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Key principles
  • In England and Wales, privilege is a fundamental common law right protecting individuals and companies from being required to produce certain types of confidential documents to the authorities or to opponents in litigation.
    • Legal Advice Privilege protects communications made between a client and a lawyer for the purpose of seeking or giving legal advice and/or assistance. Within a company, only those individuals tasked with seeking the advice will be considered to be the “client”.

    • Litigation Privilege protects documents created confidentially for the dominant purpose of pending, reasonably contemplated or existing litigation to which the client is or would be a party. Litigation is “reasonably contemplated” if adversarial proceedings are reasonably in prospect. Importantly, the privilege covers communications not only between a client and lawyer, but also between the client or lawyer and a third party.

      A claim to litigation privilege necessarily involves a contextual assessment of the nature and stage of the investigation. Importantly, commencing an internal investigation will not automatically cloak communications and documents related to internal fact finding with litigation privilege. Nor will the threat or commencement of an external investigation automatically mean that adversarial proceedings are reasonably in prospect.

      Documents created for the investigation will fall within litigation privilege only if their dominant purpose is anticipated litigation. An investigation may be conducted for the dominant purpose of litigation notwithstanding that the client is cooperating and in regular dialogue with an authority.

      In the context of criminal investigations the decision in SFO v ENRC (recently endorsed in R v Jukes) held that work carried out further to a criminal investigation is not privileged until such point as a prosecution is commenced or, having investigated the matter, the client believes that a prosecution is more likely than not. Documenting this belief is fraught with difficulty. It effectively requires the client to accept that it has seen evidence upon which there is a realistic prospect of conviction and that it would be in the public interest for it to be prosecuted. Note that the mere issue by the SFO of a Section 2 Notice may not be enough to trigger the availability of litigation privilege.

      Absent litigation privilege, communications between employees and a company’s lawyers whose purpose is for the employee to provide factual information are unlikely to be privileged. This includes records of employee interviews, except to the extent that the company can prove that the lawyers’ record reflects the trend of legal advice being given to the company.

      For more information, see our user friendly Passmore on Privilege microsite.

Recent developments
    • On 03 July 2018, the Court of Appeal heard ENRC’s appeal against the High Court’s decision in its case against the SFO. Counsel for ENRC argued that the “[High Court] judge can’t be right that the avoidance of litigation is incapable of attracting litigation privilege…Avoiding litigation is not an excluded purpose, but is very much part of the rationale of litigation privilege”. The Law Society, in a rare intervention, told the Court of Appeal that last year’s decision had put the English law position on privilege, as against other common law jurisdictions, “out on a limb”. The Law Society went on to say that the “profession needs authoritative and correct guidance on this issue and needs it urgently” to allay the current dismay felt by legal professionals. The Court of Appeal has reserved judgment, with a ruling expected in October 2018.

    • Pending the results of ENRC’s appeal, two judgments have provided further analysis on the issue of litigation privilege:
      • In 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.

      • More recently, 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.
    • Further, 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”. 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.