July 30, 2008
Most jurisdictions have at least some requirement that parties to disputes must disclose relevant documents to their opposing parties. England is no exception. Disclosure is normally provided subject to obligations on the opposing party to (i) keep such documents confidential and (ii) not use such documents for any purpose other than the proceedings for which the documents are disclosed (non-use obligations). Non-use obligations, naturally, apply both to the parties to the dispute and to their legal advisers. Generally, they are well understood and cause no difficulties. However, questions can sometimes arise as to whether, like conflicts of interest, they can prevent a client from instructing its lawyer of choice.
A common situation where such a question may arise is where there are different proceedings concerning the same or similar subject matters, such as an insurance claim being conducted in litigation with the reinsurance claim being conducted in arbitration. In such a scenario, confidential documents disclosed in the insurance claim may have some relevance to the reinsurance claim, and vice versa. Of course, the documents disclosed in one proceeding may in general not be used in the other, but the question is this: even absent a conflict, do the non-use obligations prevent the same lawyer from acting both for the insurer in the insurance litigation and for the reinsured in the reinsurance claim? Does it make a difference if the insurer/reinsured is the same entity? What if the reinsured is not the same entity as the insurer but the insurer’s captive? What if the two claims relate to the same subject matter but are otherwise entirely distinct and involve entirely non-related parties?
One can see the obvious advantages of the same lawyers being instructed for both sets of proceedings in all of the examples given. If the lawyers’ clients are the same or related, there are evident costs savings, no duplication of effort and no risk of inconsistent approaches being taken. Even if the lawyers’ clients are neither the same nor related, each client can gain the benefit of the lawyers’ expertise in acting in the other proceeding, with its clear benefits and costs savings. But the other side of the coin is that there may be a risk of an inadvertent breach of the non-use obligations and, even if the documents themselves are not actually used, the lawyer will have gleaned knowledge of the confidential material produced in one proceeding, which might assist in or inform the advice he or she gives to its client in the other.
Whilst, of course, it is vital that both lawyers and their clients comply with all obligations to which they are subject, how far do non-use obligations extend? To put it another way: where does a lawyer’s experience or expertise end and misuse of confidential material begin?
Where there was previously a lack of jurisprudence, the recent decision of the English Court of Appeal in BSkyB v Virgin Media[i] has brought some clarity to this question. In particular, the English Court of Appeal has upheld that a client’s right to choose its legal adviser is paramount and should not be displaced unless absolutely essential.
English law
Disclosure obligations under English law
English litigation procedure requires a party to litigation to disclose, inter alia:
(a) documents on which that party relies;
(b) documents which adversely affect that party’s own case;
(c) documents which adversely affect another party’s case; and
(d) documents which support another party’s case[ii].
Disclosure is also normally required in any arbitration that has English law as its procedural law. Section 34(1)(d) of the English Arbitration Act 1996 provides that "[i]t shall be for the tribunal to decide all procedural and evidential matters, subject to the right of the parties to agree any matter", where "[p]rocedural and evidential matters include … whether any and if so which documents or classes of documents should be disclosed between and produced by the parties and at what stage".
English law on non-use obligations
The use to which the opposing party can put any documents disclosed in accordance with the above is generally limited by the imposition of non-use obligations.
In particular, the English court rules provide that "[a] party to whom a document has been disclosed may use the document only for the purpose of the proceedings in which it is disclosed, except where (a) the document has been read to or by the court, or referred to, at a hearing which has been held in public[iii]; (b) the court gives permission; or (c) the party who disclosed the document and the person to whom the document belongs agree"[iv].
As for arbitration, whilst there are no equivalent non-use obligations in the English Arbitration Act 1996, English law implies a term into an arbitration agreement that is subject to English law requiring the parties to keep the arbitration confidential. This includes keeping confidential any documents generated and disclosed during the arbitration and not using any such documents other than for the purposes of the arbitration[v]. As with English court proceedings, there are exceptions to the non-use obligations in arbitrations, including: the consent of the parties; an order of the court; and where disclosure is reasonably necessary for the establishment or protection of a party’s legal rights[vi].
How far do non-use obligations go?
It is beyond doubt that non-use obligations prohibit a document disclosed in one proceeding being adduced as evidence in different proceedings, unless an exception applies. But what about lawyers being influenced, by the knowledge they have acquired from documents disclosed in one proceeding, in the manner in which they represent their clients or in the advice that they give to their clients in another? Would that amount to a breach of the non-use obligations, such that, absent an exception, the relevant lawyer should not act in the second proceeding even if there is no conflict of interests?
