Posts Tagged Privilege
The RBS rights issue litigation: A missed opportunity for choice of law re privilege to go up to the UKSC.
Update 6 January 2018. Thank you Gordon Nardell QC for signalling that the CA has given leave to appeal in  EWHC 1017 (QB) Serious Fraud Office (SFO) v Eurasian Natural Resources Corporation Ltd. The issues there are summarised by Gordon’s learned friend Christopher Newman here. Appeal in SFO v ENR will give an opportunity to the Court of Appeal to address many of the same privilege issues – although not perhaps lex causae.
Welcome to this end of 2018.
Thank you Kate Wilford for flagging  EWHC 3161 (Ch) The RBS Rights issue litigation. The litigation concerns a rights issue of shares in the Royal Bank of Scotland (“RBS”) which was taken up in 2008. By the various actions, shareholders in RBS seek to invoke statutory remedies against RBS under the Financial Services and Markets Act 2000 (“FSMA”) whereby to recover substantial investment losses incurred further to the collapse of RBS shares. The prospectus for the Rights Issue was argued not be to accurate or complete.
The case at issue was held December 2016 but has only now come to my attention. Of note to this blog is one of the three issues that were sub judice: whether RBS is entitled to rely on the federal law of the USA as the law applicable to the particular issue, and if so, whether under that law the claim of privilege is maintainable: Hildyard J referred to this as “the Applicable Law Point”. It is discussed under 129 ff.
As Kate notes, the issue was concerned with the availability of legal advice privilege over records of interviews conducted by US lawyers in a fact-gathering investigation. RBS contended that the English court should have applied US privilege rules, which would have afforded the interview records a much broader degree of protection against disclosure.
I reviewed privilege and applicable law in my post on People of State of New York v. PriceWaterhouseCoopers, albeit that in that case the toss-up was between different States’ law, not federal law. Hildyard J discusses the English 1859 authority Lawrence v Campbell: lex fori applies. Particular attention is paid to the in my view rather convincing arguments of Adam Johnson (who has since taken silk) as to why this 1859 authority should no longer hold, see 145-147. Yet his arguments were all rejected, fairly summarily. RBS’ lawyers proposed an alternative rule (at 137): “Save where to do so would be contrary to English public policy, the English court should apply the law of the jurisdiction with which the engagement or instructions, pursuant to which the documents came into existence or the communications arose, are most closely connected.”
Rome I or II did not feature at all in the analysis – wrongly I believe for there could have been some useful clues there and at any rate the applicable law rules of the Regulations certainly apply to the litigation at issue and should have been considered.
Now, there seems to have been consensus that the case was Supreme Court material – however RBS did not pursue the point. We’ll have to wait therefore until another suitable case comes along which I imagine should not be too long in the making.
(Handbook of) European Private International Law, 2nd ed. 2016, Chapter 1.
Comparative conflict of laws is often a useful source for exam (essay) questions. I used People of State of New York v. PriceWaterhouseCoopers, LLP, No. 3685N (N.Y. App. Div. May 23, 2017) to ask my students to surmise how an EU-base court would judge the issue raised.
Keith Goldberg over at LAw360 has the following great summary:
A New York appellate court [.. ] upheld a decision to force ExxonMobil’s outside auditor PricewaterhouseCoopers LLP to comply with New York Attorney General Eric Schneiderman’s demand for documents in his probe of whether the oil giant lied to investors about the climate change risks to its business.
The Appellate Division backed state Supreme Court Judge Barry Ostrager’s Nov. 26 order that PwC turn over documents related to its audit of Exxon subpoenaed by Schneiderman, saying the judge correctly held that New York law, not the law of Texas, where Exxon is headquartered, applies to questions of evidentiary privilege and that the Empire State doesn’t recognize accountant-client privilege.
Mr Ostrager’s decision is here – it has more choice of law considerations than the appelate court’s order. Eversheds have excellent analysis here of the overall issue of considering applicable law for privilege under the first and second restatement of the law. In the case at issue, ExxonMobil as well as the documents disclosure of which is sought (such as projected carbon costs and their application to Exxon’s capital allocation decisions, as well as documents provided to Exxon by PwC concerning the auditor’s role in compiling Exxon’s submissions about greenhouse gas emissions for the Carbon Disclosure Project, a nonprofit that collects information on greenhouse gas emissions) are based at Texas. But the trial is underway in New York.
Now, to the essay Q: how would an EU-based court hold on the issue? (For the purpose of last week’s exam I had a Belgian court rule on the issue, with the oil company based at Belgium, and the accountant at England, with the agreement between company and accountants subject to English law.
I am marking these exams later this week and hope to read some or all of the following: reference to overall principle that procedure is subject to lex fori; that statement being of little use in a system (like the EU) that thrives on predictability: for what is procedure to one, is substantive law to another; arguments existing both pro this being procedure (closely tied up with evidence, clear links with public policy) as well as substantive (privilege despite its public nature also protecting private, including commercial interest; parties wishing to manage the issue of sensitive information and forum); need for autonomous interpretation and tendency within the EU to define the ‘scope of the law applicable’ (eg both in Rome I and II); no trace in said Regulations of privilege being included in the scope of law applicable.
As always, I am hoping for students to surprise me. Undoubtedly they will.
It must be those late nights spent marking exam papers. (Thank goodness there is the World Cup to take the edge off that exercise this year). Either that or generally the twisted mind of a conflicts lawyer. I can see one or two conflicts issues in Chinachem which the Hong Kong High Court did not pick up on: probably because parties did not raise them and /or because the dispute was not ‘international’. In which case, let’s call this blog posting Fantasy Conflicts.
In Chinachem Financial Services v Century Ventures Holdings Ltd, the Hong Kong High Court held on the issue of implied waiver of privilege. Gareth Thomas and Dominic Geiser have a summary of the case here, including a review of its implications in Hong Kong dispute resolution. It is the discussion on waiver of privilege which is of interest to this blog. Both parties to the dispute are PRC (Mainland) based. They entered into an agreement whereby defendant would assist with the appeals stage of a dispute between plaintiff and third party. After a short while, disagreement ensued on the scope of the advice and plaintiff took legal advice from a Hong Kong based law firm but with international roots. This legal advice was later handed over to defendant by Plaintiff’s former CEO, in an alleged breach of his fiduciary duties. Did the hand-over and alleged partial use of the advice in the proceedings amount to waiver of privilege?
Ramanathan SC (at 130 ff) reviewed US, Australian, and English precedent (in particular Paragon v Freshfields and subsequent case-law) and in the end opted for the English approach. In doing so he presumably applied lex fori to the waiver issue, it being procedural? (And without consideration of the intervening nature of the lex causae of the contract between the law firm and plaintiff, or third party effect thereof. Lex contractus of this contract may well have been English given the roots of the firm involved. Lex contractus for the agreement between the parties presumably was ‘Chinese’ or ‘Mainland Chinese’). In this case, the open-minded comparative law approach is commendable (and of particular note, the fact that the judge opted for the English approach citing inter alia human rights impact and related relevance to Hong Kong (at 135)).
Finally, the Hong Kong proceedings were started 7 March 2013. Proceedings by defendant on the mainland, seeking essentially the reverse of plaintiff’s action in Hong Kong, had been initiated ‘early 2013’ (at 21). Yet any form of lis alibi pendens does not seem to have been entertained – presumably because mainland China generally has no structured approach to lis alibi pendens and Hong Kong is not willing to employ one unilaterally.
Fantasy over. Back to marking exams. Geert.