knowledge | 25 May 2017 |
Internal Investigations and Legal Professional Privilege: Challenging Times for Clients
A decision of the English High Court has cast doubt on UK companies’ ability to claim litigation privilege in the context of potential criminal investigations.
The past six months have seen a significant period of activity in the development of the law of legal professional privilege in England. The case of Serious Fraud Office (SFO) v Eurasian Natural Resources Corporation Ltd (ENRC)  EWHC 1017 (QB) (08 May 2017) comes in the wake of the High Court’s decision in The RBS Rights Issue Litigation, Re  EWHC 3161 (Ch) which confirmed a narrow definition of “client” for the purposes of privilege, meaning notes of interviews with employees prepared by a bank’s solicitors to enable the bank seek legal advice were not protected. This followed the decision of the English Court of Appeal in Three Rivers (No 5) where the “client” had been defined as only those employees charged with dealing with external lawyers to give instructions and receive advice.
This cycle of activity has culminated in the decision in ENRC. Whilst it has followed the trend of a narrow interpretation of the law of privilege, it has easily proved to be the most controversial of the recent crop of decisions. The President of the Law Society of England and Wales has criticised the decision, branding it “deeply alarming”.
The case was taken by the SFO against ENRC in an effort to obtain documentation that the company claimed was privileged.
Mrs Justice Andrews ordered that material generated by ENRC during internal investigations must be provided to the SFO which is investigating the company in relation to allegations of fraud, bribery and corruption in Kazakhstan and Africa. She said that, while ENRC believed that an investigation by the SFO was imminent, such an investigation was not “adversarial litigation”.
In a somewhat surprising judgment, she said that “[t]he policy that justifies litigation privilege does not extend to enabling a party to protect itself from having to disclose documents to an investigator.” The judgment clearly determines that the fact that an investigation is, or is believed to be, imminent does not entitle a claim of privilege in relation to documents generated at a time when there is no more than a general apprehension of future proceedings. She said that
“It is always possible that a prosecution might ensue, depending on what the investigation uncovers; but unless the person who anticipates the investigation is aware of circumstances that, once discovered, make a prosecution likely, it cannot be established that just because there is a real risk of an investigation, there is also a real risk of prosecution.”
She made the point that an SFO investigation is a preliminary step taken, and generally completed, before any decision to prosecute is taken after consideration of the results of the investigation. She said that in this case
“…the evidence fell a long way short of establishing that anyone whose state of mind might be identified for these purposes as the representing the mind and will of ENRC regarded the company being prosecuted as anything other than a possibility, in the same way as any person expecting an SFO investigation might regard prosecution as one possible outcome, depending on what the investigation discovered. The evidence does not even establish that ENRC believed that evidence implicating it in wrongdoing, or evidence of a lack of proper internal controls and safeguards against bribery and corruption, was likely to emerge from an investigation...”
She said that all of the evidence established that criminal proceedings were not in the reasonable contemplation of ENRC at any material time. She also added that even if she was wrong about that, “none of the Disputed Documents was created for the dominant purpose of deployment in, or obtaining legal advice relating to the conduct of, such anticipated criminal proceedings”.
While the judgment relates specifically to the subject matter of this case, in a general sense it makes it much more difficult to claim litigation privilege in a criminal context than in the context of potential civil litigation in the UK.
It is understood that ENRC will be appealing the decision.
The situation in Ireland as regards litigation privilege remains quite different to that established in ENRC and it is unlikely that the Irish courts will follow that decision as there has already been considerable divergence between the jurisdictions regarding the development of the law of privilege. The rule in Ireland regarding litigation privilege continues to stem from the decision of the Supreme Court in Gallagher v Stanley  2 I.R. 267, where the court ruled that the proceedings must have been reasonably apprehended, if not actually underway, at the time the evidence was created or procured and that it would look to the dominant purpose behind the preparation of a document to decide if it is privileged.
The disparity between the Irish and English positions vis-á-vis the availability of litigation privilege in criminal investigations is demonstrated by the 2013 decision of the Irish Commercial Court in Quinn v IBRC, which confirmed that litigation privilege can apply where a document has been created for the dominant purpose of a regulatory or criminal investigation.
This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.