In early 2015 an anonymous source, using the pseudonym “John Doe”, began leaking confidential documents about over 200,000 offshore companies listed by the Panamanian law firm and corporate service provider Mossack Fonseca. 11.5 million confidential documents have now been leaked to the press by “John Doe”. These documents contain detailed financial information about offshore investments, including the identities of shareholders and directors of offshore companies.
There are numerous reasons why an individual may want to set up an offshore company and most of these are entirely legal. Naturally, however, “man structures affairs sensibly” does not make the headlines and the press so far have focused on the illegal uses of offshore companies: fraud, drug trafficking, money laundering and tax evasion.
As a result of the stance taken by the press, the mere publication of the identity of an individual shown to be using an offshore structure, even if it is legitimate, could cause significant damage to that individual’s reputation. There are a wide range of legal remedies available and, as always, the devil will be in the detail.
The individuals exposed by these leaks may have claims against Mossack Fonseca in negligence, breach of confidence and breach of data protection legislation for failing to secure their private and confidential information. The focus of this article, however, is to consider what your legal rights and remedies may be if this type of information is published to a wider audience, for instance in the local or national press, or on social media networks.
If an allegation is published that an individual is corrupt or is engaged in illegal activities then this is likely to be defamatory. If the allegations are untrue then it could be worth considering bringing a claim in libel against the publisher. Remedies in libel include the removal of the allegations from online sources, the publication of a correction, an injunction restraining further publication and a payment in damages. Of course, if the allegations are true then the publisher will have a complete defence.
Another defence that the publisher may seek to employ is that their publication is in “the public interest”. This is a more complex legal argument and the success of such a defence could depend upon whether the individual exposed as being involved in an offshore structure is in the public eye and what their stance has previously been on offshore tax avoidance schemes. For instance, if the individual is a politician and he has previously been outspoken on the subject of tax avoidance (even by legitimate means) then it may be deemed to be in the public interest to correct a hypocritical public image.
Publishers may seek to avoid liability by simply publishing the facts without any commentary. The problem they will face is that entirely lawful tax planning and unlawful tax evasion are, in the current climate, perceived by some people to be morally equivalent. An article simply setting out the facts may therefore be understood by a member of the general public to be imputing an allegation of dishonesty or corruption. This is especially the case if a link is drawn in the article between the individual involved and someone who is already known to be corrupt or disreputable. Placed in this context, even the mere publication of the facts could potentially be defamatory.
Another cause of action that should be considered is breach of confidence. The Panama Papers are confidential legal documents and they are likely to be covered by legal advice privilege. A claim for breach of confidential information will face a variety of legal hurdles. The starting point is that if the documents complained of reveal a dishonest intent, such as tax evasion or fraud, then legal advice privilege will not apply. In addition, as these activities are illegal there will be a public interest in exposing them.
The position is less straightforward where the documents concern activities that are plainly legal. This will include many offshore tax planning activities, and yet it could be argued that tax avoidance schemes (particularly the more aggressive ones) will also fall within the public interest in the current climate. This is because the recent media coverage has generated a public debate about this issue. At the moment, this remains a grey area and it is likely to be a key battleground in the reputational sphere in the coming months.
Whether publishers can successfully deploy a public interest defence will depend on the facts in each case and, in the context of the ongoing public debate about tax planning, avoidance and evasion, individuals would be wise to proceed cautiously and take legal advice before responding to reputational threats.