Lawyers advising clients in the course of litigation are exempt from requirements under the Proceeds of Crime Act (POCA) 2002 to report suspicions of money laundering, the Court of Appeal ruled this week in a judgment seen as a major boost for solicitors.

The ruling in Bowman v Fels [2005] EWCA Civ 226 puts an end to a wide interpretation of the rules that has caused considerable difficulties for lawyers and delays in litigation.


Thousands of family cases in particular had been affected, with solicitors believing they were obliged to report suspicions of minor tax evasion to the National Criminal Intelligence Service (NCIS), and then unable to continue work on the case until they received NCIS consent.


The judgment represents a victory for the Law Society and Bar Council, which both intervened in the case. NCIS, which intervened to argue against the litigation exemption, said it will not appeal.


Robin Booth, chairman of the Law Society's money laundering taskforce, said: 'The judgment has made it clear that where lawyers are advising on litigation, or negotiations to reach a consensual settlement where there is litigation in the background, they are exempt from requirements to report suspicious activity.


'What this judgment does is to protect the whole process of litigation. It does not just depend on professional privilege, but on the principle that people should have access to justice and the courts without having their action disrupted by executive action.'


He added that the judgment did not specifically cover how advice on mediation or alternative dispute resolution would be affected, and the Law Society would be giving this consideration.


Law Society chief executive Janet Paraskeva added: 'This radical judgment will eliminate confusion and potential disruption for thousands of clients and lawyers involved in litigation.


'The appeal court believes that legal professional privilege can only be eroded by clear parliamentary legislation and not simply interpretation of current legislation.'


The case involved solicitor Anthony Daniels, a partner at north London firm Levine Mellins Klarfeld. He acted for Jennifer Bowman in a property dispute when he became suspicious that her former cohabitee, William Fels, may have included the cost of work carried out at the property in his business accounts.


Mr Daniels reported this to NCIS, and the normal progress of the county court case was disrupted, although NCIS eventually gave clearance. He said: 'I am very pleased and relieved that there is finally clarity in the law, which has caused solicitors so many problems.'