Parallel Civil Litigation: The UK Perspective

22.1 Introduction

The conduct under review in investigations can generate a range of parallel proceedings. These can precede the investigation, follow on from the investigation findings or, frequently, arise in the course of an investigation. It can be a particular challenge to manage parallel proceedings, which engage their own procedural rules and can force the pace of investigations or create other tensions with the investigative process. This chapter deals with the types of issues and parallel proceedings most likely to arise in complex investigations.

22.2 Stay of proceedings

Where a company subject to investigation is also involved in ongoing civil proceedings (before the courts or an arbitral tribunal) that relate to the conduct under investigation, the parties may seek to stay those proceedings pending the outcome of the investigation. This would often be an ideal solution to managing the tensions they introduce but obtaining a stay can be difficult and is not automatic.

22.2.1 Civil litigation

There are many reasons why a court may stay proceedings. As well as having inherent jurisdiction to manage proceedings,[2] the court is empowered under the Civil Procedure Rules (CPR) to stay proceedings in part or in whole, either indefinitely or until a specified date or event.[3] The court may stay proceedings in specific circumstances pursuant to certain other statutes.[4]

In circumstances where there are related criminal proceedings, the following established principles will apply to the exercise of the court’s discretion to stay civil proceedings:[5]

  • the court will only consider staying the civil proceedings if there is a real risk of serious prejudice that may lead to injustice;[6]
  • the court will exercise its discretion by reference to the competing considerations between the parties;[7]
  • the fact that a defendant, by serving a defence in civil proceedings, would be giving advance notice of their defence in criminal proceedings, carries little weight in the context of an application for a stay of civil proceedings;
  • it is not enough that both the civil and criminal proceedings arise from the same facts, or that the defence of the civil proceedings may involve a defendant taking procedural steps (such as exchanging witness statements, and providing disclosure of documents) that might not be imposed on them in the criminal proceedings;[8] and
  • even if the court is satisfied that there is a real risk of serious prejudice leading to injustice if the civil proceedings continue, the proceedings should nevertheless not be stayed if safeguards can be imposed in respect of the civil proceedings that provide sufficient protection against the risk of injustice.

A stay of proceedings puts a stop to their further conduct at the stage they have reached, apart from the taking of any steps allowed by the CPR or the terms of the stay. The court may also impose a stay on the effects of an action, such as a stay of execution of orders of a lower court pending appeal. Proceedings can be continued if the stay is lifted.

22.2.2 Arbitral proceedings

In England, as in many other jurisdictions, procedural matters in arbitration are governed first and foremost by parties’ agreement. Aspects of applicable arbitral procedure may be set out expressly in an arbitration agreement, be contained in the parties’ chosen institutional arbitration rules or subsequently be agreed by the parties to a dispute. Where parties do not reach agreement, procedural arrangements are otherwise within the discretion of the tribunal as a matter of English law, subject to the tribunal’s general duties to act fairly and impartially as between the parties and to adopt procedures suitable to the circumstances of the particular case.[9]

A tribunal may, in exercise of its discretion, elect to stay the arbitral proceedings for a variety of reasons.[10]A tribunal might stay proceedings to avoid the risk of inconsistent decisions where parallel judicial or regulatory proceedings are ongoing. In all cases, a tribunal’s decision will depend on the propriety of ordering a stay in all the relevant circumstances, which may, in the regulatory context, depend on the identity of the regulator and the extent to which the outcome of the regulatory investigation is likely to impact the matters at stake in the arbitration itself.

22.3 Multi-party litigation

Under English law, class actions do not feature as part of the parallel litigation landscape to the extent that they do in the United States (in particular, securities litigation). Nonetheless, companies may face civil actions brought by multiple parties in a variety of ways. The two main procedural mechanisms for multi-party litigation envisaged by the CPR are representative actions and group litigation orders.[11] Additionally, a form of collective proceeding exists in the competition law context. Multiple parties can also be joined to the same claim. The CPR give the court a range of powers to add or substitute parties to proceedings.

22.3.1 Financial Ombudsman or Business Banking Resolution Services

Complaints can be brought against financial services firms via an informal process of complaining to the firm and then to the Financial Ombudsman Service (FOS). The FOS applies a general ‘fair and reasonable’ test rather than applying strict law or regulation. The upper limit for an award from the FOS is now £375,000, and complaints can be brought to it by consumers, micro-enterprises and small businesses. Firms must comply with a detailed set of rules in the FCA Handbook on how they respond to complaints, and the FCA has investigated and issued several public fines against firms for poor complaints-handling. Equally, complaints to the FOS can prompt the FCA to investigate a particular product or service, and so there is an inherent interaction between financial services investigation and the FOS jurisdiction. In 2021, seven large banks devised the Business Banking Resolution Service, a voluntary scheme for resolving complaints of larger business customers.

22.3.2 Competition law claims

There are specialised collective proceedings for competition law claims.

Such proceedings may be brought before the Competition Appeal Tribunal (CAT) on a stand-alone basis (in which case, a complainant must prove an infringement of certain competition law rules) or on a follow-on basis (which requires an existing infringement decision establishing liability). Follow-on claims can be based on a competition infringement decision of the Competition and Markets Authority (CMA), or the CAT on an appeal from a decision of the CMA.[12] European Commission infringement decisions can still form the basis of such claims provided the decision was made or the Commission’s investigation was initiated before the end of the Brexit transition period (on 31 December 2020).[13]

Claims will only be eligible for inclusion in collective proceedings if the CAT considers that they raise the same, similar or related issues of fact and law, and are suitable to be brought in collective proceedings.

