Tag Archives: Ireland

Investigatory Privilege

Articles, Corporate/Commercial Law, Latest News, Litigation Mediation & Arbitration

Introduction

The Commercial Court delivered judgment in the case of Quinn v Irish Bank Resolution Corporation Limited and Kieran Wallace[1] on 19 May 2015, confirming that the scope of litigation privilege extends not only to documents created for the dominant purpose of anticipated litigation, but also to documents created in contemplation of a criminal or regulatory investigation.

The judgment has significant implications for businesses engaged in a regulatory process, as it provides them with an opportunity to immediately engage with their lawyers on a privileged and confidential basis. It also highlights that the assistance of lawyers at an early stage of an investigation can have substantial benefits for an organisation, both in the regulatory process itself and in any future civil action.

The rationale for privilege

In general, a witness will be bound to answer all relevant questions put to him, and will be held to be in contempt of court if he refuses to do so; however, the law recognises that there are a number of instances in which a person enjoys a privilege from being compelled to answer a question or produce a document.

The law of privilege seeks to balance, on the one hand, the administration of justice and the interest in ensuring that all relevant evidence is before the courts, and on the other, the protection of the relationship between lawyer and client which relies to a degree on confidentiality. The reasoning behind the existence of legal professional privilege is that of encouraging a client to make full and frank disclosure of all relevant facts in relation to his case to his lawyer, in confidence that such disclosures will not be revealed without the client’s consent.

Legal professional privilege can be divided into two basic categories: “legal advice privilege” and “litigation privilege”. Broadly speaking, legal advice privilege protects a person from producing confidential communications made between him and his lawyer for the purpose of giving or receiving legal advice. In order to establish legal advice privilege, it must be shown that the document or information sought to be disclosed consists of a confidential communication made in the course of a professional legal relationship, for the purpose of giving or receiving legal advice. It should be noted that not all communications between a solicitor and client are privileged, only those made for the purpose of giving or receiving legal advice, and those made in confidence. This privilege will apply regardless of whether litigation is contemplated or not.

Litigation privilege, on the other hand, applies to confidential communications between a client and his lawyer or a third party such as a witness or expert, the dominant purpose of which is to prepare for anticipated litigation. A document will be privileged if the dominant purpose for its creation is contemplated or reasonably apprehended litigation. The test as to the dominant purpose of the creation of the document is an objective one, and it will not be sufficient that the document was created for more than one equal purposes, one of which is contemplated litigation.

It should be noted that no privilege is absolute; as the doctrine has its roots in public policy, exceptions may be made in circumstances where the balance of the public interest in disclosing the document or communication outweighs the maintenance of the privilege. In particular, privilege will not apply to communications made in furtherance of crime or fraud. The courts have held that the purpose of legal professional privilege is “to aid the administration of justice, not to impede it”[2].

Expansion of the doctrine of privilege

The Quinn v Irish Bank Resolution Corporation Limited and Kieran Wallace case concerned an application for further and better discovery; the defendants asserted privilege over a number of disputed documents and sought to establish that the dominant purpose for the creation of the documents was the contemplation of further litigation, or for the purpose of two investigations, one by the Financial Regulator, and one by the Director of Corporate Enforcement.

Previous caselaw has confirmed that privilege can be claimed by a person whose conduct is under examination by a tribunal of inquiry, on the basis that although such a tribunal may not be involved in the administration of justice, it does have an adjudicatory function, and any report it may produce has the potential to have serious and damaging effects for the persons called before it. In the case of Ahern v Mahon[3], the plaintiff was held to be entitled to claim litigation privilege in respect of communications between him and his legal advisors and experts retained by him for the purposes of the inquiry proceedings. As a person whose conduct was under examination by the tribunal of inquiry, the plaintiff was held to be entitled to certain fundamental constitutional rights, including the right to one’s good name, the right to fair procedures, and the right to natural and constitutional justice. Judge Kelly held that a person appearing before a tribunal of inquiry and to whom such fundamental constitutional rights apply to is to be regarded as being in the same position as a party to High Court litigation, and not a mere witness, from the point of view of legal professional privilege.

Judge McGovern in the Quinn judgment accepted the first defendant’s submission that it was entitled to assert investigatory privilege or regulatory privilege in respect of any documents created for the dominant purpose of engaging with the regulatory and investigative processes in question. Judge McGovern cautioned that the privilege did not extend to all documents created after the date on which the defendant became aware of the investigations, but only those documents created for the dominant purpose of engaging with those investigation processes.

