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privilege revisited: Court of Appeal judgment in Serious Fraud Office (SFO) v Eurasian Natural Resources Corp. Ltd

18 September 2018

This article is taken from September's public matters newsletter. Click here to view more articles from this issue.


On Wednesday 6 September, one of the most awaited court judgments in recent times was handed down by the Court of Appeal. 

The judgment impacts on any entity, public or private, conducting internal investigations in order to establish whether or not wrongdoing has occurred.

Background

In 2010, mining giant Eurasian Natural Resources Corp. Ltd (ENRC) received an email containing allegations of apparent fraud, bribery and corruption relating to operations in Kazakhstan. External lawyers were instructed to conduct an internal investigation. After a number of meetings with ENRC, during which the progress of the internal investigation was discussed, the Serious Fraud Office (SFO) opened a criminal investigation.

The SFO subsequently sought to compel the production of a number of documents generated by ENRC and their lawyers during the internal investigation. ENRC refused to disclose four categories of documents on the basis that they were protected by legal professional (in this case litigation) privilege:

  • their lawyers notes of meetings with ENRC's employees (past and present) and third parties
  • material generated by forensic accountants instructed to undertake a "books and records review"
  • documents prepared by lawyers to update senior persons within ENRC on the progress of the internal investigation
  • reports generated by the forensic accountants and a number of emails /letters enclosing copies of those reports, including emails from and to a lawyer occupying a senior post within ENRC.

Legal professional privilege

The SFO’s powers of compulsion do not extend to documents which can be withheld on grounds of legal professional privilege in High Court proceedings.

Communications between clients or their lawyers and third parties will be protected by litigation privilege if they are drafted in order to obtain information or advice in connection with existing or contemplated litigation when, at the time that they are made:

  • litigation is in progress or reasonably in contemplation
  • the communications are made with the sole or dominant purpose of conducting that anticipated litigation which includes receiving advice in relation to it
  • the litigation is adversarial.

The May 2017 judgment

The SFO made an application to the High Court. In May 2017, Mrs Justice Andrews ordered ENRC to provide the SFO with the material sought.

In making the order, Mrs Justice Andrews held that documents prepared by ENRC during the investigation conducted by the company’s lawyers did not attract litigation privilege. Her ruling was that, at the time the documents were created, there could be no reasonable contemplation of criminal proceedings since the SFO investigation was at such an early (i.e. pre-charge) stage.

The ruling created justified unease that clients would feel deterred from conducting internal investigations and seeking early legal advice if documentation created during those investigations could be forcibly disclosed at a later stage.

The successful appeal

In overturning the High Court ruling, the Court of Appeal concluded that the disputed categories of documents had, on the facts before them, the benefit of litigation privilege. Importantly, the court also said that advice in respect of which the dominant purpose is to avoid legal proceedings, or which is given with a view to settlement, is as much protected by litigation privilege as advice given for the purpose of defending such proceedings.

The court noted that it is “obviously in the public interest that companies should be prepared to investigate allegations from whistle blowers or investigative journalists, prior to going to a prosecutor such as the SFO, without losing the benefit of legal professional privilege for the work product and consequences of their investigation”.

The success of the appeal means that ENRC will not be compelled to disclose the relevant documents to the SFO. The ruling confirms that documents prepared for the purpose of avoiding litigation, whether this be criminal or civil, maybe protected by litigation privilege.

The Law Society, which had intervened in the appeal, emphasised the importance of the ruling for the principle of lawyer-client confidentiality. Christina Blacklaws, Law Society President, stated that “the rule of law depends on all parties being able to seek confidential legal advice without fear of disclosure.”

What does this mean for your sector?

Public bodies may find themselves facing a criminal or regulatory investigation as a result of an incident, accident or whistle-blower allegation. It is recognised that there is a particular expectation on public bodies to be transparent and accountable. Indeed, in the health sector, this is enshrined in law in the form of duty of candour.

That said, seeking to conduct investigations and receive confidential advice should not be seen as inconsistent with such accountability and transparency. It is equally important an organisation, like an individual, can take advice and gather and submit information to or alongside its lawyers in confidence. It must be remembered that any legal privilege always belongs to the client and so can be waived by the client, and only the client, at any time allowing disclosure of material. Conversely, privilege can rarely be retrospectively claimed once material has been disclosed or produced in an unprotected manner.

This judgment provides welcome reassurance that public bodies can conduct such investigations under the banner of privilege. It is, however, extremely important that the investigation is structured and conducted in the proper fashion:

  • most importantly, litigation must be reasonably contemplated. The factual position at the time is key and early instruction of lawyers and the subsequent exchanges with them can provide good evidence of the state of mind of the organisation at the relevant time
  • it is also important that those exchanges also make clear, if it is the case, that communications are for the dominant purpose of conducting litigation, including receiving advice in relation it
  • in relation to the above, it is self-evident that when ‘litigation’ and legal advice are part of the test, a organisation has a stronger basis to assert privilege if lawyers are engaged at the outset, particularly in respect of advising upon internal investigations
  • on a practical note, lawyers will assist in key early decisions such as who the ‘client’ providing instructions and receiving advice should be, who should investigate and author any report , the purpose and remit of such a report and how that report and its findings are delivered.

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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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