In a significant judgment delivered on 26 February 2015 in complex and substantial civil fraud proceedings worth US$2.1 billion, Hamblen J has given important guidance on the appropriate scope and role of confidentiality clubs in fraud claims.

Confidentiality clubs (also called confidentiality rings), which are relatively widely used in intellectual property litigation, involve litigants whose disclosure might be confidential or particularly sensitive nevertheless being forced to provide full disclosure, but in only in circumstances where certain individuals are permitted to inspect the disclosed material.

Background

Hamblen J’s decision in The Libyan Investment Authority v Société Générale SA & ors [2015] EWHC 550 was made in proceedings in which the Libyan Investment Authority (“the LIA”) seeks to set aside various derivative transactions of around US$2.1 billion made during the Gaddafi era and said to have been procured by a fraudulent and corrupt scheme.

At or around the time of the derivative transactions, payments of around US$58 million were made to a Panamanian company, Leinada Inc, which it has since transpired was owned and controlled by a Libyan national, Walid Giahmi. The LIA alleges that Mr Giahmi had connections to the Gaddafi regime and that the payments were made as part of a fraudulent and corrupt scheme designed wrongfully to influence the LIA to enter into the derivative transactions.

In a previous decision Eder J had ordered Mr Giahmi to provide early disclosure of bank and accounting records relating to the payments (which Mr Giahmi contends were used for his own legitimate purposes and not for any fraudulent or corrupt scheme).

Mr Giahmi contended that, insofar as those documents might identify certain persons as having benefited from the payments made to Leinada Inc, if their identities were made known publicly or to the LIA itself they would be exposed to a risk to life and limb as a result of the prevailing security situation in Libya and a perception that they had been the unlawful recipients of Libyan state funds and/or associated with the Gaddafi regime.

Accordingly the identity of various persons who purportedly benefited from the payments was initially to be disclosed only on the terms of a ‘confidentiality club’ limited strictly to the parties’ lawyers and forensic accountancy teams.

Hamblen J’s decision

At the hearing before Hamblen J, the LIA sought to relax the terms of the confidentiality club, to allow the identities of the purported recipients to be disclosed to a client representative of the LIA and to remove the identities of four persons (identified only as Persons D, L, N and R) from the protection of the confidentiality club.

Mr Giahmi vigorously opposed these relaxations. He argued that it would be inappropriate to allow the LIA’s proposed client representative to be admitted to the confidentiality club because, inter alia, the proposed representative had previously acted as a ‘whistle blower’ in discussing the payments to Leinada with investigative journalists during the Libyan revolution in 2011 and might be subject to pressure from militias in Libya, whose reach was said to extend to the UK. Mr Giahmi further argued that including Mr Baruni in the confidentiality club, and identifying Persons D, L, N and R, would breach Article 2 of the European Convention on Human Rights.

Hamblen J carefully analysed the leading authorities (including In Re Officer L [2007] 1 WLR 2135, Osman v United Kingdom [1998] EHRR 245, and Al Rawi v The Security Service [2012] 1 AC 531), at paragraphs 20 to 35 of his judgment, before deciding that:

  • the starting position, under CPR r.31.22, should be that parties should be allowed unrestricted access to documents to be disclosed and it was for the party seeking the imposition of any restriction to justify departing from this approach on the basis of a real risk that the material would be used inappropriately for a collateral purpose;
  • the identities of Persons D and R, who were not resident in Libya, should not remain protected by the confidentiality club, there being insufficient evidence of a “real and immediate risk” to life and limb if the terms of the confidentiality club were relaxed (although, at the present time, the identities of Persons L and N should remain protected); and
  • the LIA’s client representative ought to be admitted to the confidentiality club, as a result of “the inherent desirability of including at least one duly appointed representative of each party within a confidentiality club; by the importance of the confidential information to the issues in the case; by the nature of the confidential information and the need for it to be considered by a client representative with relevant background knowledge, and by practical considerations such as the degree of disruption which will be caused if only the LIA’s legal team is entitled to review, discuss and act upon the confidential information”. The LIA successfully persuaded Hamblen J that there was no real risk of its client representative’s inclusion undermining the confidentiality of material protected by the confidentiality club.

Edward Cumming, instructed by Enyo Law LLP and led by Roger Masefield QC, appeared on behalf of the LIA.