Eurasian Natural Resources Corporation Limited ("ENRC") has successfully overturned, in part, a High Court judgment in which the UK's Serious Fraud Office ("SFO") had challenged its claims to legal professional privilege over documents produced during an internal investigation into criminal allegations of fraud, bribery and corruption.
| What you need to know – key takeaways |
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- This judgment may well have implications for companies subject to competition law investigations.
- The Court of Appeal recognised the clear public interest in enabling and encouraging companies to investigate possible wrongdoing under the protection of legal professional privilege.
- Legal advice given to address, avoid or even settle reasonably contemplated legal proceedings may benefit from litigation privilege in the same way as advice on defending such proceedings. However, companies will still need to demonstrate, on the facts of the case, that civil litigation or criminal prosecution is reasonably in contemplation.
- The fact that a formal investigation has not been commenced is not determinative in deciding whether proceedings are reasonably in contemplation.
- Whilst the judgment provides greater clarity on the principles of when litigation privilege may apply, the difficulties raised by Three Rivers in relation to the identity of the "client" for the purposes of legal advice privilege remain for now.
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Background
ENRC became aware of allegations of wrongdoing in December 2010, and instructed lawyers to conduct an internal investigation. It also instructed forensic accountants to investigate following reports that the SFO had become involved.
The SFO contacted ENRC in August 2011 indicating it had become aware of recent intelligence and media reports concerning the allegations. The SFO urged ENRC to consider carefully the SFO's self-reporting guidelines. There followed a lengthy dialogue over many months between ENRC and the SFO.
The SFO began a criminal investigation into ENRC in 2013, and sought to compel ENRC to produce:
- the lawyers' notes of the evidence given to them by ENRC's employees, former employees, subsidiaries and others; and
- materials generated by the forensic accountants.
ENRC refused to produce the documents on the grounds of legal privilege.
In 2016, the SFO challenged the privilege claims in Court. At first instance, the High Court controversially ruled that the documents did not benefit from litigation privilege.
Court of Appeal judgment
Litigation privilege
The Court of Appeal unanimously disagreed with the conclusions of the judge at first instance. The Court of Appeal found (amongst other points) that:
- It was clear that criminal prosecution was reasonably in contemplation when ENRC began its investigation in April 2011. The contemporaneous documents supported ENRC's claim that they believed prosecution was a serious risk and the subtext of the communications between ENRC and the SFO was the possibility of prosecution if the self-reporting process did not result in a civil settlement.
- The judge at first instance had wrongly concluded that ENRC's objective was to address compliance and governance issues. The dominant purpose was preparing for a contemplated prosecution: the need to investigate was a "subset" of the defence of criminal proceedings. The judge had also wrongly concluded that ENRC had always intended to share the information from the initial investigation with the SFO. This was not the case, and it would not have deprived the preparatory work of litigation privilege, even if that had been ENRC's intention.
- There is a clear public interest in encouraging companies to investigate suspected wrongdoing: 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". If such information were not to benefit from legal privilege, the temptation might be not to investigate at all.
Legal advice privilege
The Court of Appeal also considered legal advice privilege, which attaches to confidential communications between a client and its lawyers. The Court found it was unable to depart from its own previous narrow interpretation of the "client" in Three Rivers (No. 5). However, it suggested that it would have done so if it had been able, noting the inequality created by the test: "large corporations need, as much as small corporations and individuals, to seek and obtain legal advice without fear of intrusion", and that English law is out of step with other common law jurisdictions on this question.
The judgment made clear that this point must be decided by the Supreme Court. The SFO has announced that it will not be appealing to the Supreme Court, so the issue remains unresolved for now.
Conclusion
The case raised significant questions about how companies might conduct investigations into their own suspected wrongdoing without creating potentially prejudicial or incriminating material. The judgment makes it clear that companies do not need to have established whether claims of wrongdoing are true, and a regulatory investigation need not have started, to show that proceedings are reasonably in contemplation in order to benefit from litigation privilege.
This may well have implications for companies subject to competition law investigations. The Court of Appeal's judgment supports the principle of, and recognises the public interest in, enabling companies properly to investigate claims or allegations of infringement through relying on litigation privilege for the results of those investigations. However, companies will still need to demonstrate, on the facts of the case, that civil litigation or criminal prosecution is reasonably in contemplation. Further, the challenges presented by the Court's narrow interpretation of the "client" for the purposes of legal advice privilege remain for now.
