UK: New Fault Lines In International Cartel Enforcement And Administration Of Leniency Programs – Disclosure Of Immunity Applicant Statements

Last Updated: 30 January 2012

Article by Marc Hansen, Luca Crocco, and Susan Kennedy1


Recent rulings by courts in a number of jurisdictions (UK, Australia, United States, and the European Union) are resulting in increased disclosure of oral statements and interview materials produced by leniency applicants.2 Increased disclosure of leniency material may affect the willingness of immunity applicants to report cartel conduct in certain jurisdictions, create disincentives for comprehensive internal investigations, and cause immunity and leniency applicants to circumscribe more narrowly statements of collusive conduct provided to enforcement authorities.

These developments – when combined with an increasing number of jurisdictions with immunity and amnesty policies – may lead amnesty applicants away from parallel applications in multiple jurisdictions, and instead to focus on those countries where there is the greatest net benefit in applying. This may in turn lead enforcement efforts again to become focused on the major enforcement jurisdictions, and may marginalize "newer" cartel enforcement jurisdictions. In the medium term, applicants will be faced with a more complex analysis of immunity and leniency incentives, with substantial differences between jurisdictions.

I. Immunity incentives and protecting statements of leniency applicants against disclosure

It is a generally accepted tenet of cartel enforcement since the introduction of amnesty and immunity programs in the US in 1993 and the EU in 1996, that leniency applicants will only come forward if they can be certain that their position, having revealed the cartel conduct, is at least no worse than the expected outcome in the absence of the leniency or immunity application. This is said to require that the leniency program provide for certainty, predictability, and critically, protection of the leniency applicant against disclosure of admissions that it would not have made, but for the leniency application.

The protection of the confidentiality of leniency applicant statements against disclosure in Court is commonly seen as a cornerstone of leniency regimes. As an example, the most recent official statement in this sense by the Commission is in the Observations submitted to the UK High Court pursuant to Article 15(3) of Regulation

1/2003 in the National Grid litigation:

"The Commission's policy [is] that undertakings which voluntarily cooperate with DG Competition in revealing cartels should not be put in a significantly worse position in respect of civil claims than other cartel members that refuse any cooperation. In practical terms, this means the Commission's long established practice is that the corporate statements specifically prepared for submission under the leniency programme are given protection against disclosure both during and after its investigation".3

Similarly in the US, Scott Hammond, director of Criminal Enforcement at the Department of Justice, described in the following terms the long-standing policy of the department in the field:

"The Antitrust Division's policy is to treat as confidential the identity of leniency applicants as well as any information they provide. Thus, the Antitrust Division will not disclose a leniency applicant's identity, absent prior disclosure by or agreement with the applicant, unless authorized by court order. [...] [T]he confidentiality policy is a necessary inducement to encourage leniency applications. If jurisdictions shared information obtained from an amnesty applicant with other competition and prosecuting authorities without the applicant's permission, then it would create a significant disincentive to entering the leniency program that would lead to fewer leniency applications. Such a result would not be in anyone's interest. First, lost applications would mean that no one would have the information and the conduct would go unpunished. Second, it is important not to lose sight of the fact that amnesty applications lead to cases against other cartel members that result in public filings detailing aspects of the cartel conduct that can assist other competition authorities as well as victims to develop their own cases, even if they do not have direct access to the leniency applicant's information."4

Over the years, enforcement authorities have gone to great lengths to protect, against disclosure to third parties, the various forms of statements or materials that are prepared by leniency applicants, whether in the form of lawyer proffers in the US, Australia, UK, and Canada, or statements of corporate leniency applicants in EU and civil UK proceedings,5 or legally privileged records of internal investigations.6

Even if the protection of such materials has not been perfect,7 the general consensus in the private bar has been that the occasional failures to protect leniency applicant statements have not undermined incentives for corporate entities to seek immunity or leniency. Recent developments in some jurisdictions may, however, change this analysis and are therefore the focus of this paper.

II. Recent International Developments in Disclosure Practices

The remainder of the paper examines four recent judgments and enforcement authority positions in the United Kingdom, Australia, the United States, and the European Union, and seeks to identify possible consequences of these recent developments. The four situations raise different issues for immunity and leniency applicants, each of which may affect the incentive to apply for immunity, in one or more jurisdictions.

