We present a round-up of ten of the most significant cases and events in 2010, including the refusal of privilege for in-house lawyers and accountants, a new exception to the without prejudice rule and Lord Justice Jackson's report on costs.
This is followed by a preview of ten cases and events to watch out for in 2011, including the Jivraj appeal on restricting the nationality of arbitrators, a possible end to expert witness immunity and the coming into force of the Bribery Act 2010.
TOP TEN OF 2010
Dallah: Enforcement of an award will be refused where there is no valid arbitration agreement
Springwell: Bank not liable for representations made to sophisticated investor
Akzo Nobel: ECJ rules against widening of legal professional privilege for in-house lawyers
Oceanbulk Shipping: Settlement discussions: admissible if part of factual matrix
Prudential: Legal advice from accountants: no privilege
BSkyB: Unlimited liability for deceitful bid statements
Shah: Banks may have to prove POCA "suspicions" when delaying carrying out instructions
BAE: "Accounting offence" settlement grudgingly allowed by Court
Louis Dreyfus: Court proceedings to secure evidence may not breach an arbitration clause
Lord Justice Jackson: Review of Civil Litigation Costs
TOP TEN OF 2011
Bribery Act 2010 to come into force
Lord Justice Jackson's Costs Review: consultation ends
Expert witness immunity: Supreme Court decision
Jivraj: Supreme Court decision
EU Mediation Directive comes into force
PPI Complaints: Bank's judicial review of FSA rules
Brussels Regulation reform
EU contract law reform
New ICC rules come into force
TOP TEN OF 2010
Enforcement of an award will be refused where there is no valid arbitration agreement
In Dallah Real Estate and Tourism Holding Co v The Ministry of Religious Affairs, Government of Pakistan, the Supreme Court refused to enforce an arbitral award rendered in France where there was no valid arbitration agreement. In doing so, it held that no arbitration agreement existed to which Pakistan was a party and that there were no other grounds for enforcing the award. This case was the first decision by the Supreme Court on the legal framework supporting international arbitration. It demonstrates the extent to which the courts will, for the purposes of enforcement, re-examine awards rendered and, crucially, the need for parties to have agreed to arbitrate disputes. Parties that are entering into transactions that might require enforcement of arbitral awards in England and Wales should think carefully about transactional structure issues. In particular, where a third party is using a special purpose vehicle or equivalent, it will be important to ensure that there is a performance guarantee, or some other mechanism, from the third party containing a separate, valid, arbitration agreement.
Bank not liable for representations made to sophisticated investor
The Court of Appeal considered in Springwell Navigation Corp v JP Morgan Chase Bank the potential liability of banks for, amongst other things, negligent misstatement and misrepresentation. The court concluded that sophisticated investors must take responsibility for their own decisions and indicated that it will be extremely difficult to establish that those selling complex investments owe duties of care to such sophisticated investors. It also suggested that correctly drafted entire agreement clauses will serve to successfully exclude liability for any (non-fraudulent) misrepresentation. The key is to ensure that there are clear contractual provisions in place which include an entire agreement clause and which the investor has clearly read, understood and accepted.
ECJ rules against widening of legal professional privilege for in-house lawyers
In Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd v Commission, the ECJ reiterated its previous view first given in the 1982 case of AM&S Europe Limited v European Commission "... that they [in-house lawyers] are not able to ensure a degree of independence comparable to that of an external lawyer". Absent this independence, the ECJ felt unable to extend legal professional privilege to advice given by in-house lawyers. Accordingly, companies should take particular care when dealing with competition law issues. Although communications between a company and its in-house legal team may be protected by LPP where a domestic competition investigation is commenced, those same documents may be subject to seizure by the EC should it commence its own competition investigation. Therefore, where legal advice is sought in relation to competition issues, companies should instruct external counsel at an early stage.
Settlement discussions: admissible if part of factual matrix
The Supreme Court in Oceanbulk Shipping & Trading SA v TMT Asia Ltd & Ors created a new exception to without prejudice rule by concluding that without prejudice negotiations that form part of the factual matrix leading to a settlement agreement will be admissible to assist in the interpretation of that settlement agreement. The court considered that, as evidence establishing whether a settlement agreement was reached was admissible, so should evidence be as to the terms of that agreement. The court was also of the view that if the communications would be admissible under ordinary principles of interpretation of contracts (i.e. they formed part of the factual matrix), then the fact that the communications were without prejudice should be no bar to their admissibility. This decision creates consistency when interpreting contacts and avoids the need to apply differing principles in the case of settlement agreements.
Legal advice from accountants: no privilege
In R (on the application of Prudential plc and another) v Special Commissioner of Income Tax and others, the Court of Appeal confirmed that legal advice privilege does not apply to any professional other than a qualified lawyer. Accordingly, advice in relation to tax and other matters sought from and given by accountants will not benefit from legal advice privilege and may have to be disclosed.
Unlimited liability for deceitful bid statements
In BSkyB v EDS, one of the largest cases ever to come to trial in the outsourcing and IT services sector, the court found that EDS had deceitfully induced Sky into a £54 million contract for a new customer relationship management system. The contract contained a £30m liability cap, but as the court ruled that EDS had made a fraudulent misrepresentation, damages above the liability cap could be awarded. As a result of this judgment, it is anticipated that UK based suppliers may change the way they pitch their services, to take account of the risk of being held similarly liable.
Banks may have to prove POCA "suspicions" when delaying carrying out instructions
In Jayesh Shah & anor v. HSBC Private Bank (UK) Ltd, the Court of Appeal held that a bank which makes an authorised disclosure under the Proceeds of Crime Act 2002, preventing it complying with a customer's payment instruction, may have to prove its suspicions at trial - summary disposal of the question without disclosure and evidence is not appropriate. The bank had argued that no court should ever order disclosure of relevant documents relating to the bank's suspicion in this regard, especially disclosure relating to the bank's report to SOCA. The Court of Appeal said that this amounted to saying the case is "completely unjusticiable" and that the bank must always win. That could not be right; the Court thought the question of what should be disclosed should be decided on its merits at the disclosure stage of the proceedings, not summarily at the start. This decision raises important issues for bank money laundering procedures and should be taken into account when drafting such procedures.
BAE "Accounting offence" settlement grudgingly allowed by Court
In December, BAE Systems Plc was fined £500,000 (plus £225,000 in costs) after pleading guilty under a settlement agreement with the SFO to the offence of failing to keep adequate accounting records. The offence related to the accounting of very substantial commission payments made to an overseas agent for his services in assisting a BAE company to obtain a contract from the Tanzanian Government. The judge was clearly unhappy with the settlement terms agreed by the SFO, but ultimately chose to accept the basis of plea and sentenced BAE accordingly.
Court proceedings to secure evidence may not breach an arbitration clause
In Louis Dreyfus Commodities Kenya Limited v Bolster Shipping Company Limited, the High Court refused an application for an anti-suit injunction to prevent a third party being joined to court proceedings in Mexico. In doing so, the court was careful to examine the nature and purpose of the foreign court proceedings before concluding that they did not amount to a breach of an arbitration clause. This case is a salutary reminder that arbitration clauses are not always "bomb-proof". In certain jurisdictions, a joinder application may be a practical step for securing the provision of evidence by a third party (rather than through the medium of it acting as a witness) and such an application may not breach an arbitration clause. Parties should consider this approach where they require third parties to be bound by the terms of any pending foreign judgment.
Lord Justice Jackson's Review of Civil Litigation Costs
Lord Justice Jackson's Final Report on Civil Litigation Costs was published in January. The Report contained recommendations for, amongst other things, significant reform of the "no win / no fee" costs and insurance system, the introduction of contingency fees and judicial costs management. If implemented, Lord Justice Jackson's recommendations will have a major impact on civil litigation.
TOP TEN OF 2011
Bribery Act 2010 implementation
The Bribery Act 2010, a new comprehensive legislative regime to tackle bribery and corruption, was originally due to be implemented in April 2011, following the expected publication in January of the Government's final guidance on putting in place "adequate procedures" for the purpose of the defence to the corporate offence. This guidance has not yet been published however and as result the Act will not now be implemented in April, instead coming into force three months after the guidance is eventually published. It is hoped that this will take place in 2011.
Consultation on Lord Justice Jackson's Costs Review ends
Following the publication of Lord Justice Jackson's Final Report, the Government issued a consultation on a number of the proposed reforms including the introduction of contingency fees, the abolition of the recoverability of success fees and ATE insurance premiums and changes to the Part 36 regime. The consultation closes on Valentine's Day and the Government is expected to publish its response to the consultation in the Spring.
Supreme Court decision on Expert Witness immunity
In Jones v Kaney, heard on 11 January, the Supreme Court will decide whether expert witnesses should remain immune from lawsuits brought by dissatisfied litigants. The High Court considered itself bound by previous authority to maintain the immunity of expert witnesses, but Blake J concluded that "there is a substantial likelihood that, on re-examination by a superior court with the power to do so, it will emerge that the public policy justification for the [witness immunity] rule cannot support it." This issue was considered to be so important that the appeal leapfrogged the Court of Appeal and went directly to the Supreme Court.
Supreme Court decision on Jivraj
The Supreme Court will hear the appeal in the case of Jivraj v Hashwani. The Court of Appeal found that arbitrators were "employees" for the purposes of anti-discrimination laws and, consequently, that an arbitration agreement, which required the arbitrator to be from a particular religious group, was void in its entirety. This case is of great importance to the international arbitration community, as it creates a risk that English courts may not enforce arbitration agreements that purport to discriminate against arbitrators on any characteristics protected by anti-discrimination legislation, including nationality. It is common commercial practice to agree arbitration clauses that place restrictions on the nationality of arbitrators: this is the case in the Arbitration Rules of the main arbitration institutions such as the ICC and the LCIA, which are both intervening before the Supreme Court.
EU Mediation Directive comes into force
All Member States, other than Denmark, must bring the Mediation Directive into force by 21 May 2011. The Directive applies to cross-border mediations and aims to ensure, amongst other things, the confidentiality of mediation and the enforceability across the EU of settlement agreements reached as a result of mediation. The Commission is promoting mediation in advance of the deadline and has issued a press release reminding Member States of the benefit of mediation.
Bank's judicial review of FSA rules on PPI complaints
The British Bankers Association has launched a judicial review of rules issued by the FSA on the handling of complaints related to payment protection insurance. The new rules, which include the requirement that providers talk potential customers through the key features of a policy rather than assuming they will read relevant documentation, were implemented by the FSA in December. However, the BBA believes that the FSA will, in effect, be applying these rules retrospectively, applying new rules to previous sales of PPI, and is challenging this in relation to this specific case and to prevent a possible precedent being set allowing the retrospective application of rules to all products regulated by the FSA.
The Ministry of Justice has given a firm commitment to undertake a review of defamation law. Although the Ministry has indicated that the "groundwork" that has been done by the introduction of Lord Lester's Private Members Bill is helpful, it does not intend to adopt the Bill wholesale and has instead set out plans for a consultation, with a draft Defamation Bill due to be published in March 2011.
Brussels Regulation reforms
Following the European Commission's proposal in December 2010 for a new Brussels I Regulation, the reform of the legal matrix applying to courts' jurisdiction and circulation of judgments within the EU is on its way. The most significant aspect of the proposed reforms is the abolition of the "exequatur" procedure, which, if adopted, will allow for the automatic recognition and enforcement of judgments between Member States, thereby reducing cost and administrative burden for those seeking enforcement. The draft amended Regulation also purports to keep arbitration excluded from its scope, but provides a solution to avoid inefficient parallel court proceedings by requiring a court seised of a dispute to stay the proceedings where the question of arbitral jurisdiction is before either the courts of the seat or an arbitral tribunal. The Government is currently consulting on how the UK should approach the reforms.
EU contract law reform
In July 2010, the European Commission published a Green Paper on the harmonisation of EU contract law. The Commission proposed seven options for such harmonisation, three being voluntary, three being mandatory and another option, which appears to be attracting the most attention, being a hybrid of the two. This option (referred to as "Option 4" or the "28th Regime") would be mandatory in that it would impose a new system of contract law on Member States, but would give individuals and businesses the freedom to decide whether to use it or to let their contracts be governed by purely national rules. Submissions on the Green Paper must be filed with the Commission by the end of January 2011.
New ICC rules come into force
The ICC is continuing its review of the ICC Rules of Arbitration, with the new rules expected to come into force in the autumn. The ICC is also likely to remain headquartered in Paris, despite offers from Geneva and Vienna to host the organization, although we understand that no firm decision has yet been reached.