Potential problems for parties under foreign law when giving disclosure in English proceedings

Written on 6 Sep 2019

English proceedings, in contrast to most civil jurisdictions, require disclosure not only of the documents which support a party’s case, but also those which are adverse to its case, so long as they are relevant to the issues in dispute. Changes have recent been made regarding the nature and scope of the disclosure which has to be given. In any event, the use of such documents for purposes which are unrelated to the proceedings in which they are disclosed could therefore prove onerous for parties. In recognition of that potential hardship, the civil procedure rules seek to preserve, as far as possible, a litigant’s right to privacy and confidentiality and thereby also to promote compliance with the disclosure rules. More specifically, the rules control the use that may be made of such disclosed documents by providing 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 (unless, for example, the other side agrees or the court gives permission).

Two recent High Court cases have highlighted the difficult position in which litigants in England can find themselves when torn between two competing duties owed in two different jurisdictions.

Using disclosed documents for a collateral purpose

In the first case, ACL Netherlands v Lynch [2019] EWHC 249, the parent company of one of the parties in the case was served with a subpoena by the US courts, requiring it to provide documents within its control which, under US corporate law, included documents held by its subsidiaries. Those subsidiaries were parties to English proceedings and had received documents which had been disclosed to them by the defendants during those proceedings.

Accordingly, the subsidiaries sought permission from the English court to provide those documents to the FBI and argued that they should not be put in a position where they would be unable to comply with the subpoena and potentially be in contempt of the US courts. The defendants argued that they would be prejudiced if permission was granted.

Prior caselaw has established that the permission of the court will be granted to allow the collateral use of documents if: (a) there are special circumstances which constitute “cogent and persuasive reasons”; and (b) such collateral use will not occasion injustice to the person giving disclosure (see Crest Homes Plc v Marks [1987] AC 829).

The judge in this case concluded that the permission of the court to use the documents for a collateral purpose will be almost impossible to obtain except where “the Court is persuaded of some public interest in favour of, or even apparently mandating, such use which is stronger than the public interest and policy underlying the restrictions that the rules reflect“. Crucially, the fact of compulsion (in light of the subpoena) did not in itself establish “a cogent and persuasive reason”: instead, the test is whether the use for which permission is sought justifies an exception to the public interest which lies behind the restriction on the collateral use of documents.

Applying those principles to the fact of the case, the judge concluded that it had not been shown that disclosure of the documents was necessary for the purpose of the US process and to determine whether or not there should be an indictment: “However, in this case the fact is that the justification can only be that the documents in question are really needed to enable the Grand Jury to perfect a course already set (by amending or replacing an indictment they have already caused to be issued) or to investigate whether other persons than those thus far identified as (in its view) the main culprits should also be brought to trial“.

Nor had it been shown that the parties had legal control of the requested documents (because permission from the English court was required) and so the judge was not persuaded that they were “truly under compulsion” (even accepting that the subpoena was entirely regular).

Permission to use the documents was therefore refused: placing the parent company of the claimants potentially in the position of breaching its duties to the US courts. However, this judgment makes it clear that the English court will not allow such considerations (in themselves) to override the underlying public policy that a litigant’s right to privacy and confidentiality should be preserved.

Risk of criminal prosecution

In the second case, Bank Mellat v HM Treasury [2019] EWCA Civ 449, the issue was different. The appellant Iranian bank contended that it had a right to withhold inspection of documents which it had disclosed in redacted form, because production of the documents in unredacted form would expose it to the risk of criminal prosecution in Turkey, Iran and South Korea (because they contained confidential information). The respondent instead sought unredacted disclosure to members of a confidentiality ring.

The Court of Appeal reviewed prior caselaw and restated the principles governing such an application:

  1. The English court has jurisdiction to order production and inspection of documents even if compliance with that order would entail a breach of foreign criminal law. Foreign law does not override the English court’s ability to conduct proceedings in accordance with English procedures and law.
  2. However, the English court will not lightly make an order where compliance would entail a party to English litigation breaching its “home” criminal law.
  3. When exercising its discretion, the English court will take account of the real (ie actual) risk of prosecution in the foreign country, but this risk is just one factor in the court’s balancing exercise.
  4. The English court can minimise concerns by, for example, imposing confidentiality restrictions.
  5. Where an order for inspection is made: “considerations of comity may not unreasonably be expected to influence the foreign state in deciding whether or not to prosecute the foreign national for compliance with the order of this Court. Comity cuts both ways“.

On the facts of the case, the Court of Appeal found that the judge at first instance had applied these principles and her order, requiring inspection and imposing a confidentiality club (even though the appellant had not wanted a confidentiality club), was upheld. The Court of Appeal upheld the judge’s decision that the risk of prosecution was not as great as the appellant’s expert had presented it.

Accordingly, in this case too, the English courts adopted the position that although there can be a tension between the English law requirement for inspection of documents and the provisions of foreign law, that is not a reason, in itself, to override the English court’s policy and procedure.

In short, if the parties choose to litigate in England, the starting position is that they will be bound by English procedural rules and it is only in rare cases that issues of foreign law will provide a basis for departing from those rules.

This article was first published in the IBA Litigation Committee newsletter in September 2019, and is reproduced by kind permission of the International Bar Association, London, UK. © International Bar Association