Back to Business as Normal: Court of Appeal Prevents the Erosion of Legal Professional Privilege in a Landmark Judgment for Corporate Internal Investigations
Fulcrum acts for ENRC for the purposes of the SFO investigation, working alongside Hogan Lovells LLP who represent ENRC in the civil proceedings.
Fulcrum were responsible for advising ENRC in relation to the privilege determinations in respect of the original privilege review conducted in 2013 and to which the documents in the current proceeding relate.
Yesterday the Court of Appeal handed down a much-anticipated judgment overturning the controversial 2017 High Court decision of Mrs. Justice Andrews in Director of the Serious Fraud Office v. Eurasian Natural Resources Corporation Ltd (‘ENRC’). The vindication of ENRC’s position in withholding certain categories of documents on the basis of legal professional privilege (‘LPP’) represents a highly significant victory for ENRC and for corporates subject to investigation.
The Court of Appeal judgment represents a very clear statement as to the sanctity of LPP and the Court’s willingness to protect against its erosion.
The High Court Judgment
Undisputedly, the category of documents which has generated the most interest amongst businesses and the legal profession alike, are the interview memoranda produced by Dechert LLP’s internal investigation. Following the High Court judgment of Mrs. Justice Andrews, there has been much debate whether current practices for conducting internal investigations into alleged wrongdoing need to be altered, with concerns raised over the potential “chilling effect” upon investigations and the possible deterring of companies’ willingness to conduct comprehensive internal investigations that such a dictum might provide.
In the High Court judgment Mrs. Justice Andrews sought to impose an obligation upon companies and their legal representatives requiring that they first identify evidence which would likely lead to prosecution before being able to assert litigation privilege. Ironically, if allowed to stand this would have led to a position whereby only be memoranda produced in circumstances where a company had taken the view that criminal conduct had been uncovered, and there was a belief that a prosecution would follow, that would have the protection of LPP.
Moreover, in the High Court the SFO had argued that because ENRC had sought to engage with the SFO in a responsible manner this was inconsistent with its claim to maintaining LPP over the documents – that assurances from ENRC that it would be open with the SFO were tantamount to foregoing LPP. Mrs. Justice Andrews had accepted this analysis concluding that the evidence suggested that ENRC had created the interview memoranda for the specific purpose of showing them to the SFO.
The Court of Appeal, however, rejected these assertions.
The Court of Appeal decision
Whilst the Court of Appeal acknowledged that an individual suspect would know whether or not he or she had committed a crime, it recognised that corporate suspects are in a materially different position.
Moreover, the Court found that Mrs Justice Andrews was wrong to determine that the uncertainty as to whether or not a criminal prosecution would follow an internal allegation of misconduct mitigated against a real likelihood of prosecution. On the evidence before the Court, there were clear indications of a likely prosecution sufficient to found the reasonable contemplation necessary in order to found a proper assertion of LPP.
Turning to the question of policy issues relating to corporate internal investigations, the Court of Appeal expressed the following in relation to the “chilling effect” referred to above:
“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. Were they to do so, the temptation might well be not to investigate at all, for fear of being forced to reveal what had been uncovered whatever might be agreed (or not agreed) with a prosecuting authority…”
On the facts, the Court of Appeal found that in all of the circumstances (Dechert having been instructed in the wake of a whistleblower alleging internal criminal misconduct) the dominant purpose of the communications created by Dechert (and indeed the forensic accountants, FRA, who assisted in the internal investigation) was reasonably anticipated litigation against the company by the SFO.
Moreover, the Court of Appeal found that there was insufficient evidence to justify the finding of Mrs. Justice Andrews that the documents were created for the purposes of handing them over to the SFO. Instead the Court of Appeal acknowledged that ENRC’s indication that it would be “full and frank”, and that it would be willing to provide a report to the SFO, did not itself amount to a confirmation to the SFO that ENRC would hand over the memoranda, and associated documents, underlying the report.
Whilst it remains unclear as to whether the SFO will seek leave to appeal, if the matter is considered by the Supreme Court then, no doubt, in addition to the important questions of principle in relation to litigation privilege, careful consideration will be given to the arguments set out by the Court of Appeal. The Court acknowledged that there was “much force” in the position contended for by the company, to the effect that legal advice privilege should extend to communications between lawyers and employees for the purposes of providing legal advice to a company. Indeed, the Court indicated that they would have found in favour of the company had they felt at liberty to interfere with previous Court of Appeal authority suggesting that the corporate ‘client’ team represented a much more limited, board-level, group. Further, it was suggested that this principle ought to provide protection to communications not only with direct employees of the company in question, but also to employees of subsidiaries.
For the moment, the Court of Appeal decision provides much needed clarity for businesses and the legal profession alike as regards the protection of LPP in corporate internal investigations. The headline message for those conducting corporate internal investigations is that it’s back to business as normal.