The logic behind the application of privilege is the principle that a person must be able to consult his lawyer in confidence, and be sure that what he tells his lawyer in confidence will never be revealed without his consent. It has been described as “much more than an ordinary rule of evidence, limited in its application to the facts of a particular case. It is a fundamental condition on which the administration of justice as a whole rests”[4]. The labelling of a tribunal of inquiry as inquisitorial rather than adversarial will not be determinative, and the central issue will be one of fairness.

The Quinn judgment provides further clarity on the scope of documents that will attract privilege in the context of inquiries and investigations, and clearly establishes the principle of investigatory/regulatory privilege.

 

This briefing is correct as at 13 July 2015.

Disclaimer

This information is for guidance purposes only. It does not constitute legal or professional advice. Professional or legal advice should be obtained before taking or refraining from any action as a result of the contents of this publication. No liability is accepted by Eversheds for any action taken in reliance on the information contained herein. Any and all information is subject to change. Eversheds is not responsible for the contents of any other website or third party material which can be accessed through this website.

Eversheds is an Irish partnership and a member firm of the Eversheds International network of firms affiliated with Eversheds International Limited, an English company limited by guarantee. Member firms of Eversheds International are independent firms and members of Eversheds International Limited, but have no authority to obligate or bind Eversheds International Limited or one another vis-à-vis third parties. Neither Eversheds International Limited nor any of its member firms have any liability for each other’s acts or omissions.

[1] [2015] IEHC 315

[2] Gallagher v Stanley [1998] 2IR 267, 271.

[3] [2008] IEHC 119

[4] Lord Taylor in R. v. Derby Magistrates Court Ex parte B [1996] 1 A.C. 487, cited with approval in Duncan v. Governor of Mountjoy Prison [1997] 1 I.R. 558

Strategic Development Zones – A look at Dublin Docklands

Articles, Latest News, Real Estate and Construction,

In Ireland, Strategic Development Zones (SDZs) are designated by the Government pursuant to Section 166 of the Planning and Development Act 2000. The advantages of a Strategic Development Zone designation is that special planning and development rules pertain in an SDZ. Essentially the rules make it simpler and faster to obtain planning permission for a development which is in unison with the planning scheme in a particular SDZ. There is also the ancillary benefit that the decision of the planning authority cannot be appealed to An Bord Pleanála (Ireland’s Planning Appeals Board) by either the applicant or a third party, thus fast-tracking the planning process.

An SDZ planning scheme sets out how a zone will be developed, the type and extent of the development, the design of the development such as maximum heights, external finishes and general appearance, proposals in relation to transport/traffic management and parking, proposals regarding the provision of services on site, proposals to minimise adverse environmental consequences and for residential developments proposals relating to the provision of amenities, facilities and services for the community.

Prior to the introduction of the SDZ planning scheme, planning and development in the Dublin Docklands was governed by section 25 of the Dublin Docklands Development Authority Act, 1997 and administered by the Dublin Docklands Development Authority (which is in the process of being dissolved). The benefit of a Section 25 planning for developers was (a) it short-circuited development commencement and completion time lines, (b) created a cohesive and financially viable strategy for local development, ensuring local infrastructure issues and site specific issues were addressed, and (c) resulted in prior consultation with the community and businesses in the area.

Regrettably due to the Irish banking implosion and economic downturn, investor confidence was depleted and the regeneration of the Dublin Docklands lapsed into a developmental coma. In an attempt to reignite development in the Docklands, the Government on 18th December 2012 designated the North Lotts (which is located on the north side of the river Liffey in Dublin 1) and Grand Canal Dock (located on the south side of the river Liffey in Dublin 2) as a new SDZ. The new SDZ planning scheme seeks to unlock the potential of the Docklands, Dublin’s inner city, the city’s proximity to the sea and its cultural and historical buildings. The Government believes by leveraging such potential the State will benefit both economically and socially. The North Lotts and Grand Canal SDZ are divided into five hubs:-Spencer Dock, Point Village, Grand Canal Dock, Britain Quay and Boland’s Mill.

North Lotts and Grand Canal were designated as an SDZ due to:-

  • their economic and social potential to the State;
  • the utilisation of public investment in infrastructure; and
  • to effect policies contained in the Dublin City Council Development Plan.