Collective proceedings (which may be opt-in or opt-out) must be commenced by a person who proposes to be the representative in those proceedings, but they can only be continued if the CAT certifies them by making a collective proceedings order (CPO).

The CAT granted its first CPO in 2021[14] authorising Walter Merricks as the class representative for an opt-out collective claim against Mastercard, on behalf of a class comprising some 46.2 million individuals. The proceedings were commenced as a follow-on claim based on the European Commission’s 2007 Mastercard decision.[15] The CAT has discretion to make any order it thinks fit in relation to the payment of costs, which will not normally be awarded against represented persons who are not the class representative.

Settlement of opt-out (but not opt-in) collective proceedings is regulated by statute and overseen by the CAT (which must approve the terms of any settlement reached). In certain circumstances, collective settlements can also be reached in respect of claims even if a collective proceedings order has not been issued.

22.3.3 Collective redress schemes

The Financial Services and Markets Act (FSMA) is the main statutory framework for financial services regulation in England and Wales and contains the powers of the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA). The FCA may (under section 404 and sections 404A to 404G of FSMA) require firms authorised by the FCA to establish and operate a consumer redress scheme, where there is found to have been a widespread or regular failure by such a firm to comply with relevant requirements. The power can be used if it appears to the FCA that, as a result of the failure, consumers have suffered (or may suffer) loss or damage in respect of which a remedy or relief would be available in legal proceedings, and the FCA considers that it is desirable to make rules to secure redress for consumers in respect of the failure. In addition, pursuant to section 404F(7) of FSMA, the FCA may vary the permission or authorisation of a firm to require it to establish and operate a scheme that corresponds to, or is similar to, a consumer redress scheme. The FCA also has administrative powers to require restitution under section 384 of FSMA, which it has previously used, for example, to establish a compensatory scheme for investors who suffered loss in connection with an overstatement of expected profits by Tesco plc in 2014.[16]

22.4 Derivative claims and unfair prejudice petitions

22.4.1 Derivative claims

Members of a company can bring a derivative claim (pursuant to Part 11, Chapter 1 of the Companies Act 2006 (CA 2006)) in respect of a cause of action vested in the company, and seek relief on its behalf.

A member who brings such a derivative claim must apply for permission to continue it, and the CPR envisage a two-stage procedure for dealing with applications for permission to continue derivative claims (the company, and any other appropriate parties, are made respondents to the permission application at the second stage).

22.4.2 Unfair prejudice petitions

A member of a company may also apply to the court for an order[17] on the grounds that the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally, or of some part of its members (including at least the applicant), or that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.

The courts take a wide view of prejudice suffered by a shareholder, which need not be financial. Typically, a member will not be entitled to complain of unfairness unless there has been some breach of the terms on which the member agreed that the company’s affairs should be conducted.

The court has a wide discretion to make such order as it thinks fit for giving relief in respect of the matters complained of in an unfair prejudice petition.[18] The most common order in practice is for the shares of the petitioner to be bought by the respondent at a price to be fixed by the court.

22.5 Securities litigation

There are a number of ways in which investors in securities can seek relief before the English courts, and in recent years there has been an increase in the volume of such litigation, due in part to the growing role of third-party litigation funders and specialist claimant law firms.

Section 90 of FSMA makes persons (listed companies (issuers) and individuals within issuers) who are responsible for listing particulars or prospectuses liable to pay compensation for any untrue or misleading statement in the particulars, and for certain omissions from the particulars, to any person who has acquired securities to which the particulars relate and has suffered loss as a result of the statement or omission. A number of exemptions from such liability are set out in Schedule 10 of FSMA. Section 90A of FSMA applies to other categories of published information relating to securities, making an issuer liable to pay compensation to investors who suffer loss in respect of those securities as a result of a misleading statement or dishonest omission in that information, or a dishonest delay in publishing information (although liability under section 90A is in some respects more restricted than under section 90 – for instance, the standard of fault under section 90A is higher, and it is necessary to show reliance).[19] There is an increasing tendency for these cases to follow when there has been a significant investigation issue ostensibly linked to a fall in the share price and deferred prosecution agreement (DPA). In the financial services sector, private persons who suffer loss (such as purchasers of insurance products or investments) as a result of a breach by an authorised financial services firm of certain FCA rules can bring a claim for civil damages under section 138D of FSMA. The FCA determines which of its rules give rise to this cause of action, and this is set out in each chapter of the FCA Handbook.

In July 2022, following a consultation in 2021, the FCA announced it would introduce a new Consumer Duty applicable to regulated firms authorised under FSMA, the Payment Services Regulations and the E-money Regulations that offer products and services to retail customers.[20] The Consumer Duty will comprise a new consumer principle, requiring firms to act to deliver good outcomes for retail clients, supported by cross-cutting rules and outcome-focused rules. No private right of action for the Consumer Duty will be introduced, but the FCA has said this will remain under review. The most serious breaches of the Consumer Duty are likely to be investigated by the FCA and may result in fines against infringing firms or the establishment of customer redress schemes. The PRA also has the power under section 138D to provide that certain of its rules are subject to a similar right of action by private persons. Further, a number of other provisions in FSMA (for example, sections 26, 27 and 30) can render agreements or trans­actions unenforceable, and give rights to recover money or other property and to obtain compensation, where the circumstances in which those agreements or transactions were entered into contravene certain rules in FSMA, for instance, if necessary authorisation from the FCA has not been obtained.

