On 29 May 2017, a five judge division of the Irish Supreme Court unanimously upheld a landmark High Court judgment identifying legal breaches arising from a dawn raid investigation by the Competition and Consumer Protection Commission (CCPC). The message from this Supreme Court judgment is strong and clear - all regulators' investigative powers are limited by proportionality principles and privacy rights and regulators must take steps to afford companies their rights in this respect. This judgment provides a strong legal basis for companies asserting their defence rights during regulatory investigations. In addition, the Supreme Court recommended that there be new legislation and / or regulatory protocol to avoid a repeat of this case.
This judgment arose from a challenge to the CCPC's retention of the entire email account of a company director during a 2015 dawn raid carried out as part of an investigation of suspected competition law infringement. At present, there is no Irish legislation or CCPC regulatory protocol on treatment of irrelevant material seized at a dawn raid and the legislative power of seizure is very broadly drafted, in that its only express limitation is that seizure must be "necessary for the performance by the Authority of any of its functions". In this context, the raided company, Irish Cement Limited, sought to engage with the CCPC regarding treatment of the seized material which it argued fell outside the scope of the CCPC's powers and, as such, should not be reviewed. The CCPC refused to engage with the raided company, asserting an entitlement to independently review all material and reach its own conclusions without returning any irrelevant material obtained outside of its powers.
The Supreme Court held that the raided company had well-founded concerns that the CCPC intended to unlawfully review irrelevant material and was critical of the CCPC's refusal to engage and the absence of any regulatory protocol for the treatment of irrelevant seized material. In particular, the Supreme Court held that the CCPC's proposed approach to the review of seized material was ultra vires and in breach of the right of privacy under the Irish Constitution and the ECHR. As a consequence, the Supreme Court upheld an injunction preventing the CCPC from reviewing seized material and recommended two courses of action. First, Judge Charleton recommended that the CCPC consider adopting a regulatory protocol and, in the interim, recommended engagement between the parties and outlined a potential seven step process for reaching agreement on how to identify and destroy irrelevant seized material while protecting the raided company's privacy rights. Second, Judge Laffoy recommended that the legislature fill the lacuna in the current legislation by providing a proportionate and lawful mechanism for filtering material seized at a dawn raid.
The written judgments of the Supreme Court are over 130 pages in length and include many notable observations on the interaction between corporate rights and regulatory powers. In particular, Judge McMenamin's piercing critique of how the CCPC conducted its investigation from the outset gives reason for all regulators to take pause before launching an investigation based on a broadly drafted warrant (or other authorisation document). Judge McMenamin took issue with "the unspecific and apparently unlimited nature of the search warrant" which failed to tell the raided company "anything useful as to the scope or purpose of the projected entry and search". He held that the broad drafting of the CCPC's legislative powers provides no justification for unspecific CCPC search warrants, in particular because in the relevant circumstances it is quite clear that "a focused form of search could have been arranged for" had the CCPC been more constrained and deferential to principles of proportionality and privacy. On this basis, Judge McMenamin reached a more damning conclusion than the two other judges who gave written judgments, suggesting that the whole CCPC investigation was unsound, regardless of what may be agreed between the parties pursuant to Judge Charleton's seven step process, because "the extent of the unlawfulness does not lend itself to remediation, even by order of a court".
The CCPC issued a short press release stating that it "is carefully considering the judgments and assessing their implications for the CCPC's search powers", while also maintaining that it is 'business as usual' with all current investigations remaining ongoing.
The Supreme Court has identified shortcomings in the legislation granting the CCPC's powers and addressed some practical questions left unanswered in Judge Barrett's High Court judgment on how seizure powers can be exercised lawfully in practice. The way forward outlined by the Supreme Court places new demands on regulators and creates new protections for companies subject to a regulatory investigation.
The judgment makes it likely that regulators will be more disciplined in their approach to dawn raid preparation so that in future we can expect that dawn raids will commence with a warrant or authorisation that properly communicates the scope of the investigation so that the affected parties can safeguard their rights and avoid the seizure of irrelevant or extraneous material. It might also be expected that on-site investigations that normally last one day could last a lot longer as the CCPC and other regulators seek to take more care to avoid seizing irrelevant material outside of their legal powers. In addition, post-raid, we can expect more positive engagement by regulators to ensure that the rights of raided companies and individuals are fully and properly protected. In particular, the CCPC and other regulators may seek to formally adopt the EU protocol of "sealing" material that is seized without its relevance having been confirmed and searching it subsequently in the presence of the raided company using agreed search terms.
Overall, the Supreme Court judgment shows that broad statutory powers for regulators to 'seize now and (maybe) sift later' will not go unchecked by the Irish courts and this creates a new and much needed set of protections for companies operating in Ireland and at risk of regulatory investigations.
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