Privilege

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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. Case law shows that successful assertions of litigation privilege are generally made where the company can point to evidence of it considering the possibility of litigation or prosecution and taking appropriate steps to address this.

    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.

    The Court of Appeal’s decision in SFO v ENRC has made clear that litigation privilege can apply to communications and documents created during an investigation before any prosecution is commenced and before the company has discovered evidence sufficient to justify a prosecution. The Court noted that, unlike an individual who will know whether they have committed a crime, a company may need to find out what its employees have done before it can assess its culpability.

    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 April 2019, Lisa Osofsky, the director of the SFO, commented that it was important, when a company carries out its own investigations, to preserve “vital evidence such as first-hand accounts and witness testimony”, and that this was different from “when a company calls in a team of lawyers and then throws the blanket of Legal Professional Privilege over all the material they have gathered”. Such conduct was not cooperation, she said, despite in the same breath acknowledging that legal professional privilege is a fundamental right in our legal system. If companies want to cooperate with the SFO, they can waive that privilege, according to Osofsky, and “the waiving or privilege over that initial investigative material will be a strong indicator of cooperation” and an important factor when the SFO considers whether to enter into Deferred Prosecution Agreement negotiations.

    • On 06 August 2019, the SFO published the Corporate Cooperation Guidance for companies considering whether to self-report fraud or wrongdoing. In its Guidance, the SFO asks companies to go “above and beyond what the law requires” in order to be deemed “co-operative” - a designation that then entitles a company to (potentially) avoid prosecution or be offered the chance to enter DPA negotiations. Some of the SFO’s expectations relate to explanations of claims to privilege and/or waiver of privilege:
      • First, the Guidance asks companies to provide a schedule of documents over which they are claiming privilege and to include the basis of that claim. Organisations are also expected to provide certification by independent counsel of the privileged status of any documents withheld on this basis.

      • Second, although the Guidance does not demand waiver of privilege, it is unclear what cooperation credit, if any, a company will lose if it does not waive privilege over witness accounts, notes and transcripts. In practice, we consider that waiver of privilege will be expected, particularly in light of the comments of Lisa Osofsky, director of the SFO, in April 2019.

    For a more detailed analysis on the Guidance, please see our article here.

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, e.g. 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.