Protecting Procurement Advice : The Prudential Case 2013

Lawyer CartoonThe Prudential Case - Refusal to Protect Advice of non-lawyers

In the recent UK Supreme Court Case of  R (Prudential plc & Anor) v Special Commissioner of Income Tax & Anor [2013] UKSC 1 the law Lords struck down an attempt by Prudential to have the same confidentiality attaching to legal advice under the doctrine of legal professional privilege, attach to taxation advice received from their accountants Price Waterhouse Coopers.  Despite the intervention into the matter by the representative bodies of accountants and the fact that it was acknowledged by the court that the specific taxation advice would have been covered by legal professional privilege if it were provided by a lawyer, the Lords refused to expand the long standing rules relating to legal professional privilege.  Relying heavily on the floodgates argument, the court’s concern was where and how the line would be drawn. If the courts were obliged to enquire in each case into the professional status of town planners, pensions advisers, engineers, actuaries, auditors, accountants, architects and surveyors amongst other professions, it would lead to uncertainty, inconsistencies and increased costs. Further regard would then have to be given to individual pieces of advice: technical / commercial advice would need to be “disentangled” from legal advice.

The ruling highlights a very specific challenge which the decision confirms is not going away anytime soon and with which individuals and corporations must grapple when seeking advice on potentially sensitive issues in public sector procurement.  The conduct of procurement fraud audits, procurement risk assessments, fairness and compliance reviews, advice on debriefing of disappointed suppliers and the mediation of bid disputes, protests and complaints are all matters which ought to be conducted discretely not only for the more efficient management of projects but more importantly to preserve bidders and purchasers confidential commercial data which could compromise the fair conduct of ongoing and future procurement processes.

The Value of a Procurement Lawyer : A Question of Privilege

With emphasis being placed on transparency and accountability in the procurement function, by a growing enlightened citizenry, more savvy investigative journalism and strengthened access to information laws, buying decisions and their justifications are being placed under unprecedented public scrutiny.  Procurement decision-making must be evidenced based, objective, fair and compliant with a multiplicity of old and new regulations. Entities on both sides of the buying transaction must develop a proactive strategy for managing the new legal mine field; and disclosure obligations undoubtedly raise some of the more complicated issues to be managed.

On its face, the questions of what to buy, when to buy, how and from whom to buy are commercial decisions requiring knowledge of the market, understanding of your needs, and the assessment of your finances to ascertain feasibility and value for money.   Up until the last three to four decades, this is how the "buying" or as it is more commonly referred to now the "procurement" function has been treated.  Typically, subsumed under finance and administration departments, procurement advice was given by accountants, business, finance, administration professionals and technical experts and the lawyer was sought after primarily for contract negotiation, preparation and execution and in the event of a procurement dispute of bid protest.

However, the rapid changes taking place in the area of public procurement particularly from a regulatory standpoint along with calls for greater scrutiny and oversight over how public monies are spent, has increased the understanding of the paramountcy of procurement governance.  The demand for a new more compliance oriented breed of specialist adviser has emerged falling squarely within the remit of legal professionals.

The Prudential case eliminates any doubt that the most prudent course for an individual or corporation, requiring advice on a sensitive procurement issue the confidentiality of which one wishes to preserve, is to obtain same from a qualified lawyer with the appropriate expertise.  Receiving advice on these sensitive issues from a lawyer provides parties in public sector procurement and projects a greater degree of protection, than if the same advice is sought from other professionals. This privilege attaches confidentiality to communications between lawyers and their clients where the purpose of the communication is for the giving or obtaining legal advice. The privilege allows a client to refuse to disclose communications to third parties including courts, investigative tribunals and enquiries, regulatory bodies and enforcement agencies. The Privy Council decision in B and Others Auckland District Law Society and Another [2003] UKPC 38 reaffirmed the importance of the right to legal professional privilege as part of the public interest in the administration of justice, and sets out guidance on the limited circumstances in which the right can be overridden. However in that case it was made clear that even the statutory power of Commissions and Tribunals to request documents could not override legal professional privilege.

In the UK and other common law jurisdictions this legal advice privilege attaches to communications from those acting under the direction of qualified lawyers (eg paralegals, legal secretaries and trainees) provided they are acting in a legal capacity and not as general business advisers. (Taylor v Foster [1825]).   Also in the UK, this privilege applies to in-house lawyers as well. (Alfred Compton Amusement Machines Ltd v Customs & Excise Commissioners (No 2) [1972]).  However under EC law, the privilege only protects communications with lawyers in private practice and not those working in-house.  Accordingly, advice given by in-house lawyers to their employers will be disclosable in an EU Competition Commission investigation or during a procurement dispute. The difference in approach under EC law is premised upon the perception that in-house lawyers were not sufficiently independent from their employers. (Akzo Nobel Chemicals Ltd v European Commission [2010]). 

However this right to claim legal advice privilege has never been regarded as absolute and for example in the case of fraud or illegality, it can be overridden. Where the document came into existence as a step in a criminal or illegal act or proceeding as eg if an attorney is consulted on how to do an illegal act, it was held that the privilege would be overridden. (Bullivant v AG for Victoria [1901] A.C. 196 at 201, per Lord Halsbury and at 206, per Lord Lindley; see also R v Cox (1884) 14 Q.B.D 153).

That said, it is a uncontroversial that a lawyer cannot provide all of the procurement advice required by parties in public sector procurement and in fact such a course should be firmly discouraged. Indeed, there is a critical demand for cross-disciplinary expertise to be brought to bear on the procurement function and greater efficiency in the procurement process can be achieved by harnessing finance, auditing, economic, technical and legal expertise.

Protecting Procurement Advice

What steps therefore can an organization take to in order to protect advice received on sensitive procurement information?

  • Engage specialist procurement lawyers to provide advice on procurement irregularities, bid disputes, complaints, fraud audits, risk audits and other compliance issues
  • If non-legal inputs and advice are required, engage a specialist procurement consultancy which harnesses the economics, financial, accounting, risk management and communications expertise and provides the advice through a compliance oriented framework governed by the procurement rules.  The specialist firm then issues the advice under the hand of their lawyers.
  • Whether received from lawyers or specialist procurement consulting firms, ensure advice received is properly identified as legally privileged "attorney -client work product" and not general business consulting or financial advice.