- 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 05 September 2018 the Court of Appeal handed down its judgment in SFO v ENRC. The Court did not have to decide whether the limitation of legal advice privilege to communications involving employees authorised to instruct counsel was correct, and could not have overturned the decision in Three Rivers (No.5) anyway. However, the Court tantalisingly commented that it did not believe Three Rivers (No.5) was correct and that it made assertions of legal advice privilege unfairly difficult for large corporations. This issue awaits a case taken to the Supreme Court, which is the only court that could overturn Three Rivers (No.5). Until then, Courts – including Glaxo Wellcome UK Ltd (T/A Allen & Hanburys) v Sandoz Ltd – will continue to follow ENRC and Three Rivers (No. 5) in finding that, for legal advice privilege to apply to communications between lawyers and employees of a corporation, “the employee must be authorised to seek / obtain the legal advice that is the reason for the communication”.
- On litigation privilege the Court of Appeal brought much better news. The judgment at first instance, which held that litigation privilege could not apply until a prosecution had been commenced or the company had seen evidence suggesting a prosecution was likely to succeed, was overturned. The Court expressly recognised that companies need to investigate what has occurred and that litigation privilege can apply during this process, as long as a prosecution is in reasonable contemplation and the dominant purpose of the communications in question is to prepare for that. The Court also held that the fact that a company intends to cooperate with the prosecutor, or has stated that it will, does not prevent litigation privilege applying.
- This case and others illustrate the need to adduce evidence of the contemplation by the company of prosecution or litigation. Highlighting a trigger for this concern, often in the form of some contact from a prosecutor, and the company’s response (e.g. instructions to litigation lawyers) is key to successfully asserting 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. 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.
- 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.
- 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.