Over the last 20 years and to much fanfare a good portion of the Docklands has been redeveloped. However, there are still a number of sites and vacant plots around North Lotts and Grand Canal which have latent developmental potential. The North Lotts and Grand Canal Docks SDZ comprises 66 hectares with approximately 22 hectares yet to be developed. This area has the potential to create accommodation for 5,800 people and 23,000 workers. The Samuel Beckett Bridge is seen as the link between the North Lotts and Grand Canal Docks and brings both areas under one SDZ. In addition two new pedestrian and cycle bridges are also planned across the river Liffey from Forbes Street to New Wapping Street and from Sir John Rogerson’s Quay to Castleforbes Street (costing up to €7m each). There is also a proposal under the Transport 21 and Smarter Travel plan for an underground Dart with a station at Spencer Dock, Dublin 1. This will facilitate the interchange of the Dart, Luas and regional trains. The Dublin City Development Plan 2011-2017 notes the Docklands as one of few locations in Dublin with sites capable of hosting capital city landmark buildings. It is no coincidence that Google, Twitter, Facebook, Dogpatch Labs and Yahoo have decided to open their European head quarters in an SDZ and the area is fast becoming known as the “Silicon Docks”.

The Docklands SDZ planning scheme identifies six key themes:-

  1. Sustainability based on meaningful civic governance and engagement with the community.
  2. Economic renewal and employment. The Docklands is well placed given the variety of sites it holds to endorse national, international and local enterprises.
  3. Quality of living – the planning scheme seeks to ensure a balance between modern living, quality of life and access to employment for current and future residents.
  4. Identity – Dublin has a unique maritime character which can be utilised to advertise its heritage and rich landscape.
  5. Infrastructure – good infrastructure is essential to support the four themes mentioned above.
  6. Movement and Connectivity- this theme recognises the importance of connecting the east, north and south of the city with the city centre, with supports such as drainage, social infrastructure, electricity, health and educational facilities. Movement and connectivity is also required to support themes 1-4 mentioned above.

The above themes provide the outline for proposed developments in the SDZ across the five hubs. While particular planning requirements apply to each hub, certain elements are deemed critical/fixed for a sustainable Docklands and must be complied with, while others which provide for local conditions are treated more flexibly. Fixed elements relate to:-

  • development quantum. It is calculated that 1,800 residential units and 200,000m2 commercial space can be built on North Lotts and 830 residential units and 105,00m2 commercial space in Grand Canal,
  • the use ratio. The target is a 50:50 residential/commercial ratio over the area with 30:70 in the commercial hubs,
  • the public realm. The public realm is a fixed element so as to ensure public areas, new streets and lanes are constructed within the development timeframe,
  • the block building line. The block building line seeks to ensure a congruent street scape and avoid buildings with projecting canopies or kiosks which could impinge on the character of buildings already in the area,
  • the height of the block. The height of buildings is also taken into consideration. Large city blocks facing onto Mayor Street in Dublin 1 can be 6 storeys for commercial or 7 storeys for residential. Due to the width of the river and campshires an 8 storey commercial or 10 storey residential will be permitted. In four of the hubs e.g. Point Square located in The Point Village, 22 storeys can be accommodated while 12 storey’s commercial can be accommodated in Station Square. In the Boland’s Mill hub, buildings can be no higher than 15 storeys,
  • other matters such as block shadowing, heritage and protected structures, density and plot ratio, design material and external finishes are also considered.

The Grand Canal Dock and North Lotts Section 25 Planning Scheme (the predecessor to the SDZ planning scheme) resulted in the construction of the Grand Canal Theatre, the trendy mixed residential and commercial quarter in the Grand Canal area, the Convention Centre and Point Village.   These developments have been huge influencers in attracting Google, Twitter, Linkedin and Synga Games to Dublin. With the decision to dissolve the Dublin Docklands Development Authority many queried the validity of existing Section 25 Certificates, which have yet to be acted upon. The Dublin Docklands Development Authority (Dissolution) Bill 2014 proposes the following for existing Section 25 Certificates:-

  1. The Section 25 Certificate will be treated as abandoned where the application was submitted but had not yet been determined from the date to be designated by the Minister;
  2. A Section 25 Certificate will no longer be valid (from a date to be designated by the Minister) where the certificate has issued but substantial works have not been carried out or the development has not commenced. Unhelpfully, the Dublin Docklands Development Authority (Dissolution) Bill 2014 does not define “substantial works” so the legislators may need to look at that before finalising the Bill;
  3. Where a Section 25 Certificate has issued and substantial works have been carried out these certificates will be effective for a period of 3 years but if the development is not completed within the 3 year period the Certificate will no longer be effective;
  4. Where substantial works have been carried out under a section 25 Certificate, in order to complete those works, an application for a section 34 permission under the Planning and Development Act 2000 can be applied for. This section 34 permission (upon being granted) would replace the section 25 Certificate albeit any works carried out prior to the section 34 permission would not be prejudiced and invalidated.