BSkyB v Virgin Media
The facts
BSkyB v Virgin Media arose out of a long-running battle between BSkyB and Virgin Media, both groups of companies competing in the provision of pay TV in the United Kingdom. In particular, BSkyB was the subject of three separate proceedings in which allegations were being made by, inter alia, Virgin that BSkyB was behaving in an anticompetitive manner. The proceedings were (i) a claim in the High Court in England; (ii) an investigation being carried out by Ofcom (the Office of Communications, the English communications industry regulator); and (iii) the Competition Appeal Tribunal (a specialist judicial body in the United Kingdom with power to hear and decide appeals and other applications or claims involving competition regulatory issues).
A substantial number of documents were disclosed by both BSkyB and Virgin in the English High Court proceedings, in accordance with the disclosure requirements described above. Many of those documents were of such commercial sensitivity that the parties agreed to put in place exceptional measures to protect their confidentiality, over and above the normal non-use obligations imposed by the English court rules. In particular, the parties agreed that disclosure of the sensitive documents would be restricted to identified external legal advisers who would give express undertakings not to disclose those documents or their contents to anyone, including their own clients.
BSkyB, however, and despite the fact that the agreement went beyond the English court’s non-use obligations, contended that it did not go far enough. Instead, BSkyB submitted that the lawyers acting for Virgin in the English High Court proceedings, who had seen the sensitive documents, should not be permitted to act in either of the other proceedings (BSkyB had instructed separate lawyers). There was no suggestion that Virgin’s lawyers would, in breach of the enhanced non-use obligations, deliberately adduce the sensitive documents in any of the other proceedings or otherwise make use of them for an ulterior purpose. However, so BSkyB said, there was a risk of inadvertent use by Virgin’s lawyers if they were allowed to act in all three proceedings: in particular, having seen them, Virgin’s lawyers would inevitably be unable to avoid being influenced by the knowledge that they acquired from the sensitive documents (if only sub-consciously), either in the manner in which they represented Virgin or in the advice that they gave to Virgin.
The Court of Appeal’s decision
The Court of Appeal found in favour of Virgin. The Court’s starting position was that it is desirable that a litigant should be free to instruct the lawyer of its choice, particularly if the lawyer is already acting for the client and the client wishes the lawyer to continue to act in a related matter. Of course where a conflict of interest exists, that must override the client’s free choice of counsel. But the Court of Appeal distinguished between the duty of confidentiality that exists between lawyer and client (which might prevent the lawyer from acting for another client) and non-use obligations. In particular, it endorsed the observations of the Federal Court of Canada[vii], which said:
"the implied undertaking [i.e., non-use obligations] would be most impractical if it resulted in an ability to remove from a case any solicitor who was bound by an implied undertaking. The implied undertaking is not of sufficient public interest when balanced against the right of a party to choose his own solicitors and the public interest in the efficient administration of justice to require the court to disqualify any solicitor who might wrongly deploy information subject to the undertaking. If a solicitor fails to observe the undertaking the remedy is to cite him for contempt, not to remove him.
A lawyer who takes cases regularly must have acquired a great deal of information subject to implied undertakings. In these days of specialized education and long work hours for junior lawyers, it is possible that a significant percentage of a lawyer’s general knowledge will have been acquired in his practice of law, there having been little other opportunity for him to acquire the same. It is equally possible that a large portion of that general knowledge will be subject to implied undertakings. If the defendant’s submissions are correct, few lawyers who have been called for any length of time will be able to take part in litigation. It is to be remembered that the undertaking is to the Court and is not limited to deploying information in cases involving one or more of the same parties".
The Court of Appeal, in any event, found that as there was only limited overlap between the three proceedings and, as no witnesses were to be called other than in the High Court proceedings, the risk that information disclosed in the High Court proceedings would improperly be used in the other proceedings in breach of the enhanced non-use obligations was fanciful. For that reason alone, the Court of Appeal considered there was no justification for preventing the Virgin lawyers from acting in the other proceedings.
Additionally, the Court of Appeal indicated that no question would have, or indeed could have, been raised about preventing Virgin from using the lawyers of its choice, save for the exceptional circumstances of this case where the parties agreed special arrangements to restrict disclosure to external lawyers because of the commercially sensitive nature of the documents. Absent those special arrangements, disclosure of the relevant documents would have been made to the parties themselves (including their in-house lawyers), such that they would then necessarily (and unavoidably) have carried that knowledge with them when participating in the other proceedings. The Court of Appeal could see no reason why the external lawyers should not be in the same position.
