On 22 November 2011 The City of London Law Society (the 'CLLS') published a guide on considerations law firms should take into account when providing legal opinions in financial transactions. The guide focuses on opinion letters provided by a law firm to their client (or at their client's request to a third party) where it is to be relied upon by the client or third party or to be referred to in a public document or to be used to obtain a debt rating. Rather than laying down a set of rules the guide aims to save time and money by identifying the issues and explaining how they may be overcome.

The guide asks law firms to consider, prior to requesting another law firm for an opinion, whether, if the positions were reversed, they themselves would be prepared and permitted under professional conduct rules to give the requested opinion.

The CLLS recognise that different approaches to providing legal opinion letters can cause different expectations, particularly in cross-border transactions. The guide states that these difficulties can be minimised in relation to English law opinions and goes on to consider how law firms should address the following 12 questions:

  • what opinion letters are required, who should provide them and who may rely on them?
  • what professional conduct rules must be observed when deciding whether to provide an opinion letter and, if it is appropriate to do so, to whom should the opinion letter be addressed?
  • what issues need to be considered when a law firm is requested to provide an opinion letter to a third party?
  • what is the purpose of the opinion letter?
  • what is the proper role of the opinion provider?
  • what general considerations apply when preparing an opinion letter?
  • what approach should be taken in an opinion letter on factual issues?
  • what is the proper scope of the opinion letter on legal issues?
  • to what extent does the scope of the opinion letter differ in a cross-border transaction?
  • how should differences in opinions practice be reconciled in cross-border transactions?
  • to what type of legal entity does the opinion letter relate?
  • what is best practice when settling the form of an opinion letter?

The CLLS, whilst acknowledging that it is entirely for each law firm to decide how they approach providing opinion letters, stress that reference to the above 12 questions will save all parties time and money.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.