The Government has also introduced other initiatives which are aimed to facilitate regeneration in the Dublin Docklands and utilise unexploited amenities such as:-

the Cruise Traffic and Urban Regeneration of City Port Heritage (Local Action Plan for Dublin) which seeks to develop cruise tourism, contribute towards the regeneration of North Lotts and Grand Canal Dock leading to the creation of employment and a synergy between Dublin City and Dublin Port.

The Government has also introduced (the “Green IFSC”) initiative which will back public private partnerships in the green finance sector. The initiative focuses on low carbon emissions and aspires to attract companies to a green financial services hub where finance, trade and skills can be exchanged. The planned Green Irish Financial Services Centre seeks to anchor itself on the success of the IFSC and become a key player in the global carbon market and promote Ireland as a carbon management centre of excellence.

Conclusion

The SDZ designation should allow for a fast tracking of the construction of office and residential accommodation within the SDZ, helping to alleviate any current perceived shortages. The National Asset Management Agency (NAMA) which controls 70-80% of sites and buildings in the Docklands area plans to invest c.€2bn in redeveloping the area and has indicated it is amenable to entering joint ventures and releasing sites for development. There are other proposals, such as the €150m redevelopment of the landmark Boland’s Mill property. The planning application includes proposed office, residential, cultural and retail development, totalling almost 400,000 sq. ft. (approx. 36,800 sq. m.). The development will comprise mostly offices, 42 apartments, a cultural and exhibition space, in addition to retail and restaurant space. The planning application also envisages the creation of a new urban quarter with new streets and open spaces, including a large public square, which will open on to Grand Canal Dock. Public commentators have opined that all this bodes well for the economy and property market, leading to the creation of jobs, which was one of the primary drivers in the regeneration of the Docklands.

Regulators’ Increased Focus On Systems And Controls Environment

Articles, Banking and Finance, Latest News

Introduction

As expected, there has been a marked increase in the level of regulation, regulatory supervision and regulatory sanctions in the wake of the 2008 financial crisis. Between 2008 and 2012 €1.5 trillion in state aid was introduced throughout Europe to prevent another financial crisis occurring. Regulatory enhancement is cyclical and, following a financial crisis, history dictates a call for a strengthening of regulatory supervision and intervention. To address these calls and to enhance financial stability, the European Union (“EU“) coordinated with its international counterparts in the G20 and developed a regulatory reform agenda which included over forty proposals to be introduced over a five year period.

The objectives of this reform agenda included: the enhancement of financial stability and resilience of the financial system; the restoration of the EU single market; protection of investors and consumers; and improved efficiency and minimisation of transaction and financial services costs.

In Ireland, the Taoiseach (Irish Prime Minister) launched the ‘Strategy for the International Financial Services Industry in Ireland 2011-2016’ which included the high level goal of the ‘Proper and Effective Regulation of Financial Institutions and Markets’. To achieve this goal, the report set out a number of strategies for the Central Bank of Ireland (“Central Bank“) to undertake which mostly reflected the G20 reform agenda. Financial institutions must also be conscious of upstream regulatory risk and impending legislative developments awaiting transposition or entry into force.

Such an enhanced focus on regulation and supervision inevitably leads to an increase in regulatory sanctions, both in terms of frequency and amount. In 2010, the Central Bank imposed eight fines on financial institutions totalling €2,248,700 whereas in 2013, sixteen fines were imposed totalling €6,350,000. A leading contributory factor to these sanctions being ineffective and deficient systems and controls environments. The table below sets out a summary of sanctions since 2010 and highlights the percentage of these imposed due to ineffective and deficient systems and controls.

554650a

A recurring theme in this regard is the substantial proportion of fines for or with reference to ineffective and deficient systems and controls. In five of the six sanctions issued by the Central Bank in 2014, the Director of Enforcement in the Central Bank, Derville Rowland, has highlighted the importance of effective systems and controls frameworks, most notably stating in one sanction:

“The Central Bank views the existence and proper functioning of a firm’s policies, procedures, systems and controls as being fundamental to ensuring its compliance with its regulatory requirements. The existence of inadequate policies, procedures, systems and controls is an unacceptable risk to the Central Bank as it can be the basis for, and potentially leads to, large scale non-compliance with regulatory requirements.”

PRISM, Themed Reviews, Enforcement Priorities and Financial Enquiry Panel

There continues to be a sustained increase in PRISM (Probability Risk and Impact SysteM) engagements by the Central Bank across all sectors rising from 2,198 engagements in 2012 (including pre-PRISM engagements) to 3,925 in 2013, highlighting a clear indication that the Central Bank is interacting with and scrutinising regulated financial institutions more frequently.

