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"Opening shot" in negotiations: when does "without prejudice" protection apply?

30 September 2014

In Rochester Resources Ltd & ors v Leonid Lebedev & anr [2014] EWHC 2185 (Comm), 2 July 2014, the High Court found that a draft set of Particulars (a Complaint), produced in advance of U.S. Litigation and sent to the other side before the start of proceedings, attracted without prejudice protection as a matter of English law.


The underlying dispute was about an oil and gas business, TNK, in Russia. In 2003 TNK entered a joint venture with BP. The joint venture was sold to Rosneft in 2013. Mr Lebedev claimed to be entitled to a share of the sale proceeds under a disputed Acquisition Agreement between the parties dating from June 2003.

The Acquisition Agreement provided for disputes to be heard by the LCIA in London. However, proceedings were brought in New York, which led the claimants to seek an anti-suit injunction from the English court. In response, Mr Lebedev sought an order excluding evidence filed by the claimants in support of their application for the injunction. He claimed that the evidence was covered by without prejudice privilege. If so, it was not admissible in English proceedings.

In early 2013, Mr Lebedev had called one of the claimants – Leonard Blavatnik. The parties agreed this was a without prejudice call and was intended to discuss the possibility of compromising Mr Lebedev's claim. On 6 March 2013, Mr Lebedev's office emailed Mr Blavatnik's office a "preliminary draft" "Complaint" (the U.S. equivalent of Particulars of Claim). At the top of each page of the draft were the words "Preliminary draft for settlement purposes only subject to CPLR 4547 and Fed. R. Evid. 408". ("CPLR" refers to the New York Civil Practice Law Rules and "Fed. R. Evid. Rules" to the Federal Rules of Evidence.)

Two days later, Mr Lebedev's then New York lawyers wrote to the lawyers then representing Mr Blavatnik and Mr Vekselberg. They said that the preliminary draft Complaint was provided as "an opportunity for the parties to engage in settlement discussions that may resolve the dispute without the need for judicial intervention".

The issue for Blair J was that the claimants wanted to refer in the English proceedings to the draft Complaint which, they said, materially contradicted the Complaint as actually issued. The defendants objected on the grounds that it was protected by without prejudice privilege.

As a preliminary point, Blair J held that the question of privilege was one for English law and that the Complaint's status under foreign law was irrelevant.

The key issues before the court were therefore whether, as the defendants claimed, the draft was "created as part of negotiations genuinely aimed at settlement" and that sending it was the "opening shot" in the hoped-for negotiations.

By contrast, the claimants argued that:

  1. the document was essentially a letter before action;

  2. as it was materially different from the Complaint ultimately issued, and as that Complaint would be stated to be true, the draft could not have been true. If so, it could not have been part of a genuine attempt to settle. To hide the draft Complaint behind without prejudice protection would thus be to create a "cheat's charter";

  3. the "draft" was not a draft at all, or would not have been interpreted as such by an objective observer. It would have been seen as a document ready for issue;

  4. there was no reservation, either when the draft was first sent, or in the lawyers' letters of 8 March, that the complaint was preliminary or would change – even if the words "without prejudice" had been attached, this would not have changed the substance of its status; and

  5. the email of 6 March, and the letters of 8 March, were open. They were an invitation to treat for settlement, not negotiating documents.

Blair J noted that there was already provision in English law for ensuring that without prejudice protection disappeared if misused. Such privilege is lost in cases of "unambiguous impropriety". He therefore dismissed the inconsistency issue. As to "opening shots" which are not preceded by any previous correspondence, these were capable of being without prejudice (eg South Shropshire CC v Amos [1986] 1 WLR 1271), depending on the substance of the communication and the facts of the case.

The claimants also said that the documents could not constitute negotiations because they had no element of concession. However, Blair J felt that the email of 6 March, and the letters of 8 March, had to be considered together. Hence, as stated in the letters, they were explicitly intended in order to provide an opportunity to engage in settlement discussions. The draft Complaint was also explicitly described as preliminary and so could not be seen as an advance copy of a Complaint that would be issued.

The preliminary draft Complaint therefore met the requirements for without prejudice privilege and was inadmissible in proceedings.

Comment: Blair J's ruling provides a helpful reminder that questions of without prejudice privilege will be determined by the "lex fori" – the law of the court where the question of admissibility arises – and not by the law of the jurisdiction in which the document was created or sent. This can be important in international disputes, especially if a document is being sent from a different jurisdiction to that in which any proceedings will be heard. Thus, it may be that a document that you are sending would be privileged in your home jurisdiction, but might not be protected from being used in the court or tribunal where any dispute will be heard (the same may apply in oral communications). If there is a risk of this, you should either seek legal advice in the jurisdiction of the proceedings, or explicitly agree with the other side first that they will treat the communications as without prejudice.

More generally, the expression "without prejudice" is often used loosely by both lawyers and laymen when what is actually meant is akin to "subject to contract". In evidential terms, "without prejudice" is not the same as reserving your legal position or making it clear that your position is not settled or that you are not entering a binding agreement. "Without prejudice" is a privilege preventing documents or communications from being used in court or before an arbitral tribunal. It applies only where the communications are part of a genuine attempt to reach settlement, though, if this test is passed, it then extends to all matters discussed or disclosed in the without prejudice discussions (Unilever Plc v The Procter and Gamble Co. [2000] 1 WLR).

It is also a question of substance, not form. Simply writing or saying "without prejudice" will not make communications privileged if they are not part of a genuine attempt at settlement. Nor will communications fail to be protected if you do not write or say this, though, clearly, it is helpful as evidence of your position if you do.

As Blair J also makes clear, the point when communications begin to qualify for such privilege is a question of fact. Even if there has been no earlier agreement that subsequent communications would be privileged, an "opening shot" can be privileged if it would be objectively clear to the recipient that it was meant to be without prejudice.