+44 (0)20 7353 6000
08 Jul 2015

The risk of waiving privilege in regulatory investigations

The recent decision in Property Alliance Group Ltd v Royal Bank of Scotland Plc [2015] EWHC 1557 (Ch) illustrates the civil litigation risk that arises when a party under investigation waives legal professional privilege (LPP) on a limited basis over documents provided to a regulator during a negotiated settlement.


Property Alliance Group Ltd is suing RBS for alleged misrepresentations about LIBOR in connection with interest rate swaps sold to it by RBS. In its defence RBS denies that it manipulated GBP LIBOR and makes the positive point that the FCA in its Final Notice, and other regulators in their formal decisions, made regulatory findings of misconduct against RBS in relation to JPY and CHF LIBOR, but not in relation to GBP LIBOR, the only relevant currency for the swaps. When RBS served its disclosure list, it objected to the inspection of various categories of document created during its negotiations with the regulators. Two such categories were: (a) communications between RBS and the FCA which RBS claimed were protected by the without prejudice rule, (b) six documents shown or handed over to regulators which RBS claimed were protected by LPP. RBS contended that it had waived LPP only for the limited purpose of the regulators’ investigations, and not against any other third parties.

The without prejudice material

In relation to (a) above, the Court held that a party has a right to withhold inspection of communications which comprised genuine settlement discussions with a regulator. The Court accepted that the material between RBS and the FCA benefited from this protection, which it described as analogous but not identical to the without prejudice right recognised in civil proceedings. However, this protection could not be maintained where, as here, the basis on which the Final Notice was decided was itself put in issue in the civil proceedings. Birss J held that, in these circumstances, “justice demands that the communications which led to the Final Notice be disclosed”. The Court therefore ordered inspection.

The limited waiver material

In relation to (b) above, the Court held that the limited waiver principle applied despite the existence of “carve-outs” which permitted the regulators to share the documents with third parties, or to make them public. However, this protection had been lost in this case, again because RBS in its civil defence had relied on the limited scope of the regulators’ findings. The Court therefore ordered inspection.


The Court was concerned that RBS should not be permitted to rely upon an absence of criticism in the regulators’ decisions as indicating the limits of its misconduct, whilst at the same time seeking to withhold from inspection the without prejudice and LPP material considered by the regulators in making their findings.

In relation to the without prejudice material, the Court’s concern was understandable. Without prejudice is akin to confidentiality rather than privilege, and it has long been established that the protection it affords can be lost in civil proceedings in numerous defined circumstances, including when a settlement reached with a third party is put in dispute (see Muller v Linsley & Mortimer [1994] EWCA Civ 39 and Unilever Plc v Procter & Gamble Co [2000] 1 WLR 2436). The fact that without prejudice material can lose its protection from inspection in civil proceedings reflects the fact that regulators such as the FCA, as well as prosecutors such as the SFO, are able to compel parties to produce without prejudice material during an investigation.

The Court’s findings in relation to the limited waiver documents were more surprising because, unless the crime/fraud exception applies, LPP cannot usually be overridden. The protection afforded by LPP is far stronger than the protection afforded by the without prejudice rule. For example, the FCA, like the SFO, cannot compel a party to produce material that is properly protected by LPP. But a party being investigated by the FCA will invariably create and receive material protected by LPP, including potentially an internal investigation report which, with the aim of mitigating sanction and reducing reputational damage, it might disclose to the FCA on a limited basis during settlement negotiations. Similarly, an entity being investigated by the SFO might waive privilege on a limited basis over an internal investigation report as a hallmark of cooperation, in the hope of achieving a non prosecution or deferred prosecution agreement.

Parties being investigated by a criminal or regulatory body therefore face a dilemma. They may be tempted to waive LPP on a limited basis over important documents so as to achieve a more lenient outcome to an investigation. But cooperating in this way exposes them to the risk that civil claimants may subsequently become entitled to inspect those documents if they are placed in issue in the civil litigation. Thus any agreement reached with a regulator to the effect that LPP was waived only for the limited purpose of the regulatory investigation, can be overridden, such that the protection afforded by LPP is circumvented.

Latest Insights


April 17 2024


April 11 2024


April 4 2024