‘In the Public Interest’ legal professional privilege
This submission looks at the issue of legal professional privilege (“privilege”) and whether its scope should be extended to other advisers. In particular, we consider the potential impact of such extension on the Public Interest Disclosure Act 1998 with regard to deterring and addressing corporate wrongdoing.
Of the 3 options set out in the Consultation Paper (see paragraph 119) we would recommend the preservation of status quo, affirming the public interest in preserving privilege. If notwithstanding this, the Government find it necessary in the interests of competition to alter the status quo, we recommend that privilege is limited to litigation privilege. We do not recommend the extension of privilege to other professionals on the basis that it would inhibit the disclosure of corporate fraud and other wrongdoing. Finally, although not considered in the consultation paper, we discuss the position of privilege in, and the impact of any extension of privilege on, the Public Interest Disclosure Act 1998.
In case you are not aware of this organisation, I start by explaining our work and approach.
Public Concern at Work
Public Concern at Work (PCaW) is an independent public interest charity and was launched in 1993. We have four main activities:
- Providing free confidential legal advice to people who are unsure whether or how to raise a concern about wrongdoing in the workplace;
- Training and supporting organisations on whistleblowing and accountability;
- Educating the public that there are safe alternatives to silence; and
- Informing public policy in areas of governance and regulation.
Within two years of our launch, our approach to whistleblowing (set out in the enclosed review) had been endorsed by the Committee on Standards in Public Life and by the Audit Commission. In 1995 and 1996, MPs asked us to prepare and promote draft legislation on whistleblowing, which was strongly supported by the then opposition. In its White Paper The Governance of Public Bodies, the last Conservative Government described us as ‘the leading organisation in this field’.
In 1997, the new Labour Government asked us to assist it and Richard Shepherd MP in formulating, consulting on and promoting the Bill which became the Public Interest Disclosure Act 1998 (PIDA). While technically a piece of employment law, this legislation was and remains supported by the CBI, IoD and TUC. For our work on PIDA, Lord Nolan commended us in Parliament ‘for so skilfully achieving the essential but delicate balance between the public interest and the interests of employers’. The Government has restated its strong support for PIDA, as a framework for responsible public interest whistleblowing designed to deter wrongdoing and increase organisational accountability, and amended both the Employment Act and the Police Reform Act in consequence.
The intended effect of PIDA is to reassure people in the workplace with genuine concerns about wrongdoing that there is a safe alternative to silence. In practice, it enables and guides them to raise such concerns internally, or where necessary, with an appropriate authority in a way that is both open and responsible. The consequence is that PIDA can help embed within an organisation a culture where the organisation is more keen to deal - and be seen to deal - properly with such genuine concerns. The Act works in this way to deter, as well as detect, malpractice.
Though it is still early days - the Act has been in force for 3 years - it appears that the cultural, legal and practical effects are much as intended. No tide of claims has in fact been generated and there have so far been some 400 PIDA claims registered a year.
The legal and practical advice that we provide to whistleblowers through our helpline is based on PIDA and this in turn informs our public education, training and consultancy work, where we explain and promote the Act. The role of this charity in monitoring how the Act is working in practice (albeit greatly thwarted by the new secrecy of the Employment Tribunals’ Register1), means that we are seen by many as the guardians of the Act.
In this role, and as lawyers in a public interest charity, we hope you may find helpful our comments on any possible extension of privilege and its impact on the deterrence and detection of wrongdoing.
In this response we do not differentiate between the extension of privilege to tax advisers and accountants from its extension to other professions, and so comment on the following issues:
- What Government action would you recommend or discourage relating to the extension of legal professional privilege to tax advisers and other professionals? (Questions 44 and 50)
- If privilege is to be extended to communications with accountants, tax advisers and other professions, what additions to their training and code of ethics would be necessary? (Questions 42 and 48)
1) What Government action we recommend relating to the extension of legal professional privilege to tax advisers and other professionals?
