- Key principles
- Recent developments
- On 02 October 2017, the Court of Appeal granted ENRC leave to appeal. The hearing is scheduled to take place on over three days, starting on 03 July 2018. The Law Society has expressed significant interest and confirmed on 10 November 2017 that it will intervene in the appeal. It described the ENRC ruling as having “profound implications for when and how companies and their employees are protected by privilege” and, if upheld, the potential for the “perverse effect” of discouraging firms from reporting suspected criminal wrongdoing. For a full analysis please see our elexica article and a recording of Colin Passmore’s client call.
- Pending the appeal of SFO v ENRC in July 2018, three judgments have provided further analysis on the issue of litigation privilege:
- In February 2018 Bilta v RBS, the Court upheld RBS’s claim of litigation privilege over documents generated during a tax fraud investigation, including transcripts of interviews conducted as part of the investigation. The Court’s approach suggests that a subsidiary purpose of discovering what happened can be subsumed within a dominant purpose of preparing for litigation. In this case, litigation was reasonably in contemplation from a “watershed moment” when RBS received a letter from the HMRC and its subsequent actions indicated its anticipation of litigation. Bilta therefore provides more flexibility on when proceedings are in contemplation in the context of regulatory and tax investigations.
- In the same month, the Court of Appeal in R v Jukes endorsed ENRC on the issue of when criminal proceedings are in contemplation. Mr Jukes appealed his conviction on the basis that prosecution evidence was inadmissible on grounds of litigation privilege. The Court found that there was no reasonable contemplation of litigation. Expressly endorsing Andrews J in ENRC, the Court of Appeal held that a criminal investigation “is not adversarial litigation” and “does not necessarily equate to the reasonable contemplation of a prosecution.” Therefore, the high bar for asserting litigation privilege in the context of criminal investigations remains.
- In April 2018, the Divisional Court in R (on the application of AL) v SFO, XYZ and ors made obiter comments (having refused jurisdiction over the judicial review application) that described the position that no privilege could attach to first interview notes taken by lawyers when conducting an investigation as “settled law”. The judges went on to say that any privilege that might exist would in any event have been waived by the giving to the SFO of oral proffers summarising the contents of those notes and no limited waiver could apply where the SFO had a duty of disclosure of such material to other criminal defendants.
- In April 2018, SFO Case Controller John Gibson commented that “where the SFO sees an overly ambitious claim of privilege, we will, and indeed should, challenge such a claim…There is also an argument to suggest that in specific circumstances [the SFO] may be obliged to challenge overly ambitious privilege claims”. There is no doubt that, following criticism of the agency in the XYZ judicial review, the SFO will be under pressure to pursue documents created in an investigation over which a company seeks to claim privilege. If a company wants to undertake an internal investigation but retain litigation privilege, Mr. Gibson suggests that the question is: what is motivating the company to preserve litigation privilege? He goes on to suggest that part of the answer would be to communicate with the SFO about what the company is doing and how it is conducting its investigation. In light of Mr Gibson’s comments, the ENRC appeal takes on even greater significance for the conduct of investigations in the UK.
- Practical tips in an investigation
- Employees participating in an internal investigation should be cautioned at the outset to keep their communications confidential, in order to maintain the company's privilege where available.
- Communications need to be restricted to preserve claims of legal advice privilege, which extends only to communications between lawyers and the “client” (the employees authorised to seek legal advice). In light of the recent ENRC decision, it is particularly important that the identity of the “client” is clearly documented at the outset of the investigation and that clear lines of communication are established both internally and externally.
- Care needs to be taken not to create unnecessary non-privileged documents that may later be disclosable to authorities or other third parties. It is important to remember that disclosable material will include, in the absence of litigation privilege, records of interviews with employees.
- Reports by or communications with third parties, eg forensic accountants, will not be protected by privilege unless they are created for the dominant purpose of litigation that is under way or contemplated. If litigation privilege does apply, it is sensible to ensure that third party retainers expressly state that their work is for the primary purpose of the contemplated or current proceedings.
- Regulators conducting external investigations expect that a company will share facts - and that may include facts contained in otherwise privileged documents. While a company may choose to waive privilege in the spirit of cooperation, waiver (even on a limited basis) carries a number of risks. An external authority that receives privileged documents may elect or be obliged to share them with other domestic or overseas authorities, use them as evidence, or make the documents or their contents public.
- International perspective
- Protections for privileged material differ between jurisdictions. For example, in some jurisdictions, regulators will not allow any information to be withheld on the basis that it is privileged or for similar client-lawyer confidentiality reasons. This could mean that even advice that a firm or individual receives from lawyers in relation to the merits of the issues under investigation might also need to be disclosed. Where an investigation is multi-jurisdictional, we suggest seeking local advice when responding to requests for confidential information from authorities in each country.
This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.