A privileged position15 October 2020

The English Commercial Court has confirmed that English rules on legal privilege extend to protect communications with in-house lawyers irrespective of their location or country of qualification. The generous approach of the English courts to legal advice privilege was set out in PJSC Tatneft v Bogolyubov & Ors¹. The judgment is a welcome clarification of the law in this area and will reassure foreign companies and their in-house counsel that, if they are engaged in litigation or arbitration in England, their legal advice, and the communications in respect of that advice, should be protected by privilege and need not be disclosed during a dispute. In contrast, the position in some continental European jurisdictions may be less clear cut.

Background

Tatneft, one of the largest oil producers in Russia, had brought a claim in England against four Ukrainian businessmen, alleging that they had taken part in a dishonest scheme to misappropriate substantial sums which should have been paid to Tatneft.

An order was made for standard disclosure and in the usual way – Tatneft made a disclosure statement in which it asserted legal advice privilege over correspondence and other documents passing between it and its legal advisers for the purpose of requesting or giving legal advice and assistance. In correspondence, Tatneft confirmed that this included communications between its employees and officers, and members of its in-house legal department.

The second defendant challenged the claim to privilege in respect of the communications with Tatneft’s in-house lawyers and sought specific disclosure of those documents.

The extent of legal advice privilege

The “cards on the table” approach to litigation in England and Wales means that parties are obliged to disclose supportive and adverse documents to their opponent in the course of a dispute. However, legal advice privilege entitles a party to withhold from disclosure confidential communications between a client and its lawyer created in order to give or seek legal advice. The rationale behind the principle is that it is in the public interest that clients can obtain legal advice and that these communications should be kept confidential.

The question of whether a document is covered by privilege in English litigation or arbitration seated in England is a question of English law, as the law of the forum, and it is established that legal advice privilege can extend to foreign lawyers². However, the second defendant contended that the privilege only applies to foreign lawyers who are “appropriately qualified” and since, under Russian law, the equivalent legal concept of “advocate’s secrecy” does not apply to in-house lawyers, Tatneft’s in-house legal team based in Russia were not appropriately qualified.

Noting the comments of Lord Justice Neuberger in R (on the application of Prudential plc and Anr) v Special Commissioner of Income Tax³ that the English courts have extended legal advice privilege to all foreign lawyers, apparently without regard to national standards or regulations as a precondition to the recognition of privilege, Mrs Justice Moulder rejected this argument. The English view is that it is the “function” of the relationship between the lawyer and the client, and not the “status” of the lawyer, which is relevant in the case of foreign legal advisers. The judge noted the uncertainty that would result if, even where there was a relationship of lawyer and client, the court had to go further and examine particular national standards or regulations to determine in a particular case whether a party’s communications with their lawyer were protected by privilege, not to mention the issues of comity that would result if the English court were obliged to express views on the qualifications and regulation of foreign lawyers. Indeed, this case demonstrated the unfairness and inconvenience that would result from such a rule, since on the defendant’s case all in-house lawyers and a large proportion of other lawyers working in Russia would be excluded from the rule.

As to whether the position was any different in circumstances where the foreign lawyer was also an in-house lawyer, the judge observed that it is clear that in English law legal advice privilege applies to communications with in-house lawyers, and suggestions that such lawyers are not sufficiently independent have been firmly rejected by the English courts⁴. Once it was accepted that the English courts will not investigate if a foreign lawyer is regulated, the inclusion of foreign in-house lawyers followed as a matter of both logic and principle.

Uncertainty in the EU after Brexit transition period

The situation after expiry of the Brexit transition period does not appear to be so clear cut in a number of EU jurisdictions. EU rules on the recognition of home state titles mean that courts and tribunals in Member States apply their rules on privilege equally for all lawyers qualified in any Member State. Once the transition period expires, courts and tribunals in Member States will no longer be bound by those EU rules as regards English-qualified lawyers (and possibly even EU-qualified lawyers practising in England). Instead, those courts and tribunals are expected to apply their own national rules, unfettered by the EU rules, on the question of whether communications with an English-qualified lawyer will be treated as privileged. Some courts and tribunals may treat such communications differently to comparable communications with EU-qualified lawyers.