Aggrieved investors may be able to bring other civil actions against financial services firms, in addition to claims under FSMA. Misrepresentation claims pursuant to section 2(1) of the Misrepresentation Act 1967 may be available to investors in circumstances where the investor enters into a contract in reliance on a misrepresentation made to them by another party to the contract, which causes loss, and where the representor did not have a reasonable belief at the time the contract was made that the facts represented were true. Investors may also be able to bring a negligent misstatement claim (in circumstances where a duty of care is owed to the investor, that duty has been breached and that breach causes the investor to suffer recoverable loss), or a claim based on the tort of deceit (which requires, among other things, proof that the defendant knowingly or recklessly made a false representation).

22.6 Other private litigation

22.6.1 ‘Tainted’ contracts

Conduct that is illegal or contrary to public policy (and that may well be the subject of an investigation) may ‘taint’ contracts entered into by a company.

The common law doctrine of illegality may prevent a party to a contract tainted by illegal conduct from enforcing their contractual rights and remedies in certain circumstances. Historically, the law in this area has been complicated and unclear, but it was reconsidered by nine Supreme Court justices in the case of Patel v. Mirza.[21] The majority held that the essential rationale under­pinning the illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would harm the integrity of the legal system.

Civil law bribery

If bribery has occurred, then a number of civil law consequences may also follow. Civil law bribery[22] arises in the context of agency relationships, where an agent receives a benefit that puts them in a position where their duty (to their principal) and their (personal) interest conflict. There must be a sufficient relationship of trust and confidence between the agent and principal.[23] The benefit need not be monetary, or provided directly to the agent, and there is no need to prove motive, inducement or loss up to the amount of the bribe. The bribe need not be linked to a particular transaction (provided the agent is tainted by bribery at the time of the relevant transaction between the briber and the principal), and it may taint subsequent transactions. An arrangement will not constitute a bribe in the absence of secrecy, although it may still amount to a breach of fiduciary duty on the part of the agent if the principal’s fully informed consent is not obtained.

A variety of alternative remedies are available to a principal faced with civil law bribery as against the bribed agent and the briber.

22.6.2 Specific provisions in commercial contracts

Parties often include specific provisions in their commercial contracts aimed at preventing, or providing contractual protection in relation to, illegal behaviour (in particular, corruption) involving a party to the agreement. Accordingly, the fact of an investigation (or related proceedings), or conduct that is the subject of an investigation, may have adverse contractual consequences for a company. These will naturally depend on the nature of both the investigation itself and the specific conduct under investigation, as well as the contractual provisions. By way of illustration, many commercial contracts contain:

  • obligations to comply with certain applicable laws and regulations;
  • obligations to have in place and comply with specified policies (such as data protection, cybersecurity, anti-slavery and human trafficking or anti-bribery and corruption policies);
  • obligations to report generally on compliance to contractual counter­parties on a continuing basis, which could include requiring the provision of a confirmation signed by an officer of the company. Audit rights may also be granted to contractual counterparties; and
  • representations (given by the company, and that may be repeated) that it has not been investigated for or convicted of certain offences (and that no proceedings or investigations are pending or threatened), or that relate to the accuracy and completeness of information provided to contractual counterparties.

A company may face parallel litigation brought by its contractual counter­parties in reliance on such provisions. A company may also be able to invoke such provisions against its contractual counterparties, although where a company is under investigation it may not wish to take the position in civil proceedings that its counterparty has engaged in illegal activity if the company is also exposed for its counterparty’s conduct.

22.6.3 Mergers, acquisitions and investments

Mergers, acquisitions and investments[24] can present particular risks for companies. Illegal behaviour in the target (or its subsidiaries, or other related ­companies and persons) may have various negative consequences for an acquiring entity, which can include (1) financial consequences (for example, the target may have been overvalued), (2) legal consequences (both civil and criminal) for the target, the acquiring entity and relevant individuals (including officers of both entities), along with associated legal costs and (3) other practical consequences (such as reputational damage).[25]

Accordingly, the existence of an investigation (or related proceedings), or conduct that is the subject of an investigation, may give the acquiring entity contractual rights, which it can seek to enforce (including through litigation or arbitration). Again, however, care may need to be taken in doing so, for the reasons given in Section 22.6.2.

22.6.4 Defamation proceedings

A company may face defamation actions[26] brought by individuals arising from internal investigations carried out by the company or may bring defamation actions itself.

The law of defamation is concerned with the protection of reputation. It covers the torts of libel (which concerns more permanent forms of publication) and slander (which concerns more transient forms of publication, such as speech, and generally is actionable only if special damage can be shown).

Broadly speaking, a defamatory statement is one whose publication has caused, or is likely to cause, serious harm to the claimant’s reputation, although a number of different tests have been utilised by the courts. The statement must have been published (communicated) to a third party, and each publication will amount to a separate cause of action. Liability for publication extends to those who participate in or authorise publication and those who republish or repeat the relevant statement. However, defences are available in certain circumstances to persons who publish statements and who are not the author, editor or publisher (in the sense of being a commercial publisher) of the relevant statement; as well as to website operators, if they can show that the relevant statement was posted on the website by another.

A number of defences may be available to a company facing a defamation action. For example, it may be able to rely on absolute privilege, which will exist where a statement or conduct can fairly be said to be part of the process of investigating a possible crime with a view to a prosecution in respect of the matter being investigated. This applies to statements made by persons assisting an inquiry to investigators, and by investigators to those persons or to each other. Absolute privilege will also extend beyond the criminal context, to certain enquiries made in connection with proceedings before a tribunal, the proceedings of which are protected by absolute privilege. Accordingly, the provision of information by a company to the authorities in connection with an investigation is unlikely to expose that company to the risk of a defamation action. The defence of qualified privilege will also be available in circumstances where the maker of a statement has a legitimate interest or duty in making it to the recipient, and the recipient has a corresponding interest or duty in receiving it, provided the maker is not motivated by malice. This may apply to certain communications between an employer and their employees, or between employees, that relate to the employer’s business.

A company may, in theory, be in a position to bring a defamation action against a whistleblower, given that the act of blowing the whistle will typically involve the publication of a statement that causes harm to reputation. Nonetheless, under the Defamation Act 2013, to satisfy the serious harm threshold, a company must show that the publication caused or is likely to cause serious financial loss. Whistleblowers may be able to make out one or more possible defences to such a claim. In particular if the whistleblower can show that the statement was substantially true, this will generally constitute a defence to a defamation action. Whistleblowers may also benefit from the defence of absolute privilege or qualified privilege, provided that they are not motivated by malice. It is notable, however, that the Public Interest Disclosure Act 1998 does not provide protection from a defamation action for a whistleblower, although if such an action were brought by an employer this is likely to amount to a ‘detriment’ for the purposes of section 47B of Part V of the Employment Rights Act 1996.[27]

In addition, a company may be in a position to bring a defamation action in relation to press comment although litigation could have the effect of drawing attention to the allegation, which is seldom beneficial.

The primary remedy in defamation actions is the award of damages, and claimants may also seek an injunction against repetition of the publication complained of.

22.6.5 Privacy

Generally an individual subject to a police or regulatory investigation but who has not been charged may have a reasonable expectation of privacy in relation to that investigation.[28] If the company discloses information about an investigation that identifies that individual, he or she may be able to bring a claim for misuse of private information (which could include seeking an injunction to prevent disclosure). However, the claim’s viability will depend greatly on the circumstances, both the extent to which the individual’s right to privacy is engaged, and any countervailing interest the company may have in disclosing the information, which might outweigh the individual’s right to privacy.

22.6.6 Arbitration

Allegations of unlawful behaviour can have a significant impact in the context of international arbitration,[29] both before a tribunal itself and before national courts at the stage of recognition or enforcement of an award.

In the context of commercial arbitration, allegations of unlawful conduct can impact parties’ disputed rights and obligations under the applicable law in myriad ways. Should a regulatory body, for instance, determine a party’s conduct to be unlawful, this might be taken into account by a tribunal in its consideration of claims of invalidity of a contract on grounds of illegality. In the context of recognition and enforcement of foreign arbitral awards, unlawful conduct may impact a court’s assessment of a party’s claims to resist recognition or enforcement on the grounds set out in Article V of the New York Convention, for instance, on public policy grounds.[30]

A party’s unlawful conduct can also have a significant impact in the context of determination of investor-state disputes arising under international treaties. In particular, numerous international tribunals have been faced with assessing allegations of investor misconduct, often involving corruption or bribery, in a variety of contexts. The findings of a domestic regulatory body, while compelling evidence of unlawful conduct under the law of the regulator’s jurisdiction, are only one factor to be taken into account by a tribunal. The consequences of a finding of unlawful conduct under a domestic law will vary, and often depend on the provisions of the treaty or other instrument under which the claim has been brought. In general terms, however, there is an emerging consensus in international practice that investment claims tainted by corruption or other unlawful conduct will be dismissed on grounds of inadmissibility (or, according to some tribunals, for lack of jurisdiction).[31]

22.6.7 Employment law and whistleblowing

Investigations can have employment law consequences for a company. Employees may seek to bring claims against their employers arising out of the subject matter of an investigation, or how the investigation is handled; conversely, an employer may wish to take action against an employee implicated in the conduct under investigation.

In addition, to the extent that allegations have been made by whistleblowers, companies under investigation or conducting investigations should carefully respect whistleblower rights (including a protection from being subject to a ‘detriment’ for blowing the whistle). For a disclosure to be protected, it must be made where the employee has a reasonable belief that the information tends to show breach of a legal obligation, is in the public interest and more than a personal issue for one individual,[32] and made to the employer or to a prescribed person. PRA regulated financial services firms must also comply with specific PRA and FCA whistleblowing rules covering policies, procedures and training on whistleblowing and, importantly, how they escalate and assess whistleblowing reports that meet the definition of ‘reportable concerns’ (which is very broad). The EU Whistleblowing Directive,[33] which was enacted in December 2021, introduces, among other things, a requirement for organisations with 50 or more employees to establish internal channels for whistleblowers to raise concerns and have their concerns investigated. The Directive will remain relevant for firms with wider EU operations, despite the United Kingdom’s departure from the European Union.

