The Court of Appeal has overturned a controversial 2017 judgment and ruled that documents created by corporations in the course of an internal investigation may be covered by litigation privilege.
On 5 September 2018, the Court of Appeal handed down judgment in the case of The Director of the Serious Fraud Office v Eurasian Natural Resources Company ("ENRC") [2018] EWCA Civ 2006.
In 2011, ENRC had instructed DLA Piper to undertake a fact-finding investigation into allegations of corruption made against its Kazakhstani subsidiary. After corresponding with the company for several years regarding the allegations, the SFO commenced criminal proceedings in 2013 and sought disclosure of the documents which had been drafted during the internal investigation.
The SFO and ENRC clashed over the disclosure of three categories of documents, made up of interviews, records and notes created in the course of the internal investigation. In a joint judgment, Sir Brian Leveson, Sir Geoffrey Vos and Lord Justice McCombe found that the documents (with the exception of two emails) had been drafted for the dominant purpose of resisting or avoiding criminal proceedings and were covered by litigation privilege.
The decision reversed the controversial ruling of Mrs Justice Andrews in May 2017 that privilege did not apply to any of the documents in question, as ENRC had not contemplated criminal proceedings at the time of the investigation and had only instructed DLA Piper for compliance purposes. The Court of Appeal considered the policy implications of Mrs Justice Andrews' decision and found:
"It is, however, obviously in the public interest that companies should be prepared to investigate allegations from whistle blowers or investigative journalists, prior to going to a prosecutor such as the SFO, without losing the benefit of legal professional privilege for the work product and consequences of their investigation."
The judgment also considered the impact of the decision upon the deferred prosecution agreements scheme (which was not available at the time of the SFO's investigation into ENRC). The Court affirmed that nothing in the judgment should be taken to adversely affect the operation of the scheme, but acknowledged that the decision to waive privilege in relation to documents produced in an internal investigation may influence the SFO's view as to whether a DPA is appropriate:
"... to determine whether a DPA is in the interests of justice, and whether the terms of the particular DPA are fair, reasonable and proportionate, the court must examine the company's conduct and the extent to which it cooperated with the SFO. Such an examination will consider whether the company was willing to waive any privilege attaching to documents produced during internal investigations, so that it could share those documents with the SFO ... Had the court been asked to approve a DPA between ENRC and the SFO, the company's failure to make good on its promises to be full and frank would undoubtedly have counted against it."
Also in issue was the finding of Mrs Justice Andrews that employees of a defendant company should be treated as though they were agents or third parties for the purposes of legal privilege, such that their communications are not protected from disclosure (applying the ruling in Three Rivers District Council v Bank of England (No. 5) [2004] UKHL 48). After hearing extensive argument about legal advice privilege, the Court declined to determine whether the case of Three Rivers had been correctly decided. It held that it was bound to apply the ruling, though the bench commented that it would have been in favour of departing from it, had it been able to do so:
"... large corporations need, as much as small corporations and individuals, to seek and obtain legal advice without fear of intrusion. ... If a multi-national corporation cannot ask its lawyers to obtain the information it needs to advise that corporation from the corporation's employees with relevant first-hand knowledge under the protection of legal advice privilege, that corporation will be in a less advantageous position than a smaller entity seeking such advice. In our view, at least, whatever the rule is, it should be equally applicable to all clients, whatever their size or reach."
The Court concluded that the scope of legal advice privilege for large corporations was a matter which would have to be determined by the Supreme Court in due course.
This decision makes it easier for defendant corporations to claim legal privilege over documents produced in contemplation of criminal proceedings, even if the purpose of the documents was to avoid or prevent a possible prosecution. Corporations may undertake internal investigations with greater confidence that they will not be required to disclose the material to law enforcement agencies at a later date, provided that criminal proceedings are in the contemplation of the corporation at the time of the investigation.
It is, however, important for corporations to consider the impact of withholding information from the SFO, even if that information is privileged, as this behaviour may be seen as non-cooperation and influence the decision to grant a DPA.
Those who are concerned about whether their documents are protected by privilege should seek legal advice about the effect of this judgment.
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