A recent High Court judgments suggests that a party controlling litigation pursuant to a "conduct of claims" clause in an SPA cannot benefit from litigation privilege.
A non-party cannot claim litigation privilege over documents created for use in proceedings which it controls under a “conduct of claims” clause. Non-parties conducting litigation should structure communications and reporting lines as soon as litigation is a reasonable prospect to prevent communications with third parties (e.g. expert witnesses) being subject to disclosure and production in those or subsequent proceedings.
Parties commonly include indemnities and conduct of claims clauses in transaction documents. Under these provisions, the purchaser must notify the seller once it becomes aware that it is facing litigation in respect of which it is entitled to claim against the seller under an indemnity. The seller may then exercise its right to take control of that litigation under the conduct of the claims clause. The seller will often provide instructions to and correspond with legal advisors and third parties in relation to the litigation but the buyer will remain the named party.
The judgment of Mrs Justice Moulder in Minera Las Bambas SA v Glencore Queensland Ltd  EWHC 286 (Comm) establishes that a non-party in that position cannot claim litigation privilege over documents with third parties.
Glencore sold a subsidiary to Minera Las Bambas (“MLB”). After the sale, the Peruvian tax authority increased MLB’s tax liability. Glencore stepped in to conduct the proceedings, presumably because it would ultimately have been liable to MLB for the additional payments made to the Peruvian tax authority. MLB remained the named party.
In subsequent proceedings between MLB and Glencore in England, Glencore claimed litigation privilege over documents held by third-party advisors acting in respect of the Peruvian proceedings. MLB argued and the court agreed that litigation privilege did not belong to Glencore as it was not a party to the Peruvian proceedings.
Therefore, in circumstances where a non-party controls litigation pursuant to a conduct of claims clause, communications and reporting lines should be structured to ensure communications are directed between the named party, legal advisors and third parties, or between the non-party and legal advisors. The court did not consider joint or common interest privilege in this case but they may also be useful doctrines. If two parties share a joint or common interest in the subject matter of a privileged document, then they may be entitled to assert privilege as against the rest of the world but not against each other.
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