Denmark: When To Conduct An External Counsel Investigation

In case of suspicion of serious irregularities in an organisation, it may be necessary to arrange a thorough investigation by external lawyers.

Many investigations regarding possible irregularities, including serious offences, can be carried out internally or in collaboration between a client and lawyer. In more serious cases, however, the entire investigation may need to be handled by an external lawyer. This may often be the case if internal control functions or a senior management have (or ought to have had) a role in the incidents to be investigated, or if there is a close relationship between the person(s) under investigation and that part of the organisation that would normally conduct the relevant investigation. Similarly, in problem cases that are publicly known, there may be a need to place the investigation outside of the investigated organisation and at the same time inform the public that the investigation will proceed under external auspices.

What are the benefits of an external counsel investigation?

• The organisation will be ensured action on and handling of the incidents.
• The organisation will get an opportunity to make arrangements to prevent such incidents from happening again, or to make sure that if they do happen again they will be handled better.
• The organisation will restore whatever trust that may have been lost in the eyes of employees, customers or the general public.

Why will the retaining of an external lawyer to conduct the investigation ensure the validity of the result?

• The investigation will be performed with the necessary professional expertise.
• The investigation will be performed on a more autonomous and objective basis and in a manner ensuring a certain distancing to the organisation being investigated.
• Individuals will feel safer and more comfortable when volunteering information. A safe environment will be more conducive to people coming forward to disclose what they know.

External counsel investigation framework

Danish law does not provide a specific definition of an external counsel investigation. In practice, the nature of an external counsel investigation varies, including in terms of purpose, subject, type and process. However, a common characteristic of all external counsel investigations is that one or more external lawyers are asked to investigate and determine a series of incidents and that the lawyers typically arranges collection of the information needed for this purpose.

Other common characteristics are that external counsel investigations are initiated on the basis of a written mandate, typically drawn up jointly by the lawyer and the commissioning party, and that the investigations result in a written report to the commissioning party. The mandate is the formal assignment from the organisation requesting the investigation and specifies the purpose and scope of the investigation. Subject to the Code of Conduct for the Danish Bar and Law Society and other applicable rules, the mandate determines the investigation process.

Pre-investigation considerations

The need for an external counsel investigation may arise as a result of one or more incidents in an organisation. The extent and scope of the external counsel investigation will depend on the number and nature of the incidents.

• In some situations, the nature of the incidents may render it necessary to conduct the external counsel investigation in strict confidentiality. In other situations, the nature of the incidents may justify a more transparent investigation with public access to information about its background, purpose and findings.
• In some cases, the nature of the incidents being investigated may require the establishment of a reporting system making it possible to report incidents anonymously. In other cases, the investigation can be based on written reports only.
• In external counsel investigations, anonymous reporting should always be considered. The possibility of participating anonymously in an external counsel investigation will often – depending on the nature of the incidents – increase the likelihood of receiving input from persons who possess relevant information. On the other hand, it must be taken into account in the assessment of the evidence that the information has been provided anonymously.

Collection of information

Depending on the mandate, an external counsel investigation will typically involve collection, organisation and evidential assessment of a vast amount of information. On that basis, the lawyer will establish the facts of the case, which will then be analysed and assessed in a legal context, and identify one or more legal issues, typically of a highly complex nature, including their legal consequences, if relevant. The procedure of collecting information will depend on the mandate, which will also specify the questions to be answered. Also, the mandate will specify whether the incidents are to be investigated only on the basis of written and digital material, or if the investigation should also include information received via a reporting system or from oral interviews.

Reporting and findings in external counsel investigations

The lawyer will draw up the report after the necessary information has been collected and analysed and the legal issues have been identified, including the possible legal consequences. The mandate will specify how and when the findings in the report are to be presented to the client and whether all or part of the findings are to be made available to the public. Furthermore, the lawyer will together with the organisation decide if specific persons are to be notified of the completion of the investigation and the findings before preparation or (if applicable) publication of the report.

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.