assumptions would include the following: i) that the parties to the particular transaction have been validly incorporated and exist, ii) that the parties to the transaction have the capacity, power and authority to execute and deliver the transaction documents and to perform their obligations and exercise their rights under the transaction documents, iii) that all signatures to the transaction documents are genuine, iv) that all original documents examined are complete, authentic and up to date, v) that the information disclosed by the searches carried out is true, accurate, complete and up to date, vi) and in the context of a cross-border transaction, that all matters under the laws of any jurisdiction (other than England and Wales) relating to the transaction documents have been complied with.
The Opinion, reservations and reliance – In this section of the opinion the law firm will opine on the specific matter(s) for which the opinion has been requested. This will be limited to expressions of a legal conclusion about and/or legal analysis of a point of law or the transaction. The opinion will, however, be qualified by certain reservations which again will vary depending on the nature of the transaction. For example, an opinion may include a statement setting out specific areas which have not been covered or, in the context of a cross-border transaction, a statement dealing with application of foreign law where an obligation is to be performed in a jurisdiction outside England and Wales. In such circumstances the opinion may be qualified by a statement that the performance of such an obligation may not be enforceable in England and Wales if it would be illegal or against public policy under the laws of the foreign jurisdiction concerned. It is important to note that the legal opinion can only be relied on by the addressee and will contain a statement to the effect that it has been prepared solely for the benefit of the addressee and cannot be relied on by anyone else.
Practical issues to consider
Depending on the circumstances giving rise to the request for a legal opinion certain timing and related issues (which are set out below) will need to considered and dealt with early on to prevent any delays in issuing the opinion.
Agreeing the text of opinion – This is particularly important in the context of a cross-border transaction where legal opinions may be required in several foreign jurisdictions. In such circumstances it will be important for the text of each form of opinion to be agreed amongst all the parties as early as possible in order prevent any delays occurring to completion of the transaction and to ensure all relevant matters are opined upon. Agreeing the text early allows the law firm preparing the opinion to ensure that the text is appropriate for the client’s purposes and to consider the scope of searches to be carried out.
Internal compliance procedures – Most international law firms will have an internal review procedure which will need to be complied with before an opinion by that firm will be released. It is not uncommon for at least two partners, not involved in the transaction or the project, to be required to review and approve the opinion before its release. The significance to a law firm in the context of an opinion is the extent to which documents may be relied upon by third parties, who are not client’s of the firm, and the liability issues (as set out above) that may arise if the opinion proves to be shown to be subsequently inaccurate and/or misleading. The liability issues to be considered by the law firm in such circumstances may be different those arising in the context of a client of the firm relying on the firm’s opinion.
Carrying out searches – All relevant searches and enquiries should be carried out as soon as the text of the opinion has been agreed. The company search should be updated on the date that the opinion is given.
Dating the opinion – If the opinion is to be issued for the purposes of a transaction, it should be dated the same date as the transaction documents in order to ensure that it reflects the law or the matter which has been opined upon as at the transaction date.