The recent judgment of the High Court in AL v. SFO & Ors includes discussion of some significant privilege issues of relevance to white collar crime and regulatory practitioners.
A company, referred to as XYZ Ltd, conducted an internal investigation aided by external lawyers, in order to decide whether to self-report to the SFO. This investigation included very lengthy interviews of senior executives. These interviews were integral to XYZ's decision as to whether it would self-report to the SFO. The interviews were not recorded, but detailed notes were taken by the company's lawyers (the Notes). Ultimately, XYZ entered into a Deferred Prosecution Agreement (DPA) with the SFO. Pursuant to its terms, XYZ had a duty to provide information and material to the SFO unless there was a valid claim to privilege.
The SFO sought copies of the Notes. XYZ asserted privilege over the Notes, and agreed instead to provide an oral proffer. This involved XYZ's lawyers reading to the SFO a short statement purporting to be a summary of the interviews (the Summaries). The SFO ultimately elected to charge the Defendants and disclosed copies of the Summaries. However, the Defendants sought copies of the Notes. Consequently, the SFO sought these from XYZ again, but XYZ persisted in its refusal to provide them on the basis of privilege. Indeed, XYZ went on to refuse to make disclosure of the Notes on a number of occasions on this basis, even when the SFO pointed out that claims to privilege over the Notes were "unlikely to succeed" in light of recent case law.
Ultimately, one of the Defendants sought judicial review of the SFO's decision not to press for disclosure of the Notes. Whilst this failed because the High Court took the view that it was not the appropriate forum to resolve disputes about disclosure, the Court expressed "real reservations" about the approach adopted by the SFO and said that, but for its view on forum, it would have been content to quash the decision:
- The Court considered the oral proffer process to be "highly artificial". It did not understand why copies of the Summaries could not simply have been handed over, rather than the proffers being oral.
- It considered that, despite the spate of recent caselaw, the law relating to legal professional privilege was clear. The Notes were prepared as part of an internal investigation conducted by external lawyers, to enable XYZ to decide whether to self-report. Interview material obtained for that purpose was too far removed from the conditions for privilege set down by the House of Lords in Three Rivers and applied in the recent cases of RBS Rights Issue Litigation and SFO v. ENRC (currently under appeal) that the SFO had itself referred to in one of its letters to XYZ. Any genuinely privileged content (such as "lawyer's musings" or aspects relating to on-going unrelated civil proceedings) could be redacted from the Notes.
- The SFO did not turn its mind to whether the oral proffers amounted to a waiver of privilege or a limited waiver of privilege. The Court indicated that it would have had real difficulties with any argument that any waiver was for a limited purpose of disclosure to the SFO under the DPA.
- In any event, even if the Notes were privileged, the SFO might nonetheless expect privilege to be waived as part of XYZ's co-operative stance. This was consistent with public statements by the SFO and its own Code of Practice on DPA's.
It was already clear following ENRC that claims to privilege over lawyers' notes made during any internal investigation conducted before criminal proceedings were reasonably contemplated would not be privileged. Nevertheless, aside from the interest generated by the criticism of the SFO, the comments in XYZ add some useful nuance.
As we have previously reported " Internal Investigations: the FCA Makes its Position Clear", the FCA has historically expressed a sceptical view towards claims to privilege in the context of internal investigations. In a speech delivered in November 2015, it said that claims to privilege over lawyers' notes of internal investigation interviews looked like "gaming" the system. There is therefore every reason to think that following this decision the FCA will push even harder for any internal investigation interview notes made before any self-report or even during an investigation. Firms will need to take this into account when conducting or planning an internal investigation. Likewise the risk of satellite litigation if material is released to the public, is surely increased.
It is also conceivable that firms will be criticised by the FCA under Principle 11 for not making disclosure of internal investigation notes, or for resisting disclosure of them.
If the FCA does obtain this material, individuals who are subject to FCA proceedings may well find themselves receiving it at the Warning Notice stage, or even in some cases before. That could be of real benefit to them.
Finally, practitioners would be well advised to note the Court's apparent view about the oral proffer potentially amounting to a waiver of privilege. If there is otherwise a proper claim to privilege, this could well impact on precisely what firms may want to tell the FCA.
The appeal of the ENRC decision is due to be heard in July 2018 in the Court of Appeal. We await the judgment with great interest.
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