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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  Sports Direct International    FRAS   GB00B1QH8P22

SPORTS DIRECT INTERNATIONAL

(FRAS)
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Sports Direct International : Privileged Material Saved From Regulator's View

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03/20/2020 | 01:15am EDT

A recent decision of the UK Court of Appeal, though not binding here, will offer some comfort to companies facing demands from regulators for legally privileged documents.

More and more, regulators here and in the UK are challenging claims that documents are protected by legal professional privilege and are exerting pressure on companies to waive privilege and to hand over their documents.

The recent decision of the UK Court of Appeal in Sports Direct International plc v The Financial Reporting Council confirms that privilege is an absolute right and there is no general exception allowing regulators to demand privileged material from regulated entities or their clients.

Privilege

Communications which are privileged - whether because of legal advice privilege or litigation privilege - do not have to be disclosed in the course of legal or regulatory action. (Read our previous article which discusses privilege as a fundamental right here).

Privilege may be waived and, in practice, decisions are sometimes made to hand over privileged documents to a regulator, though decisions of this nature should only be made after seeking legal advice.

Apart from a decision to waive privilege, the recognised exceptions to privilege are very limited.

Statutory confirmation of privilege

While the right to claim privilege exists regardless of whether it is provided for by statute, many statutes confirm the right.

Legislation giving power to regulators to carry out investigations will often include a provision confirming that the person or body under investigation is entitled to refuse to hand over privileged documents. For example, the Companies Act 2014 restricts the Director of Corporate Enforcement from requiring a person or body to hand over documents where that person would be entitled to refuse to produce the documents in legal proceedings on the basis of privilege. Similarly, the Data Protection Act 2018 states that a controller or processor under investigation does not have to furnish the Data Protection Commission with privileged information. There are many more examples.

What happened in Sports Direct?

Controversially, the UK High Court in 2018 ordered Sports Direct to hand over a number of documents to the UK Financial Reporting Council (FRC) to assist it in its investigation into Sports Direct's former auditors. This, the UK High Court said, would not infringe Sports Direct's privilege.

The Court made this ruling notwithstanding a provision in the relevant UK legislation which states that bodies under investigation by the FRC do not have to provide any information to the FRC that they would be entitled to refuse to hand over in any court proceedings on the grounds of privilege.

The UK High Court said that there can be no infringement of privilege where a regulated body or its client is required to give privileged documents to the regulator solely for the purposes of a confidential investigation by the regulator into the conduct of the regulated body.

The UK Court of Appeal has now overruled the High Court decision. It noted that the relevant legislation does not include any express provision overriding privilege; on the contrary, it appears to limit the regulator's power and confirm the protection of privilege. The Court said that there is nothing in the relevant legislation or in previous case law to suggest that it means something different from exactly what it says and that, had the UK Parliament intended to create an exception to privilege where documents are sought by a regulator, the legislation would have been drafted differently.

It has been reported that the FRC is considering appealing to the UK Supreme Court.

Comfort to companies

Companies facing regulatory investigation may take some comfort from this decision. Though the decision is fact-specific and based on the wording of the relevant UK legislation, it is in line with the approach we would expect an Irish court to take as the Irish courts typically adopt a relatively protective approach to privilege.

As always where privilege is concerned, the best approach is to proceed with caution and to seek legal advice as soon as you receive notification from a regulator of an investigation or a request from a regulator for information.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

Ms Joanelle O'Cleirigh
Arthur Cox
Ten Earlsfort Terrace
Dublin 2
D02 T380
IRELAND
Tel: 1920 1000
Fax: 1920 1020
E-mail: mail@arthurcox.com
URL: www.arthurcox.ie

© Mondaq Ltd, 2020 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source Business Briefing

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Financials
Sales 2020 3 888 M 4 801 M 4 801 M
Net income 2020 82,0 M 101 M 101 M
Net Debt 2020 363 M 448 M 448 M
P/E ratio 2020 15,9x
Yield 2020 -
Capitalization 1 539 M 1 899 M 1 900 M
EV / Sales 2019
EV / Sales 2020 0,49x
Nbr of Employees 29 400
Free-Float 27,1%
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Technical analysis trends SPORTS DIRECT INTERNATIONA
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TrendsBullishBullishBearish
Income Statement Evolution
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Mean consensus HOLD
Number of Analysts 4
Average target price 312,50 GBp
Last Close Price 306,60 GBp
Spread / Highest target 95,7%
Spread / Average Target 1,92%
Spread / Lowest Target -34,8%
EPS Revisions
Managers
NameTitle
Michael James Wallace Ashley Chief Executive Officer
David Daly Non-Executive Chairman
Chris Wootton Chief Financial Officer
David Brayshaw Non-Executive Director
Nicola Frampton Non-Executive Director
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