A regulator's demand for documents - whose privilege is it anyway...?
A recent decision of the English High Court - A v B, The Financial Reporting Council Limited - deals with an interesting issue of privilege in relation to regulatory investigations and enforcement. Clients of any regulated service providers with whom privileged documents are shared should pay particular attention to the terms of their engagement; they should ensure they are notified of regulatory demands for documentation which may be privileged.
In this case, The Financial Reporting Council Ltd (the "FRC") (the regulator for auditors in the UK) sought disclosure from the auditor of documents belonging to the auditor's client. Furthermore, the client claimed privilege over those documents. Matters ground to a halt, however, as there was a dispute between the auditor and its client as to whether the documents were, in fact, privileged.
The court did not grant the relief sought by the client (which basically sought clarification as to who was entitled to exert the privilege in the documents requested by the FRC). It would not be drawn on the specific terms of the declaration sought. However, the court did say that the auditor must form its own view on whether documents are privileged, whether the privilege is that of the auditor or its client. The court said that the statutory duty to disclose documents to its regulator was on the auditor and disclosure could only be refused on the grounds that a document was actually privileged. Mere assertion of privilege by the client was insufficient.
If the client disagrees with the service provider's analysis of privilege, then it will need to apply to court for an injunction preventing the service provider from giving the regulator the document. Whilst the regulator may, of course, ultimately be interested in what the court determines and might join that action, in reality this debate is one to be had between the client and the service provider.
This case may have wider impact on other areas of regulation such as in FCA-authorised businesses where the FCA utilises its powers to compel a regulated person to disclose documents. The question there would be whether the client's documents are "protected items" under section 413 of the Financial Services and Markets Act 2000. If the client and the service provider do not agree on a document's "protected" or privileged status, this judgment is likely to be "read across" so that the service provider has to make up its own mind whether to exert the client's claim to privilege. If the client disagrees, it will have to apply to court for injunctive relief, seeking to prohibit the service provider from disclosing the document to the FCA.
The key point to bear in mind as a client in mitigating this risk is to ensure that all of your contracts with regulated service providers include specific wording which protects your privilege. In particular, there should be an obligation which requires the service provider to notify you should they receive a regulator's request or demand for documents which relate to their engagement with you. That should start a dialogue in which you can ascertain and debate, hopefully in a grown-up manner, which documents might or might not be privileged. If the grown-ups cannot sort this amicably, at least you will then have the opportunity to seek the court's assistance in blocking the regulator's access to the documents by preventing the service provider disclosing it.
To find out more on how we can help you, please visit our Investigations page.
LIDW21: A view from London and India - How dispute avoidance can keep construction and infrastructure plans on track
Join us as we discuss the challenges of the possible rise in disputes in the construction and infrastructure sector in India
The Lawyer, New Law Journal, International Adviser, CDR Magazine and eprivateclient report on the firm's partner promotions
Charles Russell Speechlys promoted five lawyers to partner, effective 1 May 2021.
Recent Trends In Firewall Legislation: BVI, Bermuda And Gibraltar
Charles Russell Speechlys promotes five to Partner
The promotions are effective 1 May 2021 and are accompanied by one Legal Director and 15 Senior Associate promotions.
ICC 2021 Rules
The ICC has recently updated its rules for arbitration: the new rules entered into force on 1 January 2021 (the “2021 Rules”).
The Lugano convention – the journey continues
The UK’s departure from the European Union has had the effect of leaving the UK outside of the Lugano Convention of 2007.
Adding claimants pre-service and amending outside the limitation period: pitfalls for the unwary
Sonia looks at a recent High Court judgment and its important guidance on the ability of claimants to be added to a claim before service
Joe Edwards, Simon Heatley and Lauren Kelly write for Practical Law on damages-based agreements
Law firms entering damages-based agreements face a catch-22.
Damages-based agreements: an island of clarity in changing seas
Simon, Joe and Lauren look at a recent judgment which is a welcome island of clarity in the damages-based agreement sea of uncertainty.
Patrick Gearon FCIArb
Insolvency Legislation in the GCC
The interesting times of the last 14 months were preceded by the interesting times of the financial crisis of 2008/2009.
Guidance where Domestic Abuse alleged
Rhys Novak quoted by Citywealth on the ways companies can combat potential issues of fraud
Is fraud on the rise and should investors be wary?
Bribery & Corruption team successfully act in Italian bribery prosecution
Helen Coward, Hugh Gunson and Guy Bud write for Tax Journal on remuneration arrangements in partnerships with mixed membership
Odey Asset Management LLP and HFFX LLP consider the law relating to remuneration arrangements in partnerships with mixed membership.
Mind the gap? Enforcing transition-period UK judgments in Switzerland revisited
A decision on an application to apply the Lugano Convention after the end of the UK’s transition period.
The rise of cost sanctions in family law proceedings (even against successful parties!)
CIS General Insurance Limited v IBM United Kingdom Limited - An analysis
Slow and chaotic – lessons from a digital transformation disaster in CIS General Insurance Limited v IBM United Kingdom Limited.
Stewart Hey featured in The Lawyer's reporting on the post-Brexit disputes landscape in the UK
Post-Brexit, the importance of making sure contracts have certainty with regards to jurisdiction and enforcement has never been greater.
Ghassan El Daye
Ghassan El Daye quoted by The National on the Dubai courts rejection of Dh1.3m rent refund claim
A convenience shop in Dubai lost its claim to a rent refund of Dh1.3 million from its landlord on grounds of lost revenue during lockdown.
Warranties on an indemnity basis: a question of damages
John and Simon take an in-depth look at warranties on an indemnity basis