UK: Privilege (War And Peace): ENRC Wins Appeal

Last Updated: 12 September 2018
Article by Felicity Ewing, Thomas Leyland, Natalia Fludra and Daren Allen

In a much-awaited judgment handed down on 5 September 2018 the Court of Appeal has clarified the scope of litigation privilege, systematically overturning the first instance findings of Mrs Justice Andrews in Director of the Serious Fraud Office v Eurasian Natural Resources Corporation Ltd [2017] 1 W.L.R. 4205.

Controversy followed the May 2017 decision of Andrews J, which severely pared back the protections of litigation privilege, particularly in the context of criminal investigations. Such was the alarm that the Law Society gained permission to intervene on appeal, noting that the rule of law depended on all parties being able to seek confidential legal advice without fear of disclosure.

Andrews J had ruled that ENRC must disclose various documents generated during internal investigations undertaken by solicitors and forensic accountants, in the context of a fraud and anti-corruption investigation. These included external lawyers' notes of interviews with employees and suppliers, and materials generated by the forensic accountants in their "books and records" review.

In a 50 page judgment the Court of Appeal found that, on the facts, all categories of documents the subject of the appeal were protected from disclosure by litigation privilege. In so doing it addressed several principles of scope and application, and re-unified the civil and criminal positions.

Shedding light on its rationale, the Court emphasised that it was obviously in the public interest that companies should be prepared to investigate criminal allegations prior to going to a prosecutor such as the SFO, without losing the protection of privilege for the work product and consequences of their investigation. Were privilege to be lost, the Court acknowledged that companies might well be tempted not to investigate at all, for fear of being forced to reveal what had been uncovered to a prosecuting authority.

For most clients and in-house lawyers conducting internal investigations this decision may not transform their working practices, but it restores the availability of privilege to a somewhat more practical footing, recognising the realities of operating in a regulated corporate environment.

LITIGATION PRIVILEGE

Adversarial proceedings in contemplation

It is a necessary ingredient of litigation privilege that adversarial proceedings must be reasonably in contemplation.

At first instance Andrews J distinguished between civil and criminal process, holding that criminal proceedings could only be reasonably contemplated once the defendant knew enough of what the investigation was likely to unearth to realistically expect a prosecutor to secure a conviction. This led to widespread concern that clients would have to effectively self-incriminate in order to claim litigation privilege in a criminal context.

The Court of Appeal disagreed, confirming that litigation privilege can attach before either a defendant knows the full details of what is likely to be unearthed or a decision to prosecute has been taken. A party will often need to make further investigation before it can say that proceedings are likely, and that uncertainty does not in itself prevent proceedings from being in reasonable contemplation.

The Court also held that Andrews J had drawn an "illusory" distinction between civil and criminal proceedings, and noted that while not every SFO manifestation of concern would properly be regarded as adversarial litigation, nonetheless where the SFO specifically made clear to the company the prospect of its criminal prosecution, and legal advisers were engaged to deal with that situation, there was a clear ground for contending that criminal prosecution was in reasonable contemplation.

Dominant purpose: avoiding contemplated litigation

A further necessary ingredient of litigation privilege is that the relevant documents have been prepared for the sole or dominant purpose of the conduct of litigation. Andrews J considered that while documents created for the defence of contemplated proceedings, or to settle litigation already in train, could attract litigation privilege, documents created in order to obtain advice on how to avoid contemplated litigation could not.

The Court of Appeal overturned this finding, holding that in both a civil and criminal context legal advice given so as to head off, avoid or settle reasonably contemplated proceedings is as much protected by litigation privilege as advice given for the purpose of resisting or defending such contemplated proceedings.

Dominant purpose: compliance and remediation

It is in practice notoriously difficult to assess the extent to which a company's internal investigation is conducted for the purpose of fact-finding in accordance with its own compliance requirements, as opposed to for the purpose of proceedings that will likely result if the investigation unearths wrongdoing.