22.6.8 Data breaches

The UK General Data Protection Regulation sets out key principles that should inform the approach to processing personal data in Article 5.[34] The first of these is lawfulness, fairness and transparency. Under this principle, processing must be based on at least one of the grounds listed in Article 6.[35] The most commonly used are consent, performance of a contract and pursuit of legitimate interests. If relying on legitimate interest, an assessment[36] weighing up the balance of the interest and the data subject’s individual rights must be undertaken. If special category personal data is processed, more restrictive rules apply.[37] Those affected by the processing must be given notice, usually in the form of a privacy policy or privacy notice giving details prescribed by Article 13.[38]

There are exemptions from these obligations where necessary for matters of national or public security, defence, criminal investigations and prosecutions, and investigation and prosecution of breaches of ethics in regulated professions, among others. These must be provided for by law and are described in Article 23.[39] Additionally, a data protection impact assessment[40] must be undertaken for processing that is likely to result in a high risk to individuals.

A second key principle is purpose limitation. This means that processing must only be for a specific recorded purpose.[41] If it is going to be used for an additional or different purpose it must also be lawful, fair and transparent, and subjects may need to be informed.

Other key principles include data minimisation, accuracy and storage limitation. Only the data that is needed should be collected, the data should be kept accurate and up to date, and it should only be retained for as long as necessary. Lastly, the integrity and confidentiality of data must be maintained. Technical and organisational measures[42] must be implemented to keep data secure.

The Information Commissioner’s Office may impose penalties, which can include an administrative fine of up to £17.5 million or up to 4 per cent of a business’s total worldwide annual turnover in the preceding year (whichever is higher).[43] Supervisory authorities and any affected data subjects must be notified of breaches falling above specific risk thresholds.[44] Companies may also face actions brought by data subjects, who may seek to assert their rights under data protection laws, including requesting access to their data or erasure.[45] Liability could arise where data has not been gathered in accordance with law, for example, through covert CCTV or monitoring. Such issues could also lead to evidence being challenged in court, or to parallel proceedings.

22.7 Evidentiary issues

22.7.1 Reliance by the court on findings made by the authorities

Parties may seek to rely on findings made by the authorities in an investigation (such as a final notice from the FCA) in subsequent civil litigation. Objections may be raised to such reliance on the grounds of admissibility. As a matter of evidence, bare findings made in earlier proceedings are ordinarily inadmissible and excluded under what is known as the rule in Hollington v. Hewthorn,[46] although this controversial rule is subject to exceptions, and it has been held that a court can take into account the substance of underlying evidence as set out in prior decisions (giving it such weight as is appropriate).[47] In addition, a court may allow documents containing other relevant evidence, in addition to inadmissible findings, to be put before the court, with the judge taking into account that which is admissible and ignoring that which is inadmissible.[48] However, care should be taken when relying on regulatory findings in litigation. In Property Alliance Group v. RBS,[49] the court held that, while privileged material could be disclosed to the FCA on a limited waiver basis, in the circumstances, RBS had inadvertently waived privilege by making assertions in its defence about the scope of the FCA’s subsequent findings. The court held that the bank’s defence advanced a positive point that the regulator had not made a finding of misconduct in relation to GBP LIBOR and not simply repeated the public findings. In doing so, the bank had made the settlement discussions admissible evidence.

Some investigations may result in criminal prosecutions and, potentially, convictions. In any subsequent civil proceedings, the fact of a UK conviction will be admissible in evidence for the purpose of proving, where relevant, that the convicted person committed the offence, and the information, complaint, indictment or charge sheet on which the person in question was convicted are admissible for the purpose of identifying the facts on which the conviction is based.[50] Where criminal proceedings follow civil proceedings, ordinarily findings of a civil court on the matters in issue in the criminal case will not be admissible in those subsequent criminal proceedings, although in some circumstances civil judgments may be admissible pursuant to the rules concerning evidence of bad character.

In addition, if a company enters into a DPA with a prosecutor, this must contain a statement of facts relating to the alleged offence and the company will be required to admit the contents and meaning of key documents referred to in the statement of facts.[51] Parties who bring civil litigation against the company may seek to rely on the contents of a DPA statement of facts as having the status of admissions by the company and may also seek disclosure of any underlying documents.

Certain specific rules apply in the competition law context. While the United Kingdom was an EU Member State, the High Court or CAT could not, under EU law, make determinations that conflicted with EU jurisprudence on certain competition law issues. The UK courts and competition authorities remain bound, when interpreting UK competition law, to ensure no inconsistency with EU competition case law that pre-dates the end of the Brexit transition period on 31 December 2020. They may, however, depart from such case law where it is considered appropriate in specific circumstances. UK courts are not bound by EU court rulings made after 31 December 2020 but may still have regard to them in appropriate cases. In these circumstances relevant EU court rulings may be accorded considerable weight in UK civil claims.[52] In addition, the Competition Act 1998 (as amended) provides that findings of fact made by the CMA during the course of an investigation (which have not been appealed, or have been confirmed on appeal) that are relevant to an issue arising in certain competition law proceedings before the High Court or the CAT are binding on the parties to those proceedings, unless otherwise ordered. Further, where a claim is brought before the CAT or the High Court following an infringement decision by the CMA,[53] the CAT or the court is bound by that infringement decision once it has become final (i.e., it has not been appealed, or subsequent appeals on liability were unsuccessful). The same is true in respect of European Commission infringement decisions in cases where the decision was made, or the investigation leading to the decision was commenced, before the end of the Brexit transition period.[54]