  1. The UK Office of Fair Trading ("OFT"), in October 2011, published its proposed new leniency guidance setting out the circumstances where it will require a leniency applicant to waive legal privilege8 over legal advisors' interview notes from an internal investigation.
  2. In August 2011, the Australian Federal Court ruled that the Australian Consumer and Competition Commission (the "ACCC") could not in the specific circumstances of a case rely on public interest immunity or similar principles to avoid disclosing to defendants the notes of the ACCC taken during proffer meetings with corporate immunity applicants.
  3. In response to recent high profile criminal trials where the government allegedly failed to disclose certain exculpatory material, in 2010 the United States Department of Justice ("DOJ") issued new criminal discovery guidance to ensure that all federal prosecutors meet their discovery obligations to criminal defendants, including those accused of cartel conduct.9 As more cartel cases go to trial in the U.S., this new discovery policy has the potential, and as recently as August 2011, actually led to the disclosure of virtually all of the attorney proffers provided to the government by cooperating companies and individuals in a major cartel investigation.10
  4. In June 2011, the European Court of Justice ruled in Pfleiderer11 that European Union competition law rules do not prevent a person adversely affected by a cartel infringement, who is seeking to obtain damages, from being granted access to leniency documents submitted by the perpetrator of that infringement and that it was a matter for national courts to perform the balancing exercise required. The uncertainties created by the Pfleiderer case were compounded by an even more recent judgment by the General Court in the case CDC v Commission,12 which arguably dismisses the expansive theory of confidentiality of investigation materials put forward by the Commission in several cases.

Individually and collectively, these four recent developments may lead to a shift in how leniency applicants will approach immunity and leniency applications.

United Kingdom – Requirement placed on immunity applicant to waive legal privilege in respect of applicant's internal investigation

Since the collapse in May 2010 of the prosecution brought by the OFT against four British Airways ("BA") executives, the OFT's policy in regard to disclosure requirements placed on leniency applicants has been the subject of considerable public discussion and legal commentary.13

The BA case was the first contested prosecution of the cartel offence in the UK, and was the result of information provided by Virgin Atlantic Airways ("Virgin") under the leniency policy of the OFT. The Virgin information alleged participation by certain BA and Virgin employees in anti-competitive discussions to fix passenger fuel surcharges. On the basis of the information provided, Virgin obtained full (civil and criminal) immunity under the OFT's leniency program. Following an investigation, the OFT brought criminal charges against four BA executives, alleging an offence under Section 188 of the Enterprise Act 2002 (the criminal cartel offence in UK law).

During trial, a substantial volume of electronic communications (which had been in Virgin's possession, but had not been provided to the OFT) came to light shortly before a key witness from Virgin was called. The judge, Owen J, was already cognitive of disclosure difficulties in the case and refused an OFT application for an adjournment. As a result, the OFT was forced to offer no evidence against all defendants in the case and the prosecution came to an end.

The collapse of the prosecution, and the events leading up to it and in particular a ruling by the judge in the case on disclosure by the OFT to defendants of "unused material" that may be exculpatory, have called into question the OFT's approach to the interaction between legal privilege, disclosure and leniency.

Prior to the BA case the leniency guidelines14 were silent on the issue of waiver of privilege. Following the experience during the BA / Virgin investigation and the circumstances leading to its collapse, the OFT in December 2008 issued substantially revised guidance setting out, inter alia, the OFT's position on disclosure obligations of leniency applicants in particular whether a leniency applicant may assert legal privilege ("the 2008 Guidance").15 The 2008 Guidance, was heavily influenced by the difficulties the OFT faced in obtaining material leading up to the trial of the four BA executives, and provided that in certain circumstances the OFT might require a leniency applicant to waive legal privilege over lawyer's notes taken during internal investigations. According to paragraph 8.29:

"It is accepted that the undertaking may contend that legal professional privilege will attach to notes [of internal investigations and witness interviews]. However, there may be circumstances where the OFT is advised by counsel that disclosure to the OFT and to others is necessary to enable a case to proceed and in those circumstances the OFT will expect an undertaking or individual to waive any applicable privilege to the extent that the OFT is advised that it is necessary. The OFT will not require the disclosure to it of such notes as a matter of course – it simply asks that notes are taken by the undertaking or its advisers and duly preserved pending any possible issues which might subsequently arise."

