Privilege and limited waiver agreements in Ireland

Legal Professional Privilege (LPP) is a fundamental right but the exercise of this right often gives rise to tension between regulators and their regulated entities in the context of an investigation conducted pursuant to the regulators’ statutory powers. The regulator will understandably wish to obtain all relevant documentation and information, but may feel disadvantaged or ill-informed without obtaining access to documents which benefit from LPP.

The regulated entity is, of course, fully entitled to resist producing documents which enjoy the protection of LPP: courts have long recognised that doing so may mean that, just as with judicial proceedings, regulators are thereby deprived of all relevant evidence. However, in recent years there has been a growing sense or belief among regulated entities that they must disclose privileged material in order to be seen to be co-operative with the regulator – this is in addition to the deployment of arguments often raised by the regulator over whether particular documents truly benefit from privilege or where the privilege is said to have been waived or lost. Often in these scenarios limited waiver agreements or Fyffes’ agreements as they are often known¹ are suggested as the solution. This solution is presented as a way to provide these documents to the regulator on a confidential basis while still retaining LPP as against third parties.

By entering such agreements, the regulated entity fully discloses these documents to the regulator often with a view to (i) being seen to be co-operative (ii) showing that there was nothing untoward being hidden from the regulator and (iii) evidencing that the documents do, in fact, enjoy LPP.

Limited waiver agreements have become such an important and integral part of the regulatory environment in Ireland that the Central Bank of Ireland (CBI) is seeking to give a statutory footing to such agreements. As part of the General Scheme of the Central Bank (Individual Accountability Framework) Bill 2021 it is proposed to place such limited waiver agreements on a statutory footing (Head 33). The proposed section is to be inserted in the Central Bank (Supervision & Enforcement) Act, 2013 (the 2013 Act) as a new section 33A which in essence will provide:

• “That the person to whom the legal professional privilege belongs may enter into an agreement to provide the legally privileged material to the Central Bank"; and
• “That in providing this privileged material to the Central Bank, the privilege owner shall only be deemed to have waived legal professional privilege as against the Central Bank and not as against any other person. Further, there will be no deemed onward waiver of any other legally privileged information which has not itself been disclosed to the Central Bank”.

This is, it must be said, an innovative and far-sighted provision which is not to be found in comparable legislation in other jurisdictions. It is to be welcomed for putting onto a statutory basis (if implemented) the common law practice reflected in Fyffes agreements.

However, it is important to note that Head 33 of the General Scheme also provides that the legally privileged information provided under the limited waiver will be subject to the disclosure requirements pursuant to Section 33 AK of the Central Bank Act, 1942 (the 1942 Act). This simply gives a statutory recognition to the current position when documents are provided under a limited waiver agreement.

Section 33AK of the 1942 Act is the relevant gateway provision which obliges or permits the CBI to disclose material to other regulatory and like entities (sub-section 3 and sub-section 5). Accordingly, any limited waiver agreement in favour of the CBI places those documents and information at risk of further disclosure to a number of bodies/entities including but not limited to, other foreign regulators, the Revenue Commissioners, the Garda Siochana, the Joint Committee of the Houses of the Oireachtas etc. While such onwards waiver is likely to occur on terms that the recipient deal with the privileged materials in a way that preserves its underlying confidentiality and privilege, there must be some risk that the recipients may need to use this material, for example, in court proceedings, such as a prosecution. If that happens, then there is a high probability that the regulated entity’s privilege is thereby lost. In many cases, this may not matter, but it will if there are on-going parallel proceedings, as in Fyffes, and as in the PCP decision discussed below.

Risk of full loss of privilege as a consequence of Limited Waiver agreement

When evaluating whether or not to enter into a limited waiver agreement, it is essential to assess the risk of a possible loss of privilege resulting from such disclosure and the consequences of same. Such risk needs to be weighed up against the benefit perceived in entering into a limited waiver agreement. As noted, the new section 33A will provide a degree of statutory protection, but it is the onward transmission risks that bring the potential loss of privilege into focus.

Thus, while limited waiver agreements pursuant to section 33A are only intended to waive privilege as against the CBI and not third parties, such a waiver can still result in a full loss of privilege in certain situations. For example, in the UK, Barclays Bank disclosed to the Serious Fraud Office (SFO) privileged documents as part of a limited waiver agreement, albeit one which accepted that the SFO might well have to use those documents in criminal proceedings. This duly happened, with the result some of these documents were referred to in open court (the open documents) in the course of a prosecution brought by the SFO against former bank executives. Barclays then relied on the open documents and disclosed them to claimants who brought related civil proceedings against it (see PCP Capital Partners Llp (2) PCP International Finance Ltd v Barclays Bank Plc [2020] EWHC 1393 (Comm) (01 June 2020)).