22.7.2 Reliance by an authority on court findings

Matters that come to light during the course of civil litigation can have repercussions beyond the immediate context of those proceedings. They may draw the attention of the authorities, and there have been cases where authorities have relied on the findings of civil courts as grounds for taking action. For example, the FCA has previously prohibited individuals from carrying on regulated activities on the basis of findings in High Court judgments (in one instance, without conducting a separate investigation).[55] Accordingly, these risks may be relevant considerations for a company when considering and implementing its litigation strategy in civil proceedings. In addition, conflict and privilege issues may arise if the interests of the company and its employees are not aligned.

22.7.3 Collateral use of disclosed documents

English law can impose onerous disclosure obligations on parties to civil proceedings. Typically, parties are required to disclose documents on which they rely, and documents that adversely affect their case, adversely affect another party’s case or that support another party’s case (although the court may make an alternative order in relation to disclosure, and a pilot scheme initially rolled out for two years in January 2019 involving generally less expansive disclosure obligations to apply in the Business and Property Courts in England and Wales was made permanent from 1 October 2022[56]). In certain circumstances, parties may protect documents from inspection, for instance, on the grounds of privilege or the public interest. However, the confidentiality of a relevant document is not, of itself, a justification for refusing to disclose it, although it may be relevant to the exercise of the court’s discretion to order disclosure. Although certain decisions of the English courts regarding the law of privilege had pointed towards a more restrictive interpretation of the scope of the protection it offers,[57] the important judgment of the Court of Appeal in the ENRC case (concerning, in particular, the scope of litigation privilege in the context of a corruption investigation) suggests that this trend is beginning to change.[58]

As a result, a company involved in civil proceedings may be required to disclose sensitive documents to an opponent, including documents relevant to an investigation or even unprivileged investigation material. This includes correspondence with the regulator, although consideration should be given to whether the regulator needs to be informed of any such requirement in advance.

The impact of the invasion of a litigant’s right to privacy and confidentiality that the obligation to give disclosure constitutes is mitigated to some extent by CPR Part 31.22, which provides that where a document has been disclosed to a party, that party may only use the document for the purpose of the proceedings in which it is disclosed, except where:

  • the document has been read to or by the court, or referred to, at a hearing held in public (although the court may make an order restricting or prohibiting the use of such a document);
  • the court gives permission; or
  • the party who disclosed the document and the person to whom the document belongs agree.[59]

The court will only grant permission if there are special circumstances which constitute a cogent reason for permitting collateral use. Permission decisions are highly fact-sensitive. The proposed collateral use and the nature of the document itself will be relevant, and, depending on the proposed use, the court may carefully consider the particular documents in respect of which permission is sought.

If the court gives permission for collateral use, a party may deploy the material outside the context of the civil proceedings. The court may make an order that they could be used in separate proceedings (including abroad). Once documents are moved outside the jurisdiction of the United Kingdom, there is a risk that they may be seized or that the party in possession of them may be compelled under local laws to produce them to third parties. Similar concerns about losing control over documents may arise where documents have been provided to regulatory or enforcement authorities during the course of an investigation. Even where documents are shared with an authority on a conditional basis, the authority may share the documents with third parties if it believes it has a statutory duty to do so. There is also the risk that the authority will be required to disclose those documents if it becomes involved in civil proceedings.

22.8 Practical considerations

22.8.1 Coordination with investigations team

It is important that those within the company responsible for managing parallel civil litigation are in constant communication with the internal team responsible for dealing with investigations, to ensure that:

  • a clear, holistic strategy is developed for managing the investigations and parallel civil proceedings, and anticipating areas of potential risk (e.g., possible civil claims that may arise but have not yet been commenced);
  • both teams understand, and evaluate the risks of, new developments in both the criminal and civil spheres; and
  • any proposed action by the company or associated persons, in the civil or criminal spheres, is carefully analysed to determine the potential repercussions for all other proceedings and investigations.

Similarly, the company’s criminal and civil legal advisers should coordinate closely to ensure consistency of approach. Issues can arise, for instance, where:

  • an authority seeks disclosure of privileged documents from the company in circumstances where the company may wish to assert privilege over those documents in subsequent civil proceedings;
  • witnesses, whose testimony may be important for the company’s case in civil proceedings, are under investigation, or have been classified as suspects, by the authorities, and have concerns about self-incrimination. Depending on the circumstances, employment proceedings may also be ongoing in respect of such individuals;
  • pleading possible defences (such as illegality) in civil proceedings, which may strengthen the company’s case in those proceedings but would undermine the position it has taken in relation to an investigation;
  • (as part of DPA negotiations) there is a risk that matters which an authority seeks to include in an agreed statement of facts could be relied upon against the company in parallel civil proceedings. Conversely, any settlement agreement relating to civil proceedings may be disclosable to an authority as part of their investigation; or
  • suspicious activity is identified in the course of civil proceedings (e.g., during disclosure), which the company is then obliged to disclose to the investigating authority.
See Chapter 12 on witness interviews
See Chapter 20 on negotiating global settlements

