The 'fitness for purpose' of the legal privilege regime is under question, notably in the context of regulatory intervention. So, has the time come for reform?
The ruling by the High Court in London earlier this week to grant the Serious Fraud Office access to sensitive documents generated by solicitors and forensic accountants and last year's ruling by the court in the 'RBS Rights Issue' litigation to order the disclosure of notes of interviews carried out by the bank's lawyers raise difficult and important questions for firms looking to defend their legitimate interests in the face of heightened regulatory scrutiny, such as:
- How can evidence gathered in an internal investigation into a suspected compliance breach be effectively protected from disclosure (if at all)?
- To what extent (if any) will forensic analysis carried out by independent experts in order to prepare for a regulatory investigation benefit from legal privilege?
At the moment, the answers to these questions have to be worked out from court rulings such as the two mentioned above (as well as older decisions of the appellate courts, such as the [in]famous 'Three Rivers' case), which is often very tricky bearing in mind that they are designed to resolve very specific disputes rather than to lay down general guidance.
There is, however, a much bigger issue at play: the legal principles which are being interpreted and applied in these cases have in turn been created by judges, in prior cases which date back many years and often relate to commercial disputes between private parties. And courts (as they themselves recognise) are not well suited to the job of legislating. This leaves the UK in a situation in which the protection of highly sensitive material in regulatory interventions is governed by a set of legal principles (notably those governing 'legal advice privilege' and 'litigation privilege') which were established many years ago without much (if any) reference to the modern realities of regulatory justice and which cannot readily be updated by the courts without treading on the toes of elected law makers.
So, is it now time for policy makers to take the initiative and embark on a reform of the legal privilege regime to take account of those modern realities? There certainly seems to be a pressing need at least for a thorough review. Whether action is actually taken on this topic is likely, however, to depend upon the willingness of firms (and their advisers) to make the case for change.