Lord Neuberger (pictured), in a recent short speech, provides some interesting insights in to the problematic world of legal advice privilege (LAP), but he does so with one eye closed. Let me explain.
He begins with this:
Although the need for LAP where no litigation is contemplated or exists has been judicially doubted [he is referring to Lord Phillips], these principles are well established, and they appear to be workable and clear. And so they largely were in the world in which they were developed, a world so different from ours in many ways. We now live in a world which has global electronic communications, instantaneous international transactions, criminalisation of bribery and cartelism, detailed regulatory systems, increased investigative powers, large and international and complex corporate structures, and, it must be said, highly sophisticated financial and economic fraud. And we live in a world where the law of privilege as developed by judges is modified on a rather ad hoc basis by legislation, and is subject to a number of different sets of published official guidelines.
He mentions the problem of legal advice is given by non-lawyers (and averts to the Prudential case, perhaps regretting – although he does not say so -the way in which the Supreme Court ducked the issue) and then begins to suggest, intriguingly, that legal professional privilege (LPP) may be out of date:
…it is plain even to me that many aspects of modern commercial and legal practices give rise to potential problems in relation to LPP. Particular problems appear to have arisen from the marked increase in the domestic and international fields when it comes to regulatory and criminal sanctions in the corporate environment.
He discusses cross-border co-operation between lawyers when applying the protection of common interest privilege, and whether the US originating practice of a written joint defence agreement provides the protection of privilege. It is, he says simply, an, ‘open question and has never been tested.’ In the context of corporate clients he points out, advice privilege only applies to communications between a lawyer and the corporate client rendering the question, ‘which individuals constitute “the client”?’ important. He accepts the position that, ‘LAP does not appear to attach to communications between the solicitor and employees or agents of the corporate client, other than the individuals actually being advised by the solicitor – e.g. the chairman, the CEO, the COO, and the CFO, or the executive committee, or a group specially designated by the board or the CEO or chairman,’ but also notes that other common law jurisdictions take a much broader approach to the client. In a Francis Urquhart kind of way, he invites someone to bring an appeal to allow the Supreme Court to ‘consider’ the point.
He also then points out that, in cases where litigation privilege does not apply to internal investigations, there is no privilege in communications with witnesses other than the client. This would I think be pretty much all such investigations where litigation is not imminent. He seems to say, work out in advance which group of executives constitutes the client and don’t game that approach too hard and the court will probably regard this as satisfactory – protecting the interviewing of those employees [the senior executives] with privilege. Not particularly edifying, but sensible advice unless one takes the potential for intra-corporate conflicts of interest over such investigations seriously. This is a point which he does not even mention (in the twenty minutes he was allotted for his speech). An investigation that reports to all the subjects of the investigation as the client is an odd kind of independent investigation. An investigation that interviews beyond that group is not subject to privilege, at least in part. What is the rationale for this kind of mess?
He moves on then to look at the approach of the SFO when they look for ‘a genuinely proactive approach’ to investigation and self-reporting. I take him to be saying that the SFO requires a difficult decision by the Corporation that finds itself at the centre of wrongdoing as to whether to waive LPP. Lord Neuberger points out, this, ‘is a very valuable right, and it is a big and irrevocable step to waive it.’ Whilst also going on to point out the many uncertainties around contested privilege claims. He points to Barclays’ reported (but until then expensively hard fought) surrender of privileged documents:
it is unclear why the privilege argument was being abandoned – whether it is the fraud exception, or the absence of the dominant purpose requirement or fact that the documents were outside privilege because of Three Rivers (No 5) is unclear.
Tempting as it is to say otherwise I solemnly remind you here that you should not make your mind up until you know all the facts. But how will you (or the SFO or the court) know all the facts? If you do not know all the facts, what should your working assumption be? Given burdens of proof and the like, this probably means giving the bank the benefit of the doubt.
He also points out that investigations in the context of cartel offences give rise to a defence that (section 188B(3)) the person concerned:
‘took reasonable steps to ensure that the nature of the arrangements would be disclosed to professional legal advisers for the purposes of obtaining advice about them before their making or … implementation’.
He assumes that to rely on such a defence would require a comprehensive waiver of privilege, covering all the documents related to the seeking and giving of the advice. Criminal practitioners accustomed to advising (sometimes) less sophisticated punters on the dangers of waiving privilege when asserting a right to silence might be thinking, boo bloody hoo. But Lord Neuberger stills those crocodile tears, by going on to muse on giving the company human rights protection. The statute might be read as weakening LPP by mere (but sensible) implication, he suggests, but the fundamental human right of LPP may stop arguments about implied waiver from succeeding. This is an approach which, if adopted, will encourage a market for bad advice of the kind that Jolyon Maugham QC has so clearly criticised in tax law.