1.1 Below we comment on the options set out in the consultation paper
1.1.1 Preserving the Status Quo
We agree with the Government’s position on privilege as set out in the Consultation Paper (see paragraphs 116-118) that:
- privilege is the cornerstone of the legal system;
- as described by the House of Lords, the doctrine of privilege is “a fundamental condition on which the administration of justice as a whole rests”; and
- the fundamental nature of the doctrine has been recognised within the European Convention on Human Rights2.
This position, rightly in our view, affirms the public interest in preserving privilege as some sort of super-confidentiality which applies to the information a client tells a lawyer and the advice he receives in consequence. This privilege is the client’s - not the lawyer’s - and it is subject to waiver by the client and, we understand, to a very narrow public interest exception (such as where the communication was to perpetrate a fraud).
1.1.2 Restricting privilege
We accept the public interest in competition. Notwithstanding our recommendation above, if the Government decides to change the status quo in the light of the OFT report, we would submit that the scope of privilege should be limited to litigation privilege. This would remove any competitive advantage privilege may afford lawyers as to providing services for which litigation is not the dominant purpose.
1.1.3 Extending privilege
The work of this charity is based on the public interest that information about wrongdoing should be raised and addressed internally and, where appropriate, disclosed outside in a lawful and responsible way. Over the years the courts have balanced this public interest with the public interest in the preservation of confidence and developed the doctrines that “there is no confidence in iniquity”. This balance is also reflected in the statutory scheme set out by Parliament in PIDA.
It is our submission that the public interest in the disclosure of wrongdoing should not be fettered, unless there are clear, convincing and compelling public interest grounds for doing so. We do not consider that any public interest in addressing any competitive advantage which lawyers may have over other advisers meets this test in whole or in part.
In the post Enron/ WorldCom climate, attention is focused on the auditors, accountants and, to a lesser extent, lawyers of companies who were - or should have been - aware of the wrongdoing. Furthermore, whistleblowers played a key role in uncovering both scandals. The increased emphasis on disclosure is evident in the provisions of the Sarbanes-Oxley Act 2002, the US legislation enacted in the wake of those scandals which provide a general right to disclose to the US Securities and Exchange Commission (SEC) and penalties for companies that retaliate against whistleblowers. Apart from these legal changes consequent on Enron and WorldCom, the practical fall-out is also relevant to this issue. It seems clear that the future structure is one of greater delineation among and within professions - ie auditors split from accounting consultants etc. - and so extending privilege would be a move in the wrong direction.
As to wider policy, we reach the same view. At a time when government here and abroad are looking to raise standards of ethics and probity in accounting and financial sectors so as to reduce the risk of major scandal, we see serious disadvantage in impeding effective controls and undermining accountability by increasing the ambit of privilege.
For these reasons, we oppose the extension of the doctrine of legal professional privilege to tax advisers, accountants and other professionals as it would at worst prohibit - and at best confuse - these professionals role in deterring or combating serious wrongdoing. For example, if accountants suspect some significant financial malpractice but this information is protected by privilege, they will have less leverage to raise or pursue the matter with the client effectively. Additionally they would have less scope to assist with any subsequent inquiry.
Since we started in 1993, our helpline has received calls from over 2500 whistleblowers. Accountants who call our helpline are often confused about whether they have a duty to disclose wrongdoing and whether this conflicts with duties of client confidentiality. The duties to which accountants refer include specific statutory duties (eg under money laundering legislation), regulatory duties (under FSA rules) and duties under professional codes of ethics. Professionals in the financial services sector are also aware that the FSA promotes its whistleblowing line. Given this existing confusion we discourage any extension of privilege, as it can only further impede the willingness and ability of professionals to challenge or, where necessary, report wrongdoing.
2) If privilege is to be extended to communications with accountants, tax advisers and other professions, are additions to their training and code of ethics necessary?
If notwithstanding our submissions above, there is to be an extension, we agree that it would be vital that there should be thorough and unambiguous references to and advice on it in codes of ethics and that this should also form part of training.
3) Public Interest Disclosure Act and legal professional privilege
Although the Consultation Paper does not invite submissions on other aspects of privilege, we would like to take this opportunity to draw your attention to one aspect of it under the Public Interest Disclosure Act 1998 (PIDA) which we consider merits amendment. In particular if there is to be any extension of privilege, we urge the Government to ensure that any legislation is expressed so as to minimise any damage to the PIDA regime.
