NDAs: Duty not to take advantage
The Solicitors Regulation Authority (SRA) has revised its guidance [1] on non-disclosure agreements (NDAs) to make clear that it is concerned about the conduct of practitioners advising on and negotiating them, as well as the terms of the agreement.
A year on from the last revision of guidance first published in March 2018, the regulator has also clarified that it applies whether the opposing party is represented or not, and to NDAs in whatever context they might arise.
The guidance now emphasises that a solicitor’s duty to act in the best interest of their client “does not override your professional obligations to uphold the proper administration of justice, act in a way that maintains public trust and confidence, and to act with independence and integrity”.
If a client’s instructions threatens this, the SRA says solicitors should consider whether they can continue to act.
The guidance now includes a dedicated section on the ‘duty not to take advantage’ of the opposing party.
Examples include taking advantage of the opposing party’s lack of legal knowledge or where they have limited access to legal advice, such as “proposing or including a clause which you know to be unenforceable, or threatening to litigate upon such a clause”.
It also warns against “applying undue pressure or using inappropriate aggressive or oppressive tactics in your dealings with the opposing party or their representative, for example, imposing oppressive and artificial time limits on a vulnerable opposing party to agree the terms of the NDA”.
Solicitors should not seek to rely on their positions “as a means of exerting power over the opposing party, for example, by discouraging them from taking legal advice”.
Their obligations to ensure there is no abuse of position or unfair advantage taken are “heightened” where the opposing party is vulnerable.
The guidance also spells out that an NDA should not prevent “proper disclosure” about the agreement or circumstances surrounding the agreement to professional advisers, such as legal or tax advisors and/or medical professionals and counsellors, who are bound by a duty of confidentiality.
Further, solicitors should not use warranties, indemnities and clawback clauses in a way “which is designed to, or has the effect of, improperly preventing or inhibiting permitted reporting or disclosures being made”.
This could be asking a person to warrant that they are not aware of any reason why they would make a permitted disclosure, in circumstances where a breach of warranty would activate a clawback clause.
The guidance stresses too that importance of using “standard plain English” in the NDA and to be clear in the NDA what disclosures can and cannot be made and to whom. Those advising the person signing the NDA should give the client advice in writing about the terms of the agreement as well.