Spotlight on Solicitors Regulation Authority (SRA) Guidance: Part two, identifying your client and legal professional privilege

A. Series overview

This briefing forms part of a series looking in detail at the SRA’s guidance for in-house teams, issued following a thematic review of the sector, recognising the growth and importance of the in-house role and the unique pressures to which in-house solicitors can be subject. The guidance covers six topics and does not introduce any new standards or requirements but aims to explain how the existing framework applies in particular in-house scenarios.

Part one covered reporting concerns about wrongdoing and internal investigations. In this part we cover identifying your client and legal professional privilege and actions that in-house solicitors may want to consider in light of this guidance.  Part three will cover guidance for employers and for governing boards and senior management.

B. Identifying your client

As a solicitor, making sure you know who your client is and being clear on whether you can act is key to discharging your regulatory obligations to act in their best interests. For many in-house solicitors the client for which they are acting will be their employer. However, given the variety of structures in which in-house solicitors now operate, the client may vary from one matter to another - for example, if an in-house solicitor works for an organisation with a complex structure, they may be asked to advise other companies within the group. In light of this, this first piece guidance aims to help in-house solicitors accurately identify their client and thereby navigate any regulatory risks in this area.

Key points from the guidance include:

1. Acting in the interests of your client: As noted above, for many in-house solicitors the client for which they are acting and to which they owe relevant duties will be the organisation which employs them, as provided for in their employment contract (as distinct from the individual or part of the organisation from which they take their instructions). 
   
   In these situations, in-house solicitors are required to act in the best interests of the organisation as a whole, rather than those of specific individuals within the organisation, including their line manager or any other senior individual. An in-house solicitor’s obligations to their 'client' should therefore be focussed on the needs of the organisation. What this means will depend on the type of organisation for which they work. In a commercial organisation, it will include considering the organisation's corporate and strategic objectives and may involve consideration of its constitutional documents, such as articles of association. The ultimate representative of an in-house solicitor’s client will generally be the part of the organisation responsible for strategy and decision-making at the most senior level and ultimately accountable for the organisation's operational risk and performance (for example, for private and public companies, the Board of Directors). 
2. Sharing information: Solicitors are generally required to disclose to their client information within their knowledge that is material to a matter. This means that in-house solicitors are not necessarily able to treat conversations with colleagues as confidential but may have to disclose them internally.
3. Acting for related companies or particular individuals: Notwithstanding the general position set out above, the SRA recognises that an in-house solicitor may be asked to act for a body or individual related to their employer, such as other companies within a group or an individual member of the Board. If asked to act for such parties in addition to their employer, an in-house solicitor should consider whether there is any actual or significant risk of a conflict with their employer's interests which would prevent them from acting (and we would suggest keeping this under review as the matter progresses and recording such consideration). 
4. Acting for colleagues personally: In-house solicitors may also be asked to advise on personal matters for colleagues who are employed at their organisation. From a regulatory perspective, this can be done providing that there is no conflict of interest, or no significant risk of one arising, between the in-house solicitor’s employer and the colleague they are being asked to advise. There are important considerations for in-house solicitors to be aware of before they decide whether to act in this scenario, including checking the terms of their employment contract to ensure that there aren't any clauses that would prevent this and considering whether they have any professional indemnity insurance cover and if so, whether the terms of this insurance would extend to advising colleagues on personal matters.
5. Procedural safeguards: Establishing ways to proactively identify, monitor and record legal and regulatory risks will help to ensure that they can be managed and addressed appropriately. In-house solicitors should also be familiar with the procedures for reporting any issues that present a risk to the organisation's best interests or their regulatory obligations. 

C. Legal professional privilege

While legal advice given by in-house solicitors attracts privilege in the same way as any other solicitor, the scope of that privilege when working in-house is more complex than if working in private practice. This piece of SRA guidance does not seek to provide a full examination of the law of privilege, but is rather intended as a starting point to explore specific questions relevant to solicitors when working in-house. Understanding when legal advice privilege (LAP) arises is particularly important in the in-house context and the guidance provides some useful insight in this area, including highlighting the following key points:  

1. The internal client and client group: Since LAP only relates to communications between a client and a lawyer, it is important for in-house counsel to identify their client for privilege purposes (separately to identifying the client entity or individual as referenced above).  In an in-house context the client for privilege purposes is limited to those colleagues who are authorised to request and receive legal advice on the client's behalf (referred to below as the ‘client group’). 
   
