In a judgment that helps underpin the concept of legal advice privilege (LAP), the Chancery Division has clarified the scope of LAP in the context of a regulatory investigation. This will be of interest to, and reassuring for, corporations who may be the subject of a regulatory investigation, and provides guidance in other contexts.


In Property Alliance Group Ltd (PAG) v The Royal Bank of Scotland (the Bank)1, a case concerned with the LIBOR rate fixing scandal, the court considered whether LAP applied to documents prepared for the Bank by its external lawyers. The purpose of the documents was to update, inform and progress matters within the Bank’s Executive Steering Group (ESG). The ESG was tasked with overseeing and coordinating the Bank’s response to various regulatory investigations. The Bank’s external lawyers attended and led the ESG meetings, provided advice on the investigations, and acted as the Bank’s secretariat. It is probable that the ESG was established with a view to falling within the principles established by House of Lords in Three Rivers (No 5) [2003]2, i.e., to maintain LAP by limiting communications to a small dedicated group within the Bank.

This judgment follows an earlier decision in the case dated 8 June 20153, which dealt with ‘without prejudice’ (WP) privilege and the use of limited waiver agreements in the context of regulatory investigations. That decision confirmed that, in principle, privilege attached to both classes of documents.

  • Settlement negotiations with regulators should be treated in broadly the same way as negotiations in civil proceedings, with the subtle but important difference that regulators often have statutory powers requiring them to act on the information received. In this case, the Bank was found to have waived WP privilege due to its reliance on the relevant matters in its pleadings.
  • The express limited waiver agreements between the Bank and its regulators were upheld, protecting the documents from inspection in the civil proceedings. The agreements contained a carve-out enabling the regulator to disclose the information under their statutory powers but crucially, those powers were not exercised, and the protection remained in place.

The question for the court was whether the documents contained ‘legal’ or ‘business’ advice, or both, and whether LAP applied to the documents. It was held that LAP applied to all of the documents.

Mr Justice Snowden helpfully summarised the need for privilege in regulatory investigations, saying:“there is a clear public interest in regulatory investigations being conducted efficiently and in accordance with law. That public interest will be advanced if the regulators can deal with experienced lawyers who can accurately advise their clients how to respond and co-operate. Such lawyers must be able to give their client candid factual briefings as well as legal advice, secure in the knowledge that any such communications and any record of their discussions and the decisions taken will not subsequently be disclosed without the client’s consent.” In providing more general guidance on the correct way to assess LAP, he also confirmed that LAP will normally apply to the “continuum” of documents exchanged between lawyers and their clients in a “relevant legal context”.

What does this mean for regulatory investigations?

  1. Whilst this case is helpful for those facing an investigation, it should be read with a degree of caution. It is a case of first instance and does not set a binding precedent.
  2. It remains good practice to follow the “client” group rule set out in Three Rivers (No 5). This means keeping the group of those actually able to give instructions to and receive advice from the external legal team to a small number.
  3. Care should also be taken to ensure consistency between negotiations and pleadings to avoid accidental waiver of privilege.
  4. Advice need not be expressly sought to be privileged and indeed marking it as such will not automatically mean it is, however, it is good practice to do so. The continuum of correspondence is also likely to be privileged. It is not necessary to “perform an exercise of redacting and disclosing privileged communications sent... in confidence”. That would be unworkable and could place an unnecessary costs burden on parties to litigation.

HFW perspective

This case represents welcome confirmation of the principle that LAP will apply to regulatory investigations. Assuming that the usual requirements concerning scope and recipients are adhered to, advice and information can be shared freely between clients and their lawyers, without undue risk of later disclosure.

It will be interesting to see whether recent cases in other common law jurisdictions (and cases such as this) represent a move away from unfortunate Three Rivers lacuna for legal advice privilege in England.