Finally, the Court of Appeal considered that it was, in fact, in the public interest that all of the relevant tribunals should have regard to the parties’ confidential documents, insofar as they were material to the issues in those proceedings. Thus, it was desirable that the lawyers for both parties should be aware of what had and had not been disclosed so that, if certain documents were missing from the consideration of one tribunal, they could apply to the High Court for permission to draw those documents to the relevant tribunal’s attention. The Court of Appeal was not dissuaded from this view by the fact that, unlike Virgin, BSkyB had chosen to instruct different lawyers in the different proceedings.
In sum, the Court of Appeal concluded: "[i]n a rare case, the fact that documents have been disclosed to solicitors acting for a party in one set of proceedings might conceivably preclude those solicitors from acting for a different party in another set of proceedings. We find it hard to conceive of circumstances where disclosure in one set of proceedings would preclude lawyers from acting in other proceedings between the same parties".
Commentary
The Court of Appeal clearly came to the right decision in BSkyB v Virgin. Lawyers should be capable of complying with their non-use obligations, just as with any other professional and legal obligations. This was not a case where there was any conflict of interest involved in Virgin’s lawyers acting in the various proceedings.
The decision is helpful clarification of the paramount importance of a client’s right to choose its legal advisers, which should not be displaced unless absolutely essential.
In BSkyB v Virgin, the relevant parties to the three proceedings were the same (or at least accepted to be the same for the purposes of the Court of Appeal’s decision). The Court of Appeal clearly took some comfort from the fact that, had special arrangements to restrict disclosure to external lawyers not been in place, disclosure of the relevant documents would have been made to the parties themselves, such that they would then necessarily have carried that knowledge with them when participating in the other proceedings. In those circumstances, the Court of Appeal considered that no question would have, or could have, been raised about preventing Virgin from using the lawyers of its choice. But what if the parties to the second claim (who wish to instruct the same lawyer) are not identical to the parties to the first, but, perhaps, a different member of the relevant party’s group[viii] or, indeed, a completely unrelated third party?
Obviously, in addition to non-use obligations, lawyers owe duties to their own clients, both to keep their clients’ documents and affairs confidential and not to put themselves in a position where there is a conflict of interests but also, more pertinent for these purposes, to disclose all information material to their clients relevant to their clients’ instructions. Absent a conflict, and provided both clients give informed consent to the same lawyer acting in both proceedings and informed consent that the lawyer is under no duty to disclose to the first client any material information of which it becomes aware in the course of the second claim, and vice versa (and, of course, provided there is no actual breach of the non-use obligations), there should be no reason in principle why the same lawyer cannot act in both proceedings.
Finally, whilst the Court of Appeal’s comments were restricted to the disclosure of documents in English court proceedings, there seems no reason in principle why, at least under English law, the same conclusion should not be reached where equivalent non-use obligations apply to documents disclosed in any other tribunal or dispute resolution procedure.
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[i] British Sky Broadcasting Group plc and British Sky Broadcasting Limited v Virgin Media Communications Limited (formerly NTL Communications Limited), Virgin Media Television Limited (formerly Flextech Television Ltd) and Virgin Media Limited (formerly NTL Group Ltd) [2008] EWCA Civ 612, Court of Appeal.
[ii] English Civil Procedure Rules, Rule 31.6.
[iii] Unless the court orders otherwise.
[iv] English Civil Procedure Rules, Rule 31.22.
[v] Some of the arbitral institutions, such as the LCIA, expressly include a requirement in their rules that the parties keep the arbitration and documents disclosed confidential.
[vi] Such as, for example, the enforcement of an arbitral award or where a witness gives evidence inconsistent with evidence given in previous arbitral proceedings.
[vii] Merck & Co v Interpharm [1992] 3 F. C. 774.
[viii] It is clear, at least in the context of arbitration proceedings governed by English law, that there is no additional exception to the non-use obligations just because the party to whom disclosure is contemplated is under the same beneficial ownership and management as one of the parties to the arbitration: Ali Shipping Corporation v Shipyard Trogir [1998] 2 All ER 136, Court of Appeal. There is, of course, no express exception in these circumstances to the non-use obligations applicable to disclosure in English court proceedings.
Gibson, Dunn & Crutcher lawyers are available to assist in addressing any questions you may have regarding these issues. Please contact the Gibson Dunn attorney with whom you work, Rachel Couter (+44 20 7071 4217, [email protected]) in the firm’s London office, or any member of the firm’s UK Dispute Resolution Group or its International Arbitration Group.
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