United States Supreme Court

Company directors will deal regularly with questions and issues that require some legal input, whether that comes internally or from private practice. Most will be aware that some legal communications attract privilege but less well-understood are the myriad pitfalls that can cause an inadvertent waiver of that legal protection. The post COVID-19 environment sees an ever-increasing volume of work, including board meetings, being carried out remotely by email and telephone or video conference, regulators aggressively policing company conduct and boards needing to justify corporate actions in dealings with suppliers, customers and employees. In times like these it is more important than ever that appropriate steps are taken to ensure that legal privilege is obtained and maintained where possible and appropriate to do so.

What is legal privilege?

Legal Advice Privilege

Legal advice privilege is perhaps the most commonly claimed privilege, yet it is also perhaps the most often waived, whether deliberately or unintentionally. Bad practice, which can result in documents or communications never attracting privilege in the first place or in privilege being lost, is all too easily adopted – particularly when working remotely.

Legal advice privilege will apply to any confidential communication or document created for the sole or dominant purpose of seeking, giving or recording legal advice. It is often the case that an in-house counsel will be involved in or privy to a broad range of discussions, issues and communications within their daily role, including attending board meetings and other senior level discussions. Many of those communications will not be related to legal issues at all but rather to commercial or other considerations. This multi-purpose role often results in a lawyer simply being copied into wide-ranging email chains. However, this common practice brings with it inherent dangers with regard to legal advice privilege.

It is a mistake to assume that, simply because a lawyer is copied into an email or takes part in a discussion, a communication is protected by legal advice privilege. Legal advice privilege will only arise when the sole or dominant reason for the document/communication is giving or receiving legal advice. Email chains covering a broad range of issues may not meet these criteria and legal advice privilege will not extend to attachments or enclosures unless they are privileged in their own right. Where legal advice is (or may be) required, it is therefore always advisable to address a separate email directly to the lawyer specifically requesting that legal advice.

Crucially, privilege will be waived where legal advice is disseminated too widely. This can apply both to internal circulation of the advice as well as to communications with third parties. Careful consideration should be given to who should be informed of the legal advice. In order to maintain privilege, advice should only be shared with those people who absolutely need it within their role at the entity to which the advice was given.

Such considerations must also extend to board meetings during which a variety of matters are likely to be discussed. If legal advice is given during a meeting, only those to whom the legal advice is relevant should be present for the discussion and separate minutes should be taken for privileged and non-privileged matters. A discussion of the agenda with the attending lawyer prior to the meeting should prove a simple way to assess and split up the discussions as appropriate.

Finally, care must also be taken in referring to legal advice having been sought. It is often tempting to support a decision by noting that legal advice had been taken on the point, however, a reference to that advice, even indirectly, could amount to a waiver of privilege. Should any issues arise subsequently, you may be required to disclose the advice itself, which is often far more equivocal than suggested when reference was made to it.

Litigation Privilege

Litigation Privilege will protect any confidential document or communication created for the sole or dominant purpose of pending or existing litigation. Its protection covers documents or communications between a company/its representatives and third parties who are not lawyers, for example accountants or other advisors. It would not, however, cover a board’s purely commercial discussions, whether internally or with stakeholders, about settlement of a dispute.

Documents or communications in relation to internal or regulatory fact finding investigations are not considered to be protected by litigation privilege – regulatory proceedings will not be considered to be “litigation” unless and until they become adversarial.

The key consideration for the application of litigation privilege is the purpose of the document or communication. So far as possible, issues that relate to a potential litigation must be separated from any other issues discussed. As with legal advice privilege, it may be necessary to record separate board minutes or to reduce the recipients of emails or documents.

Common Interest Privilege

Where a communication is produced by one party for the purpose of obtaining legal advice or to assist in the conduct of litigation, a second party may be able to assert a right of privilege over that communication if it has a common interest in the advice or litigation. Common interest privilege can be particularly relevant to group companies and in more complex corporate structures. However, the question of whether common interest privilege arises is often complex and will be determined by the individual circumstances of each case. As such, it is often worth seeking specific legal advice.

The do’s and don’ts

As can be seen, legal privilege is not a straightforward area and an inadvertent waiver of privilege can prove highly embarrassing or worse for the unsuspecting board or individual director. The implementation of an internal “privilege protocol” may be seen as a good governance and risk management matter but even without one there are some simple precautions that can be adopted to help create and protect privileged documents and avoid unintentional waiver.

  • Consider the main purpose of a communication or document – think twice if it relates to a potential litigation or to legal advice.
  • Limit the recipients of any communications relating to legal matters.
  • Where seeking legal advice, address the query directly to the lawyer, label it as privileged and state that you are seeking advice.
  • Produce separate minutes or notes of discussions of privileged and non-privileged issues and send separate emails covering legal and commercial matters.
  • Do not refer to legal advice that you have received.
  • For non-privileged communications, do not write down something that you would not be comfortable having read out in court or reproduced in a regulatory report.
  • Ask! If you have any concerns or queries around how to record the giving and receiving of legal advice or are interested in preparing a privilege protocol Squire Patton Boggs will be happy to advise.