At first instance Andrews J found that documents produced in the course of ENRC's investigation had been produced for the dominant purpose of ascertaining the facts to see what had happened and dealing with compliance and governance, and not for the defence of contemplated proceedings.

The Court of Appeal determined that, on the facts of this case, the need to investigate corruption for compliance and governance reasons was just a subset of the defence of contemplated proceedings, and not a distinct dominant purpose.

It noted that: "Although a reputable company will wish to ensure high ethical standards in the conduct of its business for its own sake, it is undeniable that the 'stick' used to enforce appropriate standards is the criminal law and, in some measure, the civil law also."

As such, where a criminal investigation and prosecution are reasonably in contemplation at the time of undertaking a fact-find, the reason for the company's investigation of allegations can be "brought into the zone where the dominant purpose may be to prevent or deal with litigation." In-house counsel may draw some cautious comfort from the pragmatic acknowledgment that a corporate's investigation is in reality generally addressing both compliance and litigation imperatives.

LEGAL ADVICE PRIVILEGE: THREE RIVERS (No.5)

Respective Counsel for ENRC and the intervening Law Society sought to persuade the Court of Appeal to address and overrule the controversial finding in Three Rivers District Council and others v The Governor & Company of the Bank of England (Three Rivers No 5) [2003] EWCA Civ 474 (Three Rivers (No.5)) that the "client" for the purposes of legal advice privilege constitutes only those individuals within a company authorised to seek and receive legal advice on its behalf.

The Court did not consider it was open to it to ignore the clear determination of the Court of Appeal in Three Rivers (No.5), and said that if the ambit of Three Rivers (No.5) was to be differently decided, that decision would have to be made by the Supreme Court.

Nevertheless, the Court set out its views on the effects of Three Rivers (No.5) as currently interpreted. The decision presents no problems for individuals and small businesses since, as was the position in most 19th century cases, the individual or Board are themselves likely to have information about a case to provide to their lawyer. However, the modern world must cater also for legal advice sought by large corporations, in which the relevant information is unlikely to be in the hands of the Board or in-house legal. The Court considered that if a multi-national corporation cannot ask its lawyers to obtain necessary information from those employees with first-hand knowledge of it, it will be in a less advantageous position than a small entity, and emphasised that, "whatever the rule is, it should be equally applicable to all clients, whatever their size and reach."

The Court also noted the Law Society's submissions that English law on this particular issue is out of step with international common law, despite legal professional privilege being "a classic example of an area where one might expect to see commonality between the laws of common law countries, particularly when so many multinational companies operate across borders and have subsidiaries in numerous common law countries."

As such, the Court noted that, had it been open to it to do so, it would have been in favour of departing from Three Rivers (No.5). It is not yet known whether any party might appeal to the Supreme Court, presenting that opportunity.

THE STATE OF PLAY

Without that further Supreme Court appeal, legal advice privilege remains broadly where it has been for 15 years. With respect to litigation privilege the position is also restored to a more familiar state, with consistency between civil and criminal process, and no distinction drawn between the purposes of defending, settling or avoiding proceedings. Importantly, the Court has signposted how to reconcile the realities of dual-purpose investigations, where both compliance and litigation defence play a part.

Nonetheless, the tests themselves remain stringent. Counsel will remain live to the need to keep under ongoing review and carefully document when adversarial process comes into reasonable contemplation. It is very clear that this will be scrutinised on the evidence, on the specific facts of each case.

The judgment can be found here

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
15 Nov 2018, Seminar, London, UK

The FCA and other bodies have been active recently across a number of areas relevant to financial litigators, contentious regulatory lawyers and financial crime specialists.

15 Nov 2018, Conference, London, UK

Dentons Compliance Team cordially invites you to Dentons Compliance Day 2019 – our annual conference on compliance related issues.

15 Nov 2018, Business Breakfast, London, UK

The FCA and other bodies have been active recently across a number of areas relevant to financial litigators, contentious regulatory lawyers and financial crime specialists.

Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Morrison & Foerster LLP
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions