SEAR/Individual Accountability: Proposed Privilege “Safe Harbour”
It is proposed to introduce a “safe harbour” for privileged legal material submitted to the Central Bank in the course of an investigation under the Central Bank’s Administrative Sanctions Procedure (ASP).
Following our recent briefing on the proposed amendments to the ASP, this briefing focuses on this proposal in the General Scheme of the Central Bank (Individual Accountability Framework) Bill 2021 (General Scheme) to introduce a “safe harbour” for privileged legal material submitted to the Central Bank.
What is privileged legal material?
Privileged legal material is information and / or documentation which a person is entitled to withhold on the grounds of legal professional privilege in the course of legal or regulatory action. Material may be privileged for various reasons, the key ones typically being legal advice privilege or litigation privilege.
Exceptions to privilege are very limited. However, an owner of legal privilege may, in limited circumstances and typically having obtained legal advice, decide to expressly waive its entitlement to assert a claim of legal professional privilege over material. In some circumstances, an owner of privilege may be deemed to have implicitly waived their entitlement to maintain a claim of privilege by actions and/or disclosure of the document such that it is no longer confidential. Once privilege has been waived, either expressly or implicitly, it is generally not possible to reassert it.
Safe Harbour Agreements
The General Scheme proposes to introduce a privilege “safe harbour” for persons to voluntarily submit privileged legal material to the Central Bank (for example, in the course of an investigation) without such limited disclosure constituting a waiver of privilege vis-à-vis third parties generally.
The intention is not to compel the disclosure of legally privileged information but rather, to provide a mechanism to facilitate disclosure to the Central Bank on a voluntary basis with safeguards in place so that there cannot be onward disclosure of the material to other third parties. This mechanism reflects the practice of the Central Bank in concluding limited waiver agreements with firms the subject of investigation by the Central Bank.
The privilege “safe harbour” outlined in the General Scheme will allow the owner of privileged legal material to enter into a limited disclosure agreement with the Central Bank to provide it with such material. In order to qualify for the “safe harbour”, the disclosure must be made to the Central Bank in connection with the performance of its functions under financial services legislation and the agreement will be required to specify the purposes of the disclosure to the Central Bank.
Provisions protecting against disclosure
In order to protect the privileged legal material that is disclosed to the Central Bank under a “safe harbour” agreement, the General Scheme provides for a number of measures to protect the disclosure from any litigation or disclosure requests by third parties. These include:
- Disclosures made pursuant to these “safe harbour” agreements will not constitute a waiver of privilege vis-à-vis third parties generally. This means that the owner of privileged legal material is only waiving privilege vis-à-vis the Central Bank for the purposes specified in the agreement and not against any other person.
- Any privileged legal material disclosed will be exempt from freedom of information requests.
- Onward disclosure for the purposes of criminal reporting and/or the performance of the Central Bank’s functions under current legislation to entities such as the Revenue Commissioners or the Director of Corporate Enforcement shall not be deemed to be a waiver of legal professional privilege of the disclosed material.
- Professional secrecy requirements that exist under current legislation will apply to the privileged legal material where it is disclosed to entities such as the Revenue Commissioners or the Director of Corporate Enforcement for the purposes of criminal reporting and/or the performance of the Central Bank’s functions under current legislation.
Use of privileged material in an investigation or inquiry
If the privileged legal material disclosed forms part of the evidence in a Central Bank investigation or inquiry, the General Scheme provides that the fact that the material is legally privileged shall not prevent its disclosure to a subject, who is not the owner of the privileged material, where it forms part of the evidence in that investigation or inquiry. That person will be required to treat the material in accordance with its status as legally privileged material and preserve its confidentiality.
Furthermore, any inquiry or investigation hearing which involves legal material, as part of the evidence, may be heard fully or partially in private when the relevant privileged legal material is being considered in order to maintain its confidentiality.
Applications to the High Court to determine privilege
Under existing legislation, the Central Bank can bring an application to the High Court to determine whether or not legal professional privilege has been legitimately claimed. It is proposed to expand this mechanism to include circumstances where legally privileged material has been disclosed pursuant to a “safe harbour” agreement.
Such applications may be held in camera in order to protect the privileged legal material that the High Court is required to consider.
As mentioned above, the privilege “safe harbour” will not empower the Central Bank to compel the disclosure of privileged legal material. The stated intention is for the provisions to protect “safe harbour” disclosures from any litigation or disclosure requests by third parties and facilitate the effective performance of the Central Bank’s functions where a privilege “safe harbour” agreement is in place. These proposals mirror the main legal protections that the Central Bank currently provides in limited waiver agreements with firms under investigation.
The General Scheme suggests that the ability to make a “safe harbour” disclosure will only be possible in future investigations and inquiries commenced after the new legislation is published and commenced and investigations that have already commenced under existing legislation will not be impacted by the proposed amendments. However, the Central Bank may encourage the use of a framework akin to the “safe harbour” in the interim.
Keeping you Informed
We will be hosting a series of events on the individual accountability framework, including the ASP-related amendments, in the coming months. If you are interested in attending, please reach out to your usual Arthur Cox contact or email [email protected] for further details.
Please get in touch with any member of our market-leading Financial Regulation: Investigation and Enforcement team if you wish to discuss the potential impact of the proposed individual accountability framework or ASP-related amendments on your business. We advise and support clients on a wide range of financial regulatory investigations and enforcement issues, and have deep specialist knowledge of the financial services regulatory environment and experience in managing complex contentious regulatory matters.
We would like to thank Shannon Buckley Barnes for her contribution to this article.