22.8.2 Privilege waivers and disclosure obligations

During the course of an investigation, documents that attract privilege may be shown or provided to relevant authorities, often to demonstrate co-operation. These include not only privileged communications between lawyer and client but also documents, such as witness interview notes, generated by external counsel. Doing so will not necessarily constitute a general waiver of any privilege in those documents for the purposes of subsequent civil proceedings (particularly if it is made clear that this is done on a limited basis),[60] although it may lead to adverse consequences, as the company will lose a degree of control over the information in the documents. Particular care should be taken in cases involving multiple jurisdictions, as the effect of showing or providing a potentially privileged document to the authorities may vary depending on the law that governs questions of privilege.

22.9 Concurrent settlements

Difficult issues can arise for companies when attempting to negotiate settlement of global investigations, which can involve a variety of regulatory and prosecuting authorities across a range of jurisdictions. Parallel existing (or potential) civil litigation or arbitration adds a further layer of complexity to the analysis.

During settlement negotiations with the authorities, companies should be aware of the risk that the fact of a settlement, as well as any associated press coverage or documents (such as a statement of facts in a DPA), may raise awareness of potential civil claims, and in certain circumstances may even be relied upon to support such claims. This will be of particular concern in the competition law context, given the risk of follow-on actions. Accordingly, and to the extent possible, companies should avoid admitting liability as part of any negotiated settlement with the authorities; and, if an admission of liability is required, they should ensure that it is tightly circumscribed.

In addition, there is a risk that communications with the authorities made during the course of settlement negotiations will be disclosable in subsequent civil proceedings, although they may be protected from inspection by a right analogous to the ‘without prejudice’ rule.[61]

Settlement of civil claims can also carry risks for a company under investigation. There is a risk that settlement agreements entered into by the company may be disclosable in subsequent proceedings, or requested by an authority as part of their investigations. Companies should avoid admitting liability as part of any negotiated civil settlement. In addition, authorities may perceive certain types of civil settlements as suspicious. In the financial services space, firms should also be alive to the impact on civil claims on the outcome of past business reviews conducted under the supervision or awareness of the FCA.

In appropriate circumstances, it may be possible to settle civil claims on a multi-party basis. For instance, companies may try to reach collective settlements, which are available in respect of certain competition law claims (using the mechanism set out in the Competition Act 1998), or seek to utilise a collective redress scheme.

22.10 Conclusion

Cross-border investigations are complex and competing considerations need to be carefully weighed and managed. The prospect of parallel civil proceedings brings further complexity to an already difficult area. Such proceedings can present numerous and diverse challenges for a company subject to investigation. Companies will frequently be defendants in parallel proceedings and unable to exercise significant control over the existence or pace of the proceedings. They may at times be claimants out of necessity or to obtain a tactical advantage. It is important to give careful consideration at an early stage to potential parallel proceedings that may arise, and any effect they may have on an investigation (and vice versa), to enable possible tensions between investigations and parallel proceedings to be anticipated and managed effectively. There is no easy solution to the challenges presented by parallel civil proceedings. As noted above, it may be difficult to obtain a stay of them (without the consent of other parties to the proceedings), and settlements can give rise to their own particular complications.


Footnotes

[1] Nichola Peters and Michelle de Kluyver are partners at Addleshaw Goddard LLP. Michelle de Kluyver co-authored this chapter for the first edition with Edward McCullagh and would like to thank him for his contribution as co-author and then as author of later editions, as well as Jonathan Hitchin of Allen & Overy LLP for his support on all earlier editions.

[2] See, e.g., China Export & Credit Insurance Corporation v. Emerald Energy Resources Limited [2018] EWHC 1503 (Comm), [61].

[3] CPR, Part 3.1(2)(f).

[4] For example, Arbitration Act 1996, s.9.

[5] See Akcine Bendrove Bankas Snoras (in bankruptcy) v. Antonov [2013] EWHC 131 (Comm), [18].

[6] R v. Panel on Takeovers and Mergers, ex parte Fayed [1992] BCC 524, 531.

[7] Panton and others v. Financial Institutions Services Ltd [2003] UKPC 95, [11].

[8] FSA v. Anderson [2010] EWHC 308 (Ch), [19].

[9] Arbitration Act 1996, ss.33 and 34.

[10] ibid., s.45.

[11] See further Zuckerman on Civil Procedure: Principles of Practice, Adrian Zuckerman (4th edn, Sweet and Maxwell, 2021); Improving Access to Justice through Collective Actions (Civil Justice Council, 2008).

[12] Or a decision of another sectoral regulator with concurrent competition law powers.

[13] The behaviour under investigation would also need to pre-date 31 December 2020.

[14] Walter Hugh Merricks CBE v. Mastercard Incorporated and Others [2021] CAT 28. This was only the second opt-out collective claim to be brought in the CAT. The first such claim (Pride Mobility Scooters) was adjourned and then withdrawn in 2017 after a failed application for a CPO; the CAT did not dismiss the application for a CPO outright, but adjourned the proceedings to allow the representative an opportunity to reformulate the proposed subclasses of claimants and the methodology for calculating damages (Dorothy Gibson v. Pride Mobility Products Ltd [2017] CAT 9).

