Privy Council considers Norwich Pharmacal and Bankers Trust disclosure orders against banks

The Board of the Privy Council has held that the Supreme Court of Mauritius was wrong to refuse to grant a “Norwich Pharmacal” order requiring a Mauritian bank to disclose information about a customer’s account to the victims of an alleged fraud, to assist them in tracing misappropriated funds: Stanford Asset Holdings Ltd and another v AfrAsia Bank Ltd [2023] UKPC 35.

While this decision considered an application to the Mauritian courts for a third-party disclosure order against a bank located in Mauritius (which was subsequently appealed up to the Privy Council) it will be of more general interest to banks faced with Norwich Pharmacal and Bankers Trust disclosure applications.

In the present case, the Privy Council held that the disclosure order would not conflict with the bank’s common law confidentiality duties, because Norwich Pharmacal orders are a recognised exception to those duties. Commenting on the nature of the Norwich Pharmacal jurisdiction (and the similar Bankers Trust jurisdiction), the Privy Council stated that while the jurisdiction is in itself “exceptional” in the sense that it requires an innocent third party to supply information to a party to whom they would otherwise owe no duty, that does not mean that it will only exceptionally be appropriate to grant such relief where the necessary conditions are satisfied.

As noted above, this case concerned an application to the Mauritian courts for a third-party disclosure order against the foreign bank. More commonly on this blog, we consider applications of this nature made to the English court. As discussed in our recent blog post considering Scenna v Persons Unknown and Others [2023] EWHC 799 (Ch), special considerations will apply to applications for a Bankers Trust order made to the English court in respect of a foreign bank. Given the strong likelihood that compliance with the order would put the foreign bank at risk of breaching local laws (including because such an order by a non-local court may not satisfy a "compulsion of law" exception to the bank’s confidentiality duties), the English court has stressed that disclosure orders of this kind should only be made against a foreign bank in exceptional circumstances.

The case law seems to suggest that applications for third-party disclosure against foreign financial institutions may face a lower threshold before the domestic court of the relevant bank (where the foreign court is based on the English common law system at least), in comparison to a similar application before the English court. The reasoning behind this approach appears to be the assumption of a lower risk of making an order which would place the bank in breach of foreign law and expose it to financial and/or reputational damage, where the order is made by the bank's domestic court, with greater knowledge of the legal/regulatory environment in that jurisdiction.

For a more detailed discussion of this case, see our Civil Fraud and Asset Tracing Notes blog post.