However, Barclays’ own deployment of the open documents was held to amount to a waiver of privilege which led to disclosure of further privileged materials under the collateral waiver principles. In this regard, the claimants successfully argued that while the use of the documents in the prosecution was the result of a deployment decision made by the SFO alone, it was Barclays’ own actions in making them available to the SFO under a limited waiver agreement, which recognised that some or all of them would see the light of day at trial, that was the starting point for what happened at the criminal trial. Thus, Barclays’ subsequent use of them still amounted to a waiver of privilege and thus brought into play additional disclosure pursuant to the collateral waiver principles.

If documents are disclosed by the CBI to another entity under its gateway provisions, it is difficult to see how the regulated entity could stop this entity using their privileged documents in open proceedings. In this way, the documents could be lawfully disclosed by the CBI and those documents or parts of those documents may be made public resulting in the possible loss of privilege entirely.

Alternative Solution to a Limited Waiver?

Regulated entities will undoubtedly wish to maintain a good working relationship with the CBI and will understandably be keen to be co-operative and forthcoming with the CBI when engaging with them in an investigation. Often, the prospect of a limited waiver agreement arises where there is some dispute over whether the documents actually enjoy LPP or where there are arguments that LPP has been lost etc. In order to obtain certainty around whether such documents continue to enjoy LPP, there is a little-used mechanism by which to have this determined by the High Court: see Section 33 of the 2013 Act.

While an application under Section 33 of the 2013 Act may only be brought by the CBI, it remains open to the regulated entity to suggest this application is made to obtain clarity on the privileged status (or not) of the disputed documents. In an effort to save costs and maximise efficiency, it is worth (a) seeking to agree a timetable for the exchange of affidavits and legal submissions and (b) also suggesting that the CBI look to have an independent person with suitable legal qualifications appointed to examine the information and prepare a report for the Court as permitted under Section 33(5). Depending on the conclusion in this report, the parties may or may not decide to go to a full hearing of the motion.

This alternative solution does mean that the relevant documents may “lose” privilege – but if that arises because privilege was incorrectly claimed in the first place, then this hardly matters. Similarly, if such a procedure finds that privilege has been somehow waived. However, it does bring certainty to matters and if LPP is found to apply, the CBI will have the reassurance that an independent party has examined these documents and the facts surrounding same and found that they are indeed privileged. This should eliminate any uncertainty or debate about whether or not LPP is properly being asserted and help to lead to a constructive, transparent engagement with the CBI on these documents.

Experience in the UK- The Law Society Fightback

In the UK, a practice was emerging whereby some regulators applied pressure by appearing to suggest that yielding up privileged material was seen as a positive sign of co-operation (with the unspoken consequence that asserting privilege could be seen as a sign of non-co-operation). Such was the concern that this generated within the legal profession that The Law Society of England & Wales mounted a fightback against what it perceived as an erosion of the protection conferred by LPP and issued a strongly worded Practice Note, the latest version of which was issued in August 2021 (the Practice Note) see: https://www.lawsociety.org.uk/en/topics/client-care/legal-professional-privilege.²

Relevant extracts of the Practice Note reference how in recent years, LPP had come under attack. For example, it notes that from time to time concerns had been expressed as to whether lawyers might encourage clients to mis-use this right by advising them to assert LPP without any justifiable basis in order, for example, to hide evidence of their clients’ wrongdoing. These concerns were mostly misplaced and demonstrated a misunderstanding of the nature and scope of LPP, including its status as a right which belongs to the client and not the lawyer.

The Practice Note sets out that continued vigilance is required to build understanding of the status and value of LPP and to encourage legislators, regulatory bodies, and enforcement authorities to act in ways that actively uphold LPP as a right.

The Practice Note highlights that reliance on LPP should not be viewed as a means of encouraging the shielding of wrongdoing. In English (and Irish) law, LPP cannot arise where a lawyer’s assistance has been sought to further a crime or fraud, or other equivalent conduct. Rather, many of the circumstances where LPP applies are precisely those where individuals or corporations are trying to do the right thing through seeking legal advice in accordance with centuries of precedent.

The Practice Note sets out that any form of pressure to waive LPP or to conduct the client’s affairs so that LPP does not arise, is improper. Such pressure is said to undermine the absolute nature of the protection. The Practice Note goes so far to say:

• “Given that LPP is sacrosanct, and the law is clear that adverse inferences cannot be drawn from a client’s refusal to waive LPP, we consider that no regulator or investigator is entitled to exert pressure on a client to waive LPP.”

The Practice Note is comprehensive and gives definitive guidance on all issues surrounding LPP and seeks to send a very strong message to both regulators and regulated entities on the importance of LPP.

In fairness, The Law Society of Ireland has probably not had the need to adopt a similar stance to that taken by The Law Society of England and Wales but one hopes that it is aware of the Practice Note and that it would be willing to endorse it should the need ever arise. That said, if section 33A becomes law, and if we were to see in Ireland greater use of section 33(5), then maybe the need for such a note falls away. Otherwise, even with the benefit of the new provisions, practitioners who advise their clients on the pros and cons of limited waiver arrangements must keep in mind the pitfalls that arise, as in the recent PCP case.

¹ Fyffes plc v DCC plc [2005] IESC 3
² It is free to sign up to get access to the Practice Note and all that is required is an email address