NDA: Legal regulators have no role in making substantive law
The Legal Services Board (LSB) has “no role” in “attempting to control or regulate lawyers involved in assisting clients in the lawful use of NDAs”, the Bar Council has said.
The Bar Council described a call for evidence on non-disclosure agreements (NDAs) issued by the LSB earlier this year as “freighted with assumptions founded on anecdote and headlines”, while failing to reflect “the many good reasons” why NDAs were used by parties on both sides.
The LSB argued that a “strengthened and harmonised regulatory approach” to NDAs was required, amid mounting concerns about their misuse to conceal wrongdoing.
In a highly critical response, the Bar Council said determining the “precise circumstances” in which the use of a NDA was lawful or unlawful were “very difficult questions” which needed to be resolved by Parliament or the courts.
“Regulators like the LSB can have no role in answering these questions, because legal service regulators have no role in making, or unmaking, substantive law.”
The Bar Council went on: “Once it is recognised that the LSB has no role in determining the range of circumstances where use of an NDA is lawful, the separate question of whether the LSB (or any other regulator) should be attempting to control or regulate lawyers involved in assisting their clients in the lawful use of NDAs, is easily answered.
“The LSB can have no such role. The LSB should not be seeking to change professional rules to prevent the use of NDAs that are lawful.”
The LSB had “no remit to prevent lawyers acting in the best interests of clients”; if the oversight regulator disagreed with this, it was “unclear” which provisions of the Legal Services Act provided such a power.
“It is not the role of lawyers, or legal regulators, to interpose their own views of what is right and wrong, especially on difficult policy questions which Parliament has considered and where there is no unanimity of view. Rather lawyers should advise their clients as to their rights under the law as it stands.”
The Bar Council accused the LSB of “very muddled thinking indeed” in stating that lawyers could be asked to advise on what amounted to illegitimate or unethical NDAs.
“There is no safe basis upon which to attempt to define, and restrict the use of, a category of NDAs which are ‘lawful but illegitimate/unethical’. We are left totally uncertain what precisely is meant, in the context of this consultation, by ‘the misuse of NDAs’.”
The Bar Council said that “in the vast majority of cases, compromise and the terms of settlement are matters explained and advised upon by a solicitor, not a barrister” and the LSB did not “detail any evidence of misuse of NDAs by barristers”.
The call for evidence was “freighted with assumptions founded on anecdote and headlines, but which do not reflect the many good reasons why NDAs are utilised by parties on both sides of litigation”.
Imposing “poorly considered limits” on their use might drive potential litigants towards “expensive and acrimonious litigation” or to avoid raising allegations that could only be resolved expensively or acrimoniously.
“Restrictions on the operation of NDAs, and therefore on the fundamental right of parties to litigation to agree to limit the dissemination of information about matters in dispute, should not be imposed save where absolutely necessary.
“It is of significant concern to the Bar Council that it appears to be being proposed that the complex and multi-factored issues about use of NDAs and confidentiality agreements in the resolution of disputes can and should be determined by any means other than legislation.
“Those issues require national debate, in-depth parliamentary scrutiny, and ultimately a political resolution.”
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