This conditioning – in certain circumstances – of immunity on waiver of legal privilege was motivated by the OFT's desire to ensure that it would have access to the requisite exculpatory material in sufficient time to enable it to comply with its disclosure obligations as a prosecutor.16

The OFT's treatment of legal privilege and disclosure in the 2008 Guidance was explored in detail in a judgment given by Owen J in the BA case (on 7 December 2009 (unreported)). Relying on UK case law and the Attorney General's Guidelines on Disclosure,17 Owen J held that:

"where there are reasonable grounds to suspect that a third party has material or information that might be disclosable if in the possession of the OFT, the OFT is under a duty to take reasonable steps to obtain it."18

In applying this principle to the BA case, Owen J further stated:

"furthermore the argument that the OFT would not have succeeded in obtaining the relevant material, had the airlines sought to protect the privilege that they claimed by the application to the court, appears to me to miss the point. The question is whether, as the case has evolved, it would be reasonable for the OFT now to press for disclosure of the material, notwithstanding the claim to LPP, on the basis that both airlines and the VAA witnesses are under the duty to give continuous and complete cooperation as a condition of leniency/immunity, and failing a satisfactory response, to have invoked its power to revoke the leniency agreements and no-action letters. In my judgment the OFT ought reasonably to take such steps ... for a number of reasons ... the overriding obligation of the OFT as the prosecuting authority to deal fairly with the defence ... the duty on the airlines and VAA witnesses to give continuous and complete cooperation ... the nature of the material sought and ... the fact that it may shed light upon an issue likely to be of considerable importance at trial, namely whether the VAA witnesses were subject to pressure or inducement with regard to the changes in their account..."19

The competition bar in the UK were quick to point to the potentially far-reaching implications of this ruling, not only in terms of the conduct of internal investigations and disclosure of investigation results, but in particular in international cartel cases where waiver of legal privilege in one jurisdiction may result in waiver globally and in circumstances not considered by the UK court or enforcement authority.20

The disclosure problems in the BA case were also among the central reasons for the OFT appointing a panel of members of the OFT Board ("the Board Review") to examine the events leading up to and during the trial with a view to making recommendations for the conduct of future criminal cartel cases in the UK.21

When it delivered its report, some of the key findings and recommendations of the Board Review were on the issue of waiver of legal privilege22 The following recommendations were included in the conclusions:

  1. The 2008 Guidance should be reviewed and consideration should be given to including an explicit notice to leniency applicants that they may expect requests for disclosure of witness account material (including legally privileged material) in any criminal proceedings conducted by the OFT arising out of their proffer.23
  2. The OFT should in addition consider specifying in the revised guidelines that such disclosure may be required as a condition of leniency/immunity. The Board Review considered that "any concern about the impact of this approach to disclosure and possible chilling effects on future leniency applicants must be weighed against the huge financial and other advantages to applicants resulting from immunity".24
  3. It should be made clear in the revised leniency guidelines that where material sought by the OFT is withheld on the basis of claims for legal privilege or commercial sensitivity, the OFT may require the applicant to make it available for review by independent counsel (the instructions to whom will be disclosable) or, where appropriate, by an OFT lawyer unconnected with the case.25

The OFT, as follow-up to the Board Review, accepted the recommendations and in October 2011, published for consultation a revised version of its guidance on applications for immunity and no action (the "Draft Guidance").26

The Draft Guidance confirms that the OFT will continue to seek waivers of lawyers' notes taken during internal investigations (para. 3.18). The language appears, however, to offer some solutions to the types of problems seen in the BA case, while at the same time offering some protections against the consequences in other jurisdictions of requiring the applicant to waive legal privilege for lawyers' notes taken during internal investigations.

First, one must welcome the statement in para. 3.17 of the Draft Guidance that the OFT will not seek waivers in civil investigations. However, as it will only become clear after the initial internal investigation whether there is a risk of criminal investigation, the fact that there remains a risk of waiver requests will in many cases have to inform the conduct of investigations and applicants' decision-making even in cases that eventually only turn out to be civil investigations.

Second, the OFT appears to have acknowledged the validity of concerns relating to the timing of waiver requests. Paras. 3.19 and 3.22 of the Draft Guidance now make it clear that the waiver requests will at the earliest be made when the OFT has "determined that there is otherwise sufficient evidence to charge one or more individuals with the cartel offence" (para. 3.22), or in some cases even later when a case is before the courts (para. 3.19).27 This represents a significant departure from practice in early cases and limits disclosure to cases where charges are about to be brought, or the court proceedings have already commenced.

