In today’s tough economic environment, we are seeing a rise in commercial disputes.  Competitive pressure is stimulating innovative new product ideas, but these carry the risk of infringing others’ intellectual property rights. At the same time, investigations by competition authorities are a possible unexpected disruption to business.

When a commercial dispute arises, the concept of privilege can ensure that a party can investigate the causes of the dispute, assess its merits and build up its case, without having to disclose details of those activities to the opponent.  There are different types of privilege available in different circumstances.  Note that all privileged documents must be confidential in nature, though not all confidential documents will be privileged.

Legal advice privilege

A document or communication between a lawyer and his client, created for the purpose of giving or receiving legal advice will be covered by legal advice privilege. Under UK law, a lawyer includes a solicitor, barrister, qualified foreign lawyer and in-house lawyers.  In-house lawyers should take care that their communications relate to legal rather than business or commercial advice, otherwise privilege could be lost.  Also be aware that simply copying in a lawyer is not enough to create legal advice privilege.

Litigation privilege

Where a communication or document was created in contemplation of litigation and for the dominant purpose of that litigation, litigation privilege is likely to apply. This is helpful in protecting communications that may not be with lawyers, as long as the document is produced with the dominant purpose of obtaining advice or evidence in relation to the litigation.  The litigation should either be already under way or there ought to be a reasonable prospect of it, which is more than a mere possibility.  The document must be produced for the dominant purpose of the litigation, so if it has a dual purpose or it only later turns out to be relevant to the litigation, privilege may not apply.

Privilege in competition investigations

The recent judgment of the Competition Appeal Tribunal in Tesco Stores Ltd v Office of Fair Trading relating to an alleged competition infringement in the dairy sector, helpfully clarified that litigation privilege can also apply in OFT investigations. On the facts, the investigation had reached a “sufficiently adversarial” stage similar to civil proceedings, so it followed that litigation privilege should apply.

However, be aware that the position in relation to investigations by the European Commission is less clear. EU courts do not seem to have considered whether litigation privilege exists under EU law. As for legal advice privilege, the well known case of Akzo Nobel has firmly established the principle that advice from in-house lawyers is not privileged.

Practical suggestions

If there is the possibility of a dispute or investigation, ensure that communications are clearly marked as confidential, prepared solely for the purpose of dealing with the prospective litigation and only circulated to those within the business who need to be involved. Think carefully before disclosing documents to any other party, as there is a risk of waiving privilege. Ultimately, the safest method of protecting confidential communications is to seek external legal advice.