Professional secrecy has had a rough week, following several developments. (I shall use ‘professional secrecy’ to cover both confidentiality and legal professional privilege.)
Before we even get to the publication of the Paradise Papers, which again involved the papers of a law firm, the relevant committee in the European Parliament published its report and recommendations on the last, similar scandal, the Panama Papers.
I have written before about the drastic and negative comments this committee made in relation to the role of lawyers when previously discussing the Panama Papers. It was hoped that, following extensive lobbying by the bars in the meanwhile, this version of the report would be better than the preceding draft. But because of poor attendance of members supporting the bars’ line, the recommendations which now go to the Plenary Session of the Parliament next month are almost as bad as before.
Here are two examples of the committee’s recommendations, the first aimed at all intermediaries, including lawyers, and the second aimed at lawyers alone. You will note that both of them invoke the notion of ‘spirit’, whether that be the spirit of tax legislation or the spirit of the law. Good luck to anyone trying to define what that spirit might be.
‘122. Calls for the creation of an EU framework for compulsory codes of conduct for intermediaries, which includes at least a general ban on the use of contracts that impose secrecy of the tax scheme by the client or the use of a premium fee; calls for these codes of conduct to include an obligation for intermediaries to act in the public interest and not to go against the letter and spirit of tax legislation;’
’138. Points out that professional secrecy cannot be used for the purposes of protection, covering up illegal practices or violating the spirit of the law; … calls on Member States to issue guidance on the interpretation and application of the legal privilege principle for professionals and to introduce a clear demarcation line between traditional judicial advice and lawyers acting as financial operators;’
We can make fun of spirits. But the need for there to be a rethink on our part of the balance between professional secrecy and the public interest has been pressing for some time. Whether we agree or not, decision-makers believe that the current settlement is not in the public interest. It is no good saying that, with Brexit, we will escape from the clutches of the European Parliament. There are other bodies like the OECD - of which the UK is a member, and which plays a leading part in developing policy on tax avoidance – which think in the same way, as do decision-makers in the UK itself.
The recent publication of the Paradise Papers has not helped our case. The protestation that nothing illegal may have taken place is not helpful, either. There is a growing feeling, fed by rising populism, that lawyers are both enabling, and then helping to hide, the salting away of millions, on which more tax would otherwise have been paid to help raise the standards of our schools, hospitals and other public services.
The announcement that the relevant committee of the European Parliament will hold a special hearing on the Paradise Papers on 28 November was inevitable. The problem now is whether the new Papers’ publication will hinder the bars’ lobbying before the European Parliament votes in December on the negative recommendations of its own committee.
As if that was not enough, a high profile spat between the New York Times and one of the leading lawyers in the US, David Boies, has done more harm to professional secrecy. In a nutshell, David Boies’ firm was acting for the New York Times in libel litigation at the same time as he personally signed a contract with a private investigation organisation to unearth intelligence to help his client Harvey Weinstein’s efforts to stop publication of a new negative article in the New York Times. The New York Times was not pleased.
A leading US academic, Professor Deborah L. Rhode of Stanford University, wrote a scathing article in the newspaper. She pointed out that: ‘Having Mr. Boies rather than Mr. Weinstein sign the contract had the advantage of protecting the resulting information under the attorney-client privilege, which would shield it from disclosure in subsequent disputes.’
After discussing conflict of interest and other ethical rules which were much more at play in the broader affair, she ended by pointing out that: ‘When leaders with such high visibility cut ethical corners, it sends a powerful and corrosive message.’ Ouch!
Professional secrecy is increasingly in the spotlight. We can carry on as before, or we can give thought as to whether it needs to be recalibrated to meet modern expectations.
Jonathan Goldsmith is Law Society Council member for EU matters and a former secretary general of the Council of Bars and Law Societies of Europe. All views expressed are personal and do not necessarily reflect the views of the Law Society Council
Clarification note: The Gazette has been asked by Boies Schiller Flexner LLP to add a clarification relating to the issue of whether there was a conflict of interest with the firm’s representation of the New York Times. The firm has supplied us with the text of a waiver from the newspaper. Its Engagement Letter, countersigned by the Times, states: ‘We have explained and you have agreed that as a result of the types of clients the Firm advises and the types of engagements in which we are involved, we may be requested to act for other persons on matters which are not substantially related to the Engagement, where the interests of the other persons, and the Firm’s representation of them, may be against the client’s, including adversity in litigation.’