Regulated financial institutions should also be aware of the Central Bank’s ‘Programme of Themed Reviews’ (“Reviews“). The Central Bank annually publish a list of Reviews that it intends to carry out separate to its reactive reviews and regular engagements, covering multiple financial sectors and focusing on specific areas of regulation. The principle behind the Reviews is that they “allow the Central Bank to monitor compliance with the relevant rules and requirements” set by the Central Bank. In anticipation of these Reviews, regulated financial institutions must have procedures in place documenting compliance and ensuring that the entity’s obligations are documented to mitigate the risk of a Central Bank sanction, particularly in areas highlighted under the Reviews.

The Central Bank also publishes annually its “Enforcement Priorities” (“Priorities“) which document its targeted areas for enforcement action. In 2014, the Central Bank set out fifteen Priorities specific to certain sectors including two applicable to all sectors – prudential requirements and systems and controls.

In October 2014, the Central Bank announced details of its new Financial Enquiry Panel (“FEP“), which comprises a panel of thirteen domestic and international legal and banking experts with the task of investigating potential breaches of banking rules by credit institutions and personnel. Included in the FEP is Fiona Muldoon, former Central Bank Director of Credit Institutions and Insurance Supervision. In line with the Central Bank (Supervision and Enforcement) Act 2013, the FEP has the power to fine up to €10 million or 10% of an entity’s turnover. It can also ban and fine individuals up to €1 million, provided it does not bankrupt them.

The key observation to be made from this increased supervisory and regulatory activity is that regulated financial institutions need to be aware of the legal regulatory obligations applicable to their business and the need to have effective and robust systems and controls in place to monitor, record and stress test these obligations. Preparation and evidencing testing results is fundamental to documenting systems and controls. Where deficiencies are found, these need to be remedied and, in some instances, legal advice will need to be sought.

Fitness and Probity

In addition to the regulatory focus on financial institutions, the Central Bank’s Fitness and Probity (“F&P“) standards, enforceable under the Central Bank Reform Act 2010, highlight that the legal regulatory obligations extend further than just the regulated financial institution as a legal person, but to those persons in particular positions. Under the F&P standards, a person elected to a ‘pre-approval controlled function’ (“PCF“) or a ‘controlled function’ (“CF“) is required to be ‘competent and capable’ which compels the person to demonstrate that he or she:

“has a sound knowledge of the business of the regulated financial service provider as a whole, and the specific responsibilities that are to be undertaken in the relevant function;” and

“has a clear and comprehensive understanding of the regulatory and legal environment appropriate to the relevant function”.

The message from the Central Bank is clear; those who hold a PCF or CF position must understand and be aware of their regulatory obligations and must be able to demonstrate their compliance with their obligations, much like regulated financial institutions. Failure to do so may lead to the Central Bank determining the individual to be unfit for their respective control function.

The Need to Show Awareness

Recent sanctions imposed by both the Central Bank and the FCA have highlighted that regulated financial institutions are required not only to be aware of their obligations, but also actively to test and demonstrate compliance with these obligations. A number of regulated financial institutions have received warnings and sanctions for not applying regulatory measures set out in legislation after identifying the need to apply them.  These institutions should regularly test their compliance framework to ensure that the controls in place are effective, operational and accurate. Stringent risk based tests should be carried out on a continuous basis evidencing compliance with legal regulatory obligations.

Responsibility for compliance with legal regulatory obligations rests with senior management and a disconnect between management and the compliance function will be detrimental: this will reject badly on the firm’s ability to demonstrate a proper compliance system. Information presented to senior management must be useful, accurate and of sufficient quality in terms of how the regulated financial institution is discharging its responsibilities. Senior management should establish and assess a positive compliance culture and evidence that culture in action.

Conclusion

The Central Bank is conducting an increased number of inspections and PRISM engagements. The cost set aside by regulated financial institutions to manage compliance risk is increasing in line with the rise in regulatory sanctions and the associated fines imposed. The Central Bank is concentrating on preventing regulatory breaches before they occur by scrutinising regulated financial institutions’ systems and controls environments. The most important step a regulated financial institution can take in mitigating risk is to ensure the implementation of an effective and robust compliance environment and framework. This framework must be tested regularly and the results evidenced. Senior management are becoming more vulnerable than ever and must also take steps to demonstrate their compliance with applicable legal regulatory obligations. Clear reporting and escalation procedures in the event of any regulatory breaches or concerns must be established, and these breaches and concerns can only be identified by sufficient testing of a regulated financial institution’s systems and controls.