[15] Case C- 382/12 Mastercard and others v. Commission, finding that Mastercard’s multilateral interchange fees for certain cross-border payment card transactions infringed EU competition law.

[16] FCA Final Notice to Tesco plc and Tesco Stores Limited dated 28 March 2017.

[17] Part 30 of CA 2006

[18] See further paras. 29 and 30 of the Court of Appeal’s judgment in Taylor Goodchild Ltd v. Taylor and Another [2021] EWCA Civ 1135 for a discussion of relevant case law in which the courts have emphasised the breadth of CA 2006, section 996 (Part 30).

[19] The RBS Rights Issue Litigation [2016] EWHC 3161 (Ch) was a high-profile case involving claims under the FSMA, s.90; in more recent litigation arising out of an overstatement of expected profits by Tesco plc in 2014, claims have been made under FSMA, s.90A.

[20] FCA Policy Statement CP21/36 ‘A new Consumer Duty, Feedback to CP21/36 and final rules’.

[21] [2016] UKSC 42.

[22] See further Bowstead and Reynolds on Agency (ed. Peter Watts QC, 22nd ed. 2020).

[23] As discussed in Richard Conway & Deborah Conway v. Prince Arthur Ikpechukwu Eze [2019] EWCA Civ 88.

[24] See further Anti-Bribery Due Diligence for Transactions: Guidance for Anti-Bribery Due Diligence in Mergers, Acquisitions and Investments, Transparency International UK (2012).

[25] Companies should also be aware of the risk that illegal behaviour (for example, bribery) may occur during the merger, acquisition or investment transaction.

[26] See further Gatley on Libel and Slander (eds. Godwin Busuttil and Richard Parkes QC, 13th ed. 2022).

[27] See further Whistleblowing: Law and Practice, John Bowers QC, Martin Fodder, Jeremy Lewis and Jack Mitchell, 4th ed. (2022).

[28] Bloomberg LP v ZXC [2022] UKSC 5.

[29] See further International Commercial Arbitration, Gary Born, 3rd ed. (2020).

[30] Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958, Article V(2)(b); Arbitration Act 1996, s.103(3).

[31] ICSID awards will be governed by the Washington Convention, which contains fewer grounds for resisting enforcement than the New York Convention. Non-ICSID awards are likely to be governed by the New York Convention, where the same considerations apply with respect to enforcement and recognition as for commercial awards.

[32] As discussed in Ibrahim v. HCA International Ltd [2019] EWCA Civ 2007.

[33] Directive (EU) 2019/1937.

[46] Hollington v. F Hewthorn & Co Ltd [1943] KB 587.

[47] See, e.g., JSC BTA Bank v. Ablyazov & Anor [2018] EWHC 1368 (Comm), [19].

[48] Rogers v. Hoyle [2014] EWCA Civ 257, [53]–[55].

[49] Property Alliance Group Ltd v. Royal Bank of Scotland Plc [2015] EWHC 1557 (Ch).

[50] Civil Evidence Act 1968, s.11.

[51] Crime and Courts Act 2013, Schedule 17, para. 5(1); Deferred Prosecution Agreements Code of Practice, para. 6.1.

[52] This may change should the Retained EU Law (Revocation and Reform) Bill, which was introduced in Parliament in September 2022, be enacted without substantive amendments.

[53] Or a decision of another sectoral regulator with concurrent competition law powers.

[54] Where the behaviour under investigation pre-dated 31 December 2020.

[55] FCA Final Notice to Mr Anthony Verrier, dated 27 January 2014; FCA Final Notice to Mr Stephen Robert Allen, dated 14 April 2015; Stephen Robert Allen v. The Financial Conduct Authority [2014] UKUT 0348 (TCC).

[57] See, for example, The RBS Rights Issue Litigation [2016] EWHC 3161 (Ch), and the first-instance decision in The Director of the Serious Fraud Office v. Eurasian Natural Resources Corp Ltd [2017] EWHC 1017.

[58] The Director of the Serious Fraud Office v. Eurasian Natural Resources Corp Ltd [2018] EWCA Civ 2006; see also Bilta (UK) Ltd v. Royal Bank of Scotland [2017] EWHC 3535 (Ch) (concerning litigation privilege) and Property Alliance Group Limited v. The Royal Bank of Scotland Plc [2015] EWHC 3187 (Ch) (in the legal advice privilege context).

[59] See Tchenguiz v. Grant Thornton [2017] EWHC 310 (Comm) for the broad interpretation of collateral ‘use’ in relation to CPR Part 31.22, which includes, for example, reviewing documents for relevance; and see also The ECU Group Plc v. HSBC Bank Plc & Ors [2018] EWHC 3045, in which the judge emphasised the importance of the rule in CPR Part 31.22.

[60] In Property Alliance Group Ltd v. Royal Bank of Scotland Plc [2015] EWCH 1557 (Ch), the courts specifically recognised that privileged material shared with the FCA on an express limited waiver basis remained privileged against the rest of the world.

[61] See, e.g., Property Alliance Group Ltd v. Royal Bank of Scotland Plc [2015] EWHC 1557 (Ch), in which the existence of without prejudice privilege in settlement negotiations with the FCA was recognised.

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