knowledge | 6 September 2018 |

Restoration of Litigation Privilege in Internal Investigations: English Court of Appeal Overturns Controversial Privilege Decision

There has been a trend in England towards a narrow interpretation of the law of privilege, causing deep concern for those advising entities in the conduct of internal investigations as to whether documents generated during the course of that investigation attracted privilege, even where litigation was in reasonable contemplation.  However, the Court of Appeal in that jurisdiction has now overturned the most controversial of the recent judgments on the topic, a judgment which the Law Society there had described at the time as “deeply alarming”.

The English High Court decision in SFO v ENRC 1 marked the latest in a series of cases creating a divergence in the law between Ireland and England in relation to legal professional privilege. It had cast doubt on the entitlement to claim litigation privilege in the context of potential criminal investigations. 

In that case, the SFO was investigating ENRC in relation to allegations of fraud, bribery and corruption. The court held that material generated by ENRC during the related internal investigations should be provided to the SFO. Andrews J said that, while ENRC believed that an investigation by the SFO was imminent, such an investigation was not “adversarial litigation”. She said that the policy that justified litigation privilege did not extend to enabling a party to protect itself from having to disclose documents to an investigator.

She added that while it was always possible that a prosecution might ensue, depending on what the investigation uncovered, unless the person who instigated the investigation was aware of circumstances that, once discovered, made a prosecution likely, it could not be established that just because there was a real risk of an investigation, there was also a real risk of prosecution.

This case caused significant alarm amongst practitioners given the very narrow view taken by the court. However, calm has now been restored as this decision has been overturned by the Court of Appeal  which has upheld the claim to litigation privilege over most of the documents concerned.2

The Court of Appeal first set out the types of communication in respect of which litigation privilege can be claimed in England. In Three Rivers (No. 6)3 it was held that:

“communications between parties or their solicitors and third parties for the purpose of obtaining information or advice in connection with existing or contemplated litigation are privileged, but only when the following conditions are satisfied:

(a) litigation must be in progress or in contemplation;
(b) the communications must have been made for the sole or dominant purpose of conducting that litigation;
(c) the litigation must be adversarial, not investigative or inquisitorial.”

The Court of Appeal was satisfied on the evidence that criminal proceedings against ENRC were reasonably in contemplation when it initiated its internal investigation and that the High Court judge was wrong to conclude otherwise. It was equally satisfied that “the whole sub-text of the relationship between ENRC and the SFO was the possibility, if not the likelihood, of prosecution if the self-reporting process did not result in a civil settlement.” It added that whilst a party anticipating possible prosecution would often need to make further investigations before it could say with certainty that proceedings were likely, that uncertainty would not in itself prevent proceedings being in reasonable contemplation.

It disagreed with the High Court finding that the dominant purpose of the investigation was compliance and governance concluding instead that the documents were brought into existence for the dominant purpose of resisting or avoiding contemplated criminal proceedings against ENRC or its subsidiaries or their employees. The court also confirmed that in both the civil and the criminal context, legal advice given so as to head off, avoid or even settle reasonably contemplated proceedings was as much protected by litigation privilege as advice given for the purpose of resisting or defending such contemplated proceedings. The fact that solicitors had prepared a document with the ultimate intention of showing that document to the opposing party would not automatically deprive the preparatory legal work that they had undertaken of litigation privilege. It also concluded that the High Court judge had been incorrect in her finding that the documents in issue were created for the specific purpose of being shown to the SFO.

On the final aspect of the test, it concluded that while not every SFO manifestation of concern would properly be regarded as adversarial litigation, when the SFO specifically made clear to the company the prospect of its criminal prosecution, and legal advisers were engaged to deal with that situation, there was a clear ground for contending that criminal prosecution was in reasonable contemplation.

The Court of Appeal also suggested that, if it had been open to it to depart from Three Rivers (No. 5)4  which gave a narrow interpretation of who constitutes the “client” in the context of legal advice privilege, it might have been disposed to do so but said that this was a matter for the Supreme Court.

Conclusion 

This decision is to be welcomed by those in this jurisdiction who advise international clients, as it restores the principle of litigation privilege in the conduct of investigations in the UK.  Of course, it is a matter for each entity to decide whether, in the interests of full co-operation with its regulator, it chooses to waive or partially waive privilege, particularly when attempting to reach a settlement. 


  1. [2017] EWHC 1017.
  2. [2018] EWCA Civ 2006.
  3. [2004] UKHL 48.
  4. [2003] QB 1556.

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.

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