3.1 The Current Position
PIDA protects workers who make certain public interest disclosures. There are two key elements. First the information must be a qualifying disclosure and, if so, it must have been disclosed in one of several ways that attract statutory protection.
A qualifying disclosure is, put simply, one where the worker reasonably suspects some crime, illegality, danger or other wrongdoing. The Act specifically excludes from this definition information subject to legal professional privilege:
“A disclosure of information in respect of which a claim to legal professional privilege (or, in Scotland, to confidentiality as between client and professional legal adviser) could be maintained in legal proceedings is not a qualifying disclosure if it is made by a person to whom the information has been disclosed in the course of obtaining legal advice.” [section 43B(4)]
This provision means that if a legal adviser cannot be compelled in court to give evidence about a matter, neither he nor the staff in his office can be protected under PIDA for disclosing that information. Although not litigation privilege, there is an additional caveat that the information must have been communicated to the lawyer for the purposes of obtaining legal advice.
This subsection shows that Parliament in 1998 accepted that the public interest in legal professional privilege trumped the public interest that information about wrongdoing may be lawfully disclosed. However, this has led to one unwarranted and unjustified side effect as a result of the way PIDA defines protected disclosures.
As PIDA directs workers toward raising and resolving matters with their employer or the responsible person, such disclosures are protected within section 43C. Technically these are not disclosures as they are communications within the confidential relationship and this is the cause of the problem we consider needs remedying. Other protected disclosures within PIDA are in fact and law disclosures, in that they are made to a lawyer [43D], to a minister [43E], to a prescribed regulator [43F], or more widely [43G and 43H].
We therefore urge the Government
- if there is to be any extension of privilege to other professions, to make it clear that the statutory provision makes it clear that it does not apply to PIDA, whether by stating that the communication is not for the purpose of obtaining legal advice or otherwise
- in any event, to amend PIDA so that the raising of concerns about wrongdoing within the client-lawyer relationship (i.e. within the law firm or with the client) are protected.
As to this second point, we draw your attention to the new rules under the Sarbanes - Oxley Act 2002 (US) requiring internal reports by lawyers acting for companies regulated by the SEC. The SEC has indicated that lawyers will first be given a thorough disclosure regime through the management structure of the client3 and thereby within the boundaries of privilege, to raise their concerns. It is only in an exceptional case where the rules may require lawyers to make disclosures to the SEC and the SEC has confirmed that they will allow such disclosure with ‘no violation of the attorney/client privilege’4 . These rules will also apply to UK lawyers acting for US SEC registered companies.
For these reasons, we ask the Department to support an amendment to s43B(4) so that it is clear that disclosures of information subject to privilege is protected by PIDA where that disclosure does not breach the privilege. There are sound ethical and public interest reasons why lawyers should be protected under PIDA for raising concerns where privilege is not breached.
We propose the following amendment to s43B:
“A disclosure of information in respect of which a claim to legal professional privilege (or, in Scotland, to confidentiality as between client and professional legal adviser) could be maintained in legal proceedings is not a qualifying disclosure if: (a) it is made by a person to whom the information has been disclosed in the course of obtaining legal advice; and (b) such disclosure results in a breach of that privilege (or confidentiality)”.
As this final part of this paper addresses the detailed scope of PIDA, I am copying it to Charles Phillips at the Department of Trade and Industry which oversees the legislation.
We hope that this letter is clear and gives you sufficient information to understand our position and to support our recommendations. We are, of course, happy to discuss this response with you should you consider that helpful.
Yours sincerely,
Guy Dehn
- The Ombudsman is currently considering a complaint lodged by Public Concern at Work of maladministration by the DTI.
- See paragraphs 116 of the Consultation Paper
- Proposed Section 205.3(e), to implement s307 of Sarbanes-Oxley Act 2002 in US Securities and Exchange Commission Press Release 2002 - 158 at http://www.sec.gov/news/press/2002-158.htm
- “City Lawyers facing US Whistleblowing” pg 1 The Law Society Gazette, 14 November 2002.