Legal Professional Privilege and Internal Investigations

As you will no doubt be aware, the Court of Appeal handed down a landmark judgment in The Director of The Serious Fraud Office v Eurasian Natural Resources Corporation Limited [2018] EWCA Civ 2006 on 5 September 2018, overturning the High Court decision in The Director of The Serious Fraud Office v Eurasian Natural Resources Corporation Limited [2017] EWHC 1017 (QB) and finding in favour of Eurasian Natural Resources Corporation Limited (ENRC).

This case will be of particular interest to in-house lawyers as it provides clarity on the scope and application of legal professional privilege generally, but especially in the context of internal investigations a company may carry out in response to a criminal investigation by a prosecuting agency.

Case background

The case concerned a Serious Fraud Office (SFO) investigation into ENRC, notification of which was given to ENRC in April 2013. In response to this, ENRC conducted an internal investigation into the allegations, and instructed external lawyers and forensic accountants to aid in this process. The SFO subsequently sought to compel the disclosure of the lawyers' investigation interview notes and the forensic accountants' reports, but ENRC refused on the grounds that these were protected by legal professional privilege.

In 2017, the High Court ruled in favour of the SFO and made a number of findings which would significantly limit the application of litigation privilege in relation to documents created as part of a company's internal investigation.

Court of Appeal decision

The Court of Appeal upheld ENRC's argument that the internal investigation documents were protected by litigation professional privilege, by finding that:

1. At the time that the documents were created as part of the internal investigation, criminal legal proceedings were in the reasonable contemplation of ENRC.

The Court determined that "the documents and evidence pointed clearly towards the contemplation of a prosecution if the self-reporting process did not succeed in averting it" and this was the dominant purpose for those documents being created. Further, the fact that an internal investigation was required to establish whether proceedings were likely does not preclude those proceedings from being in reasonable contemplation for the purposes of litigation privilege.The Court dismissed the High Court's distinction between civil and criminal proceedings as "illusory" when considering whether litigation privilege applies. However, the Court was not clear whether every SFO investigation would constitute adversarial litigation.

2. The documents were created for the dominant purpose of resisting contemplated criminal legal proceedings against ENRC.

The Court disagreed with the High Court's factual finding that the ENRC intended to disclose the documents as part of a self-reporting process, and the legal finding that an internal investigation for compliance purposes could be distinguished as a separate process from a fact-finding investigation in preparation for anticipated litigation.

Further, the Court of Appeal ruled that the fact that a document is intended to be disclosed to the opposing party at a later date does not preclude it from being protected by litigation privilege prior to being disclosed.

Points to take away

This ruling affords greater protection to documents compiled as part of a company's internal investigation. Below are some key points for in-house lawyers to take away from this ruling and practical steps which can be taken to protect your business:

Should  we carry out internal investigations?

Carrying out internal investigation procedures and cooperating with a prosecution agency will not preclude a company from relying on litigation privilege. However, companies should be careful about what information (if any) is shared with the prosecuting agency and the basis on which such disclosures are made.

When is litigation contemplated?

At the earliest possible stage of an internal investigation, a note should be made of the reasons why criminal and/or civil litigation is reasonably contemplated (whether by in-house or external lawyers) to increase the likelihood that all documents from that point on will be protected by litigation privilege. Instructing external lawyers in itself could signal that litigation is contemplated, but this should be made clear in the letter of instruction.

Who is the client?

The Court of Appeal stated that they would have been in favour of departing from the narrow interpretation of "client" followed in Three Rivers District Council and Others v Governor and Company of the Bank of England [2003] EWCA Civ 474 (Disclosure) (No.3). Until such time as we have a Supreme Court ruling on this principle, it will be important to identify who within the company is the "client" (e.g., the in-house lawyers, the directors, the chief executive, etc.) at the outset of the retainer, as only communications between the lawyer and those authorised to communicate with the lawyers will be protected by legal advice privilege.

In relation to internal communications between those within the company who comprise the "client" and the in-house lawyers, these are only protected by legal advice privilege insofar as the communications relate to the giving of legal advice (i.e. this will not extend to the performance of any management or administrative role the in-house lawyer may have within the company). However, all internal communications between the "client" and the in-house lawyers will be protected by litigation privilege where litigation is reasonably contemplated and the communications are made with litigation as the dominant purpose. Companies should take care about what information is shared with company employees other than the in-house lawyers and those in the group of individuals defined as the "client", as well as any documents created by them, as this may prevent such documents from being protected by privilege.

Do the documents constitute legal advice?

The Court of Appeal did not give a ruling on whether the High Court was correct that lawyers' papers are only protected by legal advice privilege if they "betray the tenor of legal advice". Until we have clarity on this principle, it will be important for lawyers to ensure that any factual notes (such as interview notes) include the lawyer's analysis and/or advice.

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