Lord Neuberger ends with this simple plea:
I believe that this takes me to my 20-minute limit, but, before I stop, I would like to say that this short tour de piste of what is only a few aspects of the law of LPP gives rise to two feelings on my part. The first is how difficult the role of a professional adviser can be in an increasingly complex and fast moving world. So often, she is faced with a problem which not only is hard to answer and requires a quick answer, but is one to which there is no safe answer: go wrong one way, and she will be advising her client to break the law; go wrong the other way and she will be unnecessarily disadvantaging her client. Secondly, and concomitantly, judges and legislators have to try harder than ever to ensure that the law is simple, clear and accessible.
I must say, and with all due respect, and as much mildness as I can muster, that this is a rather disappointing way to frame the question. The motivating concern appears to be the position of the adviser. In official justifications of legal professional privilege, especially legal advice privilege, the justifications are most definitely not supposed to be centred on the needs of the adviser. The academic literature, imperfect as it is, points out that the historical origins of privilege and some of its application mean privilege has been developed with too keen an eye on the protection of lawyers. If you want a little clue as to the recognition of this, notice from now on how often a judge or similar reminds the audience that privilege is the client’s right, not the lawyers. They do that for a reason. Lawyers need reminding of it.
Notice also what is missing from this lecture. Lord Neuberger speaks of what he knows, with his audience on the night in mind. He was also invited only to give a very brief speech. So I am not wishing to sound censorious, but I do think there is a very large and unheard part of the story missing here. That story would include:
-The significant anxieties expressed by, inter alia, the director of the SFO about how privileged internal investigations have the effect of cleaning up crime scenes;
-The ways in which corporate investigations can be used to mislead investigators (the News of the World’s interactions with the Culture Media and Sport Select Committee being a particularly well exposed one but similar if less acute problems are often seen in practice).
-The role that privilege played in the approach of General Motors’ to its recent ignition switch problems. In that case, privilege may have literally contributed to lost lives.
-The role that privilege played in Big Tobacco’s attempts to conceal document destruction in Tobacco litigation. There’s a fascinating Court of Appeal case on very troubling facts decided by Brooke LJ which makes fascinating reading.
Such examples are not the whole story, and are emotionally loaded, but they are absolutely vital nonetheless. I have resisted the urge many times since the creation of this blog to write about the pros and cons of privilege. It is an idea too engrained in the profession, and artificially elevated by judges and I have not made up my mind about the pros and cons, so why take it on? Even suggesting legal advice privilege is wrong is likely to lead to an exaggeratedly hostile reaction. I haven’t got the energy for the grief.
Yet, I do not think the case for legal advice privilege is as clear or obvious as the profession plainly would like it to be. Legal Advice Privilege is useful. Legal Advice Privilege is harmful. Legal Advice Privilege is abused. Legal Advice Privilege protects. Legal advice privilege in corporate contexts however does not protect the individuals if the corporation decides to waive it. Furthermore, the need to encourage the corporation to take legal advice when it otherwise would not, which is one part of the justification, is somewhat weaker in corporate contexts. The arguments about privilege supporting trust building between lawyers and corporate actors holds some water, though a good deal of that same water leaks out when one understands how vulnerable corporate employees can be to the ‘real’ client waiving privilege.
There is a particular case for reconsidering LAP in the light of the complexities and uncertainties that Lord Neuberger identifies but one simple answer would be to abolish it. Or abolish it for companies. Or abolish it for companies when relying on lawyers as reputational intermediaries.* Other answers might be to strengthen and clarify the exceptions. Or to think very hard about what independent investigations carried out by legal professionals should really look like. I really do not know. I am not advocating a position, but I think we should think about the issue from a wider perspective than ‘this makes the lives of lawyers difficult’. This kind of difficult decision is what the £1,000 an hour rates are for. The substantive harms caused by privilege may or may not be outweighed by the benefits of privilege, for advice, in the corporate context: but we at least have to weigh those harms properly.
—
*Okay that one may not be so simple.
Richard Moorhead is professor of law and professional ethics at UCL Faculty of Laws and director of the Centre for Ethics and Law. He blogs at Lawyer Watch. Follow Richard on Twitter.