   The guidance sets out considerations that an in-house solicitor may want to consider in identifying the client group to determine if privilege attaches to communications, including: 
   1. putting in place a system to record who is generally authorised to obtain and receive legal advice on matters within the organisation; 
   2. developing a legal advice request form that asks the requestor to confirm that they are authorised to instruct the in-house function and seek legal advice; and/ or 
   3. putting in place special arrangements for specific matters to designate who is specifically authorised to obtain and receive legal advice on the matter.
2. External lawyers: When using external lawyers, in-house solicitors should consider who is part of the client group for the purpose of instructing the external lawyer and receiving their advice and what role they play in the matter. Where relevant, in-house solicitors should document that they have authorisation from the client entity to seek and obtain legal advice. (When dealing with colleagues outside the client group, such as when engaged in any information gathering exercise, in-house lawyers should also consider whether related communications are protected by litigation privilege).
3. Non-legal communications: LAP will not usually apply where the communications are for non-legal purposes such as pure strategic or commercial advice. Where an in-house solicitor is involved in a conversation about the commerciality of a deal for example, they should consider if their involvement falls into the category of a lawyer acting in the course of their professional duties and providing legal advice. The question that has been asked by the court has been whether the lawyer was being asked 'to put on legal spectacles' when reading, considering and commenting on material.
4. Use of distribution lists: With regards to group emails, including an in-house lawyer on the distribution list may not be sufficient to assert privilege across whole email exchanges.  Each individual exchange needs to be considered on its own. For example, the guidance states that exchanges between board members about a potential settlement where there is no connection to legal advice from an in-house lawyer, will not be privileged, even if an in-house lawyer is copied in to see. 
5. Information collected from third parties: LAP does not cover information collected by a client from third parties for the purpose of instructing lawyers.
6. Communications passing on advice: LAP can apply not only to the direct communication from the lawyer containing the advice but, in certain circumstances, it can also apply to communications passing on, considering or applying that advice internally, such as those sharing the privileged advice with a company's board of directors if they need the advice for the purpose of their work. However, this will not always be the case.  In particular, privilege may not cover board minutes which document discussion regarding legal advice. 
7. Sharing of privileged material more broadly: Sharing of privileged material beyond the client group can be an issue, particularly within corporate groups or when material is shared with third parties. However, it is possible to, in controlled circumstances, share privileged documents with third parties without waiving privilege. If privileged documents need to be shared, for example between parent and subsidiary or with other members of a multi-disciplinary team (for example, on a corporate transaction), in-house solicitors may wish to consider whether common interest privilege or limited waiver could be used. In either case, careful consideration should be given to the relevant legal basis for sharing and this should be documented prior to any disclosure of the relevant documents. Generally, strict controls should be implemented around sharing privileged material and in-house solicitors should consider how to store privileged documents to reduce the risk of disclosure in error, as well as the use of passwords to protect confidentiality and separate files and folders. 
8. Labels: These can be useful in order to clearly indicate when a document contains privileged advice and help to avoid inadvertent waiver. However, ultimately, labelling a document privileged doesn't make it so if the necessary features that attract privilege are not present and in-house solicitors should resist any pressure from their client to use the label of privilege to avoid disclosing documents or communications.
9. Investigations: Whether LAP applies where in-house solicitors are instructed to conduct an internal investigation will be fact specific. It will also be specific to the circumstances whether documents produced during an internal investigation may be protected by litigation privilege.
10. Whistleblowing: The guidance states that generally whistleblowing does not breach privilege on the basis that, if an organisation has an internal whistleblowing reporting line, it is likely that, in putting this in place, it has consented to disclosures of this nature. However, in-house solicitors should review the relevant whistleblowing policy or guidance to be clear about the status of any whistleblowing report that they want to make. If an in-house solicitor makes a whistleblowing report and their employer subsequently makes a referral to the SRA for breach of confidentiality/ privilege, the SRA will consider the in-house solicitor’s intention in making the report as part of its wider consideration of the case and in-house solicitors should therefore keep detailed records of their actions so that their decisions can be justified (for further information on the SRA’s guidance on reporting concerns about wrongdoing see our briefing here).

D. Actions

Key practical steps for in-house solicitors to take include:

1. Internal policies and procedures: Review any existing policies and procedures that apply to the instruction of the in-house legal team to ensure they adequately cover the points highlighted in the guidance including the identification and recording of the client and client group and the circumstances in which communications may be protected by legal privilege.  Consider whether some additional controls and guidance might be helpful, recognising that a risk-based approach may be appropriate and that more formal processes are likely to be of greatest assistance for the most significant matters.  
2. Independence: In addition to dealing with the mechanics of instructions, relevant organisational policies and terms of engagement can also be helpful in recording the ethical standards that underpin the work of in-house solicitors and help in avoiding situations where in-house teams are unfairly pressured by individuals who do not have authority to instruct them. They should also provide appropriate means of escalation where solicitors identify any wrong doing or need to report issues internally (taking into account the guidance on reporting misconduct).
3. Accepting instructions and working on the matter: Points for in-house solicitors to consider when accepting instructions include identifying the client and the client group; and whether there is any actual or significant risk of a conflict between relevant client entities or individuals. It may be necessary to speak to those seeking to instruct legal to understand any potential conflict and seek direction from a line manager or a senior colleague. An in-house solicitor may be unable to act for a related company/ individual, in which case alternative solutions should be explored, such as instructing external counsel. Similarly, it is important when seeking to establish LAP to ensure that everyone understands who is in the client group and that this is kept under review as the matter progresses. The guidance highlights that, when considering privilege in-house solicitors should carefully consider issues at the time, rather than retrospectively. While the court will always look at facts in the round, a file note of contemporaneous intention may be useful in supporting a case should there be any challenge. 
4. Spread awareness among non-legal colleagues: Consider how to ensure that colleagues who interact with the in-house legal function know how to instruct and work with the legal team effectively; are familiar with any internal policies and procedures and the role played by in-house lawyers; and that they understand the extent to which communications relating to a matter will be privileged and how to protect privilege. Policies, procedures and training can facilitate this understanding.