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Asserting and maintaining privilege in SFO investigations

Posted on 11 September 2017 by Jo Rickards and Ciju Puthuppally. Source: The Law Society

Asserting and maintaining privilege in SFO investigations

David Green CB QC made plain at a recent debate hosted at Mishcon de Reya that the Serious Fraud Office (SFO) will continue to test claims to privilege where it thinks they are unjustified.

It had done just that in the High Court before Mrs Justice Andrews in The Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd [2017] EWHC 1017 (‘ENRC’) with some success. As things stand, the ENRC decision has restricted how privilege applies in internal investigations in a criminal context. This, together with the decision in The RBS Rights Issue Litigation [2016] EWHC 3161 (‘RBS’) in relation to legal advice privilege, means that lawyers involved in internal investigations have to be very careful about how they proceed. Otherwise, their clients may be unable to succeed in a claim to privilege should the SFO challenge it down the line.

Litigation privilege

A claim for litigation privilege can be asserted where litigation is in progress or reasonably in contemplation, the relevant communications are made for that purpose, and the litigation is adversarial.

The facts in the ENRC case were that the company had hired lawyers to investigate a whistleblower claim into alleged bribery. The lawyers were also instructed to engage in a dialogue with the SFO about the investigation into the whistleblower's claims, which they did early on. It was not until 20 months after that engagement that the SFO began a criminal investigation into the company.

ENRC claimed privilege over its external lawyers' interview notes and accountants' reports. The company said the documents had been created in the course of conducting an internal investigation into allegations of criminal misconduct, and while engaging in a self-reporting process with the SFO. The SFO sought declarations from the court that certain classes of documents created during the course of the internal investigation were not privileged.

Adversarial proceedings

Mrs Justice Andrews rejected ENRC's argument that a criminal investigation should itself be treated as ‘adversarial litigation’ for the purposes of litigation privilege. The court took the view that a criminal investigation was a preliminary step, undertaken before any decision to prosecute was made. That being so, ENRC could not rely simply on the prospect of a criminal investigation to claim litigation privilege, but would have to address the prospect of a prosecution.  

Reasonable contemplation of litigation

In order to qualify under this heading, there must be a ‘real likelihood’ of litigation, rather than a ‘mere’ or even ‘distinct’ possibility, although it need not be shown to be ‘more likely than not’. The likelihood is assessed objectively, based on what was known to the relevant party at the time. 

Mrs Justice Andrews held that a criminal investigation did not automatically generate a ‘reasonable contemplation of litigation’ in every case. Since a decision to prosecute could not be taken until there was sufficient cogent evidence upon which to base the case, much depended on what evidence there was to support the allegations. On the facts, the court found that ENRC did not believe there was any evidence to substantiate the allegations. Therefore, a prosecution was not reasonably in contemplation, and litigation privilege did not apply.

Communications created for the dominant purpose of use in litigation

The court also rejected the claim to privilege over both the interview notes and the accountants' reports on the basis that they had not been created with the dominant purpose of use in litigation. To the contrary, since they were created with a view to self-reporting to the SFO so as to persuade the SFO to opt for a civil settlement instead of prosecution, they were created for the purpose of avoiding litigation and thus no dominant litigation purpose use applied.

Legal advice privilege

The basic requirements

Legal advice privilege is strictly confined to the protection of confidential communications between lawyers and a limited group of individuals specifically authorised by the client to seek and receive legal advice.

The recent cases

Astex Therapeutics Ltd v AstraZeneca AB [2016] EWHC 2759 held that notes of interviews with AstraZeneca's employees were not covered by legal advice privilege, notwithstanding the fact that they had been prepared by AstraZeneca's lawyers. The interviewees in question were not authorised to give instructions on behalf of the company, and the mere fact that lawyers had prepared the notes did not make up for that deficiency.

RBS clarified that the category of a corporate client's officers whose communications with lawyers are covered by privilege is confined to those authorised specifically ‘to seek and receive legal advice from the lawyer’, as they are ‘the client’. Authorisation to provide information to lawyers (i.e. in an interview with the employee) will not attract privilege.

The courtalso rejected the argument that lawyer-prepared notes of interviews with a client's employees attract privilege by virtue of their status as ‘lawyers' working papers’.

Practical implications

Corporate clients will need to carefully define who is authorised to ‘seek and receive’ legal advice. Ultimately, notes of interviews with individuals outside that select circle are unlikely to be protected by legal advice privilege. Clients should also document board-level discussions about anticipated litigation. 

When facing a criminal investigation, thought should be given by the board to whether the investigation is in fact likely to lead to prosecution, and if necessary, advice can be obtained from an independent lawyer on this point. Only if that is so will litigation privilege apply, and even then it will not apply to documents created with a view to persuading the authorities not to prosecute as the law currently stands.

Authors: Jo Rickards (partner) and Ciju Puthuppally (paralegal), Mishcon de Reya LLP

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