The suggestion in para. 3.19 that, at least in some cases, the waiver would only be considered when the case is before the courts ("having sought the guidance of the court where necessary") may be intended to deal with cases with an international component. In such cases, there is a significant risk of even limited waivers in a UK proceeding being found to result in complete subject-matter waiver in other jurisdictions, and perhaps even under English law.28 By involving the court in the decision to seek disclosure of privileged materials, the OFT may be seeking ways to avoid collateral (international) effects of the waiver policy. This should be lauded, and while a UK court may not be willing29 to issue an order that the privileged materials be disclosed under protective order (thereby avoiding need for a waiver of privilege), there may be court-enforced procedural devices by which the waiver is limited and protective orders are imposed which would convince a judge, e.g., in the United States or Australia, that waiver had not been entirely voluntary and that the disclosure was under circumstances similar to procedures that might have been employed in those jurisdictions to order limited disclosure of privileged communications.

Even with these proposed improvements over the 2008 Guidance, it is regrettable however that the OFT has not focused on whether intrusive waiver requirements are indeed the best way to address the issues that come up in cases such as the BA case, which as many commentators have noted, involved a perhaps unique set of facts in which a criminal prosecution was pursued in a bilateral cartel case where a jury would ultimately have been asked to consider whether a self-admitted cartellist was, despite this, a witness of truth.

In this regard, one may question whether there are not more proportionate responses to late disclosure of contradictory or exculpatory statements, such as possibly requesting the leniency applicant to certify at certain times during a proceeding (under risk of loss of leniency) that there are no material contradictory or exculpatory materials.30 It is in any event, with increasingly interlinked international investigations, not clear that it will serve the enforcement interests of the United Kingdom to seek waivers except in very specific and narrow circumstances.

Australia – Disclosure of proffer notes of the enforcement agency

The ACCC has since August 2005 had in place an immunity policy for cartel enforcement. The most recent version of that policy was issued in 2009.

The various iterations of the ACCC immunity policy, and the ACCC practice under that policy, have provided that immunity applicants may provide certain information to the ACCC – e.g., in the context of proffers by applicants which are subject to cooperation obligations – subject to an understanding that elements of such statements or proffers will be held in confidence by the ACCC, or at least that the ACCC will use its "best endeavours" to protect such confidentiality.31 This is particularly relevant where a witness cooperating in Australia may be the subject of prosecution in another country, but the ACCC seeks from that witness information which serves as background and may not necessarily be needed for an Australian prosecution, but could be harmful to the witness if disclosed to the third country authorities. It is also very relevant for leniency applicants assessing whether admissions to the ACCC will be disclosed to civil plaintiffs.

A recent judgment of the Australian Federal Court sheds new light on the degree to which the ACCC can protect information provided in confidence by an immunity applicant.

The case concerns allegations of cartel conduct in contravention of section 45 of the (then) Trade Practices Act 1974 against, inter alia, Prysmian Cavi E Systemi Energia SRL ("Prysmian") and Nexans SA ("Nexans) (ACCC v. Prysmian & Ors, SAD 145/2009).32 The action, commenced in September 2009, was brought against the French and Italian parent companies of Nexans and Prysmian as those companies were established outside Australia and had no local presence against which the action could be brought.

Prysmian and Nexans contested in a preliminary action the ACCC's ability to serve process outside of Australia. In order to serve process outside the jurisdiction, the ACCC had the onus to establish a prima facie case against Prysmian and Nexans. In this connection, they sought to have disclosed to them, inter alia, evidence supporting the ACCC's affidavits in support of the action and documents relating to the immunity application.

The ACCC had taken evidence prior to the commencement of proceedings having "assured" a witness for the leniency applicant that it "would not waive legal professional privilege or public interest immunity privilege".33 An attorney for the witness noted that "prior to the interview the ACCC had stated 'public interest immunity would appear likely to be available should a third party seek to access any records of the interview, in addition to the separate legal professional privilege residing in the notes' ".34

The ACCC objected to the Nexans and Prysmian disclosure requests and argued that "public interest immunity" applied, at least at an early stage of the proceeding, to information provided by immunity applicants who cooperate with the ACCC, and also requested that a "confidentiality order" should be made under the Federal Court of Australia Act 1976 ("FCA").

The judge, Lander J, hearing the applications of Nexans and Prysmian ruled in August 2011 that the ACCC was not entitled to withhold the evidence from Nexans and Prysmian on grounds of "public interest immunity", and ordered the disclosure of a significant amount of documents. Judging by the disclosure requests formulated by the defence, the documents disclosed would appear to have included the ACCC officials' notes of proffer meetings with the immunity applicants counsel.

The Court held that the ACCC had a "heavy burden" to establish that real detriment to the public interest would result from the disclosure.35 In this case the Court held that Prysmian and Nexans were entitled to the documents in order to prepare for their challenge to the jurisdiction of the Australian courts. In its findings, the Court recognized that the result may undermine the ACCC's immunity policy and the willingness of individuals and companies to assist the ACCC in its cartel investigation, but indicated that these considerations were outweighed by the public interest of a "fair trial" in favor of disclosure, and specifically found that the risk of prosecution of witnesses provided by the immunity applicant in other jurisdictions as a result of the disclosure is not a matter to which the Court should have regard when determining where the public interest lies. The Court also refused to grant a "confidentiality order", restricting disclosure of the information. The judgment found that such an order "was in no way prevent prejudice to the administration of justice" where the public interest favors disclosure.36

The judgment in Prysmian raises again the question of the degree to which the ACCC can always give immunity applicants meaningful assurances with respect to disclosure of proffers and other preliminary information. It has been well-understood by the cartel bar that given the procedural framework within which the ACCC operates, witness statements and other evidence collected by the ACCC will eventually be disclosed when an enforcement action is brought in court, and that disclosure in court of such information is the norm given the absence of plea bargaining procedures that operate to reduce disclosure of immunity applicant materials in other jurisdictions (such as in particular the US).

The ACCC recognized this issue already some years ago and amendments to the relevant legislation now provide additional protection for information provided by immunity applicants by the introduction of a provision on "protected cartel information" in section 157B of the TPA. This "protected cartel Information" provision was held not to apply to the conduct considered by the Court in the Prysmian case.37

This new provision of Australian law provides that the ACCC may withhold from disclosure "protected cartel information", except when ordered by a court. When deciding such a matter, the Court must have regard only to those matters set out in section 157B, including, relevantly, the fact that the protected cartel information was given to the ACCC in confidence; the need to avoid disruption to national and international efforts relating to law enforcement; and the fact that the production of a document/disclosure of protected cartel information may discourage informants from giving protected cartel information in the future.

To date, the Courts have not had an opportunity to consider the application of this provision. However, the language of the new section 157B does not give all practitioners comfort when considered in light of the reasoning in the recent Prysmian Judgment. In its commentary on the judgment, Blake Dawson states: "While, this statutory formula appears to shift the balancing exercise to be undertaken when determining whether information is to be disclosed in the ACCC's / an immunity applicant's favour, the precise ramifications of section 157B in light of judicial decisions like Prysmian remain uncertain."

United States– Disclosure of proffer notes at trial

Since 1993, with the adoption of the DOJ Antitrust Division's Corporate Leniency Policy, a bedrock principle of the leniency program in the United States has been the ironclad assurance of confidentiality for all leniency applicants. In 2008, the DOJ reiterated this principle and stated that: "[t]he Division holds the identity of leniency applicants and the information they provide in strict confidence, much like the treatment afforded to confidential informants. Therefore, the Division does not publicly disclose the identity of a leniency applicant or information provided by the applicant, absent prior disclosure by, or agreement with, the applicant, unless required to do so by court order in connection with litigation."38 The Division also adopted a "policy of not disclosing to foreign antitrust agencies information obtained from a leniency applicant unless the leniency applicant agrees first to the disclosure."39

The Division has been able to abide dutifully by these confidentiality guarantees in most cases and most, if not all, of the information supplied by a leniency applicant has been kept confidential and out of the public domain. This success is the result of cartel cases being resolved primarily through plea agreements with limited information disclosed to pleading defendants or in open court.

However, with an increase in cartel cases going to trial, more information from the leniency applicant must be disclosed to the defendant and ultimately disclosed in open court. In the last few years almost every major cartel case has resulted in some indictments and the subsequent disclosure to the defendants of the identity of the leniency applicant and information provided to the government by the leniency applicant, including witness statements.40 While the DOJ regularly seeks protective orders in criminal antitrust cases, to ensure that the criminal discovery is not publicly disclosed, and is used solely for the defense of the case, there is a large amount of information relating to the leniency applicant that is inevitability disclosed in open court during the course of a criminal trial. Moreover, recent guidance from the DOJ relating to pretrial discovery obligations increases the chance of even greater disclosure of leniency material.

In 2010, in response to recent high profile criminal trials where the government allegedly failed to disclose certain exculpatory material (including the prosecution of former United States Senator Ted Stevens), the DOJ issued new criminal discovery guidance to ensure that all federal prosecutors meet their discovery obligations to criminal defendants, including those accused of cartel conduct.41 One particular area of the guidance which is relevant to cartel cases is the requirement that DOJ prosecutors review and produce "[p]rior inconsistent statements (possibly including inconsistent attorney proffers, see United States v. Triumph Capital Group, 544 F.3d 149 (2nd Cir. 2008))." (Emphasis added)

The possibility that attorney proffers from cooperating parties, including leniency applicants, may be disclosed may come as surprise to cartel defense lawyers. Antitrust enforcement agencies have gone to great lengths to allow for leniency applicants, and other cooperating parties, to provide cooperation through oral attorney proffers as a basis to obtain leniency or gain cooperation credit. These "paperless" presentations were specifically crafted to prevent their disclosure to private plaintiffs in civil damage claims. These efforts may be in vain if these same statements will be disclosed to defendants in criminal cases and possibly disclosed in open court. Moreover, it is not uncommon for a witness' initial statements to company counsel to be incomplete, especially if the lawyer does not have the benefit of documents to refresh the witness' recollection. If these early witness statements are disclosed to government, they may later need to be disclosed to the defendant as prior inconsistent statements when compared to later statements by the witness with the benefit of full preparation and review of all relevant documents.

In the United States, the government has a duty to disclose all material evidence favorable to a criminal defendant. Brady v. Maryland, 373 U.S. 83, 87 (1963). This disclosure requirement also applies to material that can used to impeach prosecution witnesses. Giglio v. United States, 405 U.S. 150, 154-55 (1972). "A Brady violation occurs when the government fails to disclose evidence materially favorable to the accused." Youngblood v. West Virginia, 547 U.S. 867, 869 (2006). Evidence is material if "there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different." Id. at 870.

Courts have recently extended the government's disclosure obligations under Brady to include attorney proffer notes that are inconsistent with subsequent statements by the prosecution witnesses. See United States v, Triumph Capital Group, Inc. 544 F.3d 149, 162-165 (2nd Cir. 2008). (The government's failure to produce attorney proffer notes that were inconsistent with that witness' later statements resulted in the reversal of the defendant's conviction on certain charges). Thus, in the context of a cartel case, if an attorney provides a proffer indicating that a particular witness was not at a meeting with a competitor or did not reach an agreement on pricing, those proffer notes may need to be handed over to the defendant by the government if the witness later provides materially different testimony.

Moreover, based on the recent practice of the DOJ, counsel should assume that all attorney proffer notes, whether inconsistent or not, will be produced to defendants indicted for cartel conduct. The disclosure of attorney proffer notes recently arose in the highly publicized case of United States v. AU Optronics, et al., Case No. 3:09- CR-0110-SI (N.D. Cal.). As part of pretrial discovery in that case the government produced "200 boxes of hard-copy documents, approximately 2300 GBs of electronically stored documents, all FBI 302s from the investigation, 132 extensive summaries of witness interviews, and transcripts of all grand jury testimony."42 In addition "the government, erring on the side of disclosure" produced "over 500 typewritten pages containing information proffered by counsel for cooperating individuals and corporations at various stages during the investigation."43 Given the large volume of attorney proffer notes it appears as if the government simply produced a copy of every single attorney proffer in its possession.

As more cartel cases go to trial in the U.S., the DOJ's new discovery policy has the potential to lead to the disclosure of leniency applicant witness statements and attorney proffers in all cases that go to trial. Fortunately, although the government is obligated to produce leniency material including attorney proffers in all criminal cases, the government recognizes its bedrock obligation to protect the confidentiality of the leniency applicant's identify and information provided by the leniency applicant. Therefore, the DOJ's Antitrust Division routinely seeks pre-trial protective orders in all criminal cases to preclude the public disclosure of leniency materials, except for the purpose of defendants defending themselves at trial. Such a protective order was entered in the United States v. AU Optronics, et al case.44 Nevertheless, despite the government's efforts to protect the identity of the leniency applicant and its cooperation material, given the public policy favoring public and open trials in the United States, there is still a large amount of material that is disclosed to the public during criminal trials. Although necessary for the fair trial of a criminal defendant, these disclosures do create meaningful disincentives to companies in deciding whether to report cartel conduct to the enforcement agencies.

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1. Antitrust Division, which obtains protective orders in almost all criminal cartel cases before discovery is provided to the defendant.

2. Third, enforcement agencies should make every effort in private damage claims to prevent the disclosure of leniency material to private civil plaintiffs. Many enforcement authorities, including those of the US, the EU, and Japan, have regularly intervened in private civil damage litigation to ensure that leniency material or other confidential information connected with their investigations is not disclosed in civil discovery. These steps will go some way in limiting the damage resulting from increased disclosures of leniency material in cartel cases.

3. The Observations of the Commission in the National Grid case are available at:

The same concern can be found in recital 8 of the Commission Leniency Notice: "In addition to submitting pre-existing documents, undertakings may provide the Commission with voluntary presentations of their knowledge of a cartel and their role therein prepared specially to be submitted under this leniency programme. These initiatives have proved to be useful for the effective investigation and termination of cartel infringements and they should not be discouraged by discovery orders issued in civil litigation. Potential leniency applicants might be dissuaded from cooperating with the Commission under this Notice if this could impair their position in civil proceedings, as compared to companies who do not cooperate. Such undesirable effect would significantly harm the public interest in ensuring effective public enforcement of Article 81 EC in cartel cases and thus its subsequent or parallel effective private enforcement."

4. Scott D. Hammond, Director of Criminal Enforcement, Antitrust Division, U.S. Department of Justice "Dispelling the myths surrounding information sharing" speech presented before the ICN Cartels Workshop Sydney, Australia November 20-21, 2004, available at:

5. A number of jurisdictions which rely on corporate statements in leniency – including the EU and Japan – moved from written to oral corporate statements after 2002 following attempts by civil plaintiffs in US litigation to gain access to copies of written corporate statements in the hands of the leniency applicant. See, e.g., footnote 7 below.

6 The DOJ Antitrust Division has for years taken the view that they will not require, as a condition for cooperation under the DOJ Amnesty Program, waiver of privilege of interview records prepared by legal counsel to an amnesty applicant. This is in contrast with the view of the DOJ in other areas of enforcement where an amnesty program is not in place (e.g., for FCPA violations).

7 See United States District Court for the District of Columbia, in Re Vitamins Antitrust Litigation—Misc. No. 99–19 in May 2002.

8 This paper uses the term "legal privilege" to denote the various forms of that privilege in different legal systems, whether referred to as legal professional privilege, legal privilege or other attorney-client confidentiality.

9 "Department of Justice Guidance for Prosecutors Regarding Criminal Discovery" David W. Ogden, Deputy Attorney General (2010) available at:

10 United States v. AU Optronics Corp., et al., 3:09-CR-0110-SI (N.D. Cal.) Doc. No. 502 at p. 2, filed Dec. 7, 2011.

11 Judgment of the Court of 14 June 2011 in Pfleiderer AG v. Bundeskartellamt, C-360/09.

12 Judgment of the General Court of 15 December 2011 in case T-437/08, CDC v European Commission.

13 See e.g., "Criminal cartel prosecution and civil leniency: international perspectives on irreconcilable differences?"; British Institute of International and Comparative Law, London, September 2011. Nicholas Purnell QC, Sir Christopher Bellamy QC, Nicole Kar, Daniel Piccinin and Priya Sahathevan "Criminal cartel enforcement – more turbulence ahead? The implications of the BA/Virgin case" Competition Law Journal.

14 Draft final guidance note on the handling of leniency applications (OFT, November 2006); Guidance on the appropriate amount of a penalty (OFT 423, as revised in December 2004); and Guidance on the issue of no-action letters for individuals (OFT 513, March 2003).

15 Leniency and no-action guidance (OFT 803, December 2008).

16 See for a detailed discussion of UK prosecutorial disclosure obligations: "Criminal cartel enforcement – more turbulence ahead? The implications of the BA/Virgin case"; see footnote 13 above.

17 "[W]here the investigator...believes that a third party...has material...which...might reasonably be capable of undermining the prosecution case or of assisting the case for the accused, the prosecutor should take what steps they regard as obtain the material." Attorney General's Guidelines on Disclosure, Attorney General (2005), para. 51.

18 R v George, Crawley and Others (unreported) 7 December 2009, para. 11.

19 R v George, Crawley and Others (unreported) 7 December 2009, para. 31 and 32.

20 Owen J went a step further than the 2008 Guidance and considered that the courts could order limited disclosure, the result potentially being that such disclosure would not amount to a waiver of legal privilege under EU or US rules. Whether disclosure could be limited in this way remains untested and it is, as some commentators have suggested, somewhat difficult to see how this would operate in practice. See e.g., "Criminal cartel enforcement – more turbulence ahead? The implications of the BA/Virgin case", see note 13 above.

21 Project Condor Board Review, December 2010.

22 In the BA case, the OFT was in the position of seeking disclosure from a leniency applicant (who was subject to a duty of cooperation) of material, some of which the applicant considered to be protected by legal privilege, which arguably it was not in the applicant's interests to disclose.

23 Project Condor Board Review, Appendix Recommendation 2.

24 Project Condor Board Review, Appendix Recommendation 2.

25 Project Condor Board Review, Appendix Recommendation 3.

26 Applications for leniency and no-action in cartel cases (OFT 803con).

27 A court would not be expected to give guidance on the need to seek disclosure of materials before charges had been brought and the court had been seized of the case.

28 In this regard, the language in para. 3.21 of the Draft Guidance suggesting that waivers should not imply that the materials will be disclosed to third parties, may be of limited comfort to parties in international cases. A third country court may well find that a limited waiver to a UK enforcement authority results in full waiver. The same is likely to apply where the OFT requests that the privileged materials be reviewed by a lawyer "unconnected with the case" in para. 3.16.

29 See footnote 20 above for commentators' doubts in this regard.

30 The draft revised leniency guidance seeks to rectify this uncertainty by specifying that information that will have a bearing on the OFT investigation includes 'information that supports a finding of cartel activity, information which suggests and absence of cartel activity (generally, or on the part of specific undertakings or individuals) – "exculpatory" material – and information on possible leads or sources of information that the OFT may wish to pursue' (para 5.14). However it could be much more specific and require the applicant to set out in detail where key individuals provide any exculpatory comment or information and this obligation could be continuous throughout the investigation.

31 See para. 45 of the Interpretation Guidelines issued with the 2005 Immunity Policy of the ACCC. See also para 64 of the current Interpretation Guidelines issued with the 2009 Immunity Policy. This provision of the Interpretation Guidelines must be seen in the context of the Australian enforcement system, where the ACCC does not have decision-making authority, but must prove its case in court and the judges will likely require considerable disclosure. As a result of the enforcement framework, it is obvious for any immunity applicant that witness statements given to, and documents provided to the ACCC are provided with a view to their disclosure in court, and the only likely protection against disclosure of such materials to third parties is the "implied undertaking" that defendants are subject to and which restrict the defendant from using the materials for purposes other than their defence. Even this implied undertaking has limitations as a third party (e.g., a civil plaintiff) may and often will apply to the court to obtain documents, and will often be granted such leave.

32 The case has been described by a number of Australian practitioners and law firms, including Blake Dawson, which has provided the following insightful summary of the case:

33 ACCC v. Prysmian & Ors, [2011] FCA 938 ("Prysmian Judgment") at [52].

34 Prysmian Judgment at [52].

35 Prysmian Judgment at [180].

36 Prysmian Judgment at [240].

37 Prysmian Judgment at [271].

38 "Frequently Asked Questions Regarding the Antitrust Division's Leniency Program and Model Leniency Letters (November 19, 2008)" by Scott D. Hammond and Belinda A. Barnett, Question No. 32 available at:

39 Id. at Question No. 33.

40 E.g., DRAM, Marine Hose, Air Cargo, and LCD cases.

41 "Department of Justice Guidance for Prosecutors Regarding Criminal Discovery" David W. Ogden, Deputy Attorney General (2010) available at:

42 United States v. AU Optronics Corp., et al, 3:09-CR-0110-SI (N.D. Cal.) Doc. No. 502 at p. 2, Filed Dec. 07, 2011.

43 Id. at p. 3.

44 United States v. AU Optronics, et al. 3:09-CR-0110-SI (N.D. Cal.) Doc. No. 120, Filed on